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1. Union Ford wins MTRC project

2. KCRC calls tenders for Fo Tan site

3. Serendipity finds Synergy to create the perfect space

4. Cheung Kong clinches MTR deal

5. Surveyors dub SAR model of planning

6. Industrial sites need flexibility, analysts say

7. Crunch time for rezoning bid

8. Paul Y.-ITC: Just Say No

1. Union Ford wins MTRC project
Staff reporters, The Standard 23 October 2002

Cheung Kong (Holdings) subsidiary Union Ford Investments has won the HK$6 billion retail-residential project at Tiu Keng Leng Station on MTR Corp's Tseung Kwan O extension.

An MTRC statement yesterday said Union Ford ``has met all tender requirements and offered the best financial terms'' to the corporation.

Other bidders were Sun Hung Kai Properties (SHKP), Sino Land, Kowloon Development, Cheung Kong (Holdings) and Henderson Land Development.

Market watchers believe the Kowloon-Canton Railway Corporation and the MTRC intend to introduce their property projects before the government releases its new housing policy - expected to include measures to boost slumping property prices.

The two rail operators have been criticised for oversupplying flats to the market, contributing to the fall in prices.

The development - the last project to be offered by the MTRC this year - comprises 1,676 apartments on a gross floor area of 1.15 million square feet and retail space covering 140,000-180,000 sq ft in the first phase.

The winning bidder will have to pay a HK$770 million ``foundation construction fee'' to the MTRC for work on the foundations and structure of the shopping mall, along with HK$1.03 billion land premium, accounting for HK$776 per sq ft.

Another five towers providing 2,096 apartments will be built in the second phase, covering a gross floor area of about 1.4 million sq ft.

The MTRC has been busy boosting its income while the government has been studying merging the rail operator with the wholly government owned KCRC.

The government had planned to sell part of its 76.6 per cent stake in the MTRC to raise HK$15 billion.

But the rail operator in June lost a bid to rival KCRC to build the HK$31 billion Sha Tin-to-Central line, making it less attractive to investors.

The government wants to speed up the merger to help sell shares in the subway operation and cut the budget deficit.

Meanwhile, the number of passengers on MTR lines and the Airport Express line dropped slightly in September after reaching year-highs in August.

Passenger patronage on the Tsuen Wan, Island, Kwun Tong, Tung Chung and Tseung Kwan O lines was 66.467 million last month, compared with 67.364 million in August.

There were 684,000 passengers on the Airport Express in September, down from 752,000 in August.

2. KCRC calls tenders for Fo Tan site
Eli Lau, The Standard 23 October 2002

The Kowloon-Canton Railway Corporation (KCRC) yesterday invited 11 developers and consortia to tender for the HK$4 billion joint-venture Ho Tung Lau retail-residential development in Fo Tan.

Without disclosing the companies, a KCRC spokeswoman said tender documents were distributed to the 11 shortlisted developers and they would attend a briefing at KCRC headquarters today.

Market watchers tipped Cheung Kong (Holdings), Wharf Holdings, Nan Fung Development, Henderson Land Development, Sun Hung Kai Properties, HKR International, Hang Lung Development, New World Development and Sino Land as possible bidders.

Wharf Holdings assistant director Ricky Wong had earlier expressed interest, saying huge potential purchasing power was accumulating in Ma On Shan and Sha Tin.

Nan Fung Development also said the company was considering a bid.

The Ho Tung Lau development comprises a gross floor area of 120,900 square metres for residential use and 2,000 sq m for retail purposes.

Five residential blocks of 37-40 storeys will be built on a two-storey podium to provide about 1,560 units and 293 car park spaces. The project is expected to be completed by 2006.

The land premium for Ho Tung Lau site is estimated at between HK$1.1 billion and HK$1.4 billion, accounting for HK$900 per square metre to HK$1,100 per sq m.

The tender closes at noon on November 12.

Tenders for the HK$6 billion residential development at Tsuen Wan West Station are expected to be launched this year after Ho Tung Lau.

In June, 13 developers had submitted expressions of interest.

The Tsuen Wan West Station project, covering 4.28 hectares, will have 10 residential towers with 2,830 units.

3. Serendipity finds Synergy to create the perfect space
DANYLL WILLS, SCMP 23 October 2002

I have a separate monitor for each of my machines, but I want to be able to use them as "one space". Ideally, I really want to share things between them. I know I can do this over the network, but that is not as convenient as I would like. I have a mixed network of Windows and Linux boxes. Can you help?

Name and address supplied, Mid-Levels

Serendipity is a lovely thing, isn't it? I just happen to have come across an interesting solution recently and it may be just what you are looking for. A project called Synergy - no relation to a company of the same name in Hong Kong - has a solution that works on Windows and Linux machines.

Suppose you have three computers, two are running Windows and the third is running Linux. Imagine the machines sitting side by side with monitors next to each other, as in A + B + C. You use the keyboard and mouse of computer C and, as you move the cursor to the left, it comes to the edge of the screen. The moment you move it beyond the edge, it appears at the far right of computer B's monitor. Also, the keyboard now sends its keys to computer B. Move the cursor even further and it will go off the screen and on to the screen of computer A.

Not only can you now use a single mouse and keyboard on multiple operating systems, you can even "cut-and-paste". Highlight something on one computer or screen and copy it to another.

This, of course, is the promise of the software.

There is no Mac version (yet) and there are a number of bugs, including the fact the "control-alt-delete" command to reboot the machines does not work. This is not surprising as the reboot sequence is special and gets its information directly from the keyboard.

Synergy also co-ordinates your screensavers so they all start simultaneously. And if you use a password to lock them, the screensavers can all be unlocked from one screen.

On the Web site, the firm has a "to do" section that lists a number of operating systems that have not been catered for, including Mac OS 9 and X, Solaris, BSD, HP-UX and AIX.

It is difficult to say great things about a product that is still in beta test mode, but if this really accomplishes everything it hopes to, it could be quite useful. If anyone tries it out, please send Tech Talk a note. Synergy can be downloaded from synergy2.sourceforge.net

Questions to Tech Talk will not be answered personally. We reserve the right to edit letters. E-mail techtalk@scmp.com.

4. Cheung Kong clinches MTR deal
SOPHIA WONG, SCMP 23 October 2002

The Mass Transit Railway Corp (MTRC) has awarded a HK$6 billion residential development in Tseung Kwan O to Cheung Kong (Holdings), while Kowloon-Canton Railway Corp (KCRC) has invited developers to bid for a HK$3 billion project in Sha Tin.

Analysts said the successful bid by Cheung Kong in Tsueng Kwan O, where flat prices were pressured by oversupply, showed rail-related property developments were securing better returns in a fragile market.

MTRC said yesterday that a Cheung Kong subsidiary had outbid four other rivals to win a 2.6 million square feet residential and retail development at Tiu Keng Leng Station along the Tseung Kwan O railway extension.

"It has met all tender requirements and offered the best financial terms to the corporation," the company said.

It is understood Cheung Kong will have to pay a land premium of HK$1.02 billion to the government, HK$770 million to the MTRC to cover the foundation cost and building expenses for a shopping centre, and to offer a minimum 25 per cent of profits from future flat sales to the MTRC.

The whole development will be divided into two phases comprising 3,772 flats to be completed in five to six years.

The land value for the project is about HK$770 per square foot.

Surpass Property Strategy Consultant managing director Charles Lai Chin-pang expected Cheung Kong could achieve a 30 per cent profit margin. He said the selling prices for flats in Tseung Kwan O had exceeded HK$3,000 per square feet, compared with the development cost of about HK$2,300 per square foot.

"Cheung Kong switching its focus from government auction land to tender developments from the railway corporation reflects it has become difficult to trigger cheap land in the application list," he said.

Under the land sale application list, land will only be released for sale when a developer guarantees a minimum acceptable price to the government.

A spokesman for KCRC said yesterday that the company had invited 11 shortlisted developers and consortiums to bid for a 1.32 million sq ft joint-venture development of Ho Tung Lau in Sha Tin. Bidding will close on November 12.

Sources said the requirements set by the KCRC were attractive to developers in terms of flexibility.

Apart from a HK$1.32 billion land premium charged by the government, the KCRC was only asking for HK$70 million up front as a consultancy fee and a proposed guaranteed profit, a source said.

Mr Lai said the venture terms were flexible and the land value at about HK$1,000 per square foot was reasonable. He expected three to five developers would submit offers.

The Ho Tung Lau development will provide a total of 1,560 residential units, 293 car-parking spaces and a 2,000-sq ft in retail space.

Twelve developers, including Sun Hung Kai Properties, Henderson Land Development, Cheung Kong (Holdings), Wharf (Holdings), Sino Land, New World Development, Hang Lung Properties, HKR International, Nan Fung Development and Pacific Concord, had earlier expressed their interest.

5. Surveyors dub SAR model of planning
RICHARD WARREN in London, SCMP 23 October 2002

Hong Kong is a model of urban development, according to a report published by the London-based Royal Institution of Chartered Surveyors (Rics).

By targeting economic and residential developments around public transport nodes, the SAR's planners have kept urban sprawl, which has blighted many other countries, to a minimum, the report says.

"Town planning in Hong Kong has been very successful. There are lots of things you can pick up on and say that works and we can try this somewhere else," said Peter Hine, author of the Rics report, entitled Integrating Transport and Development.

Mr Hine is Rics project director of research into transport development areas (TDAs) and was a former town planner with Hong Kong's New Territories Development Department, which was reorganised as part of the Territory Development Department in 1986.

In another report, published simultaneously, Rics argues that China considerably understates the size of its urban population because it uses a different set of criteria for compiling its census compared with other countries.

Rics published its TDA report to encourage the world's urban planners to integrate land use with transport planning, to support sustainable and environmentally friendly development. Case studies illustrate successful TDA development in Hong Kong, Shanghai and, when applied to rural areas, southwest China.

Hong Kong was "the ultimate TDA", Mr Hine said. The SAR had a distinctive node and corridor-style development, whereby high density projects were focused on railway stations connected to each other by the Mass Transit Railway Corp (MTRC) and Kowloon-Canton Railway Corp (KCRC), particularly along the Hong Kong Island line, the new airport railway extension and in the new towns, he said.

From his 12 years' experience of working as a town planner in Hong Kong, Mr Hine found this pattern of development had brought many benefits to the SAR. Concentrating development around railway stations meant the movement of goods and people was minimised and land was used efficiently with a greater proportion of the landscape left untouched by building.

Also, Hong Kong's public transport was effective and viable and attention to architectural design meant it had many high-quality buildings and public areas.

This model of urban planning resulted from having a large population packed into a small area, government control of land, high usage of public transport and high land values, which allowed development to provide significant public transport funding, Mr Hine said.

"One of the best examples of high-quality, high-density development concentrated around public transport nodes is along the airport link, including Tsim Sha Tsui and the Kowloon peninsula and you see it round most MTR stations.

"TDA development has been a key feature of development of the new towns since the 1970s upgrading of the KCR line and integrating that with other public transport links," Mr Hine said.

Mr Hine's report praises urban planning on the mainland. He applauds planners modernising Shanghai for providing plentiful public transport links and concentrating development along them.

"In Shanghai, clearly they are following the similar pattern of developing high-quality, high-density projects located round public transport nodes," he said.

He also believed TDA planning should be extended to other parts of the mainland. China's cities could learn from the experience of the Brazilian city of Curitiba, where mixed-use developments were built along express bus routes, with the highest-density projects concentrated at interchange bus terminals, he said.

The report showed how TDA principles could be applied to China's countryside. In southwest China, wide-ranging public transport improvements were needed to help alleviate poverty, Mr Hine said.

"In southwest China, still hardly anyone has access to their own transport, except maybe a bullock cart, so when opening up services they need to be located close to public transport, with amenities concentrated together around transport nodes," he said.

TDA development can distort the property market.

"It depends on the way it [the TDA] is laid out. It is not intended to exclude the car. You can get graded densities like in Hong Kong, where high-quality developments are located further away from the transport node with places to park your car which boosts the values of those properties.

"Where you get very high-density developments around the transport nodes, you would expect high-quality apartments to be built there," Mr Hine said.

Mr Hine said TDAs were needed to manage rapid urban growth efficiently. "TDAs can stop urban sprawl - that is one of the reasons why the Americans are quite keen on it," he said.

Measures to stop urban sprawl are needed in China where the number of large cities is mushrooming, according to a separate Rics report entitled Coping with Rapid Urban Growth.

Its author David Satterthwaite said global urbanisation was relentless. Although censuses held in 2000 and last year showed the world was less dominated by large cities than had been predicted in the 1970s, the long-term trend towards an increasingly urbanised world remained, he said.

His report revealed China had more cities with one million inhabitants or more than any other country. China had 91 such cities compared with 37 in the United States, its nearest rival. China also had two cities, Shanghai and Beijing, with populations of 10 million or more - only India had more of these "mega-cities", with three.

Despite these statistics, the size of China's urban population was understated because its planners required a larger number of people to occupy a built-up area for it to be urban than those in other countries, Mr Satterthwaite said.

6. Industrial sites need flexibility, analysts say
SOPHIA WONG, SCMP 23 October 2002

More flexibility in land use planning and a lower premium charge for lease modifications will serve as major incentives for urban redevelopment, according to analysts.

FPD Savills industrial department director James Siu Shui-sun said the industrial market was freezing due to a price slump after the Asian financial crisis.

"Market demand for traditional factories and warehouses had contracted substantially as most industrialists had moved to China as part of the economic restructuring in cost saving," Mr Siu said.

He said demand from investors and developers had fallen following the limited end-users.

"Developers will no longer target industrial sites since the market value for completed buildings is depreciating," Mr Siu said.

He has recorded just one major deal in the industrial market this year, when an educational fund bought Alexan Plaza, in Tuen Mun, for HK$115 million, or HK$83 per square foot, in June.

The building provides a total of 1.4 million sq ft.

Estate agents had estimated the building could be worth more than HK$1 billion during the market boom in 1997. Its existing value had depreciated by 90 per cent, they said.

"The 60,000 sq ft industrial site could not draw developer interest due to its negative land value. They will not pay to rebuild a factory with a below-cost market value," he said.

He said the deadlock would not be solved until the government was more flexible in regard to redevelopments in industrial areas.

Redevelopment would be encouraged if higher value properties, such as residential apartments, hotels or offices, were permitted to be built on industrial sites, he said.

For example, he said the 50,000 sq ft Wing Shan Industrial Building in Yau Tong had been rezoned for comprehensive development and could accommodate residential buildings with retail space.

He said the building would be tendered for sale soon, with a target price of HK$180 million.

"There are some developers in talks for acquiring the site," he said.

Kerry Properties is planning to build a HK$400 million residential redevelopment after acquiring a 40,000 sq ft industrial site in Tsuen Wan for HK$120 million in May.

Kerry Real Estate Agency executive director Chu Ip-pui said the site, which is now occupied by the Chung Nam Industrial Building, had planning approval for residential redevelopment.

The group was also applying for a land grant for an adjoining 30,000 sq ft site owned by the government to expand the developable area from 200,000 sq ft to 350,000 sq ft, he said.

Mr Siu said Kerry was paying a premium price for buying the site as it had spent HK$600 per square foot for the accommodation value, compared with the HK$300 per square foot price for industrial buildings in Tsuen Wan.

He said the Government could provide further incentives, such as a lower premium charge for lease modifications, to encourage redevelopment.

Centaline Properties recorded 161 industrial transactions last month, with the total consideration amounting to HK$311 million. Sales declined 29 per cent compared with August but the transaction volume had soared 26 per cent due to higher-value transactions.

7. Crunch time for rezoning bid
SOPHIA WONG, SCMP 23 October 2002

Wharf (Holdings) will learn this week if it has won its battle to rezone five hectares of Tsuen Wan industrial land so it can build a 1,400-room budget hotel to cater for the many mainland tourists expected to visit the Disney theme park under construction on Lantau Island.

The Town Planning Board will rule Friday on Wharf's application to convert the land use to business from industrial.

Wharf's previous attempt to build a hotel on the same land failed because of concerns the factories in the area would have a negative environmental impact on the hotel.

To get around this "interface" problem, Wharf has since applied to convert the land use of 14 adjacent industrial sites, including the 66,000 square foot site it owns.

Altogether, the sites constitute more than 5ha along Chai Wan Kok Street and Pun Shan Street. Planning rules allow a developer to apply for land use rezoning even if it holds no title on any of the property involved.

This is the first massive rezoning application initiated by a private developer aimed at revitalising a decaying industrial area.

The government has rezoned surplus industrial land in Tsing Yi, Kowloon Bay, Yuen Long and San Po Kong over the past year, but analysts said rezoning moves by private developers, which are more market-driven, could speed up the process of renewal.

Wharf assistant director Ricky Wong Kwong-yiu said the 5ha site would yield total developable area of more than five million sq ft.

The Town Planning Board quashed Wharf's earlier plan to build a 44-storey, 1,395-room, three-star hotel to meet fast-growing demand for accommodation for budget travellers from China.

Mr Wong said Wharf's latest application was designed to solve the problem of compatibility between the hotel and the factories.

"The interface problem can be avoided if the whole area has been rezoned for business use and the factories are gradually phased out," he said.

"We know some nearby owners who have similar intentions. We are proposing to provide more flexibility and greater incentive for redevelopments," he said.

In Tsuen Wan, the owner of the Lok Shun Seaview Factory Building plans to redevelop a 35,100 sq ft site as an 18-storey, 300-room hotel, while an application is pending for a 518,600 sq ft office building to be built on the nearby site of the Lok Shun Factory Building.

However, a planning official said that following a study "the area along Chai Wan Kok Street was preserved for industrial use as the study projected demand for factories or warehouses on the part of traditional industries in Tsuen Wan".

Mr Wong said the government had already approved similar redevelopment plans - for example, a 24-storey, 536-room hotel to be built on the 35,400 sq ft site now occupied by Fou Wah Weaving Mills.

"The market demand for two- and three-star hotels in Tsuen Wan will be boosted when the Disney park is completed," he said.

"If the rezoning application is approved, we will soon redevelop our own site into a three-star hotel of more than 40 storeys and about 1,400 rooms.

"We will charge only HK$300 per night per room to suit the mainlanders."

Dan Lee, first vice-chairman of the Hong Kong Hotel Association, said demand for hotel rooms in Tsuen Wan was not keen.

The average occupancy rate for the 1,026-room Panda Hotel, the only one in the district now, was below 80 per cent.

"But demand could soar if the economy turns around and when the Disney park is completed.

"Hotels with lower prices will be the most suitable for the growing numbers of mainland visitors," Mr Lee said.

Hong Kong has 95 hotels with 37,882 rooms, according to the Hong Kong Tourism Board. Another 17 hotels with a total of 7,849 rooms are scheduled to be built by 2004, including one in Tsuen Wan with 1,421 rooms.

8. Paul Y.-ITC: Just Say No
Webb-site.com,21st October 2002

In one of the most outrageous attempts to destroy shareholder value that we have ever seen, Charles Chan Kwok-keung (Mr Chan), Chairman of Paul Y.-ITC Construction Holdings Ltd (PaulY, 0498) has proposed a transaction in which he would in effect acquire assets from PaulY at a 90% discount to book value.

PaulY is 42.59% owned by ITC Corporation Ltd (ITC, 0372) which in turn is 34.82% owned by Mr Chan. In an announcement dated 7-Oct-02, ITC and PaulY said that Mr Chan "has requested the directors of [PaulY] to place before its shareholders a proposal..."

The proposal involves the distribution of "Scheme Assets" held by PaulY. The Scheme Assets include:

• a 36.83% stake in Downer EDI Ltd (Downer, ASX:DOW), which is listed on the Australian Stock Exchange. PaulY owns 352,727,322 shares representing 36.83% of Downer, with a market value (at 18-Oct-02) of A$208.1m (HK$899.0m). The stake is carried in PaulY's books at HK$774m;
  
• a 14.55% stake in China Strategic Holdings Ltd (CSH, 0235). After a recent rights issue, CSH has consolidated net tangible assets of HK$2,322m, so PaulY's share is HK$337.9m. It is carried in the books of PaulY at HK$644m, but its market value is only HK$12.1m; and
  
• properties with a book value at 31-Mar-02 of HK$884m. This includes investment properties which were independently valued as at 31-Mar-02.

The total value of these three items in PaulY's balance sheet is $2,302m, although for unspecified reasons, the announcement puts the total Scheme Assets at $2,107m as of 31-Mar-02.

It is proposed that the Scheme Assets will be transferred to a new wholly-owned subsidiary of PaulY. This subsidiary will then be "distributed" to shareholders, except that, as part of the plan, Mr Chan would buy the entitlements of all the shareholders of PaulY except for ITC for HK$0.20 per PaulY share.

The price

The announcement was written so cryptically that it never mentions the total amount of the payment. We can tell you: there are 1,036,744,924 PaulY shares in issue at 31-Aug-02, and ITC held 441,579,452 shares (42.59%). So the difference is 595,165,472 shares (57.41%). That means that Mr Chan would pay $119.0m for 57.41% of the Scheme Assets.

That would leave Mr Chan controlling the unlisted Scheme Assets company of which ITC would own the remaining 42.59%. He has also asked ITC to put forward a proposal to sell this stake to him at the same price per share as he is offering to the other PaulY shareholders - so that ITC would receive just $88.3m.

If both deals take place, Mr Chan would get 100% of the company holding the Scheme Assets for just $207.3m. Even if you take the lower figure of book value at $2,107m, that amounts to a 90.2% discount, a gift of HK$1,900m to Mr Chan.

Just say no

The distribution by PaulY of the Scheme Assets is a "scheme of arrangement", which means it is conditional on approval by a majority in number representing three quarters in value of the independent shareholders (other than ITC) who vote at a meeting for which the date has not yet been set.

If you are a PaulY shareholder

Mr Chan is presumably relying on the fact that the shares of PaulY trade at only $0.217, a 92.5% discount to their net asset value of $2.89 per share. He is hoping that shareholders would rather take $0.20 in cash and see their asset value trashed than hang on and try to realise the underlying value in the stock. The proposal would decimate net assets from $2.89 to $0.86 per share.

It is a cynical ploy to exploit the discount, much of which is based on the very fear of this kind of transaction. But if shareholders stand up and stop the deal, then perhaps in future the discount will narrow, because investors will be more confident that this kind of deal will not happen. As it is a scheme of arrangement, the deal will be voted on a poll where every share counts for 1 vote, not a show of hands. So vote AGAINST.

If you are an ITC shareholder

If the PaulY proposal proceeds, then the sale by ITC of its stake in the Scheme Assets is still conditional on approval by independent shareholders of ITC in general meeting, as it is a "connected transaction". Shareholders of ITC should vote AGAINST the sale of their company's interest in the Scheme Assets to Mr Chan.

However, this will be on a show of hands unless shareholders demand a poll, so if you are a registered shareholder, make sure that you do! We have been waiting for years for the Stock Exchange to close this loophole and require a poll on all resolutions.

For details on how to vote, see our voting guide.

The INEDs

Even the board of PaulY has its reservations about this. The announcement went to some pains to indicate this, stating that the proposal was "initiated by [Mr Chan] and not solicited by [PaulY] itself". The distinction is subtle given that he controls the company anyway. In a masterpiece of understatement, they wrote "the directors of [PaulY], other than [Mr Chan] consider the consideration...may not be fair and reasonable".

The board of ITC has not yet expressed any view.

The independent non-executive directors of PaulY are Vincent Cheung Ting-kau, the Senior Partner of his eponymous law firm and Ernest Kwok Shiu-keung, formerly a partner of Kwok & Chu and now a partner of law firm Koo & Partners.
The INEDs of ITC are Winston Calptor Chuck, a consultant with law firm James P.Y. Lam & Co, and Dominic Lai Hing-chiu, Senior Partner of law firm Iu, Lai & Li.

A waste of time and money

In a vague commitment, the announcement states that:

"[Mr Chan] has agreed to pay all the costs incurred in implementing the proposal including all costs incurred by [PaulY]".

This does not make clear what happens if the proposal is not "implemented" because it is voted down. We call on him to confirm that regardless of the outcome, he will pay all the costs incurred in the proposal - including the fees of lawyers, accountants, printers and independent advisers. The statement also does not say whether he will pay the costs of ITC. He should. It is the ultimate insult to use minority shareholders' funds to put forward such egregious proposals.