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1. Housing Authority 2004/05 Budget endorsed

2. Approved Pak Kong and Sha Kok Mei Outline Zoning Plan amended

3. Sino Land wins Mid-Levels site with $250m bid

4. Housing Authority looks for ways to avoid cash crunch

1. Housing Authority 2004/05 Budget endorsed
Hong Kong Government, 20 February 2004

The following is issued on behalf of the Housing Authority:

The Housing Authority (HA)'s Finance Committee (FC) today (February 20) endorsed the Revised Budget for 2003/04 and Proposed Budget for 2004/05 and noted the financial forecasts between 2005/06 and 2007/08.

The revised budget for 2003/04 shows a consolidated operating deficit of around $1.1 billion, an increase by $0.5 billion from the approved budget, mainly due to a loss of income upon the suspension of sales of unsold and returned Home Ownership Scheme (HOS) flats before the end of 2006, the rescheduled launch of Tenants Purchase Scheme (TPS) Phase 6A to 2004/05, as well as rent concession for commercial tenants during the SARS outbreak in 2003.

The budget is expected to turn back to a marginal surplus of $129 million in 2004/05 with anticipated income from the sales of TPS 6A, savings from cost containment measures, and net proceeds from divestment of HA's retail and carparking facilities. Nevertheless, operating deficits are still envisaged in the following years up to 2007/08.

Describing HA's financial situation in the coming five years as "stable but subject to external factors", the Chairman of the FC, Mr Ng Leung-sing said that HA's financial forecasts remained positive with an estimated cash balance of $13.5 billion by March this year and $12.8 billion by March 2008.

"Despite the projected deficits in the Rental and Home Ownership Assistance accounts, and based on the assumptions adopted in the budget, HA should be able to tide over its financial difficulties over the forecast period with sale proceeds from the divestment," Mr Ng said.

The Chairman conceded that HA's forecast balances could be greatly impacted by external factors, in particular the timing and quantum of proceeds from the divestment, and the outcome of the appeal on rent.

"For budget purpose, forecasts are made on the assumption that there will be no rent variation for the concerned period. However, any substantial rent reduction will definitely affect our financial position seriously," Mr Ng cautioned.

In the face of these challenges, HA is taking necessary steps to ensure that there will be sufficient funds available to finance its operations, including conducting a comprehensive review of financial arrangements with the Government and actively exploring ways to dispose of the surplus HOS flats.

"HA will keep in view the need for external financing as a contingency measure to cater for the needs of a short-term shortfall of cash flow," Mr Ng noted.

Meanwhile, HA will continue its prudent financial policies by making the best use of its funds and striving to obtain better value for money in respect of the services provided.

Efforts made to increase efficiency and productivity through re-organisation, business process re-engineering and various cost containment measures have resulted in projected savings in recurrent expenditure of 8.5 percent ($1.3 billion) in 2003/04 and 10.7 percent ($1.6 billion) in 2004/05.

The 2003/04 revised Rental Housing operating deficit before exceptional item shows a substantial reduction of $464 million as compared to the approved budget, while deficits are projected to remain at a low level during the period with the revised average operating deficit in 2003/04 standing at $70 per unit per month, while the figure will fall to $30 in the proposed budget for 2004/05.

The 2003/04 revised Commercial operating surplus shows a reduction of $215 million as compared with the approved budget. Such reduction reflects mainly the rent concession granted to commercial tenants affected by SARS.

For budget purpose, HA has assumed in the budget $16.1 billion in 2004/05 and $6.9 billion in 2007/08 being sale proceeds from the divestment. These are purely accounting assumptions. The amount of proceeds to be derived from the divestment will depend on market conditions at the time of the Initial Public Offering.

The Home Ownership Assistance operating account in 2003/04 has been revised to reflect the substantial reduction in income and expenditure arising from the suspension of sale of unsold and returned HOS flats before end 2006, and the rescheduled sales of TPS 6A to 2004/05.

"The deficit operating performance is expected to last throughout the three-year forecast period but will improve in 2005/06 and 2007/08 when proceeds from the sales of TPS and unsold and returned HOS flats come in," Mr Ng said.

The revised capital budget for 2003/04 stands at $ 13.2 billon, 9.3 percent lower than the approved budget. The reduction in the construction expenditure for 2003/04 and 2004/05 reflects a lower average number of flats under construction.

"In spite of the lowered production level, the HA will continue with its pledge to provide public rental housing for families in need and to keep the average waiting time for Waiting List applicants to around three years," Mr Ng noted, adding that options such as converting interim housing and surplus HOS flats into rental housing would be considered.

The budgets will later be tabled to the Housing Authority for approval.

2. Approved Pak Kong and Sha Kok Mei Outline Zoning Plan amended
Hong Kong Government, 20 February 2004

The Town Planning Board today (February 20) announced amendments to the approved Pak Kong and Sha Kok Mei Outline Zoning Plan (OZP).

The amendments mainly involve the rezoning of a site at Mau Ping San Tsuen from "Village Type Development" ("V") to "Green Belt" ("GB") and the rezoning of a site at Tan Cheung from "GB" to "V".

Meanwhile, two sites in Sha Kok Mei Village are rezoned from "V" to "Road" and from "Road" to "V" respectively.

Amendments have also been made to revise the Notes of the OZP to follow a revised set of Master Schedule of Notes (MSN) to Statutory Plans endorsed by the Board in 2003.

Under the revised MSN, various measures including broad use terms have been introduced to provide greater flexibility for change of use and reduce the need for planning applications. The general provisions under the covering Notes and the user schedules for various land use zones have been revised to expand the scope of uses that are always permitted.

Furthermore, the planning intentions for various zones are included in the Notes and form part of the OZP to allow the public to have better understanding and greater certainty in the planning intentions of individual zones.

The draft Pak Kong and Sha Kok Mei OZP No. S/SK-PK/7 incorporating the amendments is now available for public inspection during normal office hours at the following locations:

* Secretariat of the Town Planning Board, 15/F, North Point Government Offices, 333 Java Road, North Point;

* Sai Kung District Planning Office, 14/F, Sha Tin Government Offices, 1 Sheung Wo Che Road, Sha Tin;

* Sai Kung District Office, 2/F, Sai Kung Government Offices, 34 Chan Man Street, Sai Kung; and

* Sai Kung Rural Committee, 1 Po Tung Road, Sai Kung.

Any person affected by the amendments can submit a written objection to the Secretary of the Town Planning Board on or before April 20.

Copies of the draft Pak Kong and Sha Kok Mei OZP are available for sale at the Map Publications Centres in North Point and Yau Ma Tei. The electronic version of the plan can be seen on the board's website at www.info.gov.hk/tpb.

3. Sino Land wins Mid-Levels site with $250m bid
Raymond Wang, The Standard 21 February 2004

Sino Land has outbid eight other developers to buy a residential site in Mid-Levels for HK$250 million.

The sale is the first for a residential site this year, and sources said the price was in line with market expectations.

The 25,090 sqft site at the junction of Conduit and Kotewall roads was owned by the family of the late casino tycoon Fu Tak-iam.

A Sino spokeswoman last night confirmed the purchase. Sources also revealed that the bid price was equal to an accommodation value of around HK$3,750 per square foot. The site can be developed into a 10-storey building above a multi-level car park.

Developers have estimated total development costs at more than HK$400 million, including construction costs of more than HK$100 million and land premiums of over HK$20 million.

``The competitive bids among the developers reflects the optimism surrounding the market,'' said Alvin Yip, investment director at DTZ Debenham Tie Leung, which was the agent for the sale.

Yip said that once the development is completed, a selling price of around HK$10,000 psf could be expected in light of the buoyant prices for luxury residential properties.

Sino Land is replenishing its land bank after slowing down land acquisition over the past few years due to the market slump.

Separately, telecom giant PCCW has received offers of more than HK$150 million from six bidders for its luxury detached house on The Peak.

However, the offers are at the lower end of market expectations of between HK$150 million and HK$200 million - or HK$18,000 to HK$25,000 psf.

When tenders closed yesterday for the 8,165 sqft two-storey house at 24Middle Gap Road, the six bidders included overseas funds, local manufacturers and chairmen of Hong Kong listed companies, sources said.

Sales agent FPDSavills (Hong Kong) declined to identify the bidders pending an announcement next Wednesday.

Sources said PCCW intends to hold a second round of bidding on Monday, allowing the bidders to raise offers to meet the telecom firm's expectations of about HK$170 million. PCCW was not available for comment yesterday.

Regardless of the final transaction price, the offers definitely exceeded the existing benchmark of HK$18,000 psf set recently at the Grosvenor luxury project in Island South, sources said.

The last transaction at Middle Gap Road was for No26 - the property next to PCCW's house - which in 1999 sold for HK$148.8 million, representing more than HK$18,000 psf.

Chuang's Consortium International, which had earlier expressed interest in the PCCW property but was not available for comment yesterday, was one of the bidders, sources said.

4. Housing Authority looks for ways to avoid cash crunch
LOUISA YAN, SCMP 21 February 2004

Delaying repayments and dividends to the government might save the Hong Kong's Housing Authority having to borrow money when its cash balance drops below a crisis level of $8.7 billion in October, an authority member suggested yesterday.

The authority's finance committee announced that it recorded an operating deficit of $1.09 billion in the <121>2003/04 financial year.

The shortfall was mainly due to shrinking income as a result of rent concessions during the Sars outbreak and the freezing of sales of Home Ownership Scheme flats.

But with the listing of the first phase of a scheme to sell its car parks and shopping centres - the proceeds of which are estimated at $16.1 billion in the budget forecast - the authority expects a surplus of $129 million in the coming financial year and a year-end cash balance of $17 billion.

But the authority will not pocket the profits from the listing until March next year, and its deputy finance director, Tam Wing-pong, admitted the cash balance might drop below the minimum requirement of $8.7 billion in October. "It's part of our agreement with the government that we must maintain a cash balance of $8.7 billion at any one time. According to the terms with the government, we would have to find means to get cash so that we would be above the prudence line," he said.

"We are actively considering the means for external financing, maybe short-term loans from banks or, if it is a long-term means, we can consider issuing bonds. But at the moment we do not have a definite plan."

The forecast has not taken into account the extra money - about $4.5 billion - the authority needs to repay public housing tenants if it loses an appeal case on rental charges in April.

Wong Kwun, an authority member and chairman of the Federation of Hong Kong, Kowloon and New Territories Public Housing Estates Resident and Shopowner Organisation, said the easiest solution was to delay repayments and dividends to the government.

These payments will total $5.5 billion this year.

"The government should give allowance to the authority as it is bearing the brunt of the flops of government policies," he said.

According to Mr Wong, these flops include a substantial decline in revenue after the listing of its assets.