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1. Report blasts Tamar project as overpriced

2. Tamar HQ unit cost is twice Two IFC's

3. Diversification the key to a vibrant harbourfront, says planner

4. Tsang rejects meeting with legislators on relocation

5. Developers to launch second-tier reit offers

1. Report blasts Tamar project as overpriced
Leslie Kwoh, The Standard 25 May 2006

Construction costs for the controversial government headquarters at Tamar are almost double that of Hong Kong 's tallest building, Two International Finance Centre.

A study released Wednesday by Wong Kwok-chun, an associate professor of real estate and construction at Hong Kong University, found that the construction per unit of gross floor area at Tamar will cost HK$30,970 - or 94 percent more than the equivalent for the IFC2's main office tower.

The results of the "apples-to-apples" comparison is an indication the government "knows something that the public doesn't" in terms of the design of the complex, according to Wong.

The government has estimated that piling will cost HK$230 million and site works another HK$34 million, but for the IFC2 those two components combined cost only one-third, or HK$89 million.

While Wong said looser ground - a product of reclamation - could be one reason for the higher piling costs, he said the government's refusal to disclose details left much room for uncertainty. Another apparent reason for the cost difference is the government's earmarking of HK$95 million for information technology infrastructure, which Wong said was "unusual" as standard practice stipulates IT particulars should be included under a more general heading. In the IFC2 development, for instance, all infrastructure combined cost HK$67 million.

"From my experience, the price tag is expensive for a complex of that size," he said. "I believe the government already has a design in mind. They know what they're after, they know how they will spend the HK$5 billion, but they're not telling us anything yet."

Wan Chai district councillor and architect Steve Chan Yiu-fai said he felt something was amiss if a government building cost more than a Grade-A commercial building that was the largest kind of office accommodation in the territory.

In Hong Kong , usual practice stipulates that a developer must obtain sample costs from a local benchmark before construction. Any substantial variations between the proposed development and the benchmark must then be listed and justified.

But the government has so far refused to elaborate on the project's specifics, saying it needs funding approval before it can disclose further details.

The high costs could be the result of a number of factors, including the government's tight timetable for the project, according to one local property surveyor who asked to remain anonymous. "The more you rush, the more labor and money it will cost you," he said. Another high-cost factor, he said, was the decision to build all concrete structural units on-site to prevent potential bugging.

Though the government had previously said cost differences necessitated importing precast units from abroad, officials Monday announced that all concrete units including floors, internal and external walls, beams and staircases would be fabricated locally under supervision at a "negligible" cost difference.

In an official response issued Wednesday by the director of administration's office, the government dismissed the study as "erroneous and misleading."

It said: "Given the wrong analysis on the Tamar development project, the government cannot agree with the conclusions drawn."

The statement reiterated that the government estimates unit construction cost for the Tamar development project will be HK$11,600 per square meter, still lower than the HK$13,000 per-unit- cost for Grade-A office buildings. It also said works related to the construction of the proposed two-hectare public square in front of the complex should not be factored into the calculations.

But Wong maintained that even if he excluded costs for external works and landscape - about HK$200 million - there would be little difference in the outcome.

The study was commissioned by the Civic Party.

"The conclusion is startling ... although the government has released many confusing figures, as a political party that firmly believes in an evidence-based approach, we have a duty to reveal the true facts to the people," party vice chairman Albert Lai Kwong- tak said.

Party lawmakers, along with a handful of local concern groups, Wednesday denounced the government's apparent lack of overall planning for the project, saying it would amount to little more than a HK$5 billion "white elephant."

They have vowed to vote against the project's funding proposal, which the government will submit to the Legislative Council Monday.

Meanwhile, at the party's urging, lawmakers on the planning, lands and works panel have agreed to hold a special meeting tomorrow, inviting environmental groups Civic Exchange, Designing Hong Kong Harbour District and World Wildlife Fund to present their three-dimensional alternative vision for the Tamar site.

2. Tamar HQ unit cost is twice Two IFC's
CHLOE LAI and DIKKY SINN , SCMP 25 May 2006

Civic Party leader Audrey Eu speaks at the launch of an "e-card campaign" to raise
public awareness about the Tamar project. Photo: Martin Chan Civic Party leader
Audrey Eu speaks at the launch of an "e-card campaign" to raise public awareness
about the Tamar project. Photo: Martin Chan

The unit cost of building the Tamar project will be almost double that of the Two IFC office tower, a University of Hong Kong specialist has claimed.

Wong Kwok-chun, an associate professor in the university's Centre for Real Estate and Urban Economics, estimated that the Tamar construction cost would be about $30,974 a square metre. The 88-storey tower of the International Finance Centre cost $15,980 a square metre.

This means the total cost for Tamar, including site works, building services, footbridges and contingencies, will be $3.9 billion, compared with $2.9 billion for Two IFC.

The government last night dismissed the comparison as "erroneous and misleading". It has estimated the unit construction cost will be only $11,600 a square metre; this excludes foundation works, unlike Professor Wong's unit cost estimate. The government plans to ask the Legislative Council for $5.17 billion for the project, a figure that includes construction and non-construction costs.

Professor Wong defended his comparison, saying it was based on government information released to Legco and internal documents he had obtained from the IFC.

"I compared like with like. The newest office tower in Central is Two IFC and the two are on similar [locations]," he said. "It is impossible to have two identical sites. We can find only the closest for comparison." He had excluded the government's estimates on fitting and furnishing from his comparison as these were irrelevant to private offices.

Professor Wong described the Tamar project as "financially unsound" and called on the government to release its findings and allow more time for public discussion.

"Unless the government sells the Central Government Offices and the Murray Building , Tamar is too expensive. But there is a strong sentiment in the community that Government Hill be preserved. If the government eventually sells the two sites, it is creating political problems for itself. If it is not selling them, what is the point of keeping two old office buildings?"

Professor Wong carried out the study at the invitation of the Civic Party. The government said his estimates should not count a two-hectare open space, drainage and footbridges as part of the construction cost. "These items should not be counted into the unit construction cost and it should not be assumed that the contingency provision for the entire project would necessarily be spent on building works," a government spokeswoman said.

The Civic Party and five environmental groups have launched an internet campaign against the government plan. They have urged the public to express its concerns to the administration. The groups are Friends of the Earth, WWF Hong Kong, Clear the Air, Save our Shorelines and Designing Hong Kong Harbour District.

3. Diversification the key to a vibrant harbourfront, says planner
MAY CHAN , SCMP 25 May 2006

Hong Kong 's harbourfront needs to be diversified by mixing green areas with commercial and residential development and community use to become vibrant, a Canadian planning official and local harbour activist say.

Larry Beasley, co-director of planning for Vancouver , yesterday cited his city as an example of how to achieve diversity.

"We wanted to bring a diversified pool of people to the harbourfront," Mr Beasley said. "Humanity is value-adding to the city. In the end, the value it adds to the city is equal to, if not greater than, developing for business only."

Mr Beasley was speaking at the Foreign Correspondents' Club, at a seminar on waterfront planning organised by the Canadian Chamber of Commerce.

Drawing on experience in Vancouver , he pointed out that there was a mix of green areas, commercial development, community use and high and low-end residential projects along an extensive spread of waterfront.

High-density development around the harbour would actually help to finance the low-density, high-quality community space that should be blended into the whole harbour development, he said.

His views were endorsed at the seminar by Christine Loh Kung-wai, chief executive of the think-tank Civic Exchange.

Ms Loh challenged the government's development plans for the waterfront, which feature new highways criss-crossing the district, massive buildings - including the new government headquarters at Tamar - and mega shopping malls.

"Our harbourfront is going to be a `highway paradise'," Ms Loh told the conference.

"And the open space promised by government in Tamar is going to be a massive, sun-blasted square.

To protect our harbour front we have to push the government to change the zoning plan of Central and its plans for Tamar."

4. Tsang rejects meeting with legislators on relocation
DIKKY SINN , SCMP 25 May 2006

The chief executive has turned down an invitation from 20 legislators to discuss the controversial Tamar development project.

In a written reply to the lawmakers, Donald Tsang Yam-kuen's private secretary directed them to the director of administration and relevant departments to discuss the project, which would see relocation of the government headquarters in Central to the waterfront site.

The letter said the government had explained the rationale and details of the project eight times at various Legislative Council panel and sub-committee meetings.

The request was sent to Mr Tsang last week by independent lawmaker Kwok Ka-ki on behalf of his colleagues, who invited the chief executive to discuss the project before next Monday, when it will be examined by the legislature's public works subcommittee.

The $5.1 billion funding request for the project will be tabled at the Finance Committee next month.

Dr Kwok said it was absurd that Mr Tsang had attended a caucus meeting of the Democratic Alliance for the Betterment and Progress of Hong Kong last month to lobby support for the project, but rejected the lawmakers' invitation.

"There was no condition for our meeting. We only wanted to discuss the issue," the lawmaker said. "The chief executive has attached so much importance to the project, but he's not seeing us. He doesn't respect the 20 pro-democracy legislators. As a chief executive, he is very small-minded."

Civic Party leader Audrey Eu Yuet-mee said Mr Tsang's refusal to meet the legislators failed to reflect strong governance.

"It shows his definition of strong governance can be interpreted as going ahead with his plan while ignoring public opinion," she said.

Her party is expected to vote against the project.

Democratic Party chairman Lee Wing-tat said his party had not yet decided whether to back the proposed project.

5. Developers to launch second-tier reit offers
PEGGY SITO , SCMP 25 May 2006

Sun Hung Kai Properties (SHKP) and Henderson Land Development yesterday unveiled the details of two planned real estate investment trusts that will offer investors a chance to buy a share of the cash flow from a collection of less desirable industrial, office and retail properties in Hong Kong 's outlying districts.

SHKP, the city's biggest developer by market value, said its proposed reit, Sun Millennium Real Estate Investment Trust, would consist of 10 industrial, office and mixed-use buildings in secondary locations such as Kwun Tong, Cheung Sha Wan and Tsuen Wan.

Sunlight Real Estate Investment Trust - the reit to be jointly launched by Henderson Land and its chairman Lee Shau-kee's private investment arm Shau Kee Financial Enterprises, will own a package of 20 grade-B office and retail properties in districts such as Mongkok, Sheung Wan and Tseung Kwan O. Of the 20 properties, 11 come from Henderson Land and 9 from Shau Kee Financial.

SHKP said it would keep 36 per cent of the units in its planned Sun Millennium reit.

Henderson Land said it would retain no more than 5 per cent of the units in Sunlight reit while Shau Kee Financial Enterprises will subscribe to no more than 25 per cent.

Neither SHKP nor Henderson disclosed the timing or planned size of the sales. But sources have said SHKP will seek $3.1 billion from its reit while Henderson-Lee would aim for about $3.5 billion. Both are expected to come to market next month at the earliest.

But analysts warned that the two developers may not fetch as much as they want given the poor performance of Champion Reit, whose shares plunged 15.68 per cent to $4.30 on debut yesterday.

"Properties in the two proposed reits are less attractive than Citibank Plaza owned by Champion," said Dao Heng Securities research head Eric Yuen Chi-fung. I believe investors will expect the issuers to offer a yield higher than [the 5.46 per cent] offered by Champion,"

"If the yield is too high," he added, "the developers will [have to sell] the assets at a low price. Will [they] want to sell them at a big discount?" Setting the price, he said, "is really a headache".

The major asset in SHKP's reit is the Millennium City 1 and 3 office and retail complexes in Kwun Tong. Other properties include commercial buildings in Cheung Sha Wan and industrial buildings in Kwun Tong and Kwai Chung.

The major valuable assets set for inclusion in Sunlight reit are Metro City Phase I shopping mall in Tseung Kwan O and the Sheung Shui Centre Shopping Arcade in Sheung Shui, along with interests in grade-B office buildings at 248 Queen's Road East and Java Road 108 Commercial Centre,

"Those are not prime properties," said Prudential Brokerage associate director Kingston Lin.