Planning Department Agreement No. CE 60/2005 (TP) Land Use Planning for the Closed Area – Feasibility Study Appendix L - Financial Assessment

Agreement No. CE 60/2005 (TP) Land Use Planning for the Closed Area – Feasibility Study Financial Assessment

Contents Page

1 INTRODUCTION 1 1.1 Background 1 1.2 Objectives 1 1.3 Limitations 1 1.4 Report Structure 1 2 APPROACH AND METHODOLOGY 2 2.1 Methodology 2 2.2 Assumptions 2 2.3 Key Assumption Summary 5 3 ANALYSIS 7 3.1 Introduction 7 3.2 Land Revenue 7 3.3 FCA Whole Development Area 10 3.4 Visitor Revenue 11 4 DISCUSSION AND CONCLUSIONS 13 4.1 Discussion 13 4.2 Conclusions 14 A1 Construction Costs 16 A2 Property Transactions Record 22 A2.1 Eco-lodge Bungalows 24 A2.2 KNP Residential 24

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Planning Department Agreement No. CE 60/2005 (TP) Land Use Planning for the Closed Area – Feasibility Study Appendix L - Financial Assessment

Tables

Table 1 Development Cost Variables and Data (2010 Prices) Table 2 Summary of Other Costs Table 3 Key information of the Eco-lodge Bungalow Table 4 Key information of Kong Nga Po Residential Development Table 5 Construction period Table 6 Key Assumption Summary – Base Case Table 7 Ma Tso Lung Eco-lodge Bungalows (Discount Rate 7%) Table 8 Kong Nga Po Residential (Discount Rate 7%) Table 9 Ma Tso Lung Eco-lodge Bungalows with Infrastructure (Discount Rate 7%) Table 10 Kong Nga Po Residential with Infrastructure (Discount Rate 7%) Table 11 Kong Nga Po Residential with Infrastructure and Environmental Mitigation (Discount Rate 7%) Table 12 Base Scenario Results (Discount rate 7%) Table 14 2008 Visitor Arrivals and Same-day In-town Visitors in Hong Kong Table 15 Same day In-town spending (HK$ per day) Table 16 Spending Category for Same-day In-town Tourism

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Planning Department Agreement No. CE 60/2005 (TP) Land Use Planning for the Closed Area – Feasibility Study Appendix L - Financial Assessment

1 INTRODUCTION

1.1 Background

The existing (FCA) (the Closed Area) was first established in 1951. It provides a buffer zone to help law enforcement agencies maintain the integrity of the boundary between Hong Kong and the Mainland and to confront illegal immigration and other cross boundary criminal activities. It was recently proposed by the Security Bureau that the Closed Area could be maintained with a diminished coverage and thus the Closed Area Boundary would be revised for potential development. With the coverage reduced from about 2,800ha to 400ha, approximately 2,400ha of land will be released from the original Closed Area. This report assesses the cost and revenue implications of the release of land from the Closed Area based on the preliminary planning options on the study area.

1.2 Objectives

The objective of this report is to detail the findings of the cost-revenue assessment of the proposed planning facilities and associated infrastructures taking into account the eco- tourism viability in the study area. The preliminary development scenario includes: • Construction of an Eco-lodge comprising 80 individual Bungalow-accommodations at Ma Tso Lung; • 657 blocks of sustainable villa-residential development at Kong Nga Po (KNP); • Adaptive re-use of former disused public schools for holiday camps or visitor centres; • Hiking and heritage trails, and cycling tracks throughout most of the study area; • Road improvements for both general roads and village access roads so as to strengthen the connection with the peripheral and the Boundary Control Points (BCP). Revenue will be generated through the sale of land for the two development proposals 1) Eco-lodge at Ma Tso Lung and 2) KNP sustainable residential community. Visitor tourism related expenditure is also estimated.

1.3 Limitations

This assessment has been undertaken using current market conditions which will change over time. While every effort has been made to ensure the accuracy of this document, the uncertain nature of economic and market data, forecasting and analysis means that Ove Arup and Partners Hong Kong Ltd is unable to make any warranties in relation to the information contained herein. Ove Arup and Partners Hong Kong Ltd disclaim liability for any loss or damage, which may arise as a consequence of any person relying on the information contained in this document.

1.4 Report Structure

The remainder of this report is structured as follows: • Chapter 2 presents the approach and the methodology of the financial assessment model; • Chapter 3 outlines the result of the model under central assumptions and sensitivity tests; • Chapter 4 discusses the findings of the analysis and conclusions; and • Chapter 5 includes all the reference materials used in this report.

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Planning Department Agreement No. CE 60/2005 (TP) Land Use Planning for the Closed Area – Feasibility Study Appendix L - Financial Assessment

2 APPROACH AND METHODOLOGY

2.1 Methodology

2.1.1 Model The cost-revenue analysis has been undertaken to evaluate the financial implication of the preliminary planning scenario for the FCA. It comprises two separate components: 1. Estimating average land value for the Eco Lodge and Kong Nga Po Residential Development; 2. Estimating a net cash flow for the entire FCA that includes both land revenue from sale of the Eco Lodge and Kong Nga Po Residential Development and remaining FCA infrastructure costs. Quantifiable cost and revenue components over the entire assessment period are identified and entered at the relevant time period in a discounted cash flow model to calculate Present Value (PV) costs and revenues. The total PV cost and revenues are compared against each other and the difference represents the Net Present Value (NPV) of the development plan. In outline, the approach is as follows: • Estimate and phase over time the costs incurred over the duration of the assessment period which is until 2030; • Phase the revenue generated from land sales over the same period at the appropriate interval; • Calculate a time profile of net revenues (revenues less costs); • Calculate performance measures of Net Present Value and Revenue-Cost Ratio; • Compare and contrast the findings; and • Undertake sensitivity analysis of key parameters (construction costs and discount rate). In addition to the above, revenues generated by visitors to the area were also estimated.

2.1.2 Residual Value Method The residual method of valuation is used to estimate land value based on estimates of the Gross Development Value (GDV), which is equivalent to the current market value of the development. The land value is represented by the difference between the GDV and the total costs involved (e.g. construction costs, professional team fees, finance costs, marketing costs, developer’s profit). Comparison with similar properties has been used to benchmark residential property prices and hotel room tariffs. Other variables such as construction period and void period are also taken into account. The land value estimate is dated February 2010.

2.2 Assumptions

The variables and assumptions underpinning the analysis are described further in the remainder of this section.

2.2.1 Construction Costs A summary of the assumed construction costs for the preliminary planning scenario are summarized in Table 1 and provided in detail in Appendix 1.

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Planning Department Agreement No. CE 60/2005 (TP) Land Use Planning for the Closed Area – Feasibility Study Appendix L - Financial Assessment

Table 1 Development Cost Variables and Data (2010 Prices) Proposal Cost (HK$M) 1. Eco Lodge and KNP Residential Eco Lodge 239.9 KNP Residential Development 1,766.1 Eco Lodge and KNP Residential Total 2006.0 2. FCA Infrastructure Adaptive Re-use of Public Schools 137.6 Drainage, Sewerage Treatment Plant, Pumping Stations and Associated works, 991.3 and waterworks Road Improvement including Cycling Track, Hiking Trail and Heritage Trail 467.5 Environmental Mitigation Measures 611.6 Total Infrastructure Costs 2208.0 Total Costs 4,214.0 Note: Costs for Eco-lodge Bungalows and KNP Residential Development included above are used for land valuation only. It should be noted that all costs include a 25% contingency to cover potential uncertainties at this preliminary stage.

2.2.2 Other Costs In additional to the construction costs, the professional team fees, marketing costs and developers profit are summarized in Table 2. Table 2 Summary of Other Costs Item Data Professional team fees 6.0% of the Construction costs Marketing costs for Eco-lodge (hotel) 1.0% of the GDV Marketing costs for Residential 1.5% of the GDV Profit on Costs 25% of Costs Profit on Land 25% of the Land value

2.2.3 Revenue Estimation of Gross Development Value (GDV) of the Eco-lodge Bungalows is based on the method of summation to perpetuity, which is GDV = Annuity / discount rate Where: Annuity = per night room tariff * total number of rooms * Occupancy *365 Eco Lodge The Hong Kong Tourism Board (2009) reports the average room tariff in full year 2008 for High Tariff B Hotels in Hong Kong was approximately HK$1,100 per night, with a fluctuation between HK$858 to HK$1,224, while the average room tariff for all the hotels in Hong Kong is around 1,200. The average annual hotel occupancy for hotels across Hong Kong was 85% while the average annual occupancy in districts other then Central/Admiralty, Wan Chai/Causeway Bay, Tsim Sha Tsui and Yau Ma Tei/Mong Kok was 84%. An average annual occupancy of 84% has been adopted in the analysis.

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Planning Department Agreement No. CE 60/2005 (TP) Land Use Planning for the Closed Area – Feasibility Study Appendix L - Financial Assessment

The final room Tariff will depend directly on the proposal put forward by the developer. The developer may opt to build the eco lodge at a lower construction cost and generate greater returns assuming a room tariff of HK$1,100 per night. Similarly, the developer could opt for a more expensive development with a higher room tariff. The hotel will also generate revenue through a range of other activities including restaurants, bars, function rooms and recreational facilities such as spas. Such details at this stage are unknown. For this analysis, it has been assumed that room Tariff will be HK$1,100 per night. The key information of the Eco-lodge Bungalow development is summarized in Table 3. Table 3 Key information of the Eco-lodge Bungalow Item Data Assumed Per night Room Tariff HK$1,100 Number of Rooms 80 [1] Occupancy 84% [2] Discount Rate 7% [3] Source: [1] Land Use Planning for the Closed Area – Feasibility Study Working Paper No.6, Recommended Development Plan [2] Hotel Room Occupancy Rate by District – All Release of Final Arrivals Figures for 2008, Hong Kong Tourism Board (2009) [3] HSBC HK Best Lending Rate since 10th Nov, 2008 + 2% risk premium

Kong Nga Po Residential Development The estimation of the GDV of KNP Residential Development is calculated by multiplying the total Gross Floor Area (GFA) to the price per m² GFA. Table 4 summarizes the key information used for the KNP Residential Development. Table 4 Key information of Kong Nga Po Residential Development Item Data HK$ per m² HK$36,000 [1] Total GFA 105,000 m² [2] Discount Rate 7% [3] Source: [1] Midland Realty (2009) Transaction Records for Royal Palm, One Hyde Park, Rolling Hills and Green Crest, lower average [2] Land Use Planning for the Closed Area – Feasibility Study Working Paper No.6 Recommended Development Plan [3] HSBC HK Best Lending Rate since 10th Nov, 2008 + 2% risk premium

Property prices are currently experiencing significant variation and are lower than the highs reported in 2008. Upward and downward variation will continue to occur over time, particularly as sale of the land is not proposed for another several years into the future. The assumption of HK$36,000 per m² is a lower bound average across transaction records between May 2008 and April 2009 for the Royal Palm, One Hyde Park, Rolling Hills and Green Crest in Yuen Long by Midland Realty (see Appendix 2).

2.2.4 Residential and Eco Lodge Construction Period The construction of both the KNP Residential and Eco Lodge Developments are assumed to occur over a 2 to 4 years period.

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Planning Department Agreement No. CE 60/2005 (TP) Land Use Planning for the Closed Area – Feasibility Study Appendix L - Financial Assessment

2.2.5 Void Period The length in void period (period between completion of construction and sale) for the KNP residential and Ma Tso Lung eco-lodge developments is assumed to be 1 year for both developments, with marketing occurring during the construction period.

2.2.6 Construction Period Table 5 summarizes the construction period of all the proposed developments. Construction of Kong Nga Po Residential and Eco Lodge are not scheduled to commence until 2020. Table 5 Construction period Construction Estimated Construction Proposal Commencement Date Completion Date Construction Period for Kong Nga Po Residential 2020 2023 Construction Period for Eco-lodge 2020 2023 Construction Period for Lung Kai Public School - 2017 Construction Period for Sam Wo Public School - 2017 Construction Period for King Sau Public School - 2017 Construction Period for Kwan Ah Public School - 2017 Construction Period for Hiking Trail 2014 2017 Construction Period for Heritage Trail 2014 2017 Construction Period for Cycle Track - 2023 Construction Period for Drainage and Sewerage - 2023 Works Construction Period for Water Supply Works - 2023 Construction Period for General Road Improvement - 2023 Construction Period for Village Access Road - 2017 Construction Period for Traffic Restriction Works for - 2012 Lok Ma Chau Spur Line BCP Construction Period for Traffic Restriction Works for - 2015 BCP Construction Period for BCP - 2011 Construction Period for Traffic Restriction Works for - 2015 Station BCP

2.2.7 Land Sale It is assumed that the land sales of the KNP residential development and Ma Tso Lung eco- lodge will take place 1 year in advance of the construction period, i.e. 2019.

2.2.8 Discount Rate The base scenario discount rate is 7% real. It is referenced to the current HSBC HK best lending rate as at 10th Nov, 2008, which is 5%, plus an additional 2% risk premium incurred by the developer.

2.3 Key Assumption Summary

A summary of the key assumptions adopted in the analysis are listed below

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Planning Department Agreement No. CE 60/2005 (TP) Land Use Planning for the Closed Area – Feasibility Study Appendix L - Financial Assessment

Table 6 Key Assumption Summary – Base Case Item Assumptions Real Discount Rate 7% Capital expenditure profile Year 1 – 34%, Year 2 – 33%, Year 3 – 33% Assessment period 20 years - 2010 (Year 0) to 2030 (Year 20) Land Sale Date for Tso Ma Lung Eco-lodge-proposed land 2019 Land Sale Date for Kong Nga Po residential-proposed land 2019 Construction Period of Tso Ma Lung Eco-lodge 2020-2023 Construction Period of Kong Nga Po Residential 2020-2023 Costs Price Year 2010 Construction Costs for Eco-lodge and Residential HK$2,006 Million Construction Costs for other Development Proposals and HK$2,208 Million Road Improvements Professional team fee 6% of the total Construction costs Marketing costs for Eco-lodge (hotel) 1% of the GDV Marketing costs for Residential 1.5% of the GDV Profit on Costs 25% of Construction costs and Professional team fee Profit on Land 25% of the Land value Revenue Per night Room Tariff (Bungalow) HK$1,100 Bungalow Occupancy 84% HK$ per m² (Residential) HK$36,000

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Planning Department Agreement No. CE 60/2005 (TP) Land Use Planning for the Closed Area – Feasibility Study Appendix L - Financial Assessment

3 ANALYSIS

3.1 Introduction

The analysis consists of three components: 1. The first estimates revenue generated from sale of land for the Ma Tso Lung Eco- lodge Bungalows and KNP Residential Developments. 2. The second incorporates the estimated land revenue and total development costs of the FCA and investigates the Net Present Value (NPV) and Revenue-Cost ratio (RC Ratio) of the FCA as a whole. 3. The third estimates the visitor revenues generated from the expected number of visitors.

3.2 Land Revenue

3.2.1 Base Scenario Under the assumption adopted in the estimated land revenue from the sale of Eco Lodge and KNP Residential development are HK$27 Million and HK$553 Million respectively as shown in Table 7 and Table 8 provided in more detail in Appendix 2. The date of estimation is February 2010. Table 7 Ma Tso Lung Eco-lodge Bungalows (Discount Rate 7%) Item $ $

Gross Development Value (GDV) 385,440,000 Number of Rooms (80) Occupancy per year (84%) PV@ 7% for 3 years 314,633,854

Less Marketing Costs (1% of GDV) 3,146,339 311,487,515 Less Costs Construction Costs 239,917,500 Professional Team Fee (6% of construction costs) 14,395,050 Profits on Costs (25%) 63,578,138 317,890,688 PV@ 7% for 2 years 277,658,038 33,829,477 Profit on Land (25% of land value) 6,765,895 27,063,582 Land Value, say 27,000,000 AV ($/sq.m) 6,442

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Planning Department Agreement No. CE 60/2005 (TP) Land Use Planning for the Closed Area – Feasibility Study Appendix L - Financial Assessment

Table 8 Kong Nga Po Residential (Discount Rate 7%) Item $ $

Gross Development Value (GDV) 3,402,000,000 Saleable Area (105,000 sq.m)*90% ER Price per sq.m 36,000 PV@ 7% for 3 years 2,777,045,377

Less Marketing Costs (1.5% of GDV) 41,655,681 2,735,389,697 Less Costs Construction Costs 1,766,062,500 Professional Team Fee (6% of construction costs) 105,963,750 Profits on Costs (25%) 468,006,563 2,340,032,813 PV@ 7% for 2 years 2,043,875,284 691,514,413 Profit on Land (25% of land value) 138,302,883

553,211,530 Land Value, say 553,000,000 AV ($/sq.m) 5,854

3.2.2 Sensitivity Tests Sensitivity tests were undertaken to assess the implications if various infrastructure costs were assumed to be borne by the developer.

3.2.2.1 Eco Lodge Sensitivity test for the Eco Lodge as shown in Table 9 was undertaken by assuming some of the infrastructure costs (approximately HK$30 Million including minor road improvement, drainage, waterworks, sewerage and STP) were borne by the developer. Under the assumptions adopted, the government would need to subsidize the full value of the land compared to the base case in order to make the Eco Lodge attractive to a potential developer if they had to bear the additional infrastructure construction costs. Table 9 Ma Tso Lung Eco-lodge Bungalows with Infrastructure (Discount Rate 7%) Item $ $

Gross Development Value (GDV) 385,440,000 Number of Rooms (80) Occupancy per year (84%) PV@ 7% for 3 years 314,633,854

Less Marketing Costs (1% of GDV) 3,146,339 311,487,515 Less Costs Construction Costs 269,417,500 Professional Team Fee (6% of construction costs) 16,195,050 Profits on Costs (25%) 71,528,138 357,640,688 PV@ 7% for 2 years 307,169,349 4,318,166 Profit on Land (25% of land value) 863,633 3,454,533 Land Value, say Nil AV ($/sq.m) 0

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Planning Department Agreement No. CE 60/2005 (TP) Land Use Planning for the Closed Area – Feasibility Study Appendix L - Financial Assessment

3.2.2.2 KNP Residential Development Sensitivity tests for KNP Residential Development were undertaken by assuming some of the infrastructure costs are borne by the developer. These include: • Related infrastructure costs valued at approximately HK$124 Million including road improvement, drainage, waterworks, sewerage and STP (Table 10); and • Related infrastructure costs together with environmental mitigation measure costs valued at approximately HK$ 252 Million (Table 11). Under the assumptions adopted, the government would need to subsidize approximately 20% of the land value compared to the base case in order to make the KNP Residential Development attractive to a potential developer if they were to bear the additional infrastructure costs (Table 10). The land value would need to be subsidised by around 40% compared to the base case if the developer was to bear both the infrastructure and environmental mitigation costs (Table 11). Table 10 Kong Nga Po Residential with Infrastructure (Discount Rate 7%) Item $ $

Gross Development Value (GDV) 3,402,000,000 Saleable Area (105,000 sq.m)*90% ER Price per sq.m 36,000 PV@ 7% for 3 years 2,777,045,377

Less Marketing Costs (1.5% of GDV) 41,655,681 2,735,389,697 Less Costs Construction Costs 1,879,662,500 Professional Team Fee (6% of construction costs) 112,779,750 Profits on Costs (25%) 498,110,563 2,490,552,813 PV@ 7% for 2 years 2,175,345,281 560,044,415 Profit on Land (25% of land value) 112,008,883

448,035,532 Land Value, say 448,000,000 AV ($/sq.m) 4,741

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Planning Department Agreement No. CE 60/2005 (TP) Land Use Planning for the Closed Area – Feasibility Study Appendix L - Financial Assessment

Table 11 Kong Nga Po Residential with Infrastructure and Environmental Mitigation (Discount Rate 7%) Item $ $

Gross Development Value (GDV) 3,402,000,000 Saleable Area (105,000 sq.m)*90% ER Price per sq.m 36,000 PV@ 7% for 3 years 2,777,045,377

Less Marketing Costs (1.5% of GDV) 41,655,681 2,735,389,697 Less Costs Construction Costs 2,008,562,500 Professional Team Fee (6% of construction costs) 120,513,750 Profits on Costs (25%) 532,269,063 2,661,345,313 PV@ 7% for 2 years 2,324,522,065 410,867,631 Profit on Land (25% of land value) 82,173,526

328,694,105 Land Value, say 329,000,000 AV ($/sq.m) 3,478

3.3 FCA Whole Development Area

The following section incorporates the land revenue estimated in the previous section with the infrastructure costs for the FCA as a whole.

3.3.1 Base Scenario The results of the base scenario analysis using the assumptions listed in are shown in Table 12 below. The base scenario assumes all other infrastructure costs (i.e. HK$2,208 Million) excluding the costs for development of the Eco Lodge and KNP Residential developments which are already included in the estimates of their land value, together with the estimated land revenue as described previously (i.e. Eco Lodge HK$27.1 Million and KNP Residential HK$553.2 Million). The revenue from land sale has been allocated at 2019 for both the KNP Residential Development and the Eco Lodge. Table 12 Base Scenario Results (Discount rate 7%) PV Costs (HK$M) PV Revenue (HK$M) NPV (HK$M) Revenue-Cost Ratio 1,214.6 315.6 -898.9 0.3

The results indicate that under the assumptions used, the NPV is negative (-HK$898.9 Million) and Revenue-Cost Ratio is 0.3. In other words, the revenue generated from land sales alone is not sufficient to cover the infrastructure costs for development of the entire FCA (revenues cover about 30% of the total cost). The discounted cash flows of cumulative costs and revenue are presented in Appendix 3.

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Planning Department Agreement No. CE 60/2005 (TP) Land Use Planning for the Closed Area – Feasibility Study Appendix L - Financial Assessment

3.4 Visitor Revenue

Visitor revenue1 has been calculated by the estimated per visitor expenditure multiplied by the estimated number of visitors. Table 13 summarizes the estimated number of visitors within the whole development area. The estimated number of visitors for the planned cemetery on both Ching Ming/Chong Yeung Festivals has been excluded. Table 13 Summary of Tourism Items Item Development Total no. of visitors per year Eco-lodge Bungalows 47,000 Adaptive Re-use of Public School Holiday Camps 73,000 Agri-tourism Farms 40,000 Recreational - 110,000 Country Park - 270,000 Hiking Trail - 220,000* Bicycle Trails - 500,000 Heritage Trail - 270,000 Total 1,530,000 *Section of the hiking trail is contained within the country park. Therefore the number of visitors in the hiking trail has been reduced to avoid double counting as they are already included in the country Park estimates.

Information from the Hong Kong Tourism Board in 2009 is presented in Table 14 which shows that the total visitor arrivals in 2008 was 29,506,616, of which 41.3% (12,186,231) were classified as “same-day in-town” visitors. Table 14 2008 Visitor Arrivals and Same-day In-town Visitors in Hong Kong Market Region 2008 Visitor Arrivals Same-day In-town Visitors Mainland 16,862,003 6,964,007 Australia, New Zealand and South Pacific 763,206 315,204 South and Southeast Asia 2,936,207 1,212,653 Europe, Africa and Middle East 2,094,039 864,838 North Asia 2,229,117 920,625 The Americans 1,684,734 695,795 Taiwan 2,240,481 925,319 Others 696,829 287,790 Total 29,506,616 12,186,231

Source: Monthly Report – Visitor Arrivals Statistics: Dec 2008, Hong Kong Tourism Board (2009)

1 The revenue figure represents gross receipts, which include the intermediate inputs of the businesses concerned in addition to the value added they produce. Moreover, as spending by both local residents and incoming tourists in the Closed Area will crowd out part of their other expenditure, the overall increase in business receipt for the whole Hong Kong economy will be smaller than the visitor revenue generated in the Closed Area

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Planning Department Agreement No. CE 60/2005 (TP) Land Use Planning for the Closed Area – Feasibility Study Appendix L - Financial Assessment

Information from the Hong Kong Tourism Board and shown in Table 20 suggests that the average same day in-town spending for overseas visitors from different part of the world arriving in Hong Kong was HK$770 per day. Table 15 Same day In-town spending (HK$ per day) Market Region HK$ per day 2,138 Macau SAR 1,576 Australia, New Zealand & South Pacific 574 South & Southeast Asia 458 Europe, Africa & the Middle East 409 North Asia 394 The Americans 339 Taiwan 268 Average 770 Source: Press Release on 9th April, 2009, Hong Kong Tourism Board The Hong Kong Tourism Board also provides a breakdown of tourism related expenditure which is shown in Table 16. Between 2003 and 2007, expenditure on meals outside hotels and other items (travel, tours, recreation etc) accounted for 15.1% on average of the total same-day in-town tourism spending. This suggests from an average expenditure of HK$770 per visitor, HK$116 is spent on outside meals and other expenses which has been used to represent both local and international tourists. Table 16 Spending Category for Same-day In-town Tourism Category / Year 2003 2004 2005 2006 2007 Average Meals Outside Hotels 7.6% 7.4% 7.3% 5.9% 6.2% 6.9% Others 9.4% 8.9% 8.9% 7.5% 6.7% 8.2% Hotel Bills 1.2% 0.9% 1.2% 1.1% 6.2% 2.1% Shopping 81.8% 83.1% 82.6% 85.5% 86.2% 83.8% Source: Tourism Expenditure Associated to Inbound Tourism 2007, Hong Kong Tourism Board (2008) In estimating the total expenditure from visitors to the FCA, the following assumptions have been made: • Total visitors per year is 1,529,900, spending HK$116 each; • One in two of the 46,720 pay for accommodation at the Eco Lodge at HK$1,100 per night. The estimated visitor revenue generated in the whole development area is approximately HK$201 Million per year.

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Planning Department Agreement No. CE 60/2005 (TP) Land Use Planning for the Closed Area – Feasibility Study Appendix L - Financial Assessment

4 DISCUSSION AND CONCLUSIONS

4.1 Discussion

4.1.1 Eco Lodge and KNP Residential Development The estimated land value for the Eco Lodge and KNP Residential Development under base assumptions was HK$27 Million and HK$553 Million. Both developments are in theory feasible using current market conditions. The price for the KNP Residential development of HK$36,000 per m² is within the market range for similar properties in demand and sold in locations close to the FCA. Similarly, the Eco lodge Tariff structure lies within the market range, but the actual tariff adopted would depend on the detailed design and the associated costs it would need to cover. In addition to the room tariff, the Eco Lodge would be expected to generate revenues from other areas including restaurants, spa massage, conference rooms and recreational activities. The sensitivity tests indicate that under the assumptions adopted, the government may need to subsidise the land value if additional infrastructure and environmental mitigation costs were passed to the potential developer. The eco lodge could require a land subsidy of around 100% if infrastructure costs including minor road improvement, drainage, waterworks, sewerage and STP were borne by the developer. Similarly, the KNP Residential Development could require a land subsidy of around 20% if infrastructure costs including road improvement, drainage, waterworks, sewerage and STP were included and around 40% if infrastructure costs and environmental mitigation measures costs were passed onto the developer. Both developments are in the concept stage and are not planned for ten years into the future. Accordingly, their overall viability will depend on the future conditions present at that time including the supply and demand for similar property, the final detailed design proposal and the costs associated with them. A number of major developments are planned and/or underway in the surrounding area including the NENT NDAs and the Lok Ma Chau Loop. Underpinning these developments is the ongoing actions to improve economic linkages with and the Mainland. These factors will all exert a positive influence on future supply and demand as more people move into the area for employment, housing and recreation.

4.1.2 FCA Development Comparison of the estimated costs of the entire FCA development with the estimated revenues generated from land sales under the base scenario returns a NPV of -HK$898.9 Million and Revenue Cost ratio of 0.3. The revenue generated from land sales would cover approximately 30% of the total infrastructure development cost. The costs for sewerage treatment works and associated works are significant and account for approximately 40% of the total FCA development and infrastructure cost (excluding Eco lodge and KNP Residential). These results indicate that the development of FCA will most likely require Government assistance to proceed.

4.1.3 Tourism and other benefits Development of the Closed Area will provide a number of tourism related opportunities and it has been estimated that approximately 1.5 million visitors will be attracted to the area per year. The estimated direct tourism related expenditure from these visitors is around HK$201 Million per year. A proportion of this expenditure will be captured by local businesses who supply goods and services to visitors. In addition, the capital investment for developing the

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Planning Department Agreement No. CE 60/2005 (TP) Land Use Planning for the Closed Area – Feasibility Study Appendix L - Financial Assessment

FCA will create employment opportunities for suppliers of goods and services. Employment opportunities will also be created over the longer term for businesses associated with tourism.

4.2 Conclusions

The financial assessment of the preliminary land use planning of the Closed Area is based on current conditions which reflect the estimated costs, real estate values and borrowing rates. The results suggest that development of the eco lodge and KNP residential area is theoretically feasible at this preliminary stage. The actual attractiveness of the land to the private sector in the future will depend on conditions at that time, including costs for construction, financing, demand and type of such developments that in turn influence the expected price and room tariff structures. The cost for land could also be examined as a further means for enticing interest from developers. A number of proposed developments are underway in the area including NENT, Lok Ma Chau Loop and Sha Tau Kok. Once completed, these developments will have positive implications for transport infrastructure, economic connectivity with the mainland, and the local population and businesses. All of these factors will have an influence on the demand and supply for residential and hotel type developments. Finally, there are further benefits from the development of the Closed Area to the community including substantial visitor revenues.

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Planning Department Agreement No. CE 60/2005 (TP) Land Use Planning for the Closed Area – Feasibility Study Appendix L - Financial Assessment

REFERENCE (1) Arup (2009) Land Use Planning for the Closed Area – Feasibility Study Working Paper No.4 – Board Technical Assessments. Hong Kong (2) Arup (2009) Land Use Planning for the Closed Area – Feasibility Study Working Paper No.5 – Draft Development Plan, Hong Kong (3) HSBC HK (2008) Best lending rate since 10th Nov, 2008 (4) Hong Kong Tourism Board (2008) Tourism Expenditure Associated to Inbound Tourism 2007 (5) Hong Kong Tourism Board (2009) Monthly Report – Visitor Arrivals Statistics: Dec 2008 (6) Hong Kong Tourism Board (2009) Press Release – Tourism Spending Exceeded HK$158 Billion in 20080, 9th April, 2009 (7) Midland Realty (2009) Transaction Record – Royal Palm, One Hyde Park, Rolling Hills and Green Crest, May 2008 to April 2009 (8) Southwark Property Development & Regeneration Business Unit (2005) Southwark Affordable Housing Valuation Research. Council Offices, London

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Planning Department Agreement No. CE 60/2005 (TP) Land Use Planning for the Closed Area – Feasibility Study Appendix L - Financial Assessment

A1 Construction Costs Cost Estimate Item Location Proposal (HK$M) Development Proposal 1 Eco Lodge 80 nos of bungalows together with the Administration 239.9 Development Building, the internal infrastructure provisions, the internal road network and site formation works 2 Kong Nga Po Villas together with club house, the internal 1,766.0 Development infrastructure provisions, the internal road network and site formation works 3 Adaptive Re-use of Renovation works 31.3 Lung Kai Public School 4 Adaptive Re-use of Renovation works 37.5 Sam Wo Public School 5 Adaptive Re-use of Renovation works 43.8 King Sau Public School 6 Adaptive Re-use of Renovation works 25 Kwan Ah Public School Drainage 7 Drainage along the Installation of the 600mmm storm drain along the 4.1 existing Boundary existing Boundary Patrol Road Patrol Road 8 Drainage along Kong Detention tank 1 Nga Po Road 9 Drainage along Man Installation of the 2100mmm storm drain across Man 3.3 Kam To Road Kam To Road 10 Other drainage works Pipelines along other roads 19.4 Waterworks 11 Waterworks along the Installation of 250mm water main along the existing 12.3 existing Boundary Boundary Patrol Road Patrol Road 12 Waterworks along Installation of 150mm water main along Kong Nga Po 4.8 Kong Nga Po Road Road 13 Waterworks along Lin Installation of 150 and 200mm water main along Lin 9.6 Ma Hang Road Ma Hang Road 14 Other waterworks Pipelines along other roads 50 Sewerage 15 Lok Ma Chau Villages Package STP for Lok Ma Chau Villages 24 16 Eco-lodge Package STP for Eco-lodge 3.1 17 Liu Pok Expansion of Package STP at Liu Pok 11.4 18. Sandy Ridge 150mm sewer from Sandy Ridge Cemetery to PS3 at 0.9 Cemetery Man Kam T0 Road

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Planning Department Agreement No. CE 60/2005 (TP) Land Use Planning for the Closed Area – Feasibility Study Appendix L - Financial Assessment

Cost Estimate Item Location Proposal (HK$M) 19 Hung Lung Hang 150mm Twin Rising Main from Hung Lung Hang 2.2 Residential Residential development development 20 Kong Nga Po CDA 300mm Gravity Sewer from Kong Nga Po CDA to 4.0 PS3 at Man Kam To Road 21 From Chow Tin and 250mm Twin Rising Main from Chow Tin and Fung 5.7 Fung Wong Wu to Wong Wu to junction of Lin Ma Hang Road with Ping junction of Lin Ma Che Road Hang Road with Road 22 Along Ping Che Road 750mm twin rising main along Ping Che Road 17.0 conveying sewage flows from PC/TKL NDA and Tong Fung village 23 From Ping Che Road 900mm Gravity Sewer from Ping Che Road to new 2.5 to new STW in STW in PC/TKL PC/TKL 24 From San Kwai Tin to 150mm Gravity Sewer from San Kwai Tin to Lin Ma 2.2 Lin Ma Hang village Hang village 25 From Lin Ma Hang to 375mm Gravity Sewer from Lin Ma Hang to Pak Fu 8.5 Pak Fu Shan Shan 26 From Heung Yuen 150mm twin rising main from Heung Yuen Wai/Ha 1.8 Wai/Ha Heung Yuen Heung Yuen to Lin Ma Hang Road to Lin Ma Hang Road 27. From Pak Fu Shan to 375mm Gravity Sewer from Pak Fu Shan to STW 1.5 STW along Lin Ma along Lin Ma Hang Road Hang Road 28. Along Lin Ma Hang 450mm Gravity Sewer along Lin Ma Hang Road to 4.4 Road to STW STW 29. Shek Wu Hui STW Expansion/upgrade of Shek Wu Hui 177.6 30. New STW at PC/TKL New STW at PC/TKL NDAs 322 NDAs 31. Sha Tau Kok STW Expansion/upgrade of Sha Tau Kok STW (ADWF – 127 1296m3/s) 32. Hung Lung Hang New Pumping Station at Hung Lung Hang Residential 87 Residential Development and San Uk Ling Development and San Uk Ling 33. Bicycle track, heritage Sewage Treatment Facility for sewage generated from 18.7 and hiking trials Bicycle track, heritage and hiking trial users 34. Village Village Sewer – 150 mm 29.0 35. Village Village sewer – 225mm 36.3

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Planning Department Agreement No. CE 60/2005 (TP) Land Use Planning for the Closed Area – Feasibility Study Appendix L - Financial Assessment

Cost Estimate Item Location Proposal (HK$M) Road Improvement 36 Modification work of Relocation of police checkpoint, provision of 1 the Sha Tau Kok roundabout and the associated traffic signs at Sha Tau Road to match with Kok Road the traffic restriction plan for the Sha Tau Kok Control Point

37 Modification works of Provision of hammerhead at Lung Hau Road, 1.5 the existing roads to roundabout at Ha Wan Tsuen Road, relocation of match with the traffic police checkpoint and the associated traffic signs restriction plan for the Lok Ma Chau Spur Line Control Point 38 Modification work of • Provision of mini roundabout and signalized 2 the existing roads to junction and the associated traffic signs (except match with the traffic widening of Man Kam To Road). restriction plan for the • Expansion of vehicle holding area and removal of the existing police check point Man Kam To Control Point 39 Modification work of Provision of roundabout at existing 1 the existing Lo Wu Road Station Road to match with the traffic restriction plan for the Lo Wu Station Control Point 40 Improvement of Kong • Upgrading of the existing single 2 carriageway 54 Nga Po Road (1.9km) (1.2km) to TPDM standard (the section near Man Kam To Road) and widening the existing single track carriageway to Single 2 lanes Carriageway (2 way) (0.7km)(the section between the Kong Nga Po development and OU(rural use) area) • Provision of footpath on both sides of the carriageway • Sloping works • Road repaving 41 Improvement of Lin • Provision of footpath 27.6 Ma Hang Road • Provision of 4m wide cycle track (between Ping (section between Che Road and Wang Lek) San Uk Ling and • Extensive slopeworks Ping Che Road) • Widening the carriage to Single-2 (about 550m) (about 0.55km) 42 Improvement of Lin • Provision of footpath 50.4 Ma Hang Road • Extensive slopeworks (section between Ping • Widening the carriage to Single-2 (whole length) Che Road and Pak Fu • Provision of 4m wide cycle track (between Ping Shan) (about 1.9 km) Che Road and Wang Lek)

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Planning Department Agreement No. CE 60/2005 (TP) Land Use Planning for the Closed Area – Feasibility Study Appendix L - Financial Assessment

Cost Estimate Item Location Proposal (HK$M) 43 Improvement of Lin • Provision of footpath 138 Ma Hang Road and • Provision of 4m wide cycle track (between Ping provision of PTT Che Road and Wang Lek) (section between • Provision of a PTT near Lin Ma Hang Village Pak Fu Shan and • Extensive slopeworks (up to 10m high of slope) Wang Lek) (about 2.5km) • Widening the carriage to Single-2 (whole length)

44 Improvement of Man • Widening the carriageway from Single-3 to 30 Kam To Road (2.2 Singe-4 km) (not including the • Extensive TTM scheme modification work of the existing roads to match with the traffic restriction plan for the Man Kam To Control Point) (Option 1) 45 The access roads Road paving for the unpaved section of about 60m 0.2 leading to San Tsui 46 The access roads Provision of 1 to 2 passing bays along the access road 0.25 leading to Muk Wu 47 The access roads Provision of 1 to 2 passing bays along the access road 0.25 leading to Ha Heung Yuen 48 The access roads Provision of 1 to 2 passing bays along the access road 0.25 leading to the future relocated Chuk Yuen 49 Hiking Trail (Lok Ma • Making use of the existing trail 10 Chau Lookout to Ng • Addition of new trail (with width of 1.5m) Tung River) (8 km) • Provision of signs, maps, railings, toilet, stand, etc 50 Hiking Tail (Lin Ma • Making use of the existing trail 10 Hang to Sha Tau Kok) • Addition of new trail (with width of 1.5m) (8km) • Provision of signs, maps, railings, toilet, stand, etc

51 Hiking Tail including • Making use of the existing trail 15 Heritage Trail (Ng • Addition of new trail (with width of 1.5m) Tung River to Ping • Provision of signs, maps, railings, toilet, stand, Che Road) (6km) etc • Provision of special signs, map for Heritage Trail 52 Hiking Tail including • Making use of the existing trail 15 Heritage Trail (Ping • Addition of new trail (with width of 1.5m) Che Road to Lin Ma • Provision of signs, maps, railings, toilet, stand, Hang) (5km) etc • Provision of special signs, map for Heritage Trail

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Planning Department Agreement No. CE 60/2005 (TP) Land Use Planning for the Closed Area – Feasibility Study Appendix L - Financial Assessment

Cost Estimate Item Location Proposal (HK$M) 53 Provision of Cycling • Slopework / Filling of the fish pond 105 Track along the • Construction of the 4m wide cycling track existing Boundary • Provision of footpath Patrol Road to be excised from the FCA (including a section of road along Ng Tung River) (5.5km) 54 Provision of Passing Provision of 30 nos of passing bays 6 Bays along the existing Boundary Patrol Road to be excised from the FCA Environmental Mitigation Noise Barrier 55 Noise barrier along • Installation of 1m height noise barrier along 114.3 Kong Nga Po Road Kong Nga Po Road • Installation of 3m height noise barrier along Kong Nga Po Road • Installation of 5m height noise barrier along Kong Nga Po Road 56 Noise barrier along • Installation of 1m height noise barrier along Man 101.5 Man Kam To Road Kam To Road • Installation of 3m height noise barrier along Man Kam To Road • Installation of 5m height noise barrier along Man Kam To Road 57 Noise barrier along Installation of 3m height noise barrier along Ping Che 33.6 Ping Che Road Road 58 Noise barrier along • Installation of 1m height noise barrier along Lin 245.9 Lin Ma Hang Road Ma Hang Road • Installation of 3m height noise barrier along Lin Ma Hang Road • Installation of 5m height noise barrier along Lin Ma Hang Road 59 Noise barrier along • Installation of 3m height noise barrier along Sha 42.3 Sha Tau Kok Road Tau Kok Road • Installation of 8m height noise barrier along Sha Tau Kok Road Low Noise Surfacing 60 Low noise surfacing Re-surfacing length about 3000m 14.6 along Kong Nga Po Road 61 Low noise surfacing Re-surfacing length about 1800m 14 along Man Kam To Road 62 Low noise surfacing Re-surfacing length about 800m 3.9 along Ping Che Road Road

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Planning Department Agreement No. CE 60/2005 (TP) Land Use Planning for the Closed Area – Feasibility Study Appendix L - Financial Assessment

Cost Estimate Item Location Proposal (HK$M) 63 Low noise surfacing Re-surfacing length about 6700m 32.7 along Lin Ma Hang Road 64 Low noise surfacing Re-surfacing length about 1800m 8.8 along Sha Tau Kok Road

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Planning Department Agreement No. CE 60/2005 (TP) Land Use Planning for the Closed Area – Feasibility Study Appendix L - Financial Assessment

A2 Property Transactions Record

A1.1 Royal Palm

Date Price (HK$) Area (sq.ft) HK$/sq.ft HK$/sq.m 29/4/2009 5,650,000 1,965 2,875 30,935 27/4/2009 5,300,000 1,965 2,697 29,020 17/4/2009 6,400,000 2,183 2,932 31,548 7/4/2009 6,450,000 1,974 3,267 35,153 7/4/2009 5,300,000 1,965 2,697 29,020 30/3/2009 6,380,000 2,044 3,121 33,582 13/3/2009 10,700,000 2,476 4,321 46,494 13/3/2009 6,800,000 2,183 3,117 33,539 11/3/2009 6,100,000 2,183 2,793 30,053 11/3/2009 6,180,000 1,965 3,145 33,840 9/3/2009 5,800,000 2,044 2,838 30,537 5/3/2009 7,380,000 2,364 3,122 33,593 20/1/2009 7,380,000 2,368 3,117 33,539 16/1/2009 6,200,000 2,044 3,033 32,635 31/12/2008 4,950,000 1,958 2,528 27,201 19/12/2009 6,300,000 2,044 3,082 33,162 10/12/2008 5,550,000 1,965 2,824 30,386 10/12/2008 5,500,000 1,958 2,809 30,225 21/11/2008 6,350,000 2,044 3,107 33,431 13/11/2008 5,200,000 1,965 2,646 28,471 13/11/2008 5,300,000 1,958 2,707 29,127 17/10/2008 6,700,000 1,965 3,410 36,692 29/9/2008 7,500,000 2,044 3,669 39,478 16/9/2008 7,700,000 2,183 3,527 37,951 31/7/2008 7,720,000 2,044 3,777 40,641 11/7/2008 7,600,000 1,965 3,868 41,620 13/6/2008 8,180,000 1,958 4,178 44,955 Average 3,156 33,957

Source: Midland Realty (2009) Transaction Records - Royal Palm

A1.2 One Hyde Park

Date Price (HK$) Area (sq.ft) HK$/sq.ft HK$/sq.m 9/3/2009 9,900,000 2,096 4,723 50,823 4/3/2009 8,880,000 2,096 4,237 45,586 4/3/2009 8,880,000 2,096 4,237 45,586 2/3/2009 12,000,000 2,900 4,138 44,524 27/2/2009 8,900,000 2,096 4,246 45,689 27/2/2009 8,500,000 2,096 4,055 43,635 Average 4,273 45,974

Source: Midland Realty (2009) Transaction Records - One Hyde Park

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Planning Department Agreement No. CE 60/2005 (TP) Land Use Planning for the Closed Area – Feasibility Study Appendix L - Financial Assessment

A1.3 Rolling Hills

Date Price (HK$) Area (sq.ft) HK$/sq.ft HK$/sq.m 3/4/2009 6,960,000 2,170 3,207 34,511 30/10/2008 7,400,000 2,170 3,410 36,693 29/5/2008 9,450,000 2,428 3,892 41,879 28/5/2008 6,980,000 2,170 3,217 34,611 Average 3,432 36,923 Source: Midland Realty (2009) Transaction Records - Rolling Hills

A1.4 Green Crest

Date Price (HK$) Area (sq.ft) HK$/sq.ft HK$/sq.m 19/1/2009 10,500,000 1,979 5,306 57,089 2/1/2009 7,480,000 2,078 3,600 38,732 19/12/2008 7,500,000 2,078 3,609 38,835 2/12/2008 11,000,000 1,979 5,558 59,808 Average 4,518 48,616 Source: Midland Realty (2009) Transaction Records - Green Crest

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Planning Department Agreement No. CE 60/2005 (TP) Land Use Planning for the Closed Area – Feasibility Study Appendix L - Financial Assessment

A3 Gross Development Value (GDV)

A2.1 Eco-lodge Bungalows

GDV = Annuity / Discount Rate = (No. of rooms * Average room rate per night * Days per year * Occupancy per year) / Discount Rate

No. of rooms = 80 [a] Average room rate per night = HK$1,100 Days per year = 365 Occupancy per year = 84% [b] Discount Rate = 7% [c]

GDV = (80 * 1,100 * 365 * 84%) / 7% = 385,440,000

[a] Land Use Planning for the Closed Area – Feasibility Study Working Paper No.6, Recommended Development Plan, Arup (2010) [b] Hotel Room Occupancy Rate by District, Release of Final Arrivals Figures for 2008, Hong Kong Tourism Board (2009) [c ] HSBC HK Best Lending Rate (5%) since 10th Nov, 2008 + 2% risk premium

A2.2 KNP Residential

GDV = Price per m2 * GFA * ER

Price per m2 = HK$36,000 [a] GFA = 105,000 [b] ER = 90%

GDV = 36,000 * 105,000 * 90% = 3,402,000,000

[a] Average between the lowest average transaction price and the highest average transaction price of Royal Palm, One Hyde Park, Rolling Hills and Green Crest between May 2008 and April 2009 by Midland Realty (2009) [b] Land Use Planning for the Closed Area – Feasibility Study Working Paper No.6, Recommended Development Plan, Arup (2010)

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Planning Department Agreement No. CE 60/2005 (TP) Land Use Planning for the Closed Area – Feasibility Study Appendix L - Financial Assessment

A4 Cashflow

Economic Model 0.80 1.00 1.20

Currency HKD Construction Costs Discount rate 7.00% Sensitivity 1

Capital Expenditure Profile 34% 33% 33%

Financial Yr ending 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Year Number 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 DF 7% Sum PV's 1.0000 0.9346 0.8734 0.8163 0.7629 0.7130 0.6663 0.6227 0.5820 0.5439 0.5083 0.4751 0.4440 0.4150 0.3878 0.3624 1. Capital Costs ($M)

Construction Development Adaptive Re-use of Lung Kai Public School 10.6 10.3 10.3 Adaptive Re-use of Sam Wo Public School 12.8 12.4 12.4 Adaptive Re-use of King Sau Public School 14.9 14.5 14.5 Adaptive Re-use of Kwan Ah Public School 8.5 8.3 8.3

Drainage Drainage along Border Road 1.4 1.4 1.4 Drainage along Kong Nga Po Road 0.3 0.3 0.3 Drainage along Man Kam To Road 1.1 1.1 1.1 Other drainage works 6.6 6.4 6.4

Sewerage 301.5 292.6 292.6 Waterworks Waterworks along Border Road 4.2 4.1 4.1 Waterworks along Kong Nga Po Road 1.6 1.6 1.6 Waterworks along Lin Ma Hang Road 3.3 3.2 3.2 Other waterworks 17.0 16.5 16.5

Road Modification work of the Sha Tau Kok Road to match with the traffic restriction plan for the Sha Tau Kok Control Point 1 Modification works of the existing roads to match with the traffic restriction plan for the Lok Ma Chau Spur Line Control Point 1.5 Modification work of the existing roads to match with the traffic restriction plan for the Man Kam To Control Point 2.0 Modification work of the existing Lo Wu Station Road to match with the traffic restriction plan for the Lo Wu Station Control Point 1.0 Improvement of Kong Nga Po Road 18.4 17.8 17.8 Improvement of Lin Ma Hang Road (Section between San Uk Ling and Ping Che Road) 9.4 9.1 9.1 Improvement of Lin Ma Hang Road (Section between Ping Che Road and Pak Fu Shan) 17.1 16.6 16.6 Improvement of Lin Ma Hang Road and provision of PTT 46.9 45.5 45.5 Improvement of Man Kam To Road 10.2 9.9 9.9 The access roads loading to San Tsui 0.2 The access roads loading to Muk Wu 0.3 The access roads leading to Ha Heung Yuen 0.3 The access roads leading to the futrue relocated Chuk Yuen 0.3 Provision of passing bays along Border Road 6.0 Hiking Trail 17.0 16.5 16.5 Cycle Track 35.7 34.7 34.7 Environmental Mitigation Measures 207.9 201.8 201.8

Total Capital Cost $M 2,208.0 1.0 1.5 82.7 75.4 175.9 119.8 116.3 17.8 - - 550.0 533.8 533.8 - - - Present Value Capital Costs 1,214.6 1.0 1.4 72.2 61.5 134.2 85.4 77.5 11.1 - - 279.6 253.6 237.0 - - -

2. Operating Costs

$M 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Present Value Operating Costs 0.0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

3. Revenue Kong Nga Po Residential Land 553.21 Eco-lodge Bungalow Land 27.06

580.3 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 580.28 0.00 0.00 0.00 0.00 0.00 0.00 Present Value Revenue $M 315.6 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 315.63 0.00 0.00 0.00 0.00 0.00 0.00 4. Net Cashflow (Undiscounted) -1,627.7 (1.00) (1.50) (82.70) (75.40) (175.90) (119.83) (116.29) (17.82) - 580.28 (549.95) (533.78) (533.78) - - - 5. Net Cashflow (Discounted) -897.9 (1.40) (72.24) (61.55) (134.20) (85.44) (77.49) (11.10) - 315.63 (279.57) (253.59) (237.00) - - - Cummulative Costs (undiscounted) 1.00 2.50 85.20 160.60 336.51 456.34 572.63 590.45 590.45 590.45 1,140.40 1,674.18 2,207.95 2,207.95 2,207.95 2,207.95 Cummulative Revenue (undiscounted) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 580.28 580.28 580.28 580.28 580.28 580.28 580.28

Cummulative Costs (discounted) 1.00 2.40 74.64 136.19 270.38 355.82 433.31 444.41 444.41 444.41 723.98 977.57 1,214.57 1,214.57 1,214.57 1,214.57 Cummulative Revenues (discounted) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 315.63 315.63 315.63 315.63 315.63 315.63 315.63

5. Results Capital Cost 1,214.6 Operating Costs 0.0 Total Costs 1,214.6 Total Revenues 315.6 NPV -898.9 Benefit-Cost Ratio 0.26

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