Turning deficit to surplus

Poor collection of maintenance fees is one of the main headaches for most property managements. However, Endah Promenade Condominium’s Management Corporation (MC) chairman Sr Siew Yee Hoong advocates: “I don’t force you to pay. I motivate you to pay by creating value.”

The condo development in Sri Petaling, Kuala Lumpur, comprising 386 residential units and 105 commercial units, did not start out in the black. The management was handed over to the Joint Management Body (JMB) in 2012 with a deficit of RM173,000. But within two years, Siew managed to raise maintenance fee collection to 99%. By 2016, the 30-storey development reported a surplus of RM30,000, all the while keeping the maintenance fee at RM0.21 psf.

Siew, who was also Endah Regal Condominium MC chairman from 2006 till 2016, had used his astute measures to earn Endah Regal the 13th place among the National Property Information Centre’s list of Top 15 Condos in KL with rental yields of over 5% in 2015.

What makes it even more amazing is that the impressive performance was attained with a maintenance fee of just RM0.15 psf, having been increased only once from RM0.11 psf since its handover in 1998. Even at that minimal rate, the 504-unit condo neighbouring Endah Promenade reported a surplus of RM300,000 last year!

“If you manage it well, the cost is not very high,” Siew says.

Siew’s financial acumen has been sharpened through his 30-year experience in the banking industry, where he served as a financial consultant in Asia, including India, China, Japan and South Korea. His last posting was in Hong Kong before he opted for early retirement at 48.

Asked on what motivates him to put in so much time and effort into this voluntary commitment, Siew asserts, “I need to protect the capital value of my investments. And to do that, you need very good property management.”

In his pursuit of greater professionalism, Siew did a one-year self-study and sat for the Royal Institution of Surveyors Malaysia (RISM) Property Management and Valuation Services (PMVS) exam in 2011. He subsequently became a member of the Royal Institution of Chartered Surveyors (RICS) UK and is now a qualified valuer and tutor who conducts regular classes for those who want to sit for the PMVS exam.

Siew is also a council member of Malaysian Institute of Professional Property Managers (MIPPM) and a committee member of the Majlis Perwakilan Penduduk Wilayah Persekutuan (MPPWP).

At 65 now, Siew acknowledges he has reached the level of self-actualisation where he seeks to serve society and contribute to community. He believes there are blessings in doing good. “Keeping active also prevents Alzheimer’s,” he quips.

Here, Siew shares some practical tips for property management:

1. Change the bulbs

In Endah Regal, electrical cost was reduced by changing 1,700 pieces of T8 lights to T5 lights. Monthly electricity bills dropped from RM21,000 to RM15,000. The crowning stroke was that the replacement required no upfront payment because he negotiated a unique agreement with the contractor, whereby the company would be paid RM2,400 per month for three years through the savings from the electricity bills. The agreement also covered free replacement of faulty bulbs within the three years.

2. Install CCTV

In Endah Promenade, the management was able to cut down on eight security staff after the CCTV was installed, which gives them a savings of about RM200,000 per year. Through this, the return on investment on the CCTV was gained within 20 months. In the long run, expenses can also be kept stable because wages for security guards increase much faster than the cost on CCTV upkeep.

3. Beef up security

Some of Endah Regal’s units were unpropitiously occupied as money lenders’ dens, narcotic labs, drug haunts, brothels and other illegal activities until Siew initiated the installation of the CCTV between 2009 and 2010. Through the CCTV monitoring, authentic evidence was recorded and reports were made to the authorities. Eradicated of vice, rentals per month surged from RM800 to RM2,200 within a couple of years.

Similarly in Endah Promenade, the security was fortified through the CCTV installation. Siew reveals there were about 12 attempts at break-ins initially, but they were all swiftly resolved through CCTV evidence. In one case, burglars who carted away a safe were nabbed within two days, with most of the loot recovered.

In another incident, a food delivery man who came back on his off-duty day to try to steal a pair of sports shoes priced more than RM1,000 was apprehended even before he managed to leave the building. With the CCTV closely monitored, there has been zero break-ins since.

4. Deal with defaulters one by one

In Endah Regal, Siew managed to raise maintenance fee collection to 100.2% from recovering arrears. A resident who owed RM130,000 was offered an instalment plan, through which he settled the full sum.

In another incident, he helped arrange a loan restructuring agreement for a widow with three children. The high capital appreciation enabled her to negotiate for a new mortgage which gave her enough cash to settle her outstanding charges of RM25,000. By then, the widow’s children had grown up and started working, allowing them to service the loan.

In Endah Promenade, there were 15 major defaulters owing between RM80,000 to RM130,000, mostly of untenanted commercial lots. These defaulters have disregarded the need to pay maintenance fees because they had been granted a reduction of 21% from their purchase price which equalled three years of guaranteed rental returns promised by the developer.

Employing adroit communication skills, Siew met them one by one – negotiating, pacifying, talking reason and working out reasonable payment schedules. He also helped some of them arrange for the shop lots to be sold off and recovered the debts.

5. Rectify defects

Siew reveals he once managed a property with more than 200 defects. He and his committee worked diligently within the two-year defects liability period to ensure the developer completed the rectifications. “One of the key things is to have everything well-documented. There is no short-circuiting the process. Every defect must be logged in. Use a token system, keep proper digital records, check the status of defects every month and set deadlines. Be persistent. Write intelligently and be diplomatic. Let the developer know you are not out to hit at it, but to solve problems. We told the developer we wanted to work as a team so that the developer’s next project can sell. We are also professionals. We can contribute good solutions and the developer can make use of our knowledge and skills to resolve issues.”

6. Investigate irregularities

Any change out of the ordinary that does not make sense must be investigated. In Endah Regal, on two separate occasions, Siew noticed a sudden jump in the common properties’ water bill from RM500 to about RM2,000. Suspecting a leakage, he conducted relentless checks together with the M&E staff until they eventually discovered a punctured underground pipe.

Subterranean leakages may take months to discover but Siew stresses they must not be ignored, not only to curb wastage, but to ensure safety. “The leaks could erode its surrounding soil, causing a hollow that can lead to sudden cave-ins, endangering lives and properties. If you are not concerned, there will be consequences,” he warns.

7. Repaint

Siew considers repainting as an important aspect of maintenance. During his tenures in the various developments, he has effected repainting exercises for common areas like the external facades, internal walls and car parks, using eco-friendly paint.

“Repainting increases the value by about 5%. Repainting is very important and must be planned three years in advance. The costs of repainting were between RM800,000 and RM1.1 million. This has to come from the sinking fund and we need to provide the funding three years earlier by extra funding towards the sinking fund. The paint can normally last five years but if you use quality paint, it can last up to 10 years.”

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This story first appeared in TheEdgeProperty.com pullout on May 26, 2017. Download TheEdgeProperty.com pullout here for free.