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1. It's official, Jack So will join PCCW

2. Central building sold for $842.8m

3. Seven accused of deceiving Housing Authority

4. Expansion to cost Yue Yuen US$160m

5. SHKP to invest $10b in Yuen Long project

6. Simplified fees aim to spur changes to industrial sites

1. It's official, Jack So will join PCCW
Georgina Lee, The Standard 18 June 2003

Confirming market speculation, PCCW has announced that outgoing MTR Corp chairman Jack So will join the company as group managing director and deputy chairman, taking over the role of chief executive currently held by Richard Li.

The dominant fixed-line company said yesterday that Li would remain as chairman and executive director of the group. The position of chief executive would disappear with So's assumption of his new position no later than September 24 this year.

``Over the past 12 months, we have been strengthening the senior management of PCCW,'' Li said in a statement. ``Jack's appointment represents a significant achievement for us ... I am delighted that a person of Jack's talent, experience and knowledge is joining PCCW.''

The splitting of dual chairman-CEO role has been expected. Li has said in the past that PCCW might bring in an operational executive to take over his role of chief executive. The appointment of So completes an almost two-year search.

The splitting of Li's roles has been widely interpreted by the market as indicating that Li will now take a back seat from the day-to-day operations of the company. Speculation has gone as far as to suggest that Li might seek new challenges in another company.

So's contract with the MTR Corp will expire in September. With his departure, the railway operator has said it will recruit separate candidates for the posts of CEO and non-executive chairman.

PCCW said that Li had agreed to transfer 6.483 million PCCW shares to So, in three equal instalments over the first three years of his employment with the company.

The amount represents 0.14 per cent of PCCW's outstanding shares as at January.

PCCW closed up 5.94 per cent yesterday prior to the announcement, at HK$5.35.

2. Central building sold for $842.8m
Nicole Kwok , The Standard 18 June 2003

Morgan Stanley's real estate fund and its local partner Pamfleet have bought the 38-storey office and retail building Vicwood Plaza for HK$842.8 million.

Morgan Stanley said the purchase of the Central commercial tower was for long-term investment.

The transaction represents the first successful entire block investment in commercial properties by an international institutional investor and also the largest property transaction in Hong Kong this year, according to sale arranger Jones Lang LaSalle.

The 400,000-square-foot commercial building at 199 Des Voeux Road was sold by Vicwood Group, a closely held Hong Kong company with interests in property and building materials.

Sonny Kalsi, managing director and head of Morgan Stanley Real Estate Funds Asia, said the fund believed the timing was right for a major purchase in the Hong Kong commercial property market.

``After five years of declining values, we believe that Hong Kong property is at or near the bottom of the cycle and poised for a substantial recovery over the mid term,'' he said.

The fund would continue to look for other investment opportunities in Hong Kong.

Prices of commercial buildings in Hong Kong have fallen by about 60 per cent since their peak in 1997 and the city's best lending rate has fallen to a record low.

There have been 27 buildings sold in Hong Kong for a total of HK$4.36 billion this year, compared with 31 for HK$5.78 billion in the first six months of 2002, Jones Lang LaSalle told Bloomberg.

``This is a sign that investors are actively seeking investment opportunities to capitalise on the record-low interest environment despite the volatile market,'' Tony Lo, the head of investment department at Jones Lang LaSalle, said.

The building was sold through private negotiations.

It is known that several foreign investment funds, local companies and developers including Kowloon Development had been in negotiations to buy the property.

Vicwood Group bought the property for HK$600 million in 1988 and had intended to sell the property for about HK$1.2 billion, sources said. Vicwood Plaza is currently 70 per cent let and generating a monthly rental of about HK$4.8 million, or a yield of about 6.8 per cent. It is expected rental yield could reach 8.9 per cent if full occupancy were achieved.

CB Richard Ellis executive director of investment properties Henry Lam said grade-A office rentals had maintained an average of 6 per cent to 9 per cent, depending on properties' locations and the contract terms.

He said the transaction price of Vicwood Plaza, which translates to about HK$2,100 per square foot, was at the market value.

Several entire block transactions have been completed over the past few months, including GD Real Estate Tower and Workington Tower in Sheung Wan, East Town Building, Tung Sung Building and 88 Gloucester Road in Wan Chai.

3. Seven accused of deceiving Housing Authority
MAGDALEN CHOW, SCMP 18 June 2003

Seven men went on trial in the Court of First Instance yesterday accused of deceiving the Hong Kong Housing Authority over substandard piling at a Tin Shui Wai Home Ownership Scheme development project.

In opening the case, prosecutor Peter Callaghan told the court the concrete pile foundations of two buildings at Tin Chung Court, Tin Shui Wai, were shorter than they should have been.

It was found in the summer of 1999 that lifts could not be installed in the two blocks because they were tilting due to settlement of the foundations, the court heard.

The Tin Shui Wai residential development comprised six blocks and two schools. In September 1996, the foundation contract of the project was awarded to Franki Contractors - which later changed its identity to B+B Construction Company Limited, the court heard.

The jury of nine heard the seven defendants agreed to defraud the Hong Kong Housing Authority, and its contract manager and project supervisor Hsin Yieh Architects & Associates Limited (HYA), by convincing it that the piles conformed with the contract specifications in a bid to avoid additional cost and delay.

"It is alleged that the method used in the construction of the piles did not conform to the specifications pursuant to the contract resulting in sub-standard piling," Mr Callaghan said.

It was part of the prosecution's case that the Housing Authority was deceived into paying for the work upon submission of an alleged false registered structural engineer report dated July 7, 1997.

The seven accused were Lo Kwan-shing, 66, registered structural engineer; So Wing-pui, 57, senior design engineer; Wong Shun-wah, 37, quality control engineer; all employed by B + B Construction.

Others are Chan Tit-shau, 46, former geotechnical engineer of Joseph Chow & Partners, the geotechnical consultant to HYA; To Man-kum, 32, assistant clerk of works; Lau Kuen-fai, 28 and Lau Sai-man, both works supervisor. The trio was employed by HYA.

All defendants have pleaded not guilty to a total of three charge of conspiracy to defraud. To and Lau have both denied a total of five charges of using a false instrument.

The offences allegedly took place between September 1996 and October 1997. The hearing continues today before Mr Justice Pang Kin-kee.

4. Expansion to cost Yue Yuen US$160m
PEGGY SITO, SCMP 18 June 2003

Blue chip Yue Yuen Industrial Holdings will spend at least US$160 million this month to expand production facilities and acquire new businesses in a bid to sustain its leading position in the global sporting shoe industry.

Executive director Steve Li said the company would fork out up to US$20 million to acquire two shoe and garment-related projects as part of the expansion.

The proposed purchases, which were expected to be clinched in the second half, would further strengthen its core shoe-making business and newly developed garment operation, Mr Li said.

Yue Yuen would also use about US$140 million to boost shoe production lines across China, Vietnam and Indonesia.

Mr Li said the firm would make 150 million pairs of shoes this year.

In the first half this year, the company already increased the number of production lines, mainly in Vietnam, by 25 to 279. More lines would be established in the second half, Mr Li said.

At present, the firm has 156 production lines in Guangdong, 72 in Ho Chi Minh City and 51 on Java Island.

Yue Yuen, which makes shoes for Nike, Reebok and Adidas, diversified into garment making with the acquisition of a 73 per cent stake in casual wear garment manufacturer Pro Kingtex last month.

Mr Li said gross profit margin for garment manufacturing was 5 to 8 per cent, compared with 26 per cent for shoemaking. But the diversification would create a synergy at the customer level, he said.

Investor relations director Terry Ip said the company was in preparation for making apparels for one of its key clients, but he did not identify the potential buyer.

In the retail sector, Yue Yuen has established a wholesale network of 550 distributors and more than 90 retail stores and counters in cities such as Guangzhou, Shanghai and Beijing.

Mr Li said the company hoped to establish a large-scale retail network in China by 2008.

Yue Yuen, which posted a 37 per cent year-on-year rise in interim profit to US$152 million last month, is expected to report a 29.66 per cent increase in full-year profit to $296.9 million, according to brokers surveyed by Thomson First Call. The forecast has been revised upwards by nearly 7 per cent in the past month.

5. SHKP to invest $10b in Yuen Long project
SOPHIA WONG, SCMP 18 June 2003

The YoHo Town site in Yuen Long. SHKP has invited various business partners to provide quality goods and services for its residents. Picture by Oliver Tsang

Sun Hung Kai Properties (SHKP), one of the largest developers in Hong Kong, is spending HK$10 billion to create a landmark community in Yuen Long as a model for future large-scale residential developments.

Alfred So Chung-keung, the executive director of SHKP marketing subsidiary Sun Hung Kai Real Estate Agency, said SHKP was building a new model for future developments with its pioneer project, YoHo Town.

The project is near the Yuen Long Station along the West Rail, which is due to begin operations this year.

Phase one consists of more than 2,000 flats, due to be completed by the first half of next year - making it one of the biggest developments coming up for pre-sale this year.

YoHo stood for Young Home, Mr So said, but buyers might not be only young couples.

"The project emphasises joy of living in a comprehensive community," he said. "Buyers can be everyone looking for a happy life. Here, we bring in the latest technology and much creativity."

SHKP has invited various business partners, including Samsung, Starbucks and fashion designer Johanna Ho, to provide quality and professional goods and services for the residents of YoHo Town.

"We hope the people living here have nothing to worry about. The community will be self-sufficient, with a clean and healthy living environment, comprehensive dining, shopping, entertainment, education and transportation facilities," he said.

"YoHo is a brand with its own development concept."

The concept originates from New Town Plaza - the first large-scale private residential and commercial complex developed by SHKP above Sha Tin Station on the Kowloon-Canton Railway (East Rail) in the early 1980s.

New Town Plaza helped transform Sha Tin from a rural area into a comprehensive community of middle-income families relocated from Kowloon and the New Territories, Mr So said.

"Sha Tin was lacking infrastructure and the population was low before [New Town Plaza was completed].

"When the project was finished, a bus terminal together with a nearby railway station provided convenient transportation for living and shopping," he said.

YoHo Town had similar advantages as it was within a new transportation hub in the western New Territories. Mr So said a bus terminal would be incorporated into the project to provide multi-routes connecting other areas in Hong Kong as well as the mainland.

YoHo Town consisted of three phases to be completed within the next five to six years, said Mr So. The investment cost for the whole development was estimated at HK$10 billion. The first phase, offering more than 2,000 residential units, would be released for pre-sale soon.

Mr So said about 70 per cent of the units in phase one had two bedrooms and the rest had three bedrooms.

A shopping mall of about one million square feet would be built in the retail podium at a cost of about HK$3 billion.

SHKP was planning 24-hour business operations within the mall to increase flexibility, but Mr So said details were still under consideration.

He said planning for phases two and three, including the design of the mall, had not been finalised, pending land premium assessment. The developer has to pay a land premium to have the land converted from agricultural to residential and retail use.

According to the company's Web site, YoHo Town consists of two lots.

One spans more than two hectares and provides a gross floor area of about 1.2 million sq ft; the other is about three hectares and provides a gross floor area of 1.7 million sq ft.

Mr So said the focus of home buying was shifting to the northern New Territories as Hong Kong was integrating with the mainland.

SHKP believed Yuen Long would be a huge hinterland and was targeting additional development opportunities in the area.

The company was interested in another large residential and retail development above Yuen Long Station.
The multibillion-dollar development package could provide several thousands of units and is expected to be tendered for sale by the Kowloon-Canton Railway Corp.

6. Simplified fees aim to spur changes to industrial sites
KENNETH KO, SCMP 18 June 2003

The government has introduced standard waiver fees to encourage developers to convert underutilised industrial buildings for commercial use.

The new mechanism, unveiled by the Lands Department, aims to speed up the processing of applications from developers or landlords to change the use of their industrial premises.

A department spokesman said the main aim of the simplified procedure was to make it easier to utilise otherwise idle industrial premises.

In the past, negotiations between landlords and the government over the size of waiver fees have tended to drag on and affect the progress of processing applications.

Adopting standard waiver fees is expected to simplify the procedure and speed up approval.

The standard rates will be charged in accordance with the permitted uses under two categories.

In the first category, the uses vary from office operations to telecommunications and production studios, while in the second, uses range from art studios to travel agencies and investment brokerages. Residential and hotel uses are excluded.

Developers or landlords can pay the fees annually or as a one-off charge.

Standard rates per annum range from HK$21.27 to HK$28.60 per square foot based on the internal floor area for properties in urban areas, and from HK$15.97 to HK$21.83 per square foot in the New Territories.

The one-off rates for lifetime waivers range from HK$193 to HK$260 per square foot in urban areas and from HK$145 to HK$198 per square foot in the New Territories.

"Initially, we aim to process and issue such waivers not later than two months from the date of receipt of a valid application," the Lands Department spokesman said.

"Another benefit of the new procedure is that owners can be certain about the amount of waiver fees that they are required to pay if their applications are approved."

He also said the size of the waiver fee was a key factor for owners considering whether to put their industrial premises to other uses.

The standard rates will not apply to premises on basement, ground or podium floors. Waiver fees for premises in these locations will be subject to individual assessment.

The waiver letters to be issued by the Lands Department will cover only the user aspect of the land leases for the industrial premises concerned.

Owners will need to separately approach other relevant departments and authorities, including the Town Planning Board, Fire Services Department and the Building Authority, to obtain other necessary approval to change the use of their premises.