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1. Deal sealed for $780m air cargo terminal

2. Group to pave way for West Kowloon's new look

3. DHL wins airport terminal deal

4. Big outlay restricts pool for Tiu Keng Leng bids

1. Deal sealed for $780m air cargo terminal
Keith Wallis, The Standard 3 October 2002

The Airport Authority and DHL International (Hong Kong) have finally signed a franchise agreement to build and operate a HK$780 million express cargo terminal at Chek Lap Kok.

The move is expected to pave the way for DHL to tie up a deal with Cathay Pacific Airways to develop a regional freighter network using Cathay's wholly owned cargo subsidiary Air Hong Kong.

Cathay has already invited Airbus and Boeing to submit a request for proposals for up to 10 freighters capable of carrying about 50 tonnes of freight to be used by Air Hong Kong.

Contacted by The Standard last night, Cathay Pacific spokeswoman Rosita Ng would only say that the two companies were exploring ways of working more closely.

Cathay Pacific already operates its overnight Starlight Express cargo and passenger flights for DHL to fly express shipments between Hong Kong and five Asian cities.

The deal between the authority and DHL had been expected for months after DHL submitted the only bid for the express cargo terminal franchise, which will initially last for 15 years.

The complex will be built in three phases close to the existing cargo terminals. The 18,200 square metre phase one is due for completion in 2004 when it will have a capacity to handle 440 tonnes of freight a day. This will rise to 900 tonnes a day by 2014 when the third phase comes into operation, enlarging the terminal to 33,200 sq m.

Airport Authority spokesman Chris Donnolley told The Standard that the authority was not taking any equity investment in the terminal.

Asked what would happen at the end of the 15-year period, he said: ``It's a bit open ended, with options for the franchise to be extended.''

Using estimates prepared by McClier Corporation in its economic impact study produced in March 2001, the authority said the complex would have an initial annual payroll of HK$210 million in 2004. It would create almost 700 direct and indirect employment opportunities in 2004. Staff costs would rise to HK$280 million in 2010, when more than 900 people would be directly and indirectly employed.

Again using the McClier estimates, the authority said the ``total direct monetary contribution to the local economy is anticipated to be about HK$351 million a year''.

DHL Worldwide Express chief operating officer John Mullen said: ``The establishment and opening of the express cargo terminal is part ot our long-term commitment to develop Hong Kong as a key logistics hub within Asia.''

2. Group to pave way for West Kowloon's new look
ANTOINE SO, SCMP 3 October 2002

A high-level steering committee has been set up to transform West Kowloon into an entertainment and cultural hub.

Permanent Secretary for Planning and Lands John Tsang Chun-wah announced the setting up of the committee yesterday, saying a study would be carried out separately to decide how much money the government should commit to the project.

The steering committee, chaired by Chief Secretary Donald Tsang Yam-kuen, met for the first time two weeks ago and included policy secretaries from various areas, including transport, works, planning and home affairs, he said.

It is discussing what arts and cultural facilities should be provided, the government's financial options in relation to the project and the terms for inviting development proposals.

British architect Lord Foster won a design contest for the harbour-front district last year. The government said yesterday the future look of the district would retain Lord Foster's theme, including the canopy walkway featured in his design.

The aim is for the 40-hectare site in West Kowloon to stage a series of operas as well as to contain theatres, offices, shopping centres and flats.

Yesterday, Mr Tsang said there was no exact timetable for construction, but that the government aimed to complete the project by 2009.

He added the Financial Services Bureau and the Treasury Bureau would conduct a study on the government's options for financial involvement, which would be completed within a few months and submitted to the steering committee.

Professor Patrick Lau Sau-shing, a jury member for last year's design contest, said that in the face of the current government deficit he did not expect a high degree of direct funding. Instead, he saw a waived land premium as a possible incentive to lure developers to bid for construction.

Professor Lau said he was not worried that "weak cultural awareness" in the SAR would scare investors off. "There's a range of other facilities that should promise profit for developers, such as the shopping malls and offices. I think the most important issue here is how much the government can waive on land premium," he said.

Professor Lau said that while the best parts of the other winning entries in last year's contest should be considered, it was important to retain Lord Foster's canopy concept to offer "a character" for the district. antoine.so@scmp.com

3. DHL wins airport terminal deal
JOSEPH LO, SCMP 3 October 2002

The Airport Authority has finally awarded a franchise to DHL International to build and operate an express cargo terminal at Chek Lap Kok, but critical questions still remain over the terminal's viability.

In a statement last night, the authority said DHL had agreed to invest at least US$100 million to develop the controversial facility in three phases spread over the next 11 to 12 years, and to operate it for at least 15 years.

DHL said, however, that only about 40 per cent of the investment had been earmarked for the initial development of the facility. The remaining US$60 million is slated to go towards land lease costs to be paid to the authority over the life of the contract.

"We may have to invest more money later as we expand the facility," a DHL official said.

The authority said the terminal would be built in three phases, occupying about 18,200 square metres at the start, and begin operations in 2004.

Its initial peak handling capacity would be about 20,000 shipments per hour, rising to 45,000 by 2018.

It will handle about 440 tonnes per day in 2004, with ultimate capacity to handle about 900 tonnes per day by 2014, at which time it will occupy about 33,200 square metres.

A critical question that remains is whether there is a fixed pricing mechanism in the agreement that governs DHL's rate of return on the project, similar to the scheme of control regulating charges at Hongkong Air Cargo Terminals Ltd (Hactl), which controls about 80 per cent of air freight movements at Chek Lap Kok.

Hactl is believed to be limited to a 17.5 per cent return over 20 years on its US$1 billion initial investment.

There is also no information about the authority's share of revenues from the express terminal - Hactl has a complex revenue sharing arrangement that is believed to give the authority about 10 per cent of its earnings each year.

Both Hactl and Asia Air Terminals (AAT), the only other air cargo terminal operator at the airport, are understood to have objected strongly to the development of the express facility. They believed their franchise agreements precluded additional competition for another six years.

The authority was understood to have initiated moves to appease the two operators, but it is uncertain whether any concessions were made to Hactl and AAT.

In any case, Hactl will soon lose its biggest tenant at Superterminal 1 with the departure of DHL.

Last night's announcement comes more than nine months after DHL emerged as the only one of four companies invited to submit bids on the project to do so. The other three - Federal Express, United Parcel Service, and TNT International Express - declined to participate, saying that the authority's business plan for the facility did not favour their operations.

FedEx Asia-Pacific president David Cunningham said: "We decided that the commercial terms and the structure of the tender process were not appropriate . . . so we declined to enter a formal bid".

4. Big outlay restricts pool for Tiu Keng Leng bids
SOPHIA WONG, SCMP 3 October 2002

MTR Corp has invited bids for a 2.7 million square foot residential-retail project in Tseung Kwan O costing about HK$6 billion.

The Tiu Keng Leng Station development - the largest private tender this year - will be a key test of developers' confidence in the fragile property market.

Analysts expected only a few cash-rich developers such as Cheung Kong (Holdings), Sun Hung Kai Properties (SHKP) and Hang Lung Properties would bid due to the cost.

The winning bidder has to pay the government a HK$1.02 billion land premium for the first phase and reimburse MTR Corp HK$770 million for foundation work and a shopping mall.

The tender will go to the company that offers MTR Corp the biggest share of profits from the development - with a minimum of 25 per cent.

Yesterday, MTR Corp property director Thomas Ho Hang-kwong said the tender documents for the project had been sent to all developers. He estimated the investment cost at HK$6 billion, with the project's two phases costing an equal amount.

The first phase comprises 1.32 million sq ft of developable area and includes 1,676 residential units and a 180,000 sq ft shopping mall.

Sources said the land premium charged by the government was HK$1.02 billion, representing an accommodation value of about HK$770 per square foot.

That would be 10 per cent below the HK$850 per square foot premium set in June for a development at Hang Hau Station, another stop on the Tseung Kwan O line.

A consortium of Sino Land and Kerry Properties outbid five rivals to secure the 1.5 million sq ft residential development at Hang Hau Station.

Mr Ho would not comment on the amount of the premium for the first phase.

The premium for the second phase has not been fixed.

This phase comprises a buildable area of 1.4 million sq ft, creating 2,096 residential units.

The developer would be free to choose when to negotiate the phase two fee with the government according to market conditions, Mr Ho said.

He expected the entire development would take six to seven years.

The successful bidder would have to accept the first-phase land premium by the middle of next month.

Mr Ho said the tender schedule had been agreed by a committee formed by the two railway corporations, the Urban Renewal Authority and the Lands Department in order to regulate land supply.

"It will be the last tender from MTR Corp this year," he said.

The company had received expressions of interest from 16 developers, including Cheung Kong, SHKP, Swire Properties, Henderson Land, Wharf (Holdings), New World Development, Hang Lung Properties, Sino Land, Kerry Properties, Nan Fung Development and HKR International.