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Strata building performance as a lottery: If I hadnt bought into my new building 10 years ago, what would be its standing today?

Gerry ChiaVice Chair, Owners Corporation Network

Chairman Pacific Place Community AssociationSecretary Epica Owners Corporation

Epica, completed 2005, by MirvacChatswood, Lower North Shore Sydneyhttp://www.pacificplacechatswood.com/

Chatswood NSW Epica 31 storey new Mirvac apartment buildingCompleted 20051 of 4 strata plans in a Community AssociationChatswood, Sydney lower north shore

2005

2007

EPICA

Very complex building with multiple plant and machinery

3 high rise and 2 small liftsCentrally supplied water cooled air conditioning, 2 cooling towersCentrally supplied gas fired and solar assisted hot water consisting of 3 separate systems for low / mid / high rise

Very complex building with multiple plants and machinery 30,000 litre drinking water supply tank 20,000 litre fire sprinkler supply tankFed by pumps at street levelFire sprinklers throughout the buildingCEBus lighting control system

Very complex building with multiple plants and machinery

Strata manager did not consider plant and machinery breakdown insurance cover necessary!Office bearers liability insurance $1m

ISTM Strata Agency Agreement

3 years, with 3 year auto rolloverAnnual retainer, 5% annual increaseSchedule B disbursements uncapped18% Commission on strata insurance

On Site Building Management

Likely to be 3 years, but could be up to 10 years under NSW Strata LegislationNo opportunity to review contractNo KPIs

Motions at Inaugural AGM

Appoint strata manager for 6 monthsAppoint building management firm for 1 yearIncrease office bearers liability to $5m

Strata Management

Went to tender late 2005Fixed fee based on scope of worksNo schedule B disbursementsNo insurance commissionsMinutes and agendas sent electronically

Strata Management1 year appointment, monthly rollover after thatMajor amendments to ISTM contractMany of our changes now in SCA NSW 2012 agency agreement

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2006 Extraordinary General MeetingEGM to appoint new strata manager organised by volunteer ownersPrinted over 3000 sheets for EGM agenda, all collated and posted or inserted by ownersNew strata manager appointed March 2006. Still with same strata manager 9 years on

Insurance

Original cover arranged by the strata manager:Property insured value $110mPublic Liability $20mOffice Bearers liability $1mNo plant and machinery coverPremium $93,000pa

Insurance

In 2006 I combined the buying power of the 3 completed stratas and community association and went to tender for a broker, then to market for our insurance

Insurance 2015EPICA property insured value $190m Public Liability $50m plus additional $50m shared across all entitiesOffice bearers liability $20mPlant and machinery breakdown plus loss of rent as a result of breakdown

Insurance 2015Fixed brokerage fee Epica Premium of $120,000Combined property insured value of 4 stratas and community association of nearly billion dollars

Take home message:Owners must involve and take control of their affairs. In our case combining our immense buying power has given us top tier insurance cover at a very competitive rate, with excellent service backing. Without my involvement perhaps none of this might have occurred. It takes a champion to push to obtain the best result

Shared facilities under community association in 2005:25m outdoor pool, spa, kids wading poolBBQSeveral acres of gardensGym and sauna

Inadequate Levies

Opening levy 2 bed apartment on an upper level with ocean views $880 per quarterOn site building management Sinking fund $45,000 pa

Levy $880 per quarter

Levy $880 per quarter

Compared with 2 bed 3 storey walkup block of 6 units, $600 per quarter

Epica

Sinking Fund Survey we commissioned in 2005 recommended a levy of $300,000 PANo assistance or recommendation from original strata manager on sinking fund surveyFirst year many maintenance items were included in the supply contract, so no charge to owners corporation for year 1

Epica

Second AGM increase levies by 71%My 2 bed premium aspect now $2,100 per quarter

Taking care and reinvesting in the assetA healthy and robust sinking fund is essential to ensure the proper maintenance of the assetMany capital items require replacement or refurbishmentFor example major painting in 10-15 years, and lifts 20 years

Taking care and reinvesting in the assetWithout a robust sinking fund, the owners corporation would need to strike special levies or leave the asset to deteriorate and progress into a downward spiral, which is the case in many buildings

Taking care and reinvesting in the assetInsufficient levies cause buildings to deteriorate, rents and resale values decline, and eventually the buildings may become economically unviable and unsafe.

UPPING THE ANTE Epica in the first yearAppointed new strata managerGot high performing on site managerIncreased levies by 71%Combined and marketed our insurance requirementsfor the whole site

CREATING A HOME AND COMMUNITY:In the beginning.

Residents in the lifts pushing close buttons even though others trying to catch the liftResidents pushing into lifts before passengers have had time to alightCigarette butts, some still burning, thrown from balconies

CREATING A HOME AND COMMUNITY:In the beginning.

Visitor parking chaosResidents renting out their allocated car spaces to outsiders contrary to DATeenage residents with no parental supervision behaving badly

CREATING A HOME AND COMMUNITY:In the beginning.

Coles trolleys brought into building and left on resident floors

CREATING A HOME AND COMMUNITY:In the beginning.

Many lights outI checked external doors each night to secure them after trades and residents had propped them openI checked lights out in garden, and put fluro colour dots to indicate to building management to change globes

THE ACTION PROCESS:QUALITY SERVICE PROVIDERS

Epica a new high performing on site managerThe Community Association contracted permanently assigned on site security guards to have round the clock on site presence

QUALITY SERVICE PROVIDERSLook after, acknowledge and motivate good people

$3000 bonus pa for building managerXmas bonus for long term guardsXmas cash gift card for strata manager

QUALITY SERVICE PROVIDERSLook after, acknowledge and motivate good people

Pay peanuts !!!!!!But being charged more may not equate to quality service if you dont have the right firm and right people

BUILDING A COMMUNITY CULTURE I purchased and installed a community notice board for EpicaHeld lift doors open for people Rebuked people pushing into lifts

Greeted other residents in lifts etc.Got to know neighbours on my floorLeft welcome gift for new neighbours moving in next door

BUILDING A COMMUNITY CULTURE

Residents year end get together November 2006Organized residents end of year BBQ2006 volunteer residents cooked and prepared food60 attendees

Now for all the Pacific Place Community

380 residents attend from all 4 buildingsfully catered

Pacific Place Community Petting zoo

Santa calls with gifts for kids

Pacific Place Community

Face painting

Pacific Place Community Special guest at Community End of year event

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Other Community initiatives

Tai Chi group Mothers group

Other Epica Initiatives

Christmas tree DefibrillatorTrolleys for residents use

Other Epica Initiatives

Christmas tree DefibrillatorTrolleys for residents use

Other Epica Initiatives

Christmas tree DefibrillatorTrolleys for residents use

Other Epica Initiatives

Christmas tree DefibrillatorTrolleys for residents use

Other Epica Initiatives

Car jump starterCar wash bay industrial grade vacuum cleaner and hose reel, upgraded lighting on movement sensor

Other Epica Initiatives

Car jump starterCar wash bay industrial grade vacuum cleaner and hose reel, upgraded lighting on movement sensor

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BEEFING UP THE BY LAWS Parking enforcementShort term lettingsOvercrowding

BEEFING UP THE BY LAWS

Emergency powers in event part of the building becomes unable to be occupied as per Bondi Junction Eastgate Gardens gas explosionTimber floors standards to protect neighboursRenovations Smoke drift

INVESTING IN THE ASSET EPICA 2007 CCTV Security cameras in all public areas, entrances and 6 basement car parksUpgraded 72 fire stair door locks and lift control locks to high security Bi locks

INVESTING IN THE ASSET EPICA2010 Retrofitted all basement and fire stair lights to LED, assisted by $25,000 grant from Willoughby CouncilNow 98% all common area lighting LEDInstalled variable speed drivesReduced monthly consumption by 30,000kWhImproved power factor to .92

INVESTING IN THE ASSET EPICAReprogrammed CEBus system for better efficiencyInstalled Satellite TV dish and upgraded TV reception cable infrastructure to enable residents to receive over 100 pay and free to air satellite TV services

INVESTING IN THE ASSET- EPICA100Mbps download internet access via Telstra HFC (Hybrid Fibre Coaxial Cable), and very soon NBN Fibre to BasementPlan to install fibre backboneMain lobby update to stay ahead of newer buildings in the areaContinuous program of refreshing common areas

Investing to Improve the Community Asset:

Constructed a community roomExpanded the gym Purchased additional gym equipment and 5 flat screen TVs

Investing to Improve the Community Asset:

Constructed a community roomExpanded the gym Purchased additional gym equipment and 5 flat screen TVs

BUYING INTO STRATA IS INDEED A LOTTERY Will the building, which is your home, become a de facto hotel of serviced apartments, or student accommodation? Is there overcrowding?

BUYING INTO STRATA IS INDEED A LOTTERY How secure is your building? Certainly serviced apartments can reduce your standard of security and house keeping compared to if it was only used as full time residentialDoes the building have unresolved or hidden defects?

BUYING INTO STRATA IS INDEED A LOTTERY Do you know how your levies are spent? Do your service suppliers do quality and fairly priced work? Do they care about you as a client?

BUYING INTO STRATA IS INDEED A LOTTERY Is your executive committee transparent and committed to ensuring the well being of the building and those who live there, or are they just in it for their own agendas?Does the committee have an effective policy of quality maintenance and investing in the asset?

ENSURING STRATA WILL BE A QUALITY LIFESTYLE:

I challenge you all here today to incorporate at least 3 things To those of you who conceive and design apartments lets make them a community. Give us better design, energy efficiency, ventilation, natural light and community facilities.

ENSURING STRATA WILL BE A QUALITY LIFESTYLE:

To those who build, give us buildings that properly conform to building standards, and dont leak, and have the correct fire safety systems in place

ENSURING STRATA WILL BE A QUALITY LIFESTYLE:

To those who shape the legislation: make builders and developers accountable for defective buildings

ENSURING STRATA WILL BE A QUALITY LIFESTYLE:

To those who shape the legislation:Give us greater powers to deal with those who abuse our community. What if I came and parked in your house carport and went off to do my shopping because you lived close to the shops, and you had no powers to deal with me

ENSURING STRATA WILL BE A QUALITY LIFESTYLE:

To those who manage our assets: give us greater accountability and transparency, and guide us how to maximize our assets and create a community. Dont just see us as a means of income

ENSURING STRATA WILL BE A QUALITY LIFESTYLE:

To those in academia:I hope you will take further the concepts I have touched on in your research and studies, as strata living is now the lifestyle of choice of many living in our cities, so quality of life is a key element

ENSURING STRATA WILL BE A QUALITY LIFESTYLE:

And to those of you who live in strata help make it a house proud community. It is after all your home.

Strata building performance as a lottery: If I hadnt bought into my new building 10 years ago, what would be its standing today?

Today I have given you a glimpse into the major things we have done in Epica and Pacific Place Community AssociationI leave up to your imagination where we would have been had I not bought into my scheme 10 years ago