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1. Kowloon canopy a must: Suen

2. Great Eagle disapproves of cultural hub tender

3. Landlord dumps Tuen Mun industrial sites

1. Kowloon canopy a must: Suen
MARTIN WONG, SCMP 20 May 2004

The giant canopy over the controversial West Kowloon cultural district must be built, since it is the central design component of the project, said acting Chief Secretary Michael Suen Ming-yeung in Legco yesterday.

He was referring to a comment - made in the Legislative Council last month by Kwan Pak-lam, a Territory Development Department project manager - that the canopy might be scrapped if developers found it too expensive.

Mr Kwan should not have made the comment, Mr Suen said.

The Lord Foster-designed canopy would be a "must" for the project, he said. Tenders made without providing for the canopy would not be considered by the government.

2. Great Eagle disapproves of cultural hub tender
PEGGY SITO and SOPHIE TAYLOR, SCMP 20 May 2004

Great Eagle Holdings has become the latest developer to express its disappointment in the government's tendering method for the controversial West Kowloon cultural hub.

Deputy chairman and managing director Lo Ka-shui said granting the $24 billion project to a single developer would result in limited competition as there were only a few companies financially capable of bidding for the mega development.

Mr Lo, who is also vice-president of the Real Estate Developers Association, joins a chorus of other smaller property players who have said the form of tendering favoured big developers.

"We are not big enough to bid for the project alone. But it's not sensible to co-operate with partners to run a project for 30 years," he said after the firm's annual general meeting.

Designed by British architect Lord Norman Foster, the massive project, to be built on a 40-hectare reclaimed site near Kowloon station, is aimed at turning Hong Kong into Asia's cultural and artistic hub.

The winner will build and operate the project, with 29 per cent of the development set aside for cultural pursuits and the remaining space for residential, commercial and other uses, for 30 years.

"A majority of Real Estate Developers Association members disagree with the form of tendering," Mr Lo said.

But he did not oppose big developers bidding for the project. "If the government gives you hefty gains, why should you reject?" he said.

Henderson Land Development has expressed interest in submitting a sole bid for the project, while Sun Hung Kai Properties is in talks with Cheung Kong (Holdings) over a joint bid. However, no joint venture has been formed between the two firms yet.

Mr Lo said the firm would consider disposing of some assets to cut liabilities, now at $12 billion, in the wake of the imminent interest-rate rise in the United States.

"With total liabilities of $12 billion, a one percentage point rise in the interest rate would raise the company's finance costs by $120 million," he said.

"If the economy is good, then any rise in the interest rate will have little effect. Both [Hong Kong's and the US's] economies are growing. The important thing is for economic growth to rise faster than any rise in interest rates."

Mr Lo also argued against the government's idea of using property subsidies to finance other industries. "The government should not interfere in the economy ... it only pulls down the entire economy."

3. Landlord dumps Tuen Mun industrial sites
PEGGY SITO, SCMP 20 May 2004

Twenty years ago, a developer who owned industrial land was considered a farmer with a goose that laid golden eggs. Not any more.

These days, landlords seem only too happy to dump their industrial land sites, which they see as having deteriorated into negative assets. Others are seeking to transform industrial property usage to gain some kind of profit out of their possessions.

Small developer Hon Kwok Land Investment raised eyebrows and created property history recently when it took the most unusual move of surrendering two industrial lots it owned to the government - at zero cost.

Hon Kwok bought the sites on Hoi Wah Road, Tuen Mun, at a government land auction eight years ago.

Property consultants said the surrender, in which the developer unconditionally gave up its development rights for the sites in order to cut its losses, reflected a structural problem in the industrial real estate sector.

"We considered several options for developing the sites but none of them worked," said managing director Herman Fung Man-hei.

"It proved impossible to develop the project. Building costs are now higher than the selling price for completed industrial space."

Mr Fung said the average construction cost for industrial space was between $600 per square foot and $700 per square foot, excluding interest payments and land costs.

"Prices of industrial space have plunged to as low as just over $100 per square foot. And the demand keeps falling."

Mr Fung said the company was fined more than $500,000 for failing to complete the construction of the premises in accordance with the building covenant. "We had plans to rezone the sites for residential use but the government rejected [them]. As we were not going to build an industrial property, surrendering the premises made more sense than continuing to pay the government fines."

But he felt the government should not have imposed charges for the delay in completion because industrial sites had been trading at negative values.

The price of industrial land began to fall during the territory's economic restructuring in the 1980s, when labour-intensive industries started to move out of Hong Kong.

The decline in demand for industrial premises over the past decade has created a reservoir of unused or underutilised industrial floor space and a surplus of industrial land. In 1999, the government estimated a potential surplus of 66 hectares of industrial land by 2016.

Gregory Ku, national director at Jones Lang LaSalle, said it would be a challenge to persuade developers to build industrial properties because such investments were no longer financially viable.

Lately, developers had been putting industrial space to ancillary office or retail use, he said.

The vacancy rate at private industrial buildings in the city was about 10 per cent in 2002, according to the Rating and Valuation Department. Many are being used for non-industrial purposes.

Senior government planner Amy Cheung said the government was taking a proactive but cautious approach to freeing up industrial land for other uses.

"The land use typology is more flexible now," Ms Cheung said.

The government is considering various possibilities for industrial land, such as transforming the spaces into adult education centres or putting them to commercial use.

Three years ago, the government introduced guidelines for developing industrial land for business use, freeing up 200 hectares of land in districts such as Kwun Tong, Kowloon Bay and Kwai Chung to be used for a mix of non-polluting industrial, office, hotel and retail purposes.

As part of a long-term strategy extending to 2030, the government was also considering the introduction of loft apartments - popular in western countries.

Lofts are units used for residential purposes in buildings originally constructed for industrial use.

Ms Cheung said the study showed no technical obstacle to introducing lofts to Hong Kong, but market demand would be the first consideration.