News Stories:

Click-on these handy "jump links" to quickly access the news item
you're looking for.

1. Works plan hit as ill-advised

2. Casino win on cards for Leighton venture

3. HKR plans $2b hotel complex on Lantau

4. Wynn bets on cheap loan deal for casino

5. A lot sold for $1,010 million at land auction

1. Works plan hit as ill-advised
Danny Chung, The Standard 15 June 2004

Plans by the government to restrict the role of dispute-resolution advisers on civil engineering projects has been criticised by a leading construction industry consultant.

Battersby Kingsfield group managing director John Battersby said the move is ``extremely short-sighted''.

The 36-year industry veteran, who has worked on six projects as a dispute adviser, said civil engineering projects - including road, bridge and drainage schemes - gave rise to more complex disputes than building schemes.

These include wrangles over site access, interface issues with different government departments and trades such as mechanical and electrical engineering services, poor ground conditions and extensions of time to complete the works.

Fighting disputes costs contractors and the government billions of dollars in money and time, both internally and through the employment of specialist lawyers and consultants.

He said it is no surprise that the Environment, Transport and Works Bureau has decided to introduce a pilot programme to use dispute-resolution advisers on civil engineering contracts.

``However, what is a surprise is that the current proposals significantly curtail the role of the advisers when compared to Architectural Services Department's dispute-resolution system,'' he said.

Under current proposals, the adviser's role on civil works will be restricted to dispute avoidance.

Battersby said the ``curtailing the dispute adviser's role in this way is not understood and appears to be extremely short-sighted. After all, as the name suggests, one of the original purposes of having a dispute-resolution adviser is so that he or she can advise on the most economic method of resolving disputes''.

By comparison, the Architectural Services Department welcomes advisers. They also have an advisory role on alternative forms of dispute resolution should mediation fail.

Battersby said another surprise was that the bureau did not appear to have talked to any dispute advisers, ``the people with actual experience of the process'' during the consultation period.

Instead, it consulted the Construction Association, the Electrical and Mechanical Contractors' Association and various institutions representing architects, engineers and surveyors, he said.

Environment, Transport and Works Bureau spokeswoman Konnie Kong confirmed the government recommended the use of voluntary adjudication and dispute advisers on civil projects.

``Detailed rules and conditions of these two measures have been drafted and we have consulted the industry since October last year,'' she said.

Kong said that among those the government consulted were ``various professional institutes, which the dispute-resolution advisers should mostly belong''.

She said the adviser's role on civil engineering works was curtailed after observations during the consultation that once the engineer in charge of the project had made a decision on a dispute the position of the parties involved would be polarised.

``There is thus virtually little role to play by the dispute-resolution adviser after that,'' she said.

In response, Battersby said he was not aware that professional institutes had canvassed their members who were dispute advisers.

``It is unlikely that any of the institutes would actually know who among their members had been appointed as a dispute adviser. The only organisation who would know is the government itself through the Architectural Services Department,'' he said.

Asked about the polarisation issue, Battersby said it had been considered before, which is why the Architectural Services Department includes a clause in contracts that involved advisers.

These contracts specify the use of advisers ``all the way through the dispute-resolution process up to arbitration, which is only to be used as a last resort,'' he said.

Since an adviser would be familiar with a project and the issues surrounding the scheme, he or she would be ``a far more effective mediator and less costly'' than a mediator brought in specially for one dispute.

Battersby said that while the Architectural Services Department's dispute-resolution adviser scheme had worked well since it was implemented in the early 1990s, there was room for minor improvements.

These included more flexibility in the time allowed to assess claims and the allocation of more time to fairly appraise complex disputes.

2. Casino win on cards for Leighton venture
Keith Wallis, The Standard 15 June 2004

Australia's Leighton Contractors, in joint venture with mainland contractor China State Construction Engineering Corporation, is set for a US$285 million (HK$2.22 billion) design and building contract from Wynn Design and Development to develop Steve Wynn's casino and hotel in Macau.

The group has been in negotiations for months after initial discussions collapsed between Wynn Design and Development and French contractor Dragages et Travaux Publics.

Leighton/China State Construction has retained local architect Wong & Ouyang to design the complex, which includes a 600-bed hotel and 9,200 square metres of gaming areas.

Chris Gordon, a spokesman for Leighton's Asian headquarters in Hong Kong, said the contract has yet to be finalised, although it is expected to be confirmed shortly.

Industry insiders said the project will pose a technical challenge.

They said the joint venture will enjoy a bonus, with a significant share of the contingent liabilities, if the group maintains tight cost control. But it will face hefty liquidated damages, capped at US$20 million, for late completion.

There are also extensive interface issues to be considered. These include responsibilty for installing some of the equipment in the hotel and back-of-house facilities, but not the supply of the fixtures and fittings.

Wynn Design and Development will also retain some control over the design process even though Wong & Ouyang is the architect.

According to the terms of the deal, the joint venture will be responsible for the main building works, including some of the fit-out of the hotel and back-of-house facilities.

But Wynn's own contractors will subcontract to install equipment such as gambling tables in the casino area.

One insider said: ``The project will rely a lot on a partnership approach by everybody involved. There are issues to be considered all during the design and construction phase. The scheme will only succeed if people adopt a team vision.''

Another source believed that, with a tight 26-month construction programme, it would have been better if the project is done under a management contracting or construction management-style of contract.

``Having a project manager to drive the project, supported by a construction manager to control and manage the subcontract trades, would have possibly lessened the risk of things going wrong,'' the source said.

They pointed out that the Sands Group adopted construction management, appointing Hsin Chong Construction to manage construction of its US$240 million Sands Macau casino complex, which measures 92,000 square metres.

Rod Franks, Hsin Chong Construction managing director, said: ``Having inherited a difficult site in May last year, [the Hsin Chong team] demonstrated great skill and innovation to achieve a soft opening of the main gambling hall in May''.

Franks said a workforce of 3,400 was employed at the peak - 24 hours a day, seven days a week.

3. HKR plans $2b hotel complex on Lantau
Raymond Wang, The Standard 15 June 2004

HKR International has earmarked about HK$2 billion to build a hotel-retail complex in Discovery Bay to beef up its foothold on Lantau island.

Managing director Victor Cha said the company also intends to build 10 luxury townhouses on a separate site near the Discovery Bay golf course. HKR is the biggest landlord and developer in Discovery Bay.

Each house, valued at more than HK$100 million, will occupy a site area of 20,000 to 30,000 square feet and have a gross floor area of 5,000 to 10,000 square feet. The 10 houses are expected to fetch more than HK$1 billion.

Development and marketing division general manager Chan Chi-ming said the project is expected to be completed in two years.

The company hopes to complement the government's development plan for Lantau by building a hotel and shopping mall in Discovery Bay to attract tourists. Chan estimates investment for the hotel and shopping mall at about HK$2 billion.

Separately, Cha said the company is interested in bidding for the government site at Sa Po Road, Kowloon City, to be auctioned today.

HKR International has about 1.3 million square feet of land in Discovery Bay for which premium negotiations are underway.

The company is poised to reap about HK$4 billion from the sale of two projects in Discovery Bay and Tung Chung this year, Chan said.

Sales of Discovery Bay Phase 12, Siena Two, will be announced in two to three weeks, with an expected price of about HK$3,500 psf for the latest batch of 200 units, compared with the price tag of about HK$3,000 psf for the previous batch sold last year.

The company also plans to launch a new batch of flats at Coastal Skyline in Tung Chung in July or August.

Shares of HKR International fell 4.21 per cent to close at HK$2.275 yesterday.

4. Wynn bets on cheap loan deal for casino
Dennis Eng, The Standard 15 June 2004

Underwriters for a US$397 million (HK$3.09 billion) loan facility to be used for the construction of Wynn Resorts (Macau)'s first hotel and casino project in the enclave are offering lower pricing than similar deals in recent history.

According to the latest issue of newsletter basispoint, financiers of a US$382 million seven-year construction loan and a HK$117 million three-year working capital revolving credit facility are offered prices of 375 basis points and 295 bps, respectively. This is inclusive of the margin and fees payable to the underwriters.

Las Vegas developer Sheldon Adelson's US$100 million financing for his Venetian Macau in August was priced at between 350 and 400 bps.

Wynn Resorts, the US-listed vehicle of fellow Las Vegas mogul Steve Wynn, paid more than 400 bps for its US$1 billion deal in October 2002.

According to the newsletter, the construction loan is split into two tranches, a loan for building only the hotel and a project-financing loan that can be used to fund the construction of either the casino or the hotel.

``This structure is designed to enable banks to circumvent restrictions on lending to the gaming sector by allowing them to join either or both the hotel and project tranches,'' the report said.

``But while some banks are already saying they will seek credit approval for the deal, others are not convinced it will get past some more conservative credit committees. The sceptics argue that some credit committees will take the view the loans could ultimately be serviced by cashflows from the casino, which would not allow them to get around the restrictions on lending to gambling-related businesses.''

In a US Securities and Exchange Commission filing, Wynn Resorts and its Macau unit said Deutsche Bank, Hong Kong and Societe Generale Asia are the global co-ordinating lead arrangers for the US$397 million financing deal.

The construction loan of US$382 million may be in either Hong Kong dollars or US dollars. The working capital revolving credit facility may be in either patacas or Hong Kong dollars.

Each of the lead arrangers will underwrite the equivalent of about US$198.5 million for Wynn Resorts (Macau), the filing said.

Responses for the financing are due by July 16.

5. A lot sold for $1,010 million at land auction
Hong Kong Government, 15 June 2004

A government lot was sold for $1,010 million at a public land auction held by the Lands Department this (June 15) afternoon.

The lot, New Kowloon Inland Lot No 6330, with an area of about 3,521 square metres, is located at Sa Po Road, Kowloon. It was sold to Sunnytact Company Limited. The opening bid was $682.2 million.

Under the Conditions of Sale, the permitted use of the site is for non-industrial (excluding hotel, cinema, petrol filling station and godown) purposes and the developer is required to complete a gross floor area of not less than 19,014 square metres on or before June 30, 2008.

The auction was conducted at the Concert Hall of the Hong Kong Cultural Centre, Tsim Sha Tsui, by Assistant Director of Lands Mr Francis Ng, assisted by Chief Estate Surveyor Ms Rita Lai.