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1. Fresh interest in old buildings

2. LCQ12: Redevelopment project in Kennedy Town

3. LCQ5: Hunghom Peninsula

4. Building plans approved in January

1. Fresh interest in old buildings
ERNEST KONG , SCMP 24 February 2005

Old buildings are coming increasingly into the limelight for those who see a future in redeveloping aged properties.

One old property in the news in that connection is Castle Steps in Mid-Levels.

Swire Properties has plans for the 50-year-old, 22-unit property, which comes up for compulsory sale for redevelopment at an auction scheduled for March 11.

This will be the second time a residential property is acquired by enforced auction under a 1999 ordinance for the purposes of redevelopment.

The first was the 36-year-old Lai Sing Court, on Tai Hang Road, which Hongkong Land acquired for $1.71 billion at a forced public auction last month. Hongkong Land, which campaigned for five years to acquire the property, engaged in a 40-minute battle with an anonymous bidder, thought to be Cheung Kong (Holdings), before winning the site.

According to a Swire Properties spokeswoman, the company is not expecting any challenges from rivals at the auction.

"The property comprises only four lots and does not have much potential in itself," the spokes- woman said.

"But it is part of our [182-unit] residential project on Seymour Road. We have already acquired all ownership in an adjacent building. We had to force an auction because we were unable to acquire a small portion of Castle Steps."

The Buildings Department has already granted Swire approval to build a 63-storey residential tower on the Seymour Road site.

Under the ordinance, property owners holding more than 90 per cent of a building can apply to the Lands Tribunal for an order to force the sale of all properties in the building.

The government plans to lower the minimum ownership limit to 80 per cent for enforced auction in the case of buildings of five to nine units, because developers may face difficulty enforcing an auction even when they have possession of all units but one in a block.

"Relaxing the law on five- to nine-unit buildings may not sound significant, but in fact there are a lot of old buildings in that category," a surveyor said.

"The Castle Steps property up for auction is just one of many."

Charles Chan Chiu-kwok, executive director of property consultant Chesterton Petty, said leading developers with the resources were buying up old buildings now that the property market was gaining speed.

Chesterton handled the Lai Sing Court auction and will be the auctioneer for Castle Steps.

"Land supply is limited and most projects alongside railways are in non-core areas. And there are no Urban Renewal Authority projects in high-end residential areas on the horizon," Mr Chan said.

He said it was not easy to assess the impact of the compulsory sale ordinance because some owners had agreed to sell their properties when they heard the developer had applied to the Lands Tribunal for a forced auction.

In December, the property market rebound prompted a collective sale of more than 90 per cent of the ownership of a low-rise residential block on Alnwick Road, Kowloon Tong, by 46 individual owners.

Cheung Kong (Holdings) is believed to have bought the ownership at a public tender for more than $240 million.

Meanwhile, small developers are less excited by old buildings because the process of acquisition can drag on for years and the outcome is uncertain.

Kowloon Development general marketing and sales manager Steven Law Yu-wing said developers with small portfolios could not  justify the time and effort that was required to redevelop old buildings.

"A more viable option for acquiring projects in urban areas is to bid for Urban Renewal Authority redevelopment projects," Mr Law said.

"There was keen competition last year for available projects, and many of them were won by prominent property players. I expect the authority to put more projects on the market in future."

2. LCQ12: Redevelopment project in Kennedy Town
Hong Kong Government, 23 February 2005

Following is a question by the Hon Ma Lik and a written reply by the Secretary for Housing, Planning and Lands, Mr Michael Suen, in the Legislative Council today (February 23):

Question:

It has been reported that the Urban Redevelopment Authority ("URA") had commenced the private sale of the residential units of a property redevelopment project in Kennedy Town before putting them on public sale recently. The arrangement was criticised by some members of the public as chaotic, unfair and lacking in transparency. In this connection, will the Government inform this Council whether it knows:

(a) the URA's arrangements for selling redevelopment properties in the past and the principles it followed;

(b)  how the sale arrangement for projects jointly developed by URA and private developers compares to that for URA's own projects, and whether URA has assessed if the sale arrangement for these joint projects is reasonable and in line with the principles for the operation of public organisations, i.e. being open, transparent and accountable to the public, if it has, of the assessment results; and

(c)  whether URA will require that the residential units of property redevelopment projects participated by URA should all be sold in an open and transparent manner in future; if it will not, the reasons for that?

Reply:

Madam President,

The role of the Government is to formulate and co-ordinate the overall urban renewal policy and to monitor the implementation of the urban renewal programme.  The Urban Renewal Authority (URA) is an independent statutory body set up under the Urban Renewal Authority Ordinance (URAO) to undertake urban renewal. The URA Board is empowered to determine its own operational matters, including the sale arrangements of redevelopment properties with its joint venture partners.

We understand that the URA and its joint venture partner have recently put the redevelopment properties of the Kennedy Town project to sale through both internal and public sales. On the day when the internal sale buyers selected the flats and completed the purchase procedures, there were jostles among some of the prospective buyers but the situation was quickly brought under control. During the ensuing public sale, a registration-and-ballot mechanism was adopted and the sale was conducted in a smooth and orderly manner.

Regarding the three-part question asked by the Honourable Ma Lik, we have sought clarifications from the URA and our reply is as follows –

(a)  When putting redevelopment properties to sale in the open market, the URA and its joint venture partners have to comply with the relevant Government rules and regulations as well as follow the prevailing market practices and mode of operation. Before making the relevant decision, the URA has to carefully consider various important factors, including the following –

(i)  as the URA is funded by public money, the URAO stipulates that the URA shall exercise due care and diligence in the handling of its finances, and

(ii)  when marketing its redevelopment properties, the URA and its joint venture partners have to face open competition in the property market, no different from any other private developer.

Generally speaking, the URA's redevelopment properties are put to sale through internal and public sales.

(b)  Since its establishment in 2001, the URA has generally taken the approach of working with joint venture partners in redeveloping and selling redevelopment properties. The mode of sale adopted by the URA and its joint venture partners has largely followed the prevailing market practices (i.e. through internal and public sales). The arrangements must also be in compliance with the relevant Government rules and regulations. These practices are reasonable and are generally well-known to and accepted by the public.

(c)  In future, the URA will continue to abide by the relevant Government rules and regulations and follow the mode of operation adopted by the open property market when determining its sale arrangements.

3. LCQ5: Hunghom Peninsula
Hong Kong Government, 23 February 2005

Following is a question by the Hon Ronny Tong and a reply by the Secretary for Housing, Planning and Lands, Mr Michael Suen, in the Legislative Council today (February 23):

Question:

In its reply to me on 31st December last year, the Administration said that a lease modification to allow for redevelopment was in principle acceptable on the basis that if the scheme proposed accorded with the planning intention.  However, if the developers of Hunghom Peninsula applied for a modification to allow for redevelopment, the Administration might consider rejecting the application.  In this connection, will the Government inform this Council of:

(a) the time when the Government was legally advised that it had the right to reject the application by the developers of Hunghom Peninsula for a lease modification to allow for redevelopment; if the advice was received before 5th July of last year, why did the Administration still write on that day to remind the developer that if any redevelopment of the lot did not accord with the Master Layout Plans and the Approved Landscaping Proposals, an application for lease modification had to be made to the District Lands Officer, Kowloon West; if the advice was received after 5th July, why had the Administration not sought legal advice earlier;

(b) the time at which it was confirmed that the Administration had the right to reject the application from the developers of Hunghom Peninsula for a lease modification to allow for redevelopment; why did the Administration not inform the developer right away; and

(c) the time when the Administration decided not to accept the developer's application for lease modification and the grounds for the decision?

Reply:

Madam President,

All the leases under the Private Sector Participation Scheme contain standard conditions to ensure that in case buildings constructed under the Scheme are demolished or redeveloped if needed in future, they are carried out in accordance with the lease conditions.  The lease conditions of Hunghom Peninsula concerning demolition or redevelopment are no exception.

According to the lease of Hunghom Peninsula:

(a) Special Condition (11)(a) provides that the lot shall not be developed or redeveloped except in accordance with the Lease Conditions, the Master Layout Plans and the Approved Landscaping Proposals, and no building which is not shown on the Master Layout Plans and the Approved Landscaping Proposals shall be constructed.

(b) General Condition (7)(a) provides that the Purchaser shall maintain all buildings in accordance with the approved building plan without variation or modification thereto.  General Condition (7)(b) stipulates that in the event of the demolition of any building then standing on the lot, the Purchaser shall replace the same either by -

(1) building or buildings of the same type and of no less gross floor area; or

(2) building or buildings of such type and value as shall be approved by the Director of Lands (the Director).

In the event of demolition, according to General Condition (7)(b), the Purchaser shall within the stipulated timeframe apply to the Director for consent to carry out redevelopment, and shall commence redevelopment work within the stipulated timeframe and complete the said redevelopment to the satisfaction of and within such time limit as laid down by the Director.  

The Director of Lands has the authority to examine and approve applications for lease modification.  Applications vary from case to case.  Each application will have to be considered having regard to its details and the prevailing land policy.  Hence, it is not possible to generalise on the outcome.  As Government indicated in the reply of 31 December 2004 to the Hon Ronny Tong : "A lease modification to allow for redevelopment was, in principle, acceptable on the basis that if the scheme proposed accorded with the planning intention, it would have been entirely within land administration policy to have processed it.  Subsequently, the Administration took the view that consideration should be given, in the event of an application from the developer for a modification to allow for redevelopment of Hunghom Peninsula, to not agreeing to such a modification."

My reply to the three-part question is as follows:

(a) The Director of Lands has the authority to examine and approve applications for lease modification.  The Legal Advisory and Conveyancing Office provides legal advice in respect of lease conditions.  The need to seek legal advice from outside the Lands Department has not arisen.  In the light of some press reports that the developers of Hunghom Peninsula had yet to take a final view on its redevelopment proposals, the Legal Advisory and Conveyancing Office sent a letter to the developers on 5 July 2004, mentioning that "should the developers wish to proceed with any redevelopment which does not accord with the Master Layout Plans or the Approved Landscaping Proposals, an application for lease modification should be made to the District Lands Officer, Kowloon West".  It would only be prudent for Government to do so.  The letter does not constitute any agreement or otherwise to such an application on the part of Government.

(b) The Director of Lands has the authority to examine and approve applications for lease modification and to decide whether or not to agree to a lease modification.  Therefore, there is no need to seek legal advice on this.  Also, it does not bring into question a need to inform the developers.

(c) For the sake of clarity, Government has so far not received any application for lease modification from the developers of Hunghom Peninsula for carrying out redevelopment.  Therefore, there is no question of Government agreeing or not agreeing to a lease modification from the developers concerned.

4. Building plans approved in January
Hong Kong Government, 23 February 2005

The Buildings Department approved 19 building plans in January -- seven on Hong Kong Island, nine in Kowloon and three in the New Territories.

Of the approved plans, 11 were for apartment and apartment/commercial developments, four were for commercial developments, and four were for community services developments.

In the same month, consent was given for work to start on five building projects that, when completed, will provide 45,596 square metres of gross floor area for domestic use, involving 383 units, and 56,484 square metres of gross floor area for non-domestic use.

The department also issued 22 occupation permits -- six on Hong Kong Island, six in Kowloon and 10 in the New Territories.

Of the buildings certified for occupation, the gross floor areas for domestic use were 18,905 square metres, involving 93 units, and 131,852 square metres for non-domestic use.

The declared cost of the new buildings completed in January totalled about $3.08 billion.

In addition, eight demolition consents involving eight building structures were issued.

The department received 1,784 complaints against unauthorised building works in January, and issued 1,406 removal orders on unauthorised works.