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1. Swire eyes next-door King's Rd site

2. Facelift planned for Temple Street market

3. KCRC considering buying back West Rail shop malls

4. No quick rebound

5. Drowning under a sea of paperwork

6. 'Let bookies into soccer betting'

7. Lai Sun principal to sell North Point site

8. Battle over old-building restrictions

9. Department cites unsafe road access in rejecting applications

10. Four Seasons wins extra floor area at IFC

1. Swire eyes next-door King's Rd site
The Standard, 17 September 2002

Swire Properties has confirmed it is eyeing the possible purchase of 633 King's Road, the site in North Point owned by Lai Sun Group major shareholder Lim Por-yen which has lain idle for more than two years. Swire Properties managing director Keith Kerr confirmed that the company would ``look at the sale particulars'' of the site, which is being offered for sale by tender. The site, which has operated as a temporary car park since the partial completion of piling and foundation works, is next to Swire's development at 625 King's Road which was completed in 1998. Surveyors believe the site could be worth up to HK$390 million. Lim has appointed Jones Lang LaSalle to oversee the tender, which closes on October 18. The site covers 17,150 square feet and has a maximum development area of 260,000 sq ft. Lim secured permission to build a 28-storey, grade A office complex before initial construction stopped. From Swire's perspective, not only would the development complement 625 King's Road but it would also provide a follow-on project in the Island East area of Quarry Bay once Cambridge House is completed next year. Speaking at the topping out of Cambridge House yesterday, Kerr said occupancy levels in Island East - at 91 per cent - were slightly higher than those in Central, which are below 90 per cent. He said this reflected the more divergent range of tenants, including construction firms, consultants, shipping and trading companies at Island East. By comparison, Swire's properties in Central are heavily reliant on the financial services sector. Swire plans to start marketing Cambridge House this week at prices of about HK$20 per square foot, and Kerr would not rule out the possibility of rent-free periods and other incentives. He said the smaller floor area - of about 7,000 sq ft - targeted small and medium-sized enterprises rather than large corporations. Turning to the residential market, Kerr said he welcomed moves by the Housing Authority to introduce a new loan scheme that could spell the end of the government's home ownership scheme (HOS). ``We would prefer to see HOS gradually phased out or ended earlier. It does not have a purpose any more,'' he said. Kerr remained cautious about the future outlook of the property market. ``The fundamental problem is deflation in Hong Kong and the market hasn't yet found its equilibrium, what the market is prepared to pay,'' he said. This uncertainty would continue because there was ``quite a large supply'' of homes, he added.

2. Facelift planned for Temple Street market
The Standard, 17 September 2002

Hit by plunging sales and facing competition from the planned reopening of the Poor Man's Nightclub bazaar in Sheung Wan, Temple Street is to be given a facelift in an effort to regain its reputation as a tourist hotspot. Pedestrian areas will be repaved and decorated and local merchants will stage daily events including special performances and game booths to complement the street stalls. A ``crazy sales carnival'' featuring acrobats and Cantonese opera is also being held every weekend this month, with the help of a HK$30,000 government subsidy. Yau Ma Tei Temple Street Association of Hawkers and Shop Operators chairman Chan Kam-wing said the government would refurbish the pedestrian areas next month by renovating the pavement, planting new trees and providing new street lighting and seating. Temple Street is already famous for a variety of cheap merchandise and food, as well as street-side Chinese opera performances and palm-reading by fortune-tellers. Chan said the street needed to maintain its competitiveness in the face of the planned reopening at the end of this month of the Poor Man's Night Club, which closed in the 1980s to make way for redevelopment. Investors announced last month that they would spend HK$20 million to revive the once-popular waterfront bazaar. ``As the new bazaar is operated by big enterprises, our members are afraid that it will threaten their businesses,'' Chan said. He said 580 market stalls and shops in Temple Street had seen their business plunge by nearly 80 per cent compared with the peak in the 1980s. ``Although there has been a surge in mainland tourists coming to Hong Kong, it has not helped our businesses much because most of the things we sell here are also available on the mainland. For them, the Temple Street is not so attractive,'' he said. Chan hopes the weekend carnivals will promote the street's image as an attraction for tourists with traditional culture mixed with eating, drinking and fun

3. KCRC considering buying back West Rail shop malls
The Standard, 17 September 2002

The Kowloon-Canton Railway Corporation (KCRC) is considering buying back shopping malls along the West Rail route from the government to boost revenue. Shopping malls at Tsuen Wan West, Tuen Mun and Nam Cheong stations are believed to be under consideration. ``It is possible for us to talk to the government to buy back [the shopping malls] if they can bring us a good investment return and we can buy them at reasonable prices,'' KCRC senior director of finance and management Samuel Lai said. But he said the KCRC had not decided which shopping malls it wanted to acquire. The KCRC was studying a proposal to buy shopping malls which could generate satisfactory rental incomes in order to enlarge the corporation's source of income, he added. Sources said the KCRC was considering expanding its commercial property leasing business because it relied too heavily on fares revenue. The KCRC generated recurrent revenue of HK$463 million in 2001 from commercial activities at its stations, including rental income from shopping malls. A surveyor said the three West Rail stations believed to be targeted by the KCRC did not have a ``too bad'' outlook because they were transport hubs. He said rental income would depend on the scale of podium development at the stations. Nam Cheong Station, the southern terminus for West Rail Phase I, will be located on the West Kowloon Reclamation. It will be the interchange between West Rail and the MTR Tung Chung Line. Tsuen Wan West Station, to be located near the existing Tsuen Wan Pier, will have a new public transport interchange adjacent to the station to provide an interchange between West Rail and other modes of transport including buses, mini-buses, taxis and ferries. Tuen Mun Station, the northern terminus of West Rail Phase I, will be located west of the existing San Fat Estate. It will serve as an interchange between West Rail and the Light Rail San Fat and Ho Tin stops.

4. No quick rebound
The Standard, 17 September 2002

Is Hong Kong's glass half empty or half full? The early months of this year suggested the SAR was on the road to recovery and its cup was filling steadily. Strong mainland exports and improved property market activity suggested a trickle-down effect with more domestic consumption. Such confidence is fast evaporating with most indicators pointing to a hardening deflationary trend, causing more lay-offs and worsening personal bankruptcies. A flood of negative commentary from major SAR financial institutions has intensified the feeling of heading down an economic cul-de-sac. Commentary is again focusing on the costs of the pegged exchange rate although a concomitant spike in short-term interest rates remains a blip on an otherwise benign curve. The costs of that currency discipline are well known and it is inevitable that a further round of discounting by property developers should prompt concerns. Other fears are not so easily dismissed. If the short-term pain caused by the currency peg is needed to achieve economic restructuring and productivity improvements, the picture painted by HSBC in a recent report makes sobering reading. It points to Hong Kong being marginalised as investment bypasses China's traditional gateway. Despite a relatively buoyant trade picture the resulting pick-up in trade and finance services is not materialising. Instead, foreign firms are downsizing local operations and moving investment directly to the mainland. Such a reduction in business investment is the main cause of weak local demand rather than simply the penny-pinching habits of local consumers. With government spending unlikely to prompt a significant improvement in demand its prognosis is that Hong Kong will next year suffer its third recession in five years. Like a recent Bank of China International Research study HSBC's findings are descriptive rather than prescriptive. BOCI Research argued that the pegged exchange rate system is holding back Hong Kong's restructuring and integration with the mainland economy by maintaining its high cost structure. Unfortunately there are no easy responses to such analysis. Hong Kong is a trade dependent economy whose well-being depends on the flow of goods and capital across its borders. Its problem is that not enough of that investment is being retained in the local market. If the government must bear blame, it should be for its flip-flop policies and weak leadership. What is clear is that a quick rebound cannot be counted on and more pain lies ahead.

5. Drowning under a sea of paperwork
The SCMP, 17 September 2002

Building a new school with an original design is not easy, especially when you have to deal with more than 12 government departments before construction work can even begin. Sponsors of projects which differ from the standard design model provided by the Architectural Services Department complain that the approval process involves submitting hundreds of documents and could take up to two years. The South China Morning Post learned of the problem while researching a series of articles highlighting the way in which red tape hinders projects that could create jobs and boost the economy. The government has now pledged to streamline the approval procedures for school projects to minimise the number of departments that applicants have to deal with. Ada Wong Ying-kay, chairwoman of the Hong Kong Institute of Contemporary Culture, is one applicant working her way through the bureaucratic quagmire. She wants to establish a school in Kowloon City which will be the first in Hong Kong to specialise in creative arts such as architecture, design and film. An application for the Hong Kong School of Arts, Media and Design was first made last year and a site was granted in June. But this is just the beginning. There are still many hoops to jump through before construction can start. Ms Wong said additional red tape was involved because the design of the school, which she hopes will open in September 2004, is different to the standard model used by the government for aided schools and those which operate under the Direct Subsidy Scheme. The school expects to hire more than 40 teachers and enrol up to 900 students. "The preliminary procedures involved more than a dozen government departments and I was told by government officials that it could take up to 24 months to go through the whole process," she said. "But it will only take 18 months to complete the construction works." Ms Wong said the government should inject "new thinking" on approval procedures for school projects following the introduction of the ministerial system. Those involved in the approval procedures include the Buildings Department, the Government Property Agency, the Environmental Protection Department, the Finance Bureau, the Transport Department, and the Planning and Lands departments. The school sponsoring bodies also need to consult the District Council concerned. However, a sponsoring body which adopts a standard design only has to deal with the Education Department and Architectural Services Department. At present, there are about 30 school projects adopting the so-called Do-It-Yourself model, in which private architects are hired by sponsoring bodies. Permanent Secretary for Education and Manpower Fanny Law Fan Chiu-fun told the Post she had been liaising with different departments to expedite these projects and the responses so far had been encouraging. Assistant Director of Education Patrick Li Pak-chuen said they were now changing the approval processes and seeking to scrap some paperwork. "We have to admit that there has been unnecessary red tape in the past," he said. "It's undesirable for the departments to open files and circulate memos on a project." He said the aim of the review process would be to ensure that the sponsoring bodies now only have to deal with the Education Department and Architectural Services Department under simplified procedures. Mr Li hoped that with changes being made, the time taken to establish such a school, including its construction, would be three years, the same as for one which follows the standard model. He said he hoped Ms Wong's project could be completed by the target date with the collaboration of the sponsoring body. Ms Wong said she was pleased that government officials were willing to simplify the procedures but was not yet fully convinced they would speed them up.

6. 'Let bookies into soccer betting'
The SCMP, 17 September 2002

A lobbyist for an international bookmaking firm yesterday called on the government to open up the soccer-betting market if it decides to legalise it. Murray Burton, a private consultant lobbying on behalf of bookmakers Victor Chandler, accused the government of ignoring bookmakers' views and being biased in favour of the anti-soccer betting lobby. Victor Chandler closed its Hong Kong office in May after the government outlawed the placing of bets with offshore bookmakers. Speaking at a Tsim Sha Tsui East Rotary Club luncheon, Mr Burton said international bookmakers should be given licences to take bets in Hong Kong if soccer betting was legalised. "Having other offshore international operators involved would provide a competitive playing field," he said. Currently, the Hong Kong Jockey Club is the only organisation that can receive bets on horse racing and it is tipped to run soccer betting if it is legalised. Ronald Arculli, chairman of the Hong Kong Jockey Club, last week revealed the club is studying a system of soccer betting which could be introduced if it is legalised next year. It is understood the club is considering a limited form of betting, where punters can only bet on a team winning, losing or drawing a match but not how many goals each team scores. Mr Burton criticised the proposal as "too simple" and said it would not attract local gamblers. He also said the lack of expertise in the club could lead to a loss of profit and, as a result, tax revenue. A spokeswoman for the Home Affairs Bureau said the government was still listening to views on soccer betting from all sides.

7. Lai Sun principal to sell North Point site
The SCMP, 17 September 2002

Lai Sun Group major shareholder Lim Por-yen is offering his privately owned commercial site in North Point for tender sale, which surveyors estimate to be worth more than HK$300 million. On sale is a cleared site spanning 17,150 square feet at 633 King's Road. It has a maximum developable area of 260,000 sq ft. Mr Lim has appointed Jones Lang LaSalle as agent for the tender, which will close on October 18. Analysts estimate the site could fetch up to HK$390 million, representing an accommodation value of HK$1,500 per square foot. Sources said three potential buyers, including local blue-chip developers, were in talks with Mr Lim prior to the tender launch. Mr Lim has secured an approved plan to build a 28-storey office tower with retail and car parking spaces. From the ground to second floors is retail space, with a total area of 34,600 sq ft, while above the sixth floor will be office floors with a floor plate of 9,900 sq ft. The basement and third floor will provide car parking spaces. The site, bought by Mr Lim in the early 1990s, has been left idle over the years and is now used for parking. At one stage, Mr Lim had intended to change the plan and build serviced apartments. But the government tightened the development control of serviced apartments on commercial sites in 2000 by scrapping serviced flats from the land-use list. Under the new guidelines, all serviced apartment projects would be considered as hotels or residential projects. The government's move was to avoid residential development in the name of serviced apartments in commercial and industrial areas or areas subject to environmental constraints. Before the guidelines came into effect, Mr Lim did not need government approval to build serviced apartments because the site was under commercial land-use zoning. Consequently, Mr Lim chose to stick to an office development and secured the latest plan for the site last year. Adjacent to the site is a 26-storey office tower jointly owned by Swire Properties and China Motor Bus. Cheung Kong (Holdings) owns the nearby MLC Millennia Plaza and Harbour Plaza North Point hotel. Analysts said no similar site was presently on offer in Island East to make a price comparison. In May, Swire Properties unified the ownership of Melbourne Industrial Building in Quarry Bay and bought it for HK$310 million, or an accommodation value of HK$865 per square foot, through a compulsory-sale auction ordered by the Lands Tribunal. Swire had estimated a total investment of HK$3 billion for redevelopment of the industrial building with an adjoining site into a 40-storey grade-A office with a total gross floor area of 822,000 sq ft. It represents an average development cost of more than HK$3,600 per square foot. Swire also acquired a 16,000-sq ft commercial site at 981 King's Road in 2000 from the Haking Wong family for HK$435 million, or an accommodation of about HK$1,600 per square foot. The site is being built as Cambridge House, an expansion for Swire's office portfolio at Taikoo Place in Quarry Bay. The average net effective rent for grade-A offices in Island East dropped 6 per cent in the second quarter to HK$17 per square foot, according to DTZ Debenham Tie Leung. The vacancy rate rose from 6.8 per cent in the first quarter to 7.1 per cent in the second.

8. Battle over old-building restrictions
The SCMP, 17 September 2002

Owners of aged buildings in Wang Fung Terrace at Tai Hang, near Causeway Bay, are fighting for a massive residential redevelopment with a higher building density. A Town Planning Board spokeswoman said the owners had objected to the latest planning restrictions imposed through an outline zoning plan. Most of the buildings, located at 1-16 Wang Fung Terrace, date from the 1950s and 1960s and take up 2.54 hectares of residential-use area. The area is restricted to a plot ratio of two times and a maximum building height of six storeys, including car ports. Any excessive redevelopment scheme would need planning approval. "The owners mainly proposed to maximise the building density from a plot ratio of two times to five times," the spokeswoman said. Most of the owners of the buildings between 1 and 4 Wang Fung Terrace were united in their objections to the restrictions, while a number of other neighbouring building owners also backed them. The owners have suggested either upgrading the medium-density residential area to high-density, or rezoning the site as a comprehensive development area. The proposed plot ratio of five times would mean a maximum developable area of 1.36 million square feet. The board agreed that a comprehensive redevelopment of the area could facilitate a long-term traffic and environmental improvement, the spokeswoman said. "Old buildings along Wang Fung Terrace are somehow lacking sufficient maintenance," she said. "Members of the board are sympathetic with the situation but the existing narrow internal access linking Tai Hang Road to Wang Fung Terrace cannot afford the additional traffic flow to be generated from massive redevelopment." The board had not ruled out the possibility of rezoning the residential development area from medium density to a higher density - either by upgrading its category with a higher plot ratio or converting it to a comprehensive development area. The building owners had been advised to carry out a detailed traffic assessment to justify the feasibility of their redevelopment scheme, she said, adding that a more comprehensive building design and road access realignment would be needed as basic justifications. Sources said New World Development had been in talks with some of the Wang Fung Terrace owners for a luxury residential redevelopment but had yet to reach a compromise. A New World Development executive said: "Some redevelopment proposals were sent to the owners a year before. Tai Hang is a satisfactory location for living." He estimated the flat value in Tai Hang at more than HK$4,000 per square foot, while the accommodation value could be worth HK$1,000 to HK$2,000 per square foot, depending on the permitted development capacity and lease restrictions. Gold Rich Consultants director Francis Lau Tak said Wang Fung Terrace could be rezoned for higher density residential development if car parking spaces were reduced to a minimum and the traffic flow was minimised. "However, market value for the development could be reduced as residential flats with insufficient car parks are usually catering for the mass market," he said. He said mass residential flats in Tai Hang were worth less than HK$4,000 per square foot, compared to about HK$5,000 per square foot for luxury developments. "Redevelopment there is still financially viable if developers are able to secure a plot ratio of five times," he said. He said developers would squeeze their acquisition cost or eventually give up the redevelopment plan if the total developable floor area was reduced by a lower plot ratio. "The developers might have to pay extra land premium for the government to modify the land lease if it sets any restrictions for redevelopment," he said.

9. Department cites unsafe road access in rejecting applications
The SCMP, 17 September 2002

Repeated attempts have been made by individual owners at Wang Fung Terrace to rebuild their flats. But restrictions on land leases and safety concerns about the existing sub-standard access road were cited by the building authority in rejecting their proposals. Situated close to the historic Tiger Balm Garden and overlooking Hong Kong Stadium and Caroline Hill, Wang Fung Terrace has strong appeal to developers looking for opportunities. The area sits on a raised platform overlooking greenery and is characterised by four- to seven-storey buildings. Hongkong Land is undertaking a joint venture with the owners of nearby Lai Sing Court for a redevelopment. Cheung Kong (Holdings) is redeveloping the Tiger Balm Garden site into four 41-storey residential towers. The tallest building in Wang Fung Terrace is the 16-storey Scenic Lodge, which was built after a successful attempt by Wah Yip Holdings to redevelop a four-storey older building in 1997. At least three redevelopment attempts have been made by other owners in the past few years, with one proposing a development plot ratio of 8.9 times. All three proposals were rejected. The biggest redevelopment proposal came from owners of three five-storey residential blocks at 1-2 and 3-3E Wang Fung Terrace last year. They proposed to redevelop their buildings into four residential blocks ranging from 29 to 33 storeys. In another proposal, owners of two four- and five-storey residential blocks at 4 and 4A-4D applied to rebuild them into a 40-storey building with 36 parking spaces. The owners of Mayflower Mansion, which comprises two four- and five-storey apartment blocks at 11-12 Wang Fung Terrace, attempted to rebuild them into two 39-storey towers with 46 car parking spaces. The Buildings Department rejected the applications despite appeals as the building capacity exceeded the limit permitted under the outline zoning plan and the access road was inadequate for additional traffic flow. According to government officials, if the buildings in Wang Fung Terrace were redeveloped at a higher density, the population would increase four times. They also said that the dominant characteristics of the buildings in Wang Fung Terrace should be preserved.

10. Four Seasons wins extra floor area at IFC
The SCMP, 17 September 2002

The super-deluxe Four Seasons Hong Kong hotel, part of the International Finance Centre development at the Airport Railway's Hong Kong Station, has won a larger than usual concession for extra floor space from the government. Now under construction, the hotel will contain 1,031 guest rooms and suites, becoming the SAR's largest six-star property when it opens in mid-2004. According to the Buildings Department, the hotel will consist of a 47-storey tower and a 35-storey tower on an eight-level podium, with two basement levels - a total developable area of 1.11 million square feet. The taller tower will house conventional guest rooms while the other will contain suites with separate bedrooms and sitting rooms. The developers, Sun Hung Kai Properties (SHKP) and Henderson Land Development, persuaded the Buildings Department to exempt about 94,000 sq ft of back-of-house space, equivalent to 8.42 per cent of total buildable area, from the gross floor area calculation. The concession means the owners will get the extra space without having to pay additional land premiums to the government. Under the usual incentive programme for hotels, developers are entitled to ask for back-of-house facilities to be left out of the gross floor area calculation. But on this occasion the government is exceeding its normal limits by exempting as much as 8.42 per cent of buildable area. "Usually, the maximum limit for exemption will be less than 5 per cent of the total buildable area," a Buildings Department official said. "Permission has been granted in this case because the applicant demonstrated that overseas hotels with the same grade can get an even higher percentage of exemption. Overseas examples could exceed 10 per cent." In support of the application, the developers submitted a letter from the hotel operator, Canadian-based Four Seasons Hotels and Resorts, stating it needed extra space to provide the impeccable guest services essential to its success. Four Seasons said the extra space would accommodate its larger than usual staff and help meet the needs of VIP guests. The hotel chain, which has 55 properties worldwide, said its staff-to-guest ratio was 2 to 1, compared to less than 1 to 1 for average hotel companies. Staff training rooms, locker rooms and extra storage area were required, it said. Extra storage space was necessary because its many guests were long-stayers with a lot of luggage they would often leave at the hotel while making side trips to other destinations. With the MTR and Airport Railway stations beneath the development, the hotel will have only two basement levels, and a large part of the basement will be occupied by the chiller rooms. Therefore, the back-of house areas needed to be located on upper floors, Four Seasons said. Moreover, plans call for an in-house printing shop to produce personalised cards and stationery for patrons. The 4.7 million-sq ft Hong Kong Station development is located on the Central waterfront. It also comprises an 800,000-sq ft shopping mall and two office towers - One International Finance Centre (IFC) and Two IFC. Phase one of the mall and One IFC are already occupied, while the 88-storey Two IFC, now under construction, will be the SAR's tallest building upon completion. Besides SHKP and Henderson, other partners in the development are Hong Kong and China Gas and Sun Chung Estate Co, part of the Bank of China Group.