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1. Swire gets nod on plan to double office space

1. Swire gets nod on plan to double office space
Dennis Eng, The Standard 12 June 2003

Swire Properties, the largest commercial landlord in Quarry Bay, has received the go-ahead to almost double the gross floor area of the 10th office building in its Taikoo Place portfolio without compensating the government with additional land-use fees.

Swire said the project calls for the demolition of the Aik San Factory Building and the Melbourne Industrial Building to make way for a proposed 69-storey office building in 2006.

The development, at the junction of Westlands Road and Tai Koo Shing Road, includes the site of an existing putting green and yields 1.55 million square feet of office space for a market value of HK$4.7 billion.

Swire's original plans, approved by the Buildings Department two years ago, involved a 36-storey office building with a basement level to replace the 23-storey Melbourne Industrial Building and the 22-storey Aik San Factory Building. That plan yielded a gross floor area of 817,034 square feet.

The revised blueprint for the unnamed building, located at 14-16 Westlands Road, will add about 730,000 square feet and boost its market value by about HK$2.2 billion. There will also be two levels of carpark spaces in the basement, Swire said.

South China Research analyst Patrick Pong warned that Swire, which owned about half of the office space in the area, ``may pull out altogether if commercial rents there fall below the current level of HK$13 or HK$14 per square foot''.

``International Finance Centre 2 is not even fully leased yet, so demand for grade-A office space is still low and may be down 15 per cent this year,'' Pong said.

``But Swire is obviously looking at the longer term as there are still three years to the project's completion. With no extra fees to pay to the government, there's no harm in doubling the height of the development as it can always lower the number of storeys to suit its needs.''

The original leases for the two industrial buildings on the site allow the properties to be converted into grade-A offices while there are no such construction restrictions regarding the adjacent putting green, Swire said.

One leading analyst with a United States investment firm noted that Swire was in no rush to expand its commercial portfolio in Quarry Bay and was instead focusing on the third phase of its more lucrative Pacific Place development.

``The core business of Taikoo Place is mainly telecommunications, media and technology clients and Cyberport is giving them competition there. But Pacific Place is real because retail space is Swire's strength,'' he said.

Three Pacific Place commercial office building is to be released next year. Swire was in discussions with the government to construct subways linking the MTR Admiralty Station and Three Pacific Place.

According to Swire, construction on the Quarry Bay site is due to begin in August or September. The developer acquired the two industrial buildings using a little known Land Tribunal ordinance regarding a compulsory sale. Swire bought out minority shareholders of the Aik San Factory Building in 2001 and acquired 100 per cent of Melbourne Industrial Building last year.

The law firm of Johnson Stokes and Master advised Swire on the redevelopment of the site.