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1. South Island line denial

2. KCRC defends property plans

3. Canton Road link back on table

4. Greed rears its ugly head at the highest level

5. SHKP helps shoppers to burn the midnight oil

6. Swire clinches key leasing deal

7. LCQ2: Testing of Ma On Shan Rail making good progress

8. LCQ7: West Kowloon Cultural District

9. Building plans approved in May

10. KCRC creating a green railway

1. South Island line denial
Raymond Wang, Paris Lord and Keith Wallis, The Standard 23 June 2004

Proponents of the South Island MTR line have dismissed as ``speculation'' reports that the government may abandon support for the project in favour of a western extension to the Island Line.

Several Chinese-language newspapers carried reports yesterday saying the government believed low population density would doom the South Island line that would complete the loop from Wong Chuk Hang via Happy Valley to Wan Chai.

Instead, the reports said, population growth supported the construction of the West Island line from Sai Ying Pun to Wong Chuk Hang via Kennedy Town, Cyberport, Wah Fu and Aberdeen.

Asked about the moves last night, one MTR Corp insider said: ``Oh, that's speculation.''

Ocean Park chairman Allan Zeman echoed the comments. Speaking from Macau, he dismissed the reports as ``just speculation''.

He said the park, which has lobbied for the line, has received no indication from the government if it will or will not support the MTR plan. ``We haven't even presented our plan yet [to the government on the park's proposed redevelopment],'' he said.

Zeman had previously said the park would face an uncertain future without the South Island line. Speaking in February, he said it would be ``difficult'' for park managers to convince the government to give it the money for redevelopment if there was no railway to bring visitors to the attraction.

Powerful transport workers and their legislative allies have long opposed the line, claiming that 4,000 bus and minibus workers would lose their jobs if the plan pushed through.

The politically influential transport operators, who have their own functional constituency in Legco with just 152 electors in the 2000 polls, have been joined in their crusade to stop the line by unions which fear job losses.

Commenting on yesterday's media reports, an Environment, Transport and Works Bureau spokesman said the government is still studying the proposed West and South Island lines. This includes the MTRC's proposed financial arrangements and passenger forecasts. ``We still have to look through the proposals in detail. A decision could be be made as soon as the end of the year,'' he said.

An MTRC spokeswoman said that, with a total population of about 430,000 in Western and Island South, the rail company planned to run four-car trains that would be cheaper to operate than the high-capacity eight-car units it uses on the existing network.

The MTRC had previously said the rail links would be scrapped without substantial government support.

Initially, the rail company wanted the administration to inject HK$7.5 billion into the scheme. But it said financing could take the form of a cash injection of nearly HK$6 billion plus property development rights at Wong Chuk Hang station that would generate almost HK$1.5 billion in sales revenue.

2. KCRC defends property plans
Staff reporter, The Standard 23 June 2004

The Kowloon-Canton Railway Corp (KCRC) denies development proposals it has submitted to the government will hurt the housing market.

``The KCRC will continue to be supportive of the government policy and shares the common goal for a co-ordinated plan for property developments,'' it said yesterday. ``The KCRC believes that the projects concerned should not create any negative impact on the local property market.''

On Sunday, the railway company announced plans to release 13,600 flats for sale by 2008 at stations on the West Rail and Ma On Shan Rail lines in the New Territories, including 2,000 to go up for construction tender at Wu Kai Sha Station on the Ma On Shan Rail line from early next year.

However on Monday, the Housing, Planning and Lands Bureau claimed it had not agreed to the KCRC proposal, after Real Estate Developers' Association president Stanley Ho said it might dampen the market. Two years ago the KCRC and MTR Corp agreed to suspend tenders for property development to help prop up prices, and last year the KCRC agreed not to complete projects before 2008.

``It has always been the government's objective to ensure that property developments by the railway corporations are carried out in an orderly manner without causing adverse impact on the property market,'' the government said.

3. Canton Road link back on table
PEGGY SITO, SCMP 23 June 2004

The dispute between the KCRC and Wharf (Holdings) over the building of a station on Canton Road along the proposed Kowloon Southern Link may be settled when a revised plan for the alignment is presented in the Legislative Council tomorrow.

Kowloon-Canton Railway Corporation said talks had restarted with Wharf, the biggest landlord on Canton Road, to explore an option to build a station on the street - a proposal the rail firm had shelved earlier.

It involves building a station in the space occupied by the underground car park of the World Finance Centre, part of Wharf's Harbour City development.

"In [tomorrow's] Legco meeting, we will indicate how high the chance of building the station will be," said KCRC spokeswoman Mabel Wan Mei-bo.

KCRC will build the Kowloon Southern Link, a 3.8km passenger rail line linking the West Rail terminus at Nam Cheong station with the East Tsim Sha Tsui station being built under the Tsim Sha Tsui extension project.

The rail line, to be completed by 2009, will provide a strategic link between the West and East Rail.

The KCRC's original proposal - first submitted to the government in 2001 - was for the link to have two stations, one at West Kowloon and the other at Canton Road.

However, the plan was amended to provide just one station at West Kowloon when the Kowloon Southern Link scheme was gazetted in March this year.

The rail firm received 63 objections at the end of the gazettal period on May 25.

Analysts said Wharf was worried that the cancellation of the station would hit shopping and tourist traffic on the street, and consequently hit the value of its assets.

Wharf owns 8.3 million square feet of office, retail, serviced apartments and hotel space in the Harbour City development.

Through the Canton Road Association, which mainly comprises Wharf and retailers at its properties, the developer early this month urged Miriam Lau Kin-yee, the chairman of the transport panel of Legco, to investigate the matter.

It has also sought support from the Yau Tsim Mong District Council.

The KCRC's decision was seen by market observers as a strategic move to force Wharf to lower the compensation amount incurred from the resumption of its land to build the station.

KCRC chairman Michael Tien Puk-sun said earlier this month that Wharf had asked for land resumption compensation of more than $3 billion. This did not make the project commercially viable, taking into account the link's estimated capital costs of $8.3 billion.

Instead of building a station, the KCRC proposed a subway to link the East Tsim Sha Tsui station with Canton Road.

A spokeswoman at Wharf on Monday said: "KCRC had asked us to calculate the costs if the two-tower World Finance Centre at Canton Road was pulled down to make the room for the station. We had indicated that the costs would be about $3 billion. But this is not our proposal."

Wharf made a counter-proposal to build three mini concourses in the car park. But the KCRC rejected the plan, citing insufficient space.

Ms Wan said the two parties were discussing a new proposal that would again place the station in the car park area.

"This time, the space to be provided by Wharf will be bigger than the rejected three mini-concourse proposal," she said. The area is said to be about 30,000 square feet.

However, Ms Wan said it was too early to say if the proposal was commercially viable as the compensation cost had yet to be calculated.

Henry Chan Man-yu, chairman of Yau Tsim Mong District Council, said Canton Road was a popular business, shopping and entertainment destination for locals and tourists.

Without a station, Canton Road's status as a focal point in Kowloon would be seriously damaged, he said.

Retailers were also concerned that the one station proposal would divert passenger flow to West Kowloon, where a mega cultural hub will be built starting 2007. Sun Hung Kai Properties is building a 480-metre office-hotel tower, named Union Square, at Kowloon Station.

However, not all landlords on Canton Road were critical of the decision to cancel the station.

Sino Land associate director Lawrence Chong, said: "It will be a big bonus if there is a station at Canton Road."

However, the impact of not having a station would not be that bad, he said.

4. Greed rears its ugly head at the highest level
NICHOLAS BROOKE, SCMP 23 June 2004

Dare I say it, but are we slipping into our old ways and seeing again the emergence of the greed factor which motivated all principal players in the property market in the lead up to 1997 including, although they will always deny it, our friends in government.

Unfortunately, recent history seems to be repeating itself in so far as the government's attitude to land and land prices is concerned, with a seemingly renewed emphasis on maximisation of revenues from land sales and development/redevelopment opportunities.

The higher than expected prices paid at two recent land auctions have been warmly welcomed, and we are already hearing of higher premiums being proposed in connection with lease modifications.

However, this enthusiasm for higher land costs is not echoed by the community at large, which will remember only too well the days of unaffordable flat prices which were with us until a few years ago.

While many have been pleased to see the mass residential market more active recently, with prices rising strongly from last year's lows - and relieved the numbers of flat owners in negative equity are declining - few want to return to 1997's price levels.

Regretfully, government intervention in the housing market in recent years has created an imbalance between supply and demand.

This is likely to become increasingly evident over the next two to three years. And this, at a time when improvements in the economy are not being felt by many in the community. The fact that people still have concerns about job security and the threat of increased interest rates is reflected in a continuing cautious approach to buying property.

The reliance of the government on land premiums to top up its coffers and help reduce the budget deficit means its focus will remain on maximisation of land values. This will probably come at a cost in terms of the marketing and packaging of future developments, particularly those where, ideally, there should be a high level of community and/or cultural content. It is likely to have the biggest impact on conservation or restoration/re-use based sites and projects.

The returns from such projects - if designed and delivered with the intention of preserving the best of the old and retaining the historic or social/cultural context and not for maximising development profits - are clearly likely to be less than from a cleared redevelopment of the site.

The government needs to adopt a different attitude to the conservation and re-use of the heritage sites and buildings in its control. Sympathetic conversion of these sites - the Central Police Station is one - to modern uses which preserve the maximum number of historic buildings and allow access for the community should be the objective, not the maximisation of land premium and development profit.

There are many groups in Hong Kong with excellent ideas for the conservation and regeneration of such sites for arts/cultural and appropriate commercial uses.

But there are serious concerns that the government will look to maximise its financial returns and frame tenders in such a way that price is the main determinant and not the wider merits of the scheme.

Such tenders are generally judged on the basis of the development design and content, and on the financial return to government with a weighting given to both elements.

Continued budget deficit concerns could potentially mean that less commercial use - such as educational, cultural, artistic, social and community - will be overtaken by material considerations.

There is a real concern that the chance to create something unique in the heart of Central will be lost. Words and phrases such as creativity, cultural identity, imaginative restoration and re-use, community pride and neighbourhood regeneration, only seem to feature at government policy level but seem to lose their importance where implementation is concerned if this means lower financial returns.

The restoration and re-use of the Central Police Station site, with its particular location and social history, would be the ideal project for the government to demonstrate the sincerity of its stated wish to preserve Hong Kong's heritage, and by foregoing some element of financial return provide a place which reflects Hong Kong's history and soul.

Nicholas Brooke is chairman of Professional Property Services and head of the London-based Royal Institution of Chartered Surveyors.

5. SHKP helps shoppers to burn the midnight oil
SANDY LI, SCMP 23 June 2004

An artist's impression of APM Mall where everything is open until midnight and later. SCMP photo

Shop until midnight, then take a break at a late-night dim sum restaurant, and if you still have energy, visit a karaoke bar till the wee hours.

This stamina challenge comes in the form of Sun Hung Kai Properties' (SHKP) first midnight shopping centre, APM Mall, next to the Kwun Tong MTR station.

It is scheduled to open by the end of the year.

With people working longer hours, the developer hopes to capture night-owl shoppers with its latest concept, while allowing APM tenants to maximise their business opportunities.

Extending opening hours seems a sensible move, as retail rents in Hong Kong are relatively expensive compared with the region. For instance, property consultants Cushman & Wakefield Healy & Baker ranked Causeway Bay, at an annual average of US$500 per square foot, as the world's third-most expensive shopping district last year.

Most shopping centres in Hong Kong close by 10pm, with some restaurants staying open until 11pm.

SHKP - Hong Kong's largest private shopping-centre owner - has taken this one step further.

The developer has stipulated that all retail shops at the 11-storey APM Mall - part of the Millennium City 5 project - stay open until midnight. Restaurants will close at 2am, and the entertainment zone - comprising karaoke bars, Japanese game centres and possibly a cinema - will operate 24 hours a day.

More than 50 per cent of the centre's 630,000 square feet has been designated for restaurants and entertainment.

Maureen Fung, deputy leasing manager of SHKP subsidiary Sun Hung Kai Real Estate Agency, said there were few shopping and entertainment choices for those working until 10pm or later.

"We came up with this concept after seeing the hectic lifestyle of Hong Kong people," she said.

But other shopping centre operators such as Wharf (Holdings) and the Mass Transit Railway Corporation - which operates four shopping centres along its rail lines - expressed no interest in the idea, saying the hours did not make it viable.

Doreen Lee Yuk-fong, a director of Wharf which owns Harbour City in Tsim Sha Tsui and Times Square in Causeway Bay, said the existing operating hours, with shops closing at 10pm and restaurants at midnight, were fine.

"In general, we see fewer visitors after 9pm," she said.

Although a small number of tourists did last-minute shopping, it was not enough to convince shops to stay open for longer.

"Business volume is the determining factor," she said.

Hiring staff for extra shifts and higher electricity consumption would also drive up retailers' costs, she said.

Ms Lee said the company had difficulty five years ago convincing tenants to extend their opening hours at Harbour City. At the time, most shops closed at 7pm to 8pm.

"We offered all sorts of incentives such as free air-conditioning to encourage them to open longer," she said.

Chan Ka-ming, chief shopping centre manager at the MTRC, said it saw no need to extend opening hours at its shopping centres.

However, with APM Mall only two stops away from Telford Plaza at Kowloon Bay MTR station, some shoppers might be lured away.

"Families and office workers are our target and they will not shop after midnight," Mr Chan said.

Telford Plaza closes at 10pm, with a few restaurants staying open until 2am, he said.

To encourage longer opening hours, SHKP said APM tenants would enjoy management fees of $8.5 per square foot, about 15 per cent below the market level.

Ms Fung said rental charges would be $80 to $200 per square foot, against $100 to $200 per square foot in smaller shopping centres in the area.

She said the APM Mall aimed to attract teens and twentysomethings looking for new trends.

"Most stores will operate under a new concept where retailers integrate fashion and coffee or games. Some new sushi restaurants from Japan will open their first stores [at APM]," she said.

To keep shoppers inside as long as possible, Ms Fung said 100 plasma displays would be strategically placed to keep them in touch with the outside world.

"So customers will not need to rush home to watch their favourite programmes or miss anything while shopping," she said.

6. Swire clinches key leasing deal
PEGGY SITO, SCMP 23 June 2004

Swire Properties has reputedly clinched its first leasing deal at Three Pacific Place (the extension to the existing Pacific Place complex) with Philips Electronics, following months of soft marketing.

Philips was rumoured to have committed to 80,000 square feet, or 5-1/2 floors, of the premises, according to property consultant FPDSavills.

Both Swire and Philips Electronics were not available for comment.

But apart from this deal, the property consultant said major leasing activity slowed last month. Even Two IFC, which has captured the lion's share of the market over the past few months with 80 per cent of its space now committed, recorded no significant deals during the period.

Tenant movement was dominated by small to medium-sized requirements, with trading and small IT firms looking for space of less than 5,000 sq ft.

"Major tenant activity slowed as many have already committed to new leases or renewals over recent months," FPDSavills said in its latest research report.

"We expect large tenants with expiry [dates] in late 2005 or 2006 to begin looking at various relocation options later this year."

The largest office leasing deal of the year was concluded recently, with ICBC leasing 100,000 sq ft in Asia Pacific Finance Tower of Citibank Plaza for 10 years. FPDSavills said the net effective rent was estimated to be about $25 per square foot.

Vacancy rates declined further in May to 10.5 per cent overall, with Tsim Sha Tsui recording the largest fall of one percentage point, bringing vacancy in the district down to below 9 per cent.

7. LCQ2: Testing of Ma On Shan Rail making good progress
Hong Kong Government, 23 June 2004

Following is a question by the Hon Andrew Cheng and a reply by the Secretary for the Environment, Transport and Works, Dr Sarah Liao, at the Legislative Council today (June 23):

Question :

The Kowloon-Canton Railway Corporation ("KCRC") is building the Ma On Shan to Tai Wai Rail Link, and the Government is also conducting local consultation on the proposed public transport service plan in anticipation of the commissioning of this rail line. It is learnt that the relevant district councils and local communities strongly object to the reduction of franchised bus routes proposed in the plan. In this connection, will the Government inform this Council:

(a) whether KCRC has adjusted the estimated ridership since the commencement of the planning for the line; if so, of the number of adjustments made and the estimated ridership concerned, as well as the current estimated daily ridership;

(b) of the number of test runs conducted on the trains which will serve this rail line; whether any of these trains has had failures; if so, of the number and the causes of the failures; and

(c) whether it will reduce the franchised bus routes according to the above proposal in the plan, particularly those between Ma On Shan and Hong Kong Island?

Reply :

Madam President,

In making patronage forecasts for new railway lines, the Kowloon-Canton Railway Corporation (KCRC) makes use of a computer transport simulation model, which is based on the Government's published assumptions on economic growth, population growth and distribution, housing development, employment opportunities, bus route development etc.

The KCRC was invited by the Government to proceed with the detailed design and planning of Ma On Shan Rail (MOS Rail) in September 1998. According to KCRC's forecast at that time, the daily patronage of Ma On Shan Rail was estimated to be around 290 000 in 2011.

In end-1999, KCRC revised the patronage forecast for MOS Rail based on the latest planning figures released by the Government at that time and estimated that there would be 295 000 passengers per day in 2011.

KCRC's latest patronage forecast is based on the planning figures released by the Government in 2003. The projected population for 2004 was reduced from 7.4 million to 6.9 million. The Corporation therefore forecast that Ma On Shan Rail would have a daily patronage of about 200 000 by the end of the first year of operation, and about 100 000 during initial operation.

KCRC commenced a series of testing of the MOS Rail in early April this year. The testing mainly comprises three stages. The first stage focuses on the testing of individual functions and performance of the trains and individual systems with a view to ensuring that the performance of the trains and all the systems is up to the required standard. The second stage will focus on the interface and integration among different systems to ensure that they work well together. The final stage is known as "Trial Operation", during which the trains will run according to the actual operation timetables to ensure successful testing and to fully prepare for revenue operations.

The MOS Rail is currently undergoing the first stage of testing, in which repeated and vigorous testing of the train and individual systems is taking place. All the tests are making good progress. It is expected that the second stage of testing will commence in early July as scheduled and the final stage of testing (i.e. Trial Operation) will start in the fourth quarter this year.

As regards the adjustment to franchised bus services, since the commissioning of the MOS Rail will increase the external transport capacity of the area concerned by 34 per cent, it is necessary for us to rationalise the franchised bus services in order to reduce road congestion and improve air quality. On the other hand, our rationalisation proposals retain appropriate competition and provide choices to passengers.

Early this year, the Transport Department ("TD") started local consultation on the public transport plan to be implemented upon the commissioning of MOS Rail. Consultation work includes attending meetings of District Councils, conducting Area Consultative Forums, and holding meetings with local groups and representatives, etc. We understand that the local residents have reservation on or objection to some of the proposals to discontinue bus routes. Taking into account the above views, TD is considering modifying the controversial proposals. As regards the cancellation of bus routes plying between Ma On Shan and areas of Hong Kong Island, we will consider replacing the cancellation proposals by frequency reduction and relocation of the termini of the routes concerned from Central/Sheung Wan to Admiralty in order to improve the traffic conditions of the busy corridors in Central. We plan to launch the second round of local consultation on the revised proposal in July.

8. LCQ7: West Kowloon Cultural District
Hong Kong Government, 23 June 2004

Following is a question by the Hon Abraham Shek and a written reply by the Secretary for Housing, Planning and Lands, Mr Michael Suen, in the Legislative Council today (June 23):

Question:

Regarding proposals on the development of the West Kowloon Cultural District, will the Government inform this Council:

(a) whether it will, apart from exhibiting the proposals that have been determined as satisfying the mandatory requirements, put up for exhibition those proposals that have been determined as not satisfying such requirements, so as to enable the public to have an understanding of the contents of all proposals and facilitate their commenting on the proposals; if it will, of the details of the exhibition; if not, the reasons for that;

(b) where the views of the public and of the Administration are not at one, whether the public view will prevail in the selection of the development proposals; if so, of the details of the selection procedure; if not, the reasons for that; and

(c) whether it has estimated the amount of government subsidy required for the public facilities of the project and studied how to strike a balance between the interests of the public and those of the developers from the cultural and commercial perspectives; if it has, of the amount of subsidy and the study findings; if not, the reasons for that?

Reply:

President,

My response to the three parts of the question is as follows :

(a) The Invitation for Proposals (IFP) has clearly stated that proposals submitted must comply with all the mandatory requirements set out in the IFP before the Government will proceed with the further assessment of the proposals. This requirement is clear and open. If proposals not complying with the mandatory requirements are exhibited, not only would it contradict the spirit and principle that all proponents must abide by the same requirements, it would also be unfair to those proposals that comply with the mandatory requirements. It may also confuse the public, thus affecting the results of the public consultations. Therefore, the Government will only exhibit those proposals that comply with the mandatory requirements.

(b) The criteria for assessing the proposals for the development of the WKCD are clearly set out in the IFP. The Government has established detailed guidelines and procedures for assessing the proposals in accordance with the published assessment criteria. During the public consultation period, the Government will actively seek public's views on the various aspects of the proposals exhibited. The views of the public on the proposals will be taken into account by the Government in the selection of the best development proposal that would best suit the interest of Hong Kong.

(c) As the Government has indicated publicly on many occasions, we have decided to adopt an integrated approach for the development of the WKCD by including commercial facilities in the project. It is hoped that the private sector, with their business know how and experience, can develop and operate the whole District in a self-financing mode. The successful proponent will be required to plan, construct, operate, maintain and manage all the facilities in the project including both public and non-public facilities. The Government has no intention to provide any subsidy for the facilities of the WKCD project. The IFP states clearly that the Government expects the project to be run on a self-financing basis and that the Government will not provide any specific tax relief or exemption in relation to the project.

9. Building plans approved in May
Hong Kong Government, 23 June 2004

The Buildings Department approved 12 building plans in May--four on Hong Kong Island, one in Kowloon and seven in the New Territories.

Of the approved plans, four were for apartment and apartment/commercial developments, one were for commercial developments, three were for factory and industrial developments and four were for community services developments.

In the same month, consent was given for work to start on 17 building projects that, when completed, will provide 185,609 square metres of gross floor area for domestic use, involving 2,821 units, and 76,998 square metres of gross floor area for non-domestic use.

The department also issued 17 occupation permits -- four on Hong Kong Island, four in Kowloon and nine in the New Territories.

Of the buildings certified for occupation, the gross floor areas for domestic uses were 33,668 square metres, involving 492 units, and 209,445 square metres for non-domestic use.

The declared cost of the new buildings completed in May totalled about $4.495 billion.

In addition, 4 demolition consents involving 4 building structures were issued.

The department received 1,899 complaints against unauthorised building works in May, and issued 2,101 removal orders on unauthorised works.

10. KCRC creating a green railway
KCRC Press Release, 23 June 2004

The recent “Greening Ma On Shan Rail” tree planting campaign launched by the Kowloon-Canton Railway Corporation (KCRC) has received enthusiastic support from the community, as reported in the current issue of its staff newsletter, Trackrecord.

Community leaders, together with about 200 residents, teachers and students at Ma On Shan joined hands to plant trees underneath the viaducts of the Ma On Shan (MOS) Rail at Sha Tin Wai. The greening project will continue along the MOS Rail alignment, with two more tree planting days to be held on 4 and 11 July at City One Station and Ma On Shan respectively.

In the same issue, there is also coverage of the arrival of the last batch of trains to be used on MOS Rail, whose entire fleet of 72 train cars is now complete after six deliveries. The cars are undergoing stringent tests, to be followed by trial runs on the MOS Rail alignment.

Another article highlights the West Rail Promotion Campaign to be launched on 26 June. Following the Kick-off Ceremony will be a number of other attractions such as the “Origami Action --- Colouring the Life” cum Inauguration Ceremony of KCRC Corporate Volunteer Team, and a series of art performances in West Rail stations.

The Campaign will feature something for everyone, and West Rail stations are set to become popular gathering places in the North West New Territories.

Trackrecord, the official staff newsletter of the KCRC, is published once a month and distributed to all employees, the Corporation’s key stakeholders, senior government officials, the media and community leaders.