SKYLINE Technologies -- News Update (1 October 2005 )

1 October 2005

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1. Arts hub carved up to satisfy the public, says Hui

2. 1 in 8 comment cards on hub the same

3. Developer that wins project is in line for $40b in sales

4. Developer faces bill of $6b in land cost

5. Henderson still keen on West Kowloon tender

6. Hui fails to allay project fears

1. Arts hub carved up to satisfy the public, says Hui
CHLOE LAI, SCMP 8 October 2005

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The unpopular single-developer approach for the West Kowloon Cultural District was officially scrapped yesterday after months of wrangling and speculation, in what Chief Secretary Rafael Hui Si-yan said was a move to "satisfy public demands".

But the revised plan immediately ran into a barrage of criticism from legislators, who called it a single tender in disguise.

Critics were also upset that the huge canopy from the original Lord Foster design would be kept and complained that the government remained uncommitted to developing a cultural policy before proceeding with the project.

"The government will improve the plan to satisfy the public's demands and give the people of Hong Kong a world-class cultural hub," Mr Hui said.

"We will abolish the single tender, lower the development density, significantly reduce the residential development and demand that the winning bidder gives money for the arts hub's operation."

In measures approved by the Executive Council on Tuesday, the winner chosen from the three shortlisted bidders will be in charge of the master plan instead of building and operating the entire 40-hectare waterfront site.

The winner will directly control only 65 per cent of the site, with at least 30 per cent reserved for arts and cultural facilities.

It will also have to fork out at least $30 billion to set up a trust fund to pay for the operation of the arts facilities and a new statutory body that will run them. The fund will also cover maintenance of the canopy, an automated people-mover and open space.

Speaking at a meeting of the Legislative Council House Committee, Mr Hui also announced the expected new restrictions on the project, which limit the plot ratio governing development density to 1.81 and carve out at least half of the profit-making area for sale to other developers.

The three shortlisted bidders have until the end of January to decide whether they want to participate in the modified plan.

Mr Hui promised they would have time to revise their proposals.

If two drop out, the government will start the project all over again.

Mr Hui said that as the new plan was a continuation of the one the government had announced earlier, the project would not be opened to new participants at this stage. And as public opinion on the Lord Foster canopy was "inconclusive", it would remain in the plan at this stage.

Although the method for selling the carved-out land has not been decided, Secretary for Housing, Planning and Lands Michael Suen Ming-yeung said it was likely to be carried out either through the government or the new statutory body.

The winning company will be prohibited from bidding for the carved-out land and will be barred from buying any property built there before the arts hub project is completied.

Mr Hui also promised that the Town Planning Board would be consulted.

Democratic Party chairman Lee Wing-tat said: "The government appears to be listening to public opinion; but it is twisting public opinion. It is changing the project from a super-single-tender approach to a big-single-tender approach."

Alan Leong Kah-kit, of the Article 45 Concern Group, described the new plan as "even worse than the original one as the winning bidder will be spared from operating the arts hub".

Mr Leong, who chairs the Legco subcommittee on the West Kowloon Cultural Development, said: "The government is not responding to the anxiety of the public about the single-developer approach. It shows the government doesn't consider this is a cultural project."

2. 1 in 8 comment cards on hub the same
FELIX CHAN and CHLOE LAI, SCMP 8 October 2005

More than 4,000 of the 33,000-plus comment cards members of the public posted to show which of the shortlisted West Kowloon Cultural Project designs they preferred were in identical envelopes and contained similar answers.

The revelation appears to lend substance to shortlisted bidder Henderson Land's questioning of the credibility of public polling on the plans.

The government-commissioned consultation, conducted by Polytechnic University's Public Policy Research Institute, had three components: comment cards from the exhibition of the shortlisted proposals; written submissions and views expressed at forums/meetings; and three telephone polls.

A total of 33,416 comment cards, with answers to 13 questions, were received. Of these, 4,176 were posted using an identical envelope or mailing label and contained similar answers.

The institute's Peter Yuen Pok-man said over 90 per cent of the suspect cards favoured the plans of one of the three bidders - the one which received the strongest public support. The plans' authors were not identified in the consultation, and the government would not say which plan was involved.

Deputy Secretary for Housing, Planning and Lands Au King-chi said even after discarding the suspicious comment cards, the plan they overwhelmingly favoured still came out top. She said there were no rules for public consultation exercises barring individuals or organisations from submitting multiple copies of formatted responses.

"One has to understand that it is not like voting in an election, where you need to show your identity cards at the poll stations to collect your ballot papers," she said.

A spokeswoman for developer Henderson Land said on Sunday that it was aware that some corporations used buses to send some "related" people to the West Kowloon Cultural District project exhibition halls and that those visitors had also filled out the consultation forms.

Another bidder, Dynamic Star, last night said it would not comment on the suspicious comment cards, calling it a matter between the government and those filling out the cards.

As for the telephone polling, in which 4,553 people were polled, 61 per cent supported building a cultural district on the West Kowloon waterfront, with only 10 per cent against it. More than 75 per cent of the respondents believed the project could enhance Hong Kong's culture and arts development and tourism industry, and 72 per cent felt it could improve employment. However, half were against the now-abandoned single-developer approach.

On the sensitive issue of the canopy, 51 per cent of those polled favoured its construction, with 18 per cent against. Public support for the canopy was in contrast to the fierce opposition to its construction contained in the majority of the 623 written submissions received on the project.

Long-term vision on a grand scale

Early 1998 Hong Kong Tourism Association commissions a study on a new performance venue

September 1998 It tells the Legislative Council's home affairs panel that venues are urgently needed

October 1998 In his policy address, chief executive Tung Chee-hwa announces plans to build a giant venue on the West Kowloon reclamation area

February 1999 A tourism association study reiterates the need and pinpoints 5.5 hectares at West Kowloon

October 1999 Mr Tung reaffirms his plans and announces a competition to revitalise Victoria Harbour

November 16, 1999 The Executive Council orders a review of the use of a southern part of the West Kowloon reclamation

April 2001 Government launches the West Kowloon reclamation concept plan competition

February 2002 Lord Foster's canopy concept declared the winner

September 2002 A steering committee for the scheme is set up, chaired by then chief secretary Donald Tsang Yam-kuen

June 2003 Exco is consulted about a planned invitation for proposals for the project

September 2003 Government invites tenders for the project, including developing and managing cultural facilities and the sale and leasing of residential and commercial land

November 2003 Legco calls for a comprehensive review of the scheme

Early November 2004 Exco approves shortlisting of three of five tenders

November 10, 2004 Government publishes the shortlist and announces a public consultation

January 5, 2005 Legco passes a motion asking for the scrapping of a single-developer approach and setting up of a statutory body to develop and run cultural facilities

September, 2005 Legco members visit Bilbao, Spain, to see the impact of the Guggenheim Museum

October 7, 2005 Chief Secretary Rafael Hui Si-yan announces the new plan for est Kowloon

End of January 2006 The three shortlisted bidders must inform the government if they still want to participate in the project

April-June 2006 Public consultation on creating a statutory body to run project's cultural facilities

June-July 2006 Government will submit bill to set up a statutory body

Early 2007 Statutory body to begin work

3. Developer that wins project is in line for $40b in sales
PEGGY SITO and ANDY CHENG, SCMP 8 October 2005

The developer that wins the West Kowloon project will rack up nearly $40 billion in property sales under the revised plan unveiled yesterday, according to surveyors.

While they believed the profit margin for the winning bidder would be reduced under the revised plan, the surveyors said the project remained attractive because of its scale.

Property agent Centaline said that under the amended proposal there would be 1.95 million sq ft of commercial and office space and 780,000 sq ft of residential space. With an estimated selling price of $13,000 per sq ft for office space and $18,000 per sq ft for flats, sales would generate revenue of $39.4 billion assuming all find buyers.

The property consultant said it was difficult to estimate the profits the winning consortium would earn.

"This is because we do not know the cost of building a canopy and other construction costs," it said.

Jones Lang LaSalle regional director Lau Chun-kong said the profit margin was bound to drop under the amended plan. But he also believed the West Kowloon Cultural District remains attractive taking into account its scale.

"The government must make the project financially viable. If not, no developer will be interested in it," he said.

Christine Loh Kung-wai, chief executive of the think-tank Civic Exchange, said the successful bidder could achieve a profit margin of 50 per cent on revenue of $70 billion from the project. She said the calculation was based on the fact that property in West Kowloon was fetching $20,000 per sq ft and construction costs would be relatively low.

Land prices in West Kowloon have been increasing on the back of better-than-expected results in the government's recently resumed land auctions.

A Sino Land-led consortium last month beat out at least six other parties to buy a site at Hoi Ting Road near Olympic Station in Tai Kok Tsui for $3.19 billion, and splashed $2.73 billion on an adjacent site.

The prices were both well above top-end market estimates of $2.8 billion and $2.4 billion respectively.

Sino Land, a bidder for the West Kowloon Cultural District project, owns 50 per cent of the venture, with the rest shared equally by Chinese Estates Holdings and Nan Fung Development.

4. Developer faces bill of $6b in land cost
ERNEST KONG, SCMP 8 October 2005

Henderson Land Development expects to spend around $6 billion in land premiums for converting an agricultural site in Wu Kai Sha into a residential project.

Lee Shau-kee, chairman of the largest agricultural land holder among local developers, said the company would speed up the process of negotiating the land premium payments for converting the land bank.

The estimated cost for converting its Wu Kai Sha site into a residential development with a maximum gross floor area of about 3.5 million sq ft is about $2,000 per square foot according to current market price which would mean around $6 billion, said Mr Lee.

"But we haven't reached any agreement with the government yet," he added.

According to the company's annual results, Henderson Land acquired 4.3 million sq ft of farm land for the financial year ended on 30 June.

Meanwhile, Henderson Land vice-chairman Colin Lam Ko-yin said the developer was selling about $3 billion worth of non-core investment properties, including four storeys of offices at 9 Queen's Road bought in October last year, six office buildings and about 700 parking spaces in separate residential projects.

In response to recent reports that some Hong Kong developers had broken mainland foreign exchange rules by not repatriating all their foreign exchange earnings from overseas sales, Mr Lam said they had already settled the problem with China's State Administration of Foreign Exchange.

"It was a technical problem, as our earnings were allowed to be expatriated from the mainland in the first place," said Mr Lam.

When asked if the firm had already paid the penalty for breaking the foreign exchange rules, Mr Lam said: "The amount of money involved is insignificant," without further explaining if a penalty was imposed on the developer.

5. Henderson still keen on West Kowloon tender
Teddy Ng and Monday Ng, The Standard 8 October 2005

Henderson Land, one of the three short- listed bidders for the West Kowloon arts hub, said it is still interested in participating in the tender even though the government has now decided to abolish the single-developer approach.

The other two bidders said they respected the government's decision.
Lee Shau-kee, chairman of Henderson Land, which owns bidder World City Culture Park, said the government's new proposal had balanced the interests of various sectors and could help soothe the differences that arose from the single-developer approach.

"We have put a lot of effort into the project so we are still interested even though there will not be much profit," he said. "It is for the good of Hong Kong."

Lee admitted that the proposed plot ratio of 1.81 is very low when compared with the company's 2.5 proposal - the lowest among the three bidders.

Dynamic Star International, a consortium of Sun Hung Kai Properties and Cheung Kong (Holdings), had proposed a plot ratio of 3.28, while Sunny Development, a joint venture comprising Sino Land, Wharf (Holdings) and Chinese Estates Holdings, had a 4.33 ratio.

Lee said the controversial giant canopy covering the whole area is still a must for the sake of tourism. He said profit is not the sole motive in the investment. "We might still do it even if there is no profit," he said.

The other two bidders said further discussion and studies are necessary before they can commit themselves.

Sun Hung Kai Properties executive director Eric Chow said the plot ratio proposed by the government was different from that proposed by Dynamic Star International. He said the company needed to study the new plan with its partner before deciding on whether to participate in the tender.

He said it is difficult to say whether the newly proposed conditions are attractive to developers, but the company will respect the government's decision.

"The single developer approach may have had some advantages. But the government needed to consider other factors and arrive at a balance between them," he said.

"We respect and agree with the government's decision."

Chow said the West Kowloon Cultural District project is not a commercial development and business interests should not be the sole consideration in assessing the project.

He said it is more important that the project meets the needs of the public and the cultural sector, and whether it truly represents Hong Kong.

A Sunny Development spokesman said the company will respect the government's proposal.

A spokesman for Swire Properties, whose tender was rejected, said the company had no further comment.

"We have expressed our viewpoints and it is now up to the government and the general public to decide what they want for Hong Kong and what is best for Hong Kong," the Swire spokesman said.

6. Hui fails to allay project fears
Cannix Yau and Carrie Chan, The Standard 8 October 2005

Lawmakers have accused an embattled Chief Secretary for Administration Rafael Hui of retaining "in disguise" a plan to allow a single developer to take over the West Kowloon cultural hub project by empowering the successful bidder to "pick and choose" the best land slots.

Hui took over the project from Donald Tsang after the latter became chief executive, and earlier this week made public a scaled-down proposal for the development of the 40-hectare harborfront at the southern tip of the West Kowloon reclamation into what the government calls a "world-class cultural district."

The new proposal seeks to allay fears that the government has colluded with the business sector by limiting the land open to a single developer to 20 hectares and opening up the other half to participation by multiple developers.

Under the revised proposal, one of the three short-listed bidders would thus win sole-development rights to at least half of the residential and commercial land of at least 250,000 square meters, with the remaining land to be divided into various slots for open tender to other developers.

The three finalists are Henderson Land's World City Culture Park; a joint bid by Cheung Kong (Holdings) and Sun Hung Kai Properties called Dynamic Star International; and Sunny Development, a consortium of Sino Land, Wharf Holdings and Chinese Estates Holdings.

The successful bidder, responsible for the site's cultural development, will have to commit HK$30 billion into an independent trust fund for building and maintaining the not-for-profit cultural facilities, which must take up at least 30 percent, or about 185,000 square meters, of the project area.

A controversial mega canopy costing HK$5 billion to HK$10 billion, expected to cover 55 percent of the cultural district, will also go ahead despite overwhelming disapproval by 70 percent of those who made about 30,000 submissions to the government. Announcing the proposal at the Legislative Council, Hui said it would be inappropriate for the government to scrap the canopy, which emerged from a design competition largely dominated by British architect Norman Foster.

"This was a mandatory requirement in the original proposal. Now we put forward a new proposal. We need to see the response of the three bidders and their financial portfolios before reviewing the need for the canopy," Hui said.

"Since we are not at the screening stage, it's too early for us to decide whether to retain it or not."

He also acknowledged that the successful bidder will be allowed to select the ideal sites within the project's development before the remainder of the land is put to open tender because the winner needs to assume the role of coordinating the project to ensure efficient integration of design and a clear line of responsibility.

Alan Leong, chairman of Legco's subcommittee on the cultural district, said the government has failed to address concerns raised in his panel's report about carving up the project to encourage more participation by interested parties.

Hui insisted he had responded to the public calls by scrapping the single- developer approach.

But he said: "If the project is shared by too many developers, I am afraid it may affect the overall planning. As a result, the overall management could be less efficient, less cost-effective and the development time longer."

Chan Yuen-han of the Federation of Trade Unions also questioned whether the successful bidder will be able to override the government's decisions on the whole project because the bidder will have a decisive say over how to divide the remaining half.

The Democratic Party's James To also accused the government of wishing to turn the successful bidder into the "colonial governor" of the remaining half of the site.

Hui pledged the government will impose stringent conditions on overall planning, style and quality standards, and will strictly monitor development work.

Hui said he believes the HK$30 billion trust fund will be self-sufficient to sustain the overall building, maintaining and operating costs, generating an annual return of HK$600 million.

"So the surplus of land proceeds and other revenue generated from commercial development might likely flow back to the Treasury," Hui said.

The government has also proposed a wide-ranging West Kowloon authority comprising representatives from Legco, arts and cultural circles, tourism industry, property sector, financial services, town planning, architecture and surveying sectors, for monitoring and managing the development project.

If the government fails to receive a positive response from at least two of the three short-listed bidders by January on the new proposal, the whole project will go back to the drawing board.

If at least two respond positively, the government will develop the proposed conditions into specific requirements after a detailed financial and feasibility study, initiate amendments to the outline zoning plan with the Town Planning Board and invite the interested bidders to revise their proposals accordingly.

The government will then put forward a proposal for setting up the West Kowloon authority with stipulated powers and functions for public consultation by mid-2006, followed by a bill to be tabled in Legco next July for enactment by the end of next year.

The new conditions also stipulate a standard plot ratio of 1.81 for commercial and residential development, with the latter comprising 20 percent, or 144,000 square meters, of the site.

The three bidding consortia have submitted development plans with plot ratios of 4.33, 3.28 and 2.5.

Leong blasted the new proposal as worse than the old one.

"This is a continuation of the single- developer approach. The new proposal simply fails to address the grave concerns stated in the Legco's report about this problematic approach," he said.

"This is even worse than the original proposal because the successful bidder can pick and choose the best land slots before leaving the undesirable slots to other bidders. The chosen developer can leave the scene after building the facilities with the West Kowloon authority bearing all the responsibility.

"So far I can't see any long-term strategic planning for arts and cultural development. I can't see how construction of the canopy can enhance the long- term cultural development," he said.

Institute of Surveyors president Cheung Tat-tong said the project bidder could earn more than HK$10 billion in profit even with a reduced plot ratio.