How MTR Builds and Connects Communities in

David Tang Property Director, MTR Corporation Hong Kong

21 June 2018

MTR Corporation 27/6/18 Page 1 Introduction

MTR Corporation 27/6/18 Page 2 Where is Hong Kong?

MTR’s projects outside of Hong Kong Operate & Maintain model

Barcelona Hong Kong

MTR Corporation 27/6/18 Page 3 About Hong Kong

(Source: Wikimedia Commons, 2011)

Land Area 1 104 km2 (43% Country Park)

Built-up Area 265 km2

Population 7.39 million

Car ownership 1 vehicles / 4 households

Public Transit % 90%

MTR Corporation 27/6/18 Page 4 About MTR

Establishment of MTR Merger with

(1975) KCR

(2007)

1975 1980 1985 1990 1995 2000 2005 2010 2015

1st railway MTR was listed line opened in Market Cap (1979) Stock Exchange HK$265 of billion Hong Kong (31 May 2018)

(2000) MTR Corporation 27/6/18 Page 5 Railway Serves as Backbone of Transport

Land Uses % Within 500m of a Railway Station Housing Units 42%

Commercial & 75% Office GFA

(Source: Planning Department, 2013)

MTR Corporation 27/6/18 Page 6 Life in Hong Kong Revolves Around Railway (5.8 million daily passenger trips)

School

Office Railway Railway Home Home

BUS STOP Shopping Mall

Public transport 90% Rail market share 49.1% Efficient train service at affordable fare Country Park No direct Government subsidy on rail MTR Corporation 27/6/18 Page 7

How is this possible ?

MTR Corporation 27/6/18 Page 8 Planned by Government as a Connected City

l Railway as the transport backbone l High density development along railway lines l Property development integrated with railway to support railway construction

MTR Corporation 27/6/18 Page 9 Transit-oriented Development (TOD) Approach for Planning of New Railway Corridors

Comprehensively planned and implemented Good connection to TOD development above and around a station station by walkways & provision of convenient public transport interchange for feeders

MTR Corporation 27/6/18 Page 10 MTR Provides the First and Last Mile to Daily Trips

• Station site as Origin and Destination of travel • Rail + Property Model à Sustainable Communities

MTR Corporation 27/6/18 Page 11 Why Rail + Property Model?

MTR Corporation 27/6/18 Page 12 The Challenge of Railway Funding

MTR Corporation Page 8 Rail + Property Funding Model

Railway Initial Replacement Fare/ CAPEX CAPEX OPEX Other Revenue Funding $ Gap (NPV)

Cash OUT Cash IN Property development profit to fill new railway project funding gap

MTR Corporation 27/6/18 Page 14 Financial Functions of Rail + Property Model: Capture “Value-Add” and Increase Ridership

Property

(Source:(Source: Google Google Earth Earth ,2015) ,2015) Seamless Connectivity Natural Customers àEnhance Land Value Enhanced Value + Increased Ridership àIncrease Ridership = Funding Gap

Railway

MTR Corporation 27/6/18 Page 15 Rail + Property Model Implementation Process 3) Land premium to Government • Land premium based 5) Property on ‘Greenfield Site’ (i.e. value increases 1) Ascertain rail pre-railway basis) with railway funding gap • Payable to Government presence at time of land development

6) MTR• Assess 2) Assess 4) Developer’s Corporation’samount of amount of land contribution benefitland rights • Share of property rights required to • All or a portion of land required to development profits – bridge funding premium usedbridge to fund funding new gap • Construction and gap other development railway costs Coordinated R+P Project Implementation Property Railway Institutional Mechanism

MTR Corporation 27/6/18 Page 17 Vertical and Horizontal Integrated Development

Residential

Offices

Shopping Malls

Schools

Green Spaces

Public Facilities

PTI

Railway

MTR Corporation 27/6/18 Page 18 People- Centric

MTR Corporation 27/6/18 Page 19 Seamless Integration

MTR Corporation 27/6/18 Page 20 Examples of Rail + Property Developments

MTR Corporation 27/6/18 Page 21 Rail + Property Case Study 1 – Airport Railway

Five mixed-use communities along the line

Total GFA (sqm) Hong 415,900 Kong 1,090,010 Olympic 667,650 Tsing Yi 291,870 Tung 1,028,910 Chung Total 3,494,340

Office: 612,000 sqm

Commercial: 308,000 sqm

Residential: 28,000 units

MTR Corporation Page 22 R+P Development – Kowloon Station Kowloon Station - - International Commerce Centre International Finance Centre

MTR Corporation 27/6/18 Page 23 Kowloon Station - Comprehensive Development

Residential Buildings

Hotel / International Commerce Centre

Hotel / Service Apartment

Regional Shopping Mall, Railway Station Public Transport Interchange

MTR Corporation 27/6/18 Page 24

Kowloon Station Development

Station Area: 13.5 ha

Mixed Use Development

ICC • Super Grade A office tower (118-storey ICC) • Regional shopping mall • Two 5 / 6-star hotels & service apartments • 6,400 flats • Total gross floor area: 1,090,000 sq.m.

MTR Corporation 27/6/18 Page 25 Kowloon Station Development

MTR Corporation 27/6/18 Page 26 Rail + Property Case Study 2 – Four mixed-use communities along the line

Total GFA (sqm) 253,700 Tseung Kwan 289,400 O 142,100 LOHAS Park 1,652,800 Total* 2,338,000

Commercial: 153,980 sqm

Office: 5,000 sqm

Residential: 34,300 units

• MTR Corporation Page 27 LOHAS Park – Biggest R+P Project l Site Area: 32 hectares l Total GFA: 1.6 M m2 (Plot Ratio about 5) l 50 residential towers (25,500 units) l 45,000 m2 shopping centre l Community facilities Station l Transport interchange facilities l Extensive landscaped open space Depot A township for 68,000 people above a railway depot & station

MTR Corporation 27/6/18 Page 28 Building a Self-sufficient, People-first Community

MTR Corporation 27/6/18 Page 29 25,500 Homes Connected to Everything Needed

To LOHAS Park Station Walkway to Shops

To regional open space and soccer school To other residential development

Grade-Separated Design Walkway to Connect Buildings

MTR Corporation 27/6/18 Page 30 Convenient, Comfortable & Green Living

• Page 31 • 27/6/18 Key Benefits

• MTR Corporatio • MTRPage Corporation32 • 27/6/18 • 27/6/18 • Page 32n Benefits of Rail + Property Model

GOVERNMENT

Financial benefits

Finance construction & improve ridership SYNERGY of Property RAIL + Railway

ImprovePROPERTY accessibility & land value

Sustainable urban living & enhanced quality of life

SOCIETY & ECONOMY

MTR Corporation 27/6/18 Page 33 Contributions to MTR Underlying Profits (2017)

HK Transport Operations & Station Commercial Mainland of China & Int’l

8,4%

40,8% HK$ 32,4% 10.5B

18,4%

Property Development HK Property Rental & Management Recurrent Income from Investment Properties Total Rental Portfolio: Value and Income ~ 275,400 sq. m. Lettable Floor Area (HK$ billion)

Others 6% 17,764 sq.m. Office 14% 39,410 sq.m.

Retail 80% 13 Shopping Malls – 218,251 sq.m.

Telford Plaza (Retail) Elements (Retail) PopCorn (Retail)

Two IFC (offices) Help to Finance Enhanced Passenger Service

l Replacement of signalling system )

l Replacement of existing 93 8-car trains )

l Purchase of 40 vehicles ) Over HK$ 10 Billion

l Purchase of 68 new double-deck buses )

l Other improvement projects )

Affordable fare Efficient Service Increased mobility affordability

MTR Corporation Enable Affordable Rail Fare

From 2008 – 2016: l MTR fare increase on average: 2.9% per annum l Hong Kong inflation rate: 3.4% per annum l Average increase in household income: 4.5% per annum

Affordable fare Efficient Service Increased mobility

2017Average Fare (HK$): l Domestic service: $7.84 l Cross-boundary service: $29.11 l Airport Express (35 km): $64.75

MTR Corporation Optimise Utilisation of Valuable Land

Conveniently located land above railway station being used multiple times for: l Railway transit/ transport interchange l Residential/ commercial uses l Community uses / public realm

MTR Corporation 27/6/18 Page 38 Build Self- sufficient Communities (e.g. LOHAS Park)

Educational

K 2 Kindergartens K P P 3 Primary Schools

S 2 Secondary Schools U R Social/ Recreational E T T Early Education & Training Centre I O Centre for Community Care and Support Services for C Elderly H Supported Hostel for Mentally or Physically Disabled Handicapped Persons H K E Residential Care Home for the Elderly P T S I Integrated Children & Youth Services Centre O

C Community Hall K R Indoor Recreation Centre

Others S P K T Police Post (inside MTR Station)

U Public Transport Interchange

MTR Corporation 27/6/18 Page 39 Provide a Greener Living Environment

• Bigger transport capacity • Higher energy efficiency • Reduce carbon footprint

• Maximum 2-way passenger flow/hr (Source : UITP)

Page 40 17 June 2016 MTR Corporation Conclusion • Rail +Property model is proven to work well for Hong Kong in the financing of capital intensive railway projects • Vibrant, self-sufficient communities are built along railway lines to provide people with all the needed facilities and services • Building and connecting communities under the R+P model contributes to green and sustainable urban living

MTR Corporation 27/6/18 Page 41 caring for life’s journeys MTR Page 42 27/6/18 Corporation