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Developer backs halt to land sales 2.
Depot costs weigh on KCR tender 3.
Yu Ming eyes shop premises 4.
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1. Developer backs halt to land sales
KENNETH
KO, SCMP 5 November 2002 The
government should freeze all land disposal for 18 months and again impose a 50-hectare
limit on annual sales to rescue the property market, says a developer. Cheuk
Nang (Holdings) executive chairman Cecil Chao Sze-tsung said suspending only land
auctions and sales of Home Ownership Scheme (HOS) flats might offer some psychological
relief, but would not turn around the market. He
said the government used heavy-handed measures in 1997 to suppress property prices
and it should make similar efforts now to lift the market. All types of land disposal
- including the application list system, premium settlement and developments by
the MTRC and KCRC - should have the brakes put on for at least 18 months, Mr Chao
said. Such a
moratorium would give the market time to find an equilibrium in supply and demand,
he said: "Once equilibrium returns, confidence will be restored and the market
will recover." Mr
Chao also said the government should reintroduce the 50-hectare per annum limit
on land sales that had been in use until 1997 to regulate future supply. His proposals
came amid reports that the government would soon announce measures to prop up
property prices. Possible
measures under consideration include freezing land sales and construction of HOS
flats, reallocating housing land for other uses, providing more subsidised loans
to help home-buyers and introducing rental subsidies. It
was generally believed the application list land-sale system would be retained.
Land on the list will be released for sale only if a developer offers a minimum
price deemed acceptable by the government. However,
Mr Chao said application list sale was no difference to ordinary land disposal
and should also be suspended. He
challenged earlier remarks by some officials that there was little the government
could do to rescue the property market. "There
is a lot the government can do. It has absolute control on the whole situation,"
he said. Mr Chao
said property prices had tumbled nearly 70 per cent since 1997. "The hardest
hit are Hong Kong people, especially those in negative equity." He
said his proposals, if adopted, would help stabilise the market. "Property
prices hopefully can recover 10 per cent in one year if the measures are adopted,
and maybe 20 to 30 per cent in 1.5 years. This will be good for property owners
and the economy." He
said other supplementary relief measures included extending the home mortgage
ceiling from 70 per cent to 80 per cent, government provision of more subsidised
purchase loans, and directing mainland capital and people to invest in Hong Kong's
property market. Mr
Chao said his proposals had gained support from some other developers, including
one of the biggest property companies. He would not identify them.
2. Depot costs weigh on KCR tender
SOPHIA
WONG, SCMP 6 November 2002 
The first railway
development package being tendered by Kowloon-Canton Railway Corp (KCRC) this
year is expected to draw cautious bids due to heavy construction costs for relocating
the rail works. On
sale is a 1.32 million-square-foot residential and retail development at the East
Rail's Ho Tung Lau Depot, near Fotan Station, in Sha Tin. The tender will close
on Tuesday. Analysts
said KCRC was trying to increase the project's attractiveness by not setting basic
sharing of the sales profit. Mass
Transit Railway Corp was required to receive a minimum of 25 per cent of development
profit at its Tiu Keng Leng Station project on the Tseung Kwan O railway extension.
However, the
long and complex construction work at the Ho Tung Lau development could lead to
cautious bids, analysts said, and high construction and interest costs would squeeze
developers' profit margins. New
World Development property development senior manager Andrew Choi Fook-ming said:
"The development has transport potential but developers will be cautious
in bidding." He
estimated investment would amount to more than HK$4.1 billion, including HK$2
billion construction costs, HK$1.32 billion land premium and the balance in interest
charges. The average development cost would be HK$3,100 per square foot. "It
is financially viable only if the future sale price for the project exceeds HK$3,600
per square foot," Mr Choi said. He
said the development was more complex than usual railway projects because the
developer had to demolish the depot to build apartment blocks on top of a large
railway podium and build a new depot. The
average construction cost - HK$1,500 to HK$1,600 per square foot - was about 50
per cent higher than normal residential developments, he said. "The
development is expected to take five years to completion. A lengthy construction
period means a much higher interest cost," said Mr Choi. The
interest cost could reach HK$800 million if the government shortened the period
for pre-sale of unfinished units. Nan
Fung Development project director Donald Choi said the company was interested
in the development, but he was concerned about the technical difficulties in relocating
the railway tracks and train signalling system, which could involve a huge cost.
"It can
be very risky because the cost is hard to calculate accurately. The total construction
cost could range from HK$1.5 billion to HK$2 billion," Mr Choi said. SK
Pang Surveyors managing director Pang Shiu-kee expected four to five developers
or consortiums to submit offers. "Sun
Hung Kai Properties [SHKP] could be the most aggressive bidder. It has better
development experience because it built Royal Ascot," he said. Royal
Ascot is a luxury residential development in Fotan, completed in 1995. Centaline
Property Agency said its average price last month had plunged more than 60 per
cent from its peak to HK$3,385 per square foot. The
Ho Tung Lau development will provide 1,560 residential units, 293 parking spaces
and 2,000 sq ft of retail space. KCRC
is asking for HK$70 million up front as a consultancy fee and a proposed guaranteed
profit. The highest offer will win the bid. Developers
that had expressed interest in the project included SHKP, Henderson Land Development,
Cheung Kong (Holdings), Wharf (Holdings), Sino Land, New World Development, Hang
Lung Properties, HKR International, Nan Fung Development and Pacific Concord.
3. Yu Ming eyes shop premises
SOPHIA
WONG, SCMP 6 November 2002 Yu
Ming Investment and Management is looking for high-yield retail properties following
the doubling of rental returns for a Mongkok shopping arcade in the past five
years. Senior
manager Andrew Leong said the company was targeting retail properties and potential
developments or existing buildings suitable for refurbishment. He
said average rentals for ground to lower-level shops at Argyle Centre phase one,
above Mongkok Mass Transit Railway station, were about HK$150 per square foot,
more than double that of the market peak in 1997. "The
most expensive ground-floor shops are being leased at about HK$1,000 per square
foot per month. It is probably a record high all over Hong Kong," he said.
The company is
investment manager of locally listed Yu Ming Investments, which led a consortium
to acquire the lowest four floors at Argyle Centre phase one from Hang Lung Development
for HK$1.07 billion, or HK$23,000 per square foot, in 1997. The 45,000 sq ft shopping
arcade was the first investment of Yu Ming Investments, previously named SHK Hong
Kong Industries. Mr
Leong said about 12,000 sq ft of the retail space had been sold during the past
few years, realising proceeds of more than HK$200 million. The
remaining shops were fully let and generating a monthly rental income of HK$5.3
million, he said. "The
project had a monthly rental income of only HK$2.4 million when we bought it.
Now the floor area is less but rentals received have more than doubled. It is
the most profitable investment of the company in the past few years," he
said. However,
he said the property could be put up for sale if an investor offered up to HK$900
million, or more than HK$27,000 per square foot. "It
will still have a 7 per cent yield even though it is being sold at HK$900 million,"
he said. Another
lucrative deal earlier this year occurred when Yu Ming Investment and Management
snapped up a 30,000 sq ft home for the aged in Tai Kok Tsui for HK$49 million
and resold it for HK$55 million last month, generating a profit margin of about
20 per cent within a year, including the rental income, Mr Leong said. "We
bought it because it secured a 17 to 18 per cent rental yield. The monthly rental
is high at HK$690,000." Apart
from retail properties, the company bought a 2,000 sq ft commercial site in Hollywood
Road, Central, in 1998. He
said that Yu Ming invested HK$70 million to HK$80 million to convert an office
into 44 fully furnished serviced apartments, each of about 300 to 650 sq ft, after
market demand for office space had contracted substantially. "It
is now named The Soho and caters for overseas tenants. Monthly rentals range from
HK$17 to HK$23 per square foot with miscellaneous expenses inclusive," he
said. He estimated
the apartment block could bring in a monthly income of HK$600,000 to HK$700,000,
which represented a 12 per cent yield on full occupancy. Occupancy
rate was now 70 per cent, he said. He
said the company was not interested in pure residential and commercial properties
without a proven market. Yu
Ming is controlled by Tony Fung Wing-cheung, who recently led a failed hostile
takeover bid for listed property play China Motor Bus.
4. Wheeler
SCMP, 4 November 2002 Cartoon 
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