Requests for non-binding Expressions of Interest in the Development of the Kai Tak Multi-purpose Sports Complex
- Report on submissions received
Home Affairs Bureau
April 2013 2
Contents
Chapter Page
Introduction 1
I Overview of responses 3
II Proposed scope of facilities to be provided 9 at the Kai Tak MPSC
III Procurement and financing options 11
IV Timetable for the development of the Kai 26 Tak complex
V Master planning and design 29
VI Scope for private sector investment in the 37 Kai Tak complex
VII Ways to enhance commercial viability 39
VIII Other issues 42
IX Conclusion and way forward 45
2 Introduction
On 18 January 2013, the Home Affairs Bureau (HAB) invited private sector companies and other stakeholders to submit non-binding expressions of interest (EOI) with regard to the development of the Multi-purpose Sports Complex (MPSC) at Kai Tak. The purpose of the invitation was to show the Government’s interest in working closely with the private sector in developing the complex, and to obtain feedback on issues such as the mode of procurement and financing of the project; the scope for private sector investment in the project and the form that such investment might take; the scope for public and private sector collaboration in the design, construction and operation of the complex; and ways to maximise the commercial viability of the project. The invitation to submit EOI was posted on the MPSC website: www.hab.gov.hk/mpsc.
2. By the deadline for submissions, HAB had received 42 EOI from the following sectors –
Sector Number of Submissions
Architects 6
Banks and investment companies 4
Construction companies 5
Consulting firms 2
Individuals 1
Professional firms 1
Project management companies 6
Sports/entertainment companies 3
Sports organisations 14
3. Despite the short time allowed for the preparation of EOI and the strict limits placed on content and length, many of the submissions were of a 2 high quality and offered helpful insights into the key aspects of the project. Almost all the submissions highlighted the importance and relevance of the project to the future development of sport in Hong Kong, and many also commented on the high-profile role that the sports complex would play in defining the character of Kai Tak and the rejuvenation of Kowloon East.
4. We greatly appreciate the efforts of all respondents to the EOI invitation, and we are encouraged by the number and the quality of the submissions, which we believe indicate a general enthusiasm for the Kai Tak MPSC project, as well as a positive commentary on its viability.
5. The majority of the respondents recommended that the facilities at the complex should be multi-functional and allow the complex to host as many types of event as possible. Most respondents also advised that the Government should engage stakeholders at an early stage in the planning of the project. Several respondents emphasised the importance of the Government setting up a dedicated team to ensure the timely implementation of the project.
6. We have read and noted the content of all 42 submissions. Some of these contained relatively more detailed information on planning, procurement, finance and operations related issues. This report does not aim to cover all the information provided, but rather is intended to be a summary and is therefore based largely on the information provided in the more detailed submissions.
2 3
Chapter I - Overview of Responses
In the invitation for Expressions of Interest we specifically asked respondents to provide feedback on three areas –
The scope of facilities to be provided at the Kai Tak complex.
Options for the procurement and financing of the complex.
The timetable for the development of the complex.
2. We also invited comments on other areas, in particular –
The design and layout of the facilities for the complex.
The scope for private sector investment in the project and the form that this might take.
A business plan for the complex, including ways to enhance its commercial viability.
3. This chapter provides a summary of the main points that respondents made when commenting on these areas. More detailed accounts of the feedback that we received are provided in the subsequent chapters.
1) Scope of facilities
4. Respondents generally supported the scope of facilities described in the EOI invitation (see the Appendix attached), noting that such facilities would be expected in a world-class sports park capable of hosting major sporting and other events. Sports organisations suggested that a range of additional indoor and outdoor facilities be provided at the complex.
5. It was suggested that most of the 10,000 m² that were to be set aside for office space be reserved for “national sports associations” (NSAs), as they would be frequent users of the venues at the complex, and housing them under one roof would allow for management and operational convenience.
2) Procurement and financing options
6. With regard to procurement, most respondents felt that the
3 4
Government should take advantage of the experience and skills of the private sector in the financing and operation of such a complex. It was noted that a Private Sector Participation (PSP) approach could maximise the efficiency of the contract from design through operation and maintenance and allow for a pricing policy that strikes a fair balance between profitability and the need to provide users with a high quality service.
7. It was also observed that a PSP approach would allow for the risks associated with the project to be properly shared between the private sector partner and the public sector, with these being spelled out during the preparatory phases of the contract. A balanced sharing of risks would ensure that public funds are put to the best possible use.
8. As regards the form of PSP contract to be adopted, respondents commented that a Design-Build-Finance-Maintain-Operate (DBFMO) model could achieve a high level of value for money in the long term. Such an approach would optimise the design and quality of the complex so as to meet users’ needs and minimise maintenance and other costs over the whole life of the project.
9. A Joint Venture (JV) model was also discussed, whereby the Government would invite bids to design, build and operate the complex. After tender, the Government and the selected bidder would each establish holding companies to invest in a JV project company to develop and operate the complex. Development risk could be passed to the private sector to deliver the project on time and within a capped budget.
10. Some respondents commented on the “traditional” PWP approach to project procurement, noting that this could deliver a certain outcome for the Government in terms of basic design and construction. A PWP approach adopting a design & build contract would help ensure that the risk of design development did not rest on the Government.
11. Most respondents who commented on the financing issue considered that it would be viable to involve a degree of private sector participation in financing the project, although funding the project solely from government funds was seen as the cheapest financing option. Long-term, locked-in, low-interest government borrowing would be the second cheapest way to fund
4 5 the project. Respondents generally felt that private finance, even in a low-interest environment would be more expensive.
12. It was noted that private project financing could be viable under an arrangement whereby a consortium (or “special purpose vehicle” (SPV)) was established to design, build, finance, maintain and operate the complex under a DBFMO model. The Government could wait until construction was completed before injecting money into the project. This would create a powerful incentive for the private sector partner to deliver the project on time and within budget, although as project finance lenders generally preferred not to be exposed to market or demand-based risks, upon completion of construction the Government would need to start making regular availability payments that would cover debt servicing (principal repayment and interest) and an agreed Internal Rate of Return (IRR) on equity to the SPV shareholders.
13. It was observed that PSP arrangements could involve a mixture of public and private capital, with public funding coming from sources such as government infrastructure loan financing to offset a portion of project costs, government investment entities providing equity capital and a government payment at construction completion, with the balance of the project costs provided via long-term financing to provide for operational risk transfer.
14. In order to create an incentive for the private sector partner to deliver a high quality service throughout the life of the project, it was suggested that the availability payment under the DBFMO model be proportional to the performance of the operator in terms of event organisation and venue operation and maintenance. This would help maintain an appropriate level of risk transfer throughout the life of the contract.
3) Timetable
15. A number of possible timetables for the development of the Kai Tak complex were suggested. These ranged from the view that a 2019-20 target date for the start of operation would be challenging, to a comment that private sector involvement the complex might be opened before late 2018. Respondents added that –
5 6
Developers could accommodate aggressive timelines provided that the project is well prepared before the procurement is launched, with key risk allocation being well defined at the start.
Tried and tested fast-track construction methods involving industrialised components and the overlapping of the design process with the construction process would be appropriate subject to the overall master plan for the complex having been finalised and an operator being in place.
The timetable for the development of the complex should be accelerated as far as possible, given that our existing major stadium is falling behind world standards. Once promoters have established a connection with a place, it is difficult to shift that loyalty. If Hong Kong loses its reputation as the sporting city of Asia, it will be difficult to recover.
4) Design and layout of facilities
16. Many respondents commented on issues related to the design and layout of the Kai Tak complex. Its multi-purpose nature was repeatedly emphasised, as was the need for a people-oriented layout and the importance of easy public access to and circulation within the site.
17. As regards the planning of the complex, respondents emphasised that the broad planning concept should be to create: “a park that includes venues” as opposed to “venues with landscape filling the spaces left around them”. It was also felt that commercial spaces should complement the primary sports use rather than vice versa and that the complex should be a mix of both community and commercial elements, so that it is flexible enough to stage different events and can achieve cross-subsidy of operation.
18. On specific design-related issues, flexibility and accessibility were two of the most commonly-used terms used in relation to design parameters. Respondents mentioned that the facilities in the complex should cater for as many sports as possible and that the provision of a roof for the main stadium would greatly affect its usage mode and usage rates.
6 7
5) Scope for private sector investment
19. Several respondents noted that private sector investment could help minimise the capital and recurrent cost of the project whilst also ensuring a high quality service for stakeholders together with a strong commercial focus.
20. A few respondents put forward specific suggestions on the potential level of private sector investment in the project. For example, one suggestion was that depending on the degree of risk transfer, the equity to debt ratio of the investment on this type of project would be expected to vary from 10% (no commercial risk) to 25% (reasonable transfer of commercial risk to the SPV).
21. As regards the return on investment that private sector investors might expect, one figure suggested was a minimum internal rate of return (IRR) of 11%, whilst another submission suggested that profits could be shared with the Government if the IRR on investment exceeded 12%.
6) Enhancing commercial viability
22. Suggestions for improving the commercial viability of the Kai Tak complex generally involved expanding the ancillary revenue-generating elements of the complex, such as restaurants, shops and other commercial developments. Several respondents suggested that hotel accommodation be provided at or near the complex, along with a related retail element and facilities for conferences and meetings to attract spectators at late night events, as well as “MICE”1 or destination-driven visitors.
23. Some respondents considered that it would be of long-term value to increase the amount of the commercial space beyond the 40,000 m² currently envisaged for the complex. This could also enhance the attractiveness of the complex to a wider local and visitor community. Respondents also touched on the potential value of naming rights - including naming rights for the overall site and key venues as well as sponsorship of events programmes and individual events. It was also noted that given the popularity of Canto and K-pop in this region, stadium concerts would be a major revenue driver for the development.
1 “Meetings, Incentives, Conventions and Exhibitions”
7 8
7) Other issues
24. In addition to commenting on the planning, procurement and financing of the Kai Tak complex, several respondents commented on the relationship between the complex and other major sports venues in Hong Kong, highlighting in particular the need to consider the role of the existing Hong Kong Stadium following the development of the new complex. It was pointed out that since existing and planned similar venues could have a detrimental impact on the business model for the complex, the Government should clarify the future use of the existing venues.
25. Another point that was raised the importance of creating an environment that would promote sport at all levels and foster community participation in sport. To this end, the Government could incentivise the project company through a payment mechanism to run activities that complement the Government's broader objective of promoting sport in Hong Kong but that would otherwise be commercial loss leaders.
8 9
Chapter II - Proposed scope of facilities to be provided at the Kai Tak MPSC
The EOI invitation required respondents to provide views on the scope of facilities to be provided at the Kai Tak complex. This chapter summarises views on this issue. The current scope of facilities proposed for the project and included in the EOI invitation is at the Appendix.
General
2. Respondents generally supported the broad approach towards the provision of facilities as set out at the Appendix, noting that these are in line with those that would be expected to feature in a world class sports park capable of hosting major sporting and non-sports events. Sports and entertainment companies emphasised that the scope of facilities should reflect the content that the complex would stage and should be suitably user-friendly for promoters for top sports and entertainment events.
Sports Facilities
3. Sports organisations in particular focused on the scope and nature of the facilities to be provided at the complex, and commented that –
Public access to football and other facilities within the sports ground area should be allowed.
Outdoor facilities for sports such as tennis, five-a-side football, beach football, basketball and skateboarding should be considered to integrate with the wider development, link the indoor and outdoor facilities and help develop community ownership of the complex.
Other ancillary facilities suggested were world-class squash and badminton courts within the indoor multi-purpose sports centre, an aquatic centre, an archery venue and children’s playgrounds. The indoor centre could also provide international standard facilities for sports such as ten-pin bowling, snooker and table-tennis.
Permanent ice sports facilities could be provided in the indoor centre by placing cooling pipes in the arena floor and installing cooling
9 10
machines, dehumidifying equipment, a portable ice-rink barrier and an ice resurfacing machine. A standard 60m x 30m rink could then be provided for both recreational and competition purposes, with permanent seating capacity for 500 or more people.
Sport climbing facilities for Lead Climbing; Speed Climbing and Bouldering could be provided on the external wall of the indoor sports centre as well as inside the centre.
A bicycle skills park and cycling tracks would complement existing and future trail networks and provide a facility for teaching safe cycling.
Office Space
4. The current plan for the complex proposes the provision of about 10,000 m² of office space. It was suggested that most of this be reserved for “national sports associations” (NSAs), as they would be frequent users of the venues at the complex, and housing them under one roof would allow for management and operational convenience. Within this notional area, allowing office space for sports and event management organisations would be positive for the complex, but would require careful planning.
Other facilities
5. A respondent suggested that in addition to the main sports facilities and office and commercial space, the complex should also provide a sports equipment retail area, a sports exhibition centre, an education and training centre and other supporting facilities such as F&B outlets, seating areas and piazzas for impromptu and informal activities.
10 11
Chapter III - Procurement and financing options
The invitation for EOI specifically requested respondents to address the issue of how best to procure and finance the development of the Kai Tak complex. Potential respondents were able to see on the MPSC website the executive summary of a consultancy study on this issue carried out for HAB.
1) Procurement
Proposed procurement options
2. Two main procurement options were identified in the consultancy study: either develop the complex as a fully-funded Public Works Programme (PWP) project; or involve the private sector as a partner in the development and funding of the project. The study concluded that the MPSC would not be viable as a purely commercial project, given the large capital cost involved and the limited revenue streams likely to be available from the facilities envisaged for the Kai Tak site.
3. Submissions focused on potential ways of involving the private sector in developing the complex in partnership with the Government, taking their cue from the findings of the consultancy study, in particular the two main Private Sector Participation (PSP) models, broadly described as the Design-Build-Finance-Operate (DBFO) and Joint Venture (JV) models.
Private Sector Participation (PSP)
4. Generally respondents considered that the Government should take advantage of the skills and know-how from the private sector relating to the procurement, financing, construction and operation of such a complex. Partnering with the private sector would allow the Government to engage with the specialist designers, contractors and operators at an early stage, to ensure a degree of understanding and delivery that would be otherwise hard to achieve. It was observed that internationally PSP schemes have created innovative solutions in the context of well-prepared and detailed tender specifications. A key benefit of PSP procurement is that the public sector does not need to retain operation and maintenance risks post completion over the life of the contract and if necessary funding can be spread over the useful life of the asset. Specific views on the PSP approach included the following –
11 12
A PSP project approach can ensure the proponent’s long-term objective is achieved over the useful life of the asset, i.e., the design and construction period and an operating and maintenance period as defined by the procuring authority. The latter period typically lasts for 25 years starting from construction completion, to best balance design life, construction period and a financial return profile.
Having one single entity responsible for the design, construction and maintenance ensures that maintenance requirements are fully integrated from the design stage through construction and commissioning, with the operation and maintenance risk transferred to the private sector over the long term. The private sector partner has an incentive to undertake high quality capital investments during the construction phase, in order to prepare for the operations phase.
PSP is well suited for the development of the complex, as it can provide an appropriate financing solution, maximise the overall efficiency of the contract from design through operation and maintenance whilst allowing a pricing policy recognising a fair balance between the need for profitability and the need to provide users with maximum service quality.
With a PSP approach a public authority can rely on the private partner for delivery efficiency, and does not “execute” but rather oversees execution. The authority would focus on defining and tracking the targets to be achieved, leaving it to the private sector operator to determine the resources to be employed.
The PSP approach makes it possible to share the risks associated with the project, those risks to be covered by the private sector partner against those to be assumed by the public sector being spelled out during preparatory phases of the contract. A balanced sharing of risks ensures that public funds are put to the best possible use.
A PSP procurement approach would also offer greater potential for innovation, time-savings, operational efficiency and flexibility than using the PWP approach. An effective partnership can be cost-effective, lever in expertise and funding, and deliver a high
12 13
quality state-of-the-art development at the earliest possible time.
Procurement through “Availability Payments”
5. Several submissions discussed the merits of the “availability payment” approach to PSP, whereby a private sector bidder designs, builds, finances and operates the asset and receives revenue from the Government in the form of scheduled payments. This revenue can be supplemented by commercial rent, car-parking and event-related income (e.g., ticketing, food and beverage and merchandise sales). The Government’s payments are linked to agreed service and availability parameters, and are set at an amount that is sufficient to meet the debt cost, capital cost and fixed operational costs of the project. Respondents offered the following specific views on this approach, the financing arrangements for which are discussed later in this report –
The private sector operator should be incentivised to maximise events through revenue sharing and contractual Key Performance Indicators. Private sector financing of the construction will be more costly than public funding given that private sector debt is more expensive, and availability payments would need to be calculated accordingly.
Under this approach, whilst the private sector partner receives regular availability payments in respect of the basic steady-state operation, payments should also incentivise maximum use of the facilities to ensure a vibrant, popular calendar of events. Incentives could take the form of a sharing mechanism with Government in respect of the third-party revenues such as ticket sales, venue hire, commercial rights income, car park charges and retail rental fees.
The Government would only have to provide basic infrastructure, whilst the private sector partner would bear the costs of renovation, equipment installation and facilities operation. Upon expiry of the contract period, the Government could choose either to operate the facilities itself or award another operation contract.
Design-Build-Operate (DBO)/DBFO /DBFMO
6. Respondents noted that the DBO approach is a familiar one in the procurement and financing of projects in Hong Kong. Under such an
13 14 approach, the Government would fund the design and construction and would allow the private sector to be responsible for the operational risk, costs and revenue stream. One respondent felt that this model would be an awkward fit with the community-focused aspects of the complex, in that there could be a lack of private sector interest in accepting operational risk without an operational cost contribution from the Government.
7. Comments on the option of adopting either a DBFO or a Design-Build-Finance-Maintain-Operate (DBFMO) model were as follows –
A DBFMO contract implies a lifecycle cost approach: the most efficient technical solutions will be driven through a whole lifecycle analysis so as to achieve optimal value for money over the life of the project. This lifecycle approach will optimise the design and quality of the complex so as to minimise maintenance costs, and therefore reduce expenditure over the long term.
The DBFMO procurement model provides for economy and sustainability, as the operation and maintenance of the asset are fully integrated in the design and the construction choices. A DBFMO contract includes long-term investment with a comprehensive whole lifecycle analysis integrated in the design and construction, so that the maintenance and operation of the infrastructure are driven by the aim of providing optimal service to the end-user. The whole-life approach can generate significant recurrent cost savings and minimise interoperability issues. The DBFMO approach moreover provides a single point of contact and responsibility, which enables timely and efficient decision-making thereby benefitting the overall delivery schedule and focusing the authority on its core task of providing a service to the community.
The DBFO model would remove the responsibility for funding the investment from the HKSAR government’s balance sheet; be competitive and allow for private sector managerial practices and experience; restructure public sector service delivery by embracing private sector capital and practices; and achieve efficiency and cost saving otherwise denied to traditional methods of providing public services.
14 15
Joint Venture (JV)
8. The JV approach was discussed with particular reference to the AsiaWorld-Expo project, which was developed using such a model. In this case the Government invited bids to design, build and operate the complex, and after tender, the Government and the selected private sector entity each established holding companies to invest in a JV project company. An agreement governed the relationship between them on issues such as capital contributions, shareholding interests and voting rights. Specific views expressed on this approach in the context of the Kai Tak MPSC were as follows –
Were this approach applied to the Kai Tak project, the private sector should have a nominal capital holding in the project company but of an amount sufficient to reflect a long-term commitment to the complex. The advantage of a nominal private sector contribution is that it would minimise the commercial rate of return on private sector capital needed. Development risk could be passed to the private sector to deliver the complex on time and within a capped amount. The private sector entity would separately establish an operating company to operate and maintain the complex through an operations agreement with the project company covering matters such as the operator’s fee and performance incentives.
A modified AsiaWorld-Expo approach would be necessary if the complex is unlikely to be operationally self-sustaining. In such a case a government contribution, equivalent to the shortfall between income and expenditure would almost certainly be required. This contribution might be in the form of subsidising excess capacity, with this capacity then distributed to schools and sports organisations to further the Government’s policy objectives. Should specific events be profitable at the operational level, the Government as the majority shareholder in the project company would receive revenue in the form of ordinary dividends paid by the project company.
By using the AsiaWorld-Expo approach to procure and finance the complex, the construction and operation risks are with the same private sector party along with the risk of delivering the complex on
15 16
time and within budget. The private sector party would be incentivised to deliver the asset to a high standard, so as to minimise recurrent maintenance expenses. As the majority financer of the project, the Government would reduce its exposure to private sector financing costs.
Other issues related to procurement under the PSP approach
9. The importance of early business planning involving operators with international experience in sport and entertainment was seen as critical to the success of the complex. It was suggested that an integrated consortium including stakeholders whose global responsibility covered all the stages and aspects of the project’s life could be in the best position to take a lifecycle costs approach and provide best value for money.
10. Generally in relation to PSP procurement, respondents commented that –
The risk profile to be shared between the Government and the consortium developing the complex needs to be identified, communicated and agreed at an early stage in the procurement process. The Government should take the change-in-law risk, with the consortium responsible for the operation or third party revenue risks.
The Government should state clearly at the outset what level of control it wishes to have during the whole project cycle, for example: the allocation of venues for use by schools and local sports associations, as well as discounted charging rates for schools and sports organisations and any requirements for official events such as parades or community events. The Government should identify in the operation contract any environmental constraints potentially impacting events.
The project consortium should be required to build the entire complex as a single exercise, with responsibility for design to ensure optimum performance. Core government required facilities must be specified, but everything else should be left to the consortium to ensure that the
16 17
facilities best match the intended business plan.
The tender specifications should be drawn up on a performance basis for maximum flexibility. The Government should make it clear at the tender stage to what extent it wishes to provide a public facility free or at minimal cost to the public for their benefit, as this will have an impact on operations and financial viability.
Within the consortium the most important expertise will be in the operational area, as this will be the core element throughout the life of the consortium’s agreement with the Government. The roles of the designer and the builder will cease after construction, commissioning and handing over of the complex for operation.
PWP
11. Whilst most respondents commented on and appeared to favour a PSP approach for the MPSC, some did comment on a “traditional” PWP approach noting, for example, that such an approach can provide a more certain outcome for the Government in terms of basic design and construction, albeit with more risk to the Government in terms of operational control. A PWP approach using a design and build contract could allow for cost-effective solutions with the risk of design development not resting on the Government.
12. Without a clear and decisive Project Brief, adopting PSP forms of procurement might result in the Government having less control over the design of the end product as compared with a PWP approach. Depending on the form of procurement higher financing costs are likely to be incurred by private consortia. Generally however a PSP approach to procurement offers benefits to the Government and could also allow minimum public funding to deliver the complex.
Other Matters
13. Some respondents discussed separate packaging of the elements of the complex. One suggested splitting the project into two portions: the “Southern Portion” – namely the main stadium and its surrounding facilities, suggesting that this could be procured through a PSP approach; and the “Northern Portion” – i.e., the sports ground, indoor arena and surrounding
17 18 facilities to be procured under a PWP design & build model.
14. It was noted that the Road D2 bisecting the project site effectively split the complex into two portions. With any major international sports event however the entire complex must be manageable as one integrated facility.
15. One submission categorised the facilities proposed for the MPSC into three distinct groups each with different revenue potential, which in turn could impact on the ability to attract private sector capital. Broadly, these three groups are: the community facilities (i.e., the public recreational space); mixed facilities (the major sports venues); and commercial facilities such as the retail and office space. For the commercial facilities a commercial return is achievable based on the commercial revenue profile. Private investors will be willing to provide capital for the development of these facilities. Government support may therefore be restricted to the community facilities and the “non-commercial” part of the mixed facilities. .
2) Financing
16. Several respondents put forward views on financing options and most suggested that it would be viable to involve the private sector in financing the complex. Funding the project directly from government funds was seen as the cheapest option, and long-term locked-in low-interest government borrowing would be the second cheapest way to fund the development. Private finance, even in the current low-interest environment would be significantly more expensive. It was suggested that since the Government’s objective was to complete the complex by 2019/2020, the Government would need to fund most or all of the construction to reduce the time period between the appointment of the preferred bidder and reaching financial close.
17. It was noted that when considering private financing of a project such as the Kai Tak complex, potential lenders would look at –
The economies of the project and rationale for a PSP approach: this would include consideration of whether there were “anchor” tenants able to provide regular income for the main venues, major sports events likely to take place at the venues, and significant international events such as the Asian Games or Rugby World Cup.
18 19
The level of underwriting of revenue: If the Government plans to pass user demand risk to the private sector, project finance would need to be sought on the back of a strong revenue stream. In the absence of this, the Government would need to provide an availability-based payment and underwrite the revenue required to service debt.
Availability of financing: although financial markets are turbulent, financing remains available to contractors with a strong track record and to projects with a demonstrable business case.
18. Several respondents pointed out that even with private sector financing, the Government would still be required to provide certain guarantees, for example –
It is unlikely that wholly privately funded financing would be available unless the Government guaranteed the core income, e.g., through a unitary payment based on the availability of facilities. If the market was unwilling to fund the capital cost of the project in view of the unpredictability of the revenue streams it would be reasonable to assume that the Government would fund this.
The amount of Government guarantee should be determined such that the Government Guaranteed Debt could be serviced by the project cash-flows with a reasonable level of coverage.
The available sporting and entertainment events from which the complex can be expected to generate the majority of its revenue may leave a large shortfall between operational income and expenditure such that public funding will be needed to close this gap if the Government wishes to have private sector involvement in the project.
Three types of government support might be considered to bridge a potential “funding gap” and enable the project to benefit from strong and private sector participation –
- Direct Government funding: a direct contribution towards the capital cost of the project;
- Availability based payment: a fixed periodic payment (subject to
19 20
adjustment for performance) from the Government to the operator to cover one or both of the return on capital and the operation and maintenance costs of the facilities; and
- Government-guaranteed debt: debt raised by the private sector to finance the construction of the complex, with interest and capital repayment being guaranteed by the Government.
19. Three core alternative structures 2 were suggested that could be applied to private sector financing of the project, namely –
100% availability payments: under this structure, the revenue risk would be covered by annual availability payments from the Government. Financing of the project could be based on a 90:10 debt to equity ratio, with the cost of debt at 6.5% and cost of equity at 13%. Such an arrangement would be suitable for a project with a moderate revenue base.
Partial availability payment/volume risk revenues: this arrangement would require some availability payment support in the initial years of operation, with minimum and ceiling levels of payment. Financing could be based on a 70:30 debt to equity ratio, with the cost of debt at 7.5% and cost of equity at 15-16%. This would suit a project with significant and quantifiable commercial opportunities.
100% volume risk revenues: this structure would require a large revenue base, such as would normally only be available if the venue had one or more major “anchor” tenants – such as high-level competitive outdoor and indoor sports teams regularly attracting large “home” attendances. The project financing could then be at a 50:50 debt to equity ratio, but given the risks the cost of debt would rise to 8% and a 20-25% return on equity would be sought.
2 (1) These assume an international standard bankable concession agreement being in place, Under this concession agreement, there would be a balanced risk/reward profile for the private sector concessionaire, with the key point being that while revenue risk is mitigated the balance of risks would determine whether this type of financing structure is actually available in practice. (2) The quantitative assumptions are based on developed markets. Although HKSAR is a very developed market, it is quite new to procuring projects through public private partnership structures. Accordingly, further market testing is required before a strong view can be taken on achievable terms.
20 21
Viability of a PSP approach with private project financing
20. A PSP arrangement with private project financing could be viable under an arrangement whereby a consortium (or “special purpose vehicle” (SPV)) was established to design, build, finance, maintain and operate the MPSC under a “DBFMO” model. The SPV would raise the senior funding (debt or bond) and the project would be funded by private funding (equity + senior funding) until the completion of construction. This would create a powerful incentive for the private partner to deliver the project on time and within budget. Given their exposure to construction risk, the senior funders would perform extensive due diligence on the construction budget and schedule and require that the SPV provide guarantees and be exposed to penalties in case of late delivery or faulty termination, thereby incentivising it to comply with the construction schedule.
21. In the above context it was noted that as project finance lenders generally preferred not to be exposed to market or demand-based risks, upon completion of construction of the MPSC the Government would need to start making regular availability payments that would cover debt servicing (principal repayment and interest) and an agreed Internal Rate of Return (IRR) to the shareholders.
Combination of Public and Private Financing
22. A number of respondents commented on the option of having a mixture of private and public financing fund the construction of the MPSC. It was noted that PSP arrangements often involve a mixture of public and private capital, with the public funding coming from sources such as government infrastructure financing through a loan to offset a portion of project costs, government investment entities providing equity capital and a government payment at construction completion, with the balance of the project costs provided via long-term financing to provide for operational risk transfer.
23. Other views were put forward in relation to combinations of private and public project financing included the following –
If the complex was developed under a PSP scheme, it is expected that the project would attract significant appetite from long-term investors.
21 22
Investment funds with expertise in capital intensive infrastructure projects have developed over the last decade on a global basis and there are large amounts of equity under management. The need for public sector equity would be limited for this project.
In some PSP arrangements, the public sector contributes directly to the financing by being a shareholder of the “Special Purpose Vehicle” SPV. This model, which would still require availability payments from the procuring authority, has been used in Europe and the level of public sector equity participation has been set at levels well below 30% to ensure that the private sector leads the SPV.
From a debt financing perspective, there are schemes that involve a blend of public sector and private debt financing. A tranche of public sector debt can significantly reduce the cost of the financing. Meanwhile, the presence of private project financing would add a further layer of scrutiny and monitoring from the bidding phase through to the construction and the operating phases of the project. The Government could reduce the cost of the project by requesting the preferred bidder to launch a funding competition for the private debt portion after the award of the contract, with any savings being shared between the Government and the bidder.
As an alternative to full funding of the construction of the project by private funds, government funding could cover a portion of the construction cost, linked to progress of the construction works. This would reduce the amount of funding to be raised by the private sector where the conditions of the financial markets make it difficult to secure private financing on attractive terms for significant amounts. In any case, under the suggested scheme, the Government would commit to making periodic payments to the SPV during the operation phase of the project, to allow the SPV to cover its operation, routine maintenance and lifecycle costs; reimburse the senior debt funding over the duration of the contract; and remunerate the equity injected by the investors.
Consortia bidding for this type of development around the world can generally secure private sector financing however this often comes at
22 23
a very high premium to provide for risk. Partial public sector funding will reduce the risk for the private sector and will be cheaper in the long run.
If the Government does not wish to adopt an availability payment model for the complex as a whole, an alternative approach would be to include a government guaranteed debt tranche to reduce the level of the availability based payment. In this structure the level of government direct funding could be limited to the cost of building the community facilities plus a portion (the “non-commercial” part) of the mixed facilities – i.e., the three major venues – with the Government making availability-based payments for the operation and maintenance costs of the facilities. The mixed facilities could be partially funded by the private sector via loans with (1) debt service payment to be made using project cash-flows, and (2) the payment obligation being guaranteed by the Government. The Government would not necessarily need to fund the commercial facilities; these could be fully financed by private sector capital. If the amount of the government guarantee of debt obligations is fixed, the bidders’ required government funding contribution could be set as a key bid variable and consideration in ultimate contract award.
Revenues and risk sharing
24. With regard to revenues from the project, it was noted that the SPV would look to receive a combination of: regular availability payments from the Government, subject to satisfactory construction and operating performance; third party commercial revenues derived from commercial rentals, hotels and car parking; and third party event-related revenues derived from events, naming rights, corporate boxes, advertising and other sources. The latter could consist of “passive” hosting of events organised by promoters or “active” hosting involving bespoke content created by the project team.
25. As regards third party revenues it was suggested that these be shared with the Government, either according to a different percentage depending on the category or on an overall basis. A collaborative approach would need to be developed over the whole contract especially in respect of events such as regional or world championship for which the bid to host the event would need
23 24 to be prepared in cooperation with the relevant sporting body and the Government. Respondents also made the following points –
The Government could consider taking some of the risk of under-use of the complex by setting a minimum third party revenue threshold in the availability payment mechanism, whereby the Government would pay a percentage of the shortfall between the actual revenue and an agreed level of minimum third party revenue.
Experience with similar venue management and the ability to generate revenue is the key to achieving the Government’s objectives of garnering economic benefit from hosting major events whilst supporting the development of domestic participation and spectator sports events. A risk sharing approach here would be feasible, e.g., sharing revenue or operating margin together with working capital risk on event staging costs.
In order to align the Government and the operator’s long-term objectives, the Government could impose a lock-up period whereby the original SPV shareholders would not be allowed to dispose of their shareholdings to any third party during the construction period. Once construction is completed, a certain percentage of the original shareholding could be disposed of to a third party.
It is advisable for the Government to subscribe to a sizeable minority shareholding in the SPV as this will lend credence to the project in terms of bankability.
The Government will achieve the best value for money if the SPV takes the risks that it is best positioned to understand, analyse and manage, i.e., the design, construction, maintenance and lifecycle risks. This will help ensure that at the end of the contract the infrastructure is handed over to the Government in a fully functioning state in accordance with the agreed maintenance programme.
Private sector incentives
26. A number of respondents emphasised the need to provide appropriate incentives to the private sector if a PSP approach to the development and
24 25 long-term operation of the MPSC was to deliver the desired outcomes. One respondent noted in this context that the operator of the Singapore Sports Hub was incentivised to maximise the usage of the venues and ensure a popular calendar of events through a sharing mechanism with the Singapore Sports Council in respect of the third party revenues. Other comments included –
The private partner should have a direct incentive to maximise the number and quality of events and ancillary activities of the complex, as the associated revenues would directly contribute to the upside of the remuneration of the equity investors.
The payment of a proportion of the availability payment under the private financing model could be proportional to the performance of the complex in terms of event organisation and venue operation and maintenance. This would make remuneration of the investors (and possibly a limited proportion of the funding repayment) closely dependent on the quality of the operation, thus maintaining an appropriate level of risk transfer throughout the life of the contract. By the same token, it is recommended to allow for an upside depending on the quality of the project performance and operation, which could take the form of bonus payments.
If the prime source of revenue came from somewhere other than the operation of the facilities at the complex the operator’s incentive to perform would likely be blunted.
Other issues
27. One respondent commented that a further risk that needs to be mitigated is change-in-law risk. Lenders and the SPV would need to be protected from any change in law that adversely affects the project economics.
28. Another issue that was raised relating to PSP arrangements was the delivery of right-of-way (ROW). The Government would need to deliver 100% of the project ROW to the project company before construction commencement. Failure to deliver sufficient ROW will delay debt drawdown, as senior lenders will not lend to projects where the project company, which is also the borrower, does not own the land free of encumbrances.
25 26
Chapter IV – Timetable for the development of the Kai Tak complex
A robust and achievable timetable for the planning, procurement and delivery of the complex is one of the key concerns of companies that are interested in taking part in the project. The sports community is also concerned about the timetable for the project, given that a proposal to build new sports venues at Kai Tak has been on the drawing-board for over a decade.
2. At the briefing on the EOI exercise, government officials shared their view that the target date for the completion of the complex was financial year 2019-20. We received varied comments on this issue, for example –
The target of opening in 2019-20 is realistic and allows time for a well-considered process starting with business planning.
A 2019-20 target date for the start of operation would be challenging but achievable, subject to a 2013 start on tendering and avoiding a competitive dialogue phase.
Construction of the complex could be completed by the end of 2018, assuming the complex remains a government priority.
With private sector involvement the complex might be opened earlier, say, late 2018.
The road through the complex site must not be allowed to conflict with the project timetable, otherwise a 6-year programme from commitment of design to commencement of operation is not feasible.
An overall timescale of 5 years for the complex will need experienced leadership and risk management.
A three to four year development timetable for schemes of this nature is typical.
A 55,000 seat stadium itself can readily be constructed in about 3 years.
From design to construction completion a substantial portion of the work could be completed in 3 years.
26 27
Recommendations related to project implementation
3. Some respondents gave recommendations and advice on measures that could be taken to ensure timely delivery of the complex. It was noted that the procurement process for DBFMO models is well established and can be conducted under a pre-determined and limited timeframe. The current planning amendment process for relaxation of height restrictions should be taken forward as an urgent programme activity.
4. A respondent suggested early research on international sports events schedules and global artists’ touring itineraries. The programme for the complex should be developed accordingly, incorporating key dates and lead-time required for delivering such events. Other points made by respondents with regard to ensuring the smooth delivery of the project were –
Developers could accommodate aggressive timelines provided that the project is well prepared before the procurement is launched, with key risk allocation being well defined at the start. A two-phase tender process would involve commitment by tenderers, alongside involvement by the Government during development of the complex. In this context pre-qualification should be limited to a maximum of four candidates. Phase I tender submission could comprise preliminary design and architectural models, following which the Government would select a maximum of two candidates to develop their proposals further, also contributing to the costs of the detailed Phase II tender, which would lead to a “best and final” offer.
Since the timetable will largely depend on ground work requirements, design complexities and construction approach, the scope of advance work required would be a significant item subject to detailed consideration. Financing and procurement processes need to be strictly managed to avoid lengthy delays and addressed in parallel with wider planning and development considerations. It is critical that strategic planning for the complex should continue in parallel with the facility development process. For example, to ensure a strong sporting events programme from opening a detailed event strategy, bidding and planning process should be given as soon as possible, as the lead-in times can be over ten years for major events.
27 28
The Government should initiate the Environmental Impact Assessment (EIA) shortly after the appointment of the preferred bidder. The EIA project brief must reflect the design intent of the preferred bidder’s scheme for the complex. The process should be as transparent as possible, particularly in the light of recent judicial reviews of EIAs for government projects. The risk must be mitigated to the maximum possible extent.
Tried and tested fast-track construction methods involving industrialised components and the overlapping of the design process with the construction process to allow, for example, early commencement of foundations and substructure works whilst the superstructure is still in design would be appropriate subject to the overall master plan for the complex having been finalised.
Completion and operational opening of the complex will be affected by the 2018 planned completion of the MTR stations on the Sha Tin to Central Link designed to serve the Kai Tak area and the complex.
The best final mix of facilities and the related business plan are complex matters, and a two stage tender process might be appropriate. The first stage would involve submission of a business plan, preliminary design, funding strategy, management strategy, construction methodology and timetable. Ideas from this exercise would be incorporated into a second and final tender exercise involving a short-list of selected consortia.
In view of the volume of construction work being undertaken in Hong Kong at present and in the near future, reducing labour resources required for the project could be incorporated in the design of the facilities in order to expedite the construction programme.
5. Concern was expressed that the timetable for the development of the complex should be accelerated as much as possible. Given that our existing major stadium is falling behind world standards, Hong Kong will further lose ground to places such as Singapore. Once promoters have established a connection with one place it is difficult to shift that loyalty. If Hong Kong loses its reputation as the sporting city of Asia, it will be difficult to recover.
28 29
Chapter V - Master planning and design
Several respondents devoted much of their submissions to the master planning and overall design of the complex. The need for multi-purpose use was repeatedly emphasised, as was the need for a people-oriented layout and the importance of easy public access to and circulation within the site. Issues such as sustainability, the use of state-of-the-art technology and interface with surrounding areas, in particular the harbour-front were frequently raised.
1) Master Planning issues
Overall master planning issues
2. Respondents emphasised that the broad planning concept should be to create: “a park that includes venues” as opposed to “venues with landscape filling spaces around them”. The master plan should take into account different scales of operation: “event mode”, with intense peak flows of spectators attending the main venues and “day-to-day” mode with community use of the sports and other park facilities. The balance to be struck is to ensure that public spaces can cope with high capacity flows for events, yet are not so large that on a day-to-day basis they become vast, unused spaces.
3. It was emphasised that the more activities the complex could handle, the greater would be its target use and investment value. The facilities currently proposed are seen as a good mix in size and scope but it is important that the operator be given the opportunity to tailor the facilities to suit a commercially viable business model. The current planned facilities should not be “cast in concrete”, but should be open to review.
4. Respondents commented on the need to maximise commercial opportunities at the complex without compromising its community use, for example, space under the spectator stands might be adapted for various uses.
5. More specific comments were –
The complex should be integrated with the adjoining Metro Park and serve the local community. Harbour-front sports venues, F&B and other facilities would establish its reputation as a popular “must-see must-go destination” for tourists and locals all year.
29 30
Proximity to the Cruise Terminal and to transport links within Hong Kong and the region will help make the complex a world-renowned destination. Planning parameters should be reviewed where necessary and amended to make the complex more attractive. Commercial activity should support sport, entertainment and tourism development. Maximum height controls, view corridors and air ventilation should be optimal and connectivity between the complex and surrounding communities will be crucial factors for success.
Commercial spaces should complement the primary sports use rather than vice versa with the “content” enlarged to include services ancillary to sport, such as specialist medical facilities. Centralising some of these facilities around the main venue would help create a vibrant feel to the park and provide better user access.
It is important to identify optimum levels of retail, dining and entertainment space and propose an appropriate trade and tenant mix and leasing and management strategy. The complex should embrace community and commercial elements, so that it is flexible enough to stage different events and can achieve cross-subsidy of operation.
It would be beneficial if the complex is expanded to include the surrounding waterfront to maximize the land/water interface, open areas, major connections to roads and open-air seating. This would help make it a “place” that a large cross-section of the public would want to frequent. It would also allow features such as running and cycling tracks to be more easily included in the design.
Early engagement of specialists and contact with stakeholders
6. The early involvement of the operator with a detailed business plan should determine the design brief for the complex, rather than have the design or a construction company dictate the commercial opportunities and the functionality of the venues. Facilities must match their end use, rather than be adapted or retro-fitted, or incur additional capital and operating expenditure.
7. In the same vein early engagement with the local community, schools, sports clubs and sports organisations would facilitate understanding of
30 31 community demands on the complex, including those that may not specifically be sport related but which can bring additional revenue.
Transport
8. The following specific comments were received –
New and enhanced public transport systems are essential for all venues within the complex, especially at the peak capacity flow during large-scale spectator events.
Connectivity with the surrounding areas must be incorporated into the master plan, including pedestrian- and cycle-dedicated connections throughout the complex and in support of public transport networks.
Car and coach parking capacity should be commensurate with the needs of major events.
The complex should be well-connected to the road network at Kowloon East, including the future Central Kowloon Route and Kai Tak Trunk Road.
Entrances to MTR stations should be located within the MPSC site.
The presence of Road D2 intersecting the site is incompatible with a complex of this nature and will be a major constraint in its design and operation; if not relocated it must be lowered so as not to inhibit unrestricted and safe access to sports and entertainment areas in the complex.
2) Design-related issues
General
9. Flexibility and accessibility were two of the most commonly-used terms used in relation to future design parameters for the complex. Emphasising long-term viability, several respondents drew attention to the need for the facilities within the complex to be provided in such a way as to support the regular hosting of major events and the generation of revenue from multiple sources. In this context, some of the issues raised are –
31 32
Facilities at the complex should cater for as many sports as possible and be provided such that international competitions can be held in Hong Kong. The provision of a movable all-weather roof for the main stadium will greatly affect its usage mode and usage rates.
Open, naturally lit concourse spaces and people movement throughout the complex should be part of the Kai Tak experience. People-oriented design, strong visual impact and high technical and environmental standards should underpin design concepts.
It is essential that facilities be designed to maximise opportunities for income generation, and minimise operating costs. Constraints arising from noise sensitive receivers located nearby must be fully addressed at the early design stage, in consultation with the operator.
Areas open to the public must be readily accessible to all with minimum barriers. The design and operation of venues throughout the complex must encourage wide community and public participation, so as to “reach out to” rather than “shut out” potential users. The designer must take full advantage of the harbour views.
Sustainability must be fully integrated into the design process, seeking carbon neutrality. Each sustainability initiative should be assessed for its potential benefit including capital and lifecycle costs.
For the main and secondary stadiums consideration should be given to providing temporary facilities during major international events, for sponsors, merchandising and other uses.
Areas and facilities elsewhere within the Kai Tak district can have multiple functions in respect of public use and sports needs if considered at the concept and design stage, through the preparation of an overall “sports plan” for Kai Tak. Examples include –
- Space for temporary support facilities during major events;
- Jogging trails designed with sports events in mind, such as community runs;
32 33
- Cycle paths designed to meet the requirements of major sports events such as cycle races and triathlons;
- Waterfront promenades designed to facilitate water-sports, provide technical and operational support during major water-sports events and meet the requirements of events such as triathlons, running and cycle races;
- Landscaping designed to provide attractive areas for the public to watch water-based activities.
Multi-purpose design could allow for frequent events catering for audiences of say 15-20,000, which could be a major source of revenue. Visually closing off upper tiers by lowering a temporary visual ceiling should be considered.
Large screen electronic systems should facilitate attendee interaction and entertainment even when not watching an actual event. This is the key to developing the carnival entertainment atmosphere that events in Hong Kong need if they are to grow. The design approach should seek to create entertainment areas and events even when there is no major event taking place, such that the complex becomes a wider part of the sports scene in Hong Kong.
It is appropriate that no athletics track is proposed for the main stadium, which should be designed specifically for mass spectator sports such as football and rugby. Flexible seating arrangements would allow a wider mix of sporting events.
A supporting sports ground could provide a running track for public athletics needs. For football, hockey, and rugby matches additional seating could be provided using the running track area. Sports such as cricket, Australian Rules football or baseball, which require larger playing areas can be served by drop-in palletised grass again using the running track to provide a larger playing area.
The operator will undoubtedly ask for speed in transforming venues for different uses. Such transformation between day-to-day community uses and high capacity events might need to happen
33 34
within a matter of hours, with minimum disruption to daily use of the complex.
The indoor arena must be flexible to allow the hosting of ball sports such as basketball, handball, table tennis, badminton and volleyball, as well as indoor sports such as weightlifting, boxing, gymnastics, dance sports, and snooker at world championship and major games levels. The arena should also be capable of hosting small concerts and shows, and even theatre in the round.
Compliance with international standards
10. With the complex to be used for major international sports events, respondents highlighted the need to ensure the sports venues are fully compliant with the requirements of international sports organisations. Reference was made in particular to the requirements of international bodies for football (FIFA), rugby union (IRB) and athletics (IAAF).
Turf
11. There were several comments related to playing surfaces at the venues, in particular the question of how best to provide a top-class surface within the main stadium. With the development of the latest “4G” generation of artificial turf now being widely used as a playing and training surface elsewhere in the world, comments included the following –
Given the challenge of storing and replenishing natural turf, and advances in recent years with artificial turf technology, an artificial turf system could be considered for the main stadium. Operational provisions will be necessary to comply with international events.
Palletised grass systems require large storage areas, for two complete systems (one in use while one is recovering), such that the practicability of using such a system must be fully thought through.
The quality of the playing surface is of paramount importance. A natural grass surface must be maintained to international standards. Consideration might be given to installing artificial hybrid pitches.
34 35
Seating
12. How best to provide appropriate seating configurations and capacity at the complex and particularly for the main stadium attracted comment. The main points raised are as follows –
The use of motorised retractable seating systems offers multiple permutations to expand and contract capacities very quickly.
Whilst the seating capacity of 50,000 seats proposed for the main stadium is 25% more than the existing stadium, this may not be sufficient for the growth of the Hong Kong Sevens and other major events, such as matches involving top European football clubs or international rugby teams. A 55,000-seat stadium might be justified, given the frequent unsatisfied demand for tickets with those events attracting huge economic activity and interest. In the future more and more teams are looking to visit the Far East, and Hong Kong can be more aggressive in attracting these events with a suitable facility.
The main stadium should be able to host the Asian Games and other regional games, with the lower levels of seating retractable to allow the provision of a running track when needed. Retracted seating would also allow extension of the playing pitch area to accommodate sports such as cricket, Australian Rules football and possibly baseball.
The secondary stadium should provide capacity for up to 15,000 to 20,000 people. Sports such as cricket, hockey, baseball, soccer and rugby will need a stadium of this size to provide the atmosphere and capacity for some events until increasing numbers of spectators warrant holding the events in the main stadium, which otherwise would be too large and costly a venue.
Seating at the sports ground could be around 10,000-12,000 seats in close proximity to the playing area, providing opportunities for new events where existing grounds with a spectator capacity of 5,000 would be too small.
The indoor arena should have moveable rather than permanent seating, which could be adjusted according to the type of event. This would
35 36
provide for more world and regional championships in a number of sports, helping to establish Hong Kong as a centre for major events.
The total seating capacity in each venue should remain flexible at this stage.
Other aspects of the design of the Kai Tak complex
13. There were relatively few comments on the proposed retractable roof for the main stadium. One respondent noted that the roof would be the dominating feature of the stadium and that issues such as spectator sightlines and air quality should be addressed during its design. Other features that respondents wished to see included in the main stadium and other venues were: television stations with their own studio space; state-of-the-art studio facilities and IT coverage for all suites and vendor kiosks; enough back of house space for announcers, tournament control, players’ lounges and media related facilities; and F&B facilities and souvenir shops.
14. Some respondents suggested that residential facilities be provided in the form of serviced apartments to encourage training camps for schools and visiting teams. There was also a suggestion that the complex include an “Olympic Museum” to promote “Olympism” in Hong Kong.
36 37
Chapter VI - Scope for private sector investment in the Kai Tak complex
General
As well as asking for comments on the idea of involving private sector financing in the procurement of the complex, we invited respondents to share their views on the actual scope for private sector investment in the project. In this regard, a few respondents noted the benefits that private investment could bring to the project, such as –
Value for money for the tax-payer through risk transfer and management, for example, construction completion risk can be mitigated if the public sector only pays after services have been delivered.
Creation of added value through the integration and cross transfer of public and private sector skills, knowledge and expertise.
Involvement of private capital to incentivise performance.
2. In a similar vein, several respondents alluded to the potential for private sector investment to help minimise the capital and recurrent cost of the project whilst ensuring a high quality service to stakeholders together with a strong commercial focus. Given the current lack of a strong “anchor” tenant for the main sports venues, the complex is likely to require ongoing public sector financial support. However, this could be minimised by the developing varied income streams and by profit-sharing arrangements which provide a return to the Government whilst also incentivising private sector partners.
Suggested levels of investment and related financial implications
3. A few respondents put forward specific suggestions for private sector investment in the project. For example, one suggestion was that depending on the degree of risk transfer, the equity to debt ratio of the investment on the project could be expected to vary from 10% (no commercial risk) to 25% (reasonable transfer of commercial risk to the SPV). An appropriate level of financial return could be around “mid-teens” assuming that the best international practices and standard risk-sharing provisions were included in the Project Agreement whilst taking into account that project finance contract
37 38 management had not been tested in Hong Kong. Other respondents provided the following specific comments –
If it is possible to complete project construction within a HK$15 billion budget, returns available from operating the complex should be such that an investment by the operator of approximately 10% of the project amount (i.e., HK$1.5 billion) would be viable, with the government however providing the balance of 90% at no cost to the operating company. This assumes a 25-year lease on the facilities on a Build Operate Transfer Manage (BOTM) basis, and minimum returns on capital investment of 5% with a 10-year repayment of principal, and profit sharing with the government if returns to the investor exceed 12% per annum.
The complex could be financed with a debt to equity ratio of 80:20. Assuming a U$2 billion total project cost, equity contributions from the sponsors would be approximately US$400 million, with the balance funded by project finance lenders.
For an availability payment-based PSP project in Hong Kong, sponsors are likely to seek a minimum 11% internal rate of return (IRR) on equity throughout the concession period provided certain key performance indicators are achieved.
Other comments
4. In addition to these comments, one respondent suggested that the Government consider granting an option to the SPV to acquire the commercial properties at the complex at the end of the concession life (or alternatively granting a longer concession period for the operation of the commercial properties). This could avoid a situation occurring whereby the service standards of commercial tenants or hotel operators would deteriorate near the end of concession periods, as a result of uncertainty as to the future relationship with the landlord.
38 39
Chapter VII - Ways to enhance commercial viability
In the EOI document, we invited respondents to suggest ways in which the commercial viability of the complex project might be made more attractive to potential private sector investors, should the Government decide to go ahead with a PSP approach to the project. In the briefing on the EOI exercise, we noted that we would be open to suggestions in particular to increase the scope of commercial and office facilities, provided that this did not detract from the integrity of the complex as a sports venue.
2. Many of the suggestions in this regard involved expanding the ancillary revenue-generating elements of the complex, for example –
Ancillary facilities could include restaurants, bars, hotels, a commercial centre, a duty free shopping mall and commercial and residential developments.
It is important to maximise commercial returns by developing an optimum mix of uses including F&B, hospitality packages, spa and sports club and retail offerings, and convention and meeting uses.
Space under the stands of the sports venues can be used to accommodate hotels, offices, shops, educational facilities, museums, health and fitness clubs, conferences and banqueting.
At the London 2012 Olympics Handball arena, community facilities such as a café, health club, dance studio, crèche, IT learning suite and office accommodation for sports bodies has helped to maximise revenue streams to ensure that the facility is financially sustainable.
Hotel and conference facilities
3. Several respondents suggested that hotel accommodation be provided at or near the complex, along with a related retail element and facilities for conferences and meetings. Such respondents commented that diverse and vibrant hospitality facilities would benefit from Hong Kong’s growing tourism market and the Kowloon East Business District expansion, and that hotel facilities would appeal to spectators at late night events, as well as “MICE” or destination driven visitors.
39 40
4. One respondent proposed providing 20,000 m ² of serviced accommodation for visiting sports personnel that could also be used as a sports training campus for students and elite athletes. Another commented that a hotel could generate revenue from visiting sports dignitaries, entertainment crews and athletes and support commercial businesses at the complex.
Other commercial facilities
5. Some respondents considered that it would be of long-term value to increase commercial space above the minimum 40,000 m² level. It was also felt that given the practical importance of the commercial facilities to the day-to-day use of the complex by the public, future bidders should have the flexibility to propose alternative distribution of the commercial areas on the site and different programme mixes. Further comments received on this area included the following –
The amount of office and commercial space should be increased from 40,000 to 60,000 m², with office space accounting for 10,000 m². Preferential allocation of office space should be given to sports organisations and commercial entities that have a sporting focus.
The commercial facilities will be the major driver of revenue for the project. It is important to consider ways to enhance the viability of these facilities through the optimum level and mix of office, retail and hotel uses.
Increased office space will encourage young entrepreneurs to develop businesses in a studio and sporting environment.
There is significant potential for more commercial elements in the stadium facility mix; their inclusion may attract additional investment and will enhance the viability of the business plan, provided that there is a need and opportunity for their development.
Retail floor space could be increased to enhance the attractiveness of the complex to a wider local and visitor community. This would encourage longer visitor stay-hours and improve the appeal of the complex as a weekend and holiday destination for the family.
40 41
Backing the complex with a significant real estate programme could help finance the project - the potential of revenue from the presale of commercial space might contribute to the financing of initial investment costs.
Carefully managed real estate development would optimise returns and subsidise the cost of the project without deviating from the objectives of the Kai Tak complex.
Sports events
6. Whilst the complex will primarily be a venue for major sports events, a number of respondents commented that a comprehensive year-round programme would help generate commercial revenue. It was suggested that Kai Tak host events such as the Rugby Sevens, Hong Kong Tennis Classic, Hong Kong Badminton Open and Hong Kong Squash Open and that if there were pitches available of international size it might also be possible to host cricket competitions that could raise significant commercial and tourist interest. It was further noted that attracting an “anchor” tenant such as a football club based locally or in southern China would boost revenue.
Other commercial opportunities
7. Some respondents commented that revenues might include naming rights, donations, sponsorship and advertisements. Naming rights could include naming rights for the overall site and key venues as well as sponsorship of programmes and individual events. Other suggestions for raising additional commercial revenue included –
The Kai Tak complex should own the TV signal from the venues and be able to sell it on a commercial basis.
Income sources such as digital media platforms and corporate events should be explored and assessed.
An entertainment centre could bring in good revenue for the complex.
With the popularity of Canto and K-pop in this region, stadium concerts would be a major revenue driver for the development.
41 42
Chapter VIII - Other issues
In addition to commenting on the main issues relating to the planning, procurement and financing of the Kai Tak complex, respondents raised issues such as the relationship between the complex and other major sports venues in Hong Kong, and the idea of expanding the scope of sports facilities initially envisaged for the project.
The Kai Tak complex and existing major sports venues
2. Several respondents highlighted the need to consider the future role of the Hong Kong Stadium following the development of the new complex. It was suggested that it would be inconsistent with the Government’s objectives if the new complex faced direct competition from within Hong Kong that limited its appeal to major sporting events. Since existing and planned venues could have a detrimental impact on the business model for the complex, the Government should clarify the future use of the existing venues and how to avoid consequential loss of revenue. Other comments on this issue included the following –
The demand for and pricing of the Kai Tak facilities will compete directly with other major venues (the Hong Kong Stadium, the Hong Kong Coliseum and the Queen Elizabeth Stadium). The pricing and operation of these facilities are outside of the bidders’ control. To inform the private sector investor’s business plans and its financial model, they will need to know future plans for the operation and pricing of Government stadia and facilities.
The proposed completion date of the complex is close to that of the MPV in the West Kowloon Cultural District (WKCD). There needs to be clarity as to Government objectives for these two projects in terms of target end users.
The Hong Kong Stadium could be provided with facilities for athletics throughout the year, as well as a multi-use pitch for football, hockey and rugby. In this way, it might become economically viable and be fully utilised by schools as well as offering a new sporting club for young executives. The capacity of the Hong Kong Stadium
42 43
could be expanded by 5,000 in the near term and then reduced to 25,000 seats.
Retaining the Hong Kong Stadium with 15,000 to 20,000 seats after 2019 would be beneficial as it would provide two functional stadia to co-host certain events. Clearly there are economic considerations, but Hong Kong lacks sports grounds and pitches for football and rugby.
Proposals for additional sports and related venues at Kai Tak
3. Several sports organisations responded to the EOI exercise with proposals to develop more sports facilities at Kai Tak. A few suggested that a structured interface between the facilities at the complex and a proposed water sports centre could transform the Kai Tak Approach Channel (KTAC) and Kwun Tong Typhoon Shelter into a venue suitable for hosting world championships, Asian Games and Asian championships events, as well as providing an opportunity for daily water-sport activity by the community.
4. Other respondents proposed creating an “ice and community entertainment” centre to serve as the headquarters for ice sports in Hong Kong and a top quality training centre for Hong Kong’s ice sports athletes, as well as a facility designed and operated as a “community centre” with built-in flexibility for hosting ice and non-ice attractions.
5. Another suggestion was to establish a sports academy or sports school within or near the complex, which could potentially maximise the usage of the facilities. Besides providing quality education, this institution would be able to use the world-class facilities at Kai Tak for developing and nurturing young and talented athletes in Hong Kong.
Events Scheduling
6. One respondent quoted the example of the Singapore Sports Hub to illustrate that the Government should ensure that the operation of the complex is not driven purely by commercial motives - rather, it is important to create an environment that would promote sport at all levels and foster greater community participation in sport. To this end, the Government could incentivise the project company to run activities that complement the
43 44
Government's broader objective of promoting sport in Hong Kong. For example, the operator might be incentivised through a payment mechanism to host events that would otherwise be commercial loss leaders but sit well with the Government's agenda.
Other proposals
7. Other suggestions received from individual respondents included the following –
If Hong Kong is to compete on the world stage and attract events, consideration should be given to establishing a dedicated organisation “Event Hong Kong”, with the sole focus of attracting, creating and developing a robust event calendar for Hong Kong.
The Government should waive fees and levies such as rents and rates, land and property tax and property insurance in order to enhance the viability of the project.
Strong support to the complex should be provided from the Mega Event Fund of the Tourism Commission.
44 45
Chapter IX – Conclusion and Way Forward
The submissions that we have received provide useful information and enlightened comment. We are encouraged by the response to this exercise, which we believe demonstrates that there is keen interest from the private sector in forming a partnership with the Government to deliver the Kai Tak complex to a high specification for the benefit of Hong Kong.
2. Our current task is to study the detailed financial implications of the options for procuring and financing the Kai Tak complex. This will take account of and quantify the benefits of the risk transfer that each option offers. It will build on the foundations laid by the earlier study of procurement and financing options, and will also take account of the views and information provided by the EOI exercise. We aim to complete the study early in the third quarter of 2013, with a view to identifying a clear way forward for the procurement and financing of the Kai Tak complex, which in turn will allow us to draw up a detailed road map and timetable for implementing the project.
3. Whilst continuing to study the options for delivering a world-class sports complex for Hong Kong, we will also further consult stakeholders who express an interest in this project, including but not limited to those who responded to our invitations to submit non-binding EOI. We would be glad to receive continued feedback and views, and we will regularly update information on this project on the dedicated MPSC website at –
www.hab.gov.hk/mpsc
45 Appendix
Invitation for Expressions of Interest in the Development of a Multi-purpose Sports Complex at Kai Tak [Note: This is NOT a tendering exercise]
1. Introduction
1.1 The Government of the Hong Kong Special Administrative Region (“Government”) has decided to develop a multi-purpose sports complex (“MPSC”) at Kai Tak (“the Project”). The Government acting through the Home Affairs Bureau (“HAB”) intends to invite the private sector and other stakeholders to work together in developing the MPSC which is expected to come into operation by 2019/20.
1.2 This document sets out the objective of this invitation for Expressions of Interest (“EOI”) and provides background information on the Project.
1.3 This invitation is not the beginning of a competitive bidding process and is not a pre-qualification exercise for the subsequent competitive bidding for the Project. Neither this invitation nor any submission received by HAB in response to this invitation constitutes an offer or the basis of any contract which may be concluded in relation to the development of the MPSC.
2. Objectives of this invitation for EOI
2.1 The objectives of this invitation for EOI are –
(a) to show the Government’s interest in working closely with the private sector and other stakeholders when developing the MPSC;
(b) to obtain feedback from the private sector and other stakeholders on –
options for the mode of delivery and financing of the Project; the scope for private sector investment in the Project and the form that such investment might take; the scope for public and private sector collaboration in the design, construction and operation of the MPSC; ways to enhance the commercial viability of the MPSC; and
P- 1
(c) to obtain an understanding of the specific concerns and interests of the private sector in relation to the Project.
2.2 Information gathered will be used to help establish the most suitable approach to developing the MPSC.
2.3 Following receipt and consideration of the EOIs, HAB intends to prepare and publish a report on this exercise before deciding on the appropriate form of procurement and financing of the MPSC.
3. Background information
The case for the MPSC
3.1 The Government’s policy objectives for sports development are to promote sport in the community, to develop elite sport, and to make Hong Kong a major location for international sports events. Hong Kong has a shortage of public sports facilities, in particular sports grounds, indoor sports centres and football pitches. In addition, our capacity for hosting major sports events is affected by a lack of modern, multi-purpose venues. When hosting major sports events, we rely heavily on ageing venues that do not meet modern-day requirements. We have one major outdoor venue, the Hong Kong Stadium (“HKS”), which can accommodate 40,000 spectators but which has several constraints: it does not have a roof that would allow for the hosting of events under all weather conditions; in order to avoid damage to the turf there is a limit to the number of different types of sport and non-sports events that can be held there; and back-of-house facilities for players, spectators and the media are below the standards that are expected by participants and spectators at major events. The only indoor sports venue we have that provides sufficient arena size for major sports events and a capacity of more than 3,000 spectators is the Hong Kong Coliseum, which itself has constraints such as a lack of warm-up space and insufficient supporting facilities for players, spectators and other users.
3.2 The hosting of major international sports events creates economic benefits in areas such as tourism, retail, marketing and event management, and promotes a city’s profile. The improved performances of Asian athletes at
P- 2
the international level have generated increasing interest in sport in the region, and organisers of major sports events increasingly look to Asian cities to host such events. In recent years, several major cities in the region, including Guangzhou, Shenzhen and Singapore have built or started building new state-of-the-art multi-purpose sports facilities. Unless we address the limitations in our sports infrastructure, Hong Kong will lose opportunities to host major events.
3.3 The development of an MPSC at Kai Tak was identified as a key development component in the Kai Tak Planning Review (2007). In his 2013 Policy Address, the Chief Executive stated that the planning of the MPSC is a priority.
Planned facilities for the MPSC
3.4 An initial Technical Feasibility Study completed in 2009 envisaged that the MPSC would have a 50,000-seat multi-purpose main stadium, a 5,000-seat sports ground and a 4,000-seat indoor multi-purpose sports arena. The complex would also include over 40,000 sq. metres of office and commercial space, as well as public open space. In addition to hosting sports events, the complex would provide a venue for events such as concerts, exhibitions and carnivals.
3.5 To help meet our policy objectives for promoting sport more widely in the community, the MPSC will be a “sports park” for Hong Kong, with a mixture of high quality sports facilities for public use, open space, park features and retail and dining outlets so that the wider public and visitors to Hong Kong can enjoy the park throughout the day, seven days a week. The location plan for the MPSC is at Annex A.
3.6 The major facilities proposed for the MPSC are described at Annex B. The exact mix of facilities will be subject to further review, having regard to factors such as demand and long-term commercial viability. An initial plan showing the proposed location of the three major sports facilities for the MPSC described in paragraph 3.4 above (i.e., the main stadium, the sports ground and the indoor sports arena) is at Annex C. The plan takes account of the physical constraints related to the development of the MPSC at the site.
P- 3
Procurement and financing
3.7 In 2011, HAB engaged a consultant to study procurement and financing options for the MPSC, taking into account recent experience with the procurement and financing of large local and overseas projects. The study was completed in 2012. In addition to the option of full public financing of the Project through the Public Works Programme, the consultant noted that there was an opportunity to involve the private sector directly in the financing of the Project through options such as “Design-Build-Finance -Operate”, “Partial Private Financing” and “Joint Venture” arrangements.
3.8 The Government proposes to conduct a further study with a view to gaining a comprehensive view of the “full” costs (including the capital and recurrent costs of the MPSC and the opportunity cost of public financing) and benefits of procuring the MPSC under all viable procurement and financing options, including but not limited to the options mentioned in paragraph 3.7 above. This will help the Government to decide on an appropriate mode of procurement, and whether, and if so, the extent to which it should seek private sector financing for the Project. The study will take into account the feedback received through this exercise.
4. Approach to the exercise
4.1 This invitation is NOT an exercise to shortlist or pre-qualify any potential bidders for the Project, rather, the main objective is to obtain views on options for developing the MPSC, for the Government’s consideration Interested parties who do not submit an EOI will not be barred from taking part, or prejudiced against, in any subsequent competitive bidding exercise. Neither the Government nor any respondent will be bound by any response to the exercise.
4.2 A press release on this invitation was issued on Friday 18 January 2013. A copy of this document may be found on the HAB website at http://www.hab.gov.hk/mpsc.
4.3 Information and views provided by respondents will not be individually attributed in the report mentioned at paragraph 2.3 above and will NOT be
P- 4
considered in relation to any future tender evaluation exercise. Respondents are asked to note that under the Licence (see paragraph 4.14 below) information provided in response to this invitation including the written responses and information obtained in any subsequent interviews may be used or modified for use by the Government in drawing up the documentation for any subsequent competitive bidding exercise for the Project.
4.4 Each respondent should make its own independent assessment of the information contained in this invitation document after making such investigation and taking such professional and other advice as may be prudent in order to assess the risks and benefits and to prepare its response to this invitation. Respondents should not construe the contents of this invitation, or any other communication by or on behalf of the Government or any of its officers, agents or advisors, as financial, legal, tax or other advice. Respondents should consult their own professional advisors as to financial, legal, tax or other matters concerning the Project.
4.5 This invitation is not intended to provide the basis of any investment decision and should not be considered as a recommendation by the Government or any of its officers, agents or advisors to any potential respondent to submit any responses.
4.6 Each respondent shall be solely responsible for the fees, costs and expenses incurred in preparing for and responding to this invitation, or subsequent responses or initiatives on the part of any respondent. The Government will under no circumstances be liable to any respondent for any such fees, costs, expenses, loss or damage whatsoever arising out of or in connection with this invitation.
4.7 Some aspects of this invitation may require clarification, amplification or correction. The Government reserves the right without prior consultation or notice, to modify, amend and revise any provision of this invitation and to issue addenda to such effect at any time. Any addenda, amendments, written communications, additional information or changes to this invitation will be posted on the HAB website at http://www.hab.gov.hk/mpsc. Respondents are advised to check the website regularly. The website is not a guaranteed secure site and no
P- 5
representation, warranty or undertaking is given by the Government as to the accuracy and completeness of the information posted. If a respondent experiences difficulty in accessing or is in doubt as to the security of the website, assistance may be sought in the manner as set out in paragraph 5.5 below. The Government also reserves the right to postpone and cancel this invitation at any time.
4.8 Whilst the information in this invitation has been prepared in good faith, it does not claim to be comprehensive or to have been independently verified. Neither the Government nor any of its officers, agents or advisors accepts any liability or responsibility as to, or in relation to, the adequacy, accuracy and completeness of the information contained in this invitation or any other written or oral information which is, has been or will be provided or made available to any respondent; nor do they make any representation, statement or warranty, expressed or implied, with respect to such information or to the information on which this invitation is based. Any liability in respect of any such information or inaccuracy in this invitation or omission from this invitation is expressly disclaimed. In particular, no representation or warranty is given as to the achievement or reasonableness of any future projections, estimates, prospects or returns contained in this invitation. Nothing in this invitation nor any other written or oral information which is, has been, or will be provided or made available to any respondent should be relied on as a representation, statement or warranty as to the intention, policy or action in future of the Government, its officers or agents.
4.9 This invitation is for seeking views and suggestions only and save in relation to the obligation set out in paragraph 4.15 below does not create any legal obligations on the Government. The Government is not obliged to proceed with the development of the MPSC beyond this invitation stage. Nothing in this invitation constitutes any commitment by the Government to any respondent in respect of responses which may be submitted, nor does it guarantee that private sector participation will be implemented in any manner or form.
4.10 Should the Government proceed with the development of the MPSC beyond this invitation stage, the Government may conduct an open tender exercise or adopt any procurement strategy as the Government sees fit for
P- 6
the Project.
4.11 The Government does not have any obligation to enter into any negotiations with any respondents to the Project on an exclusive or non-exclusive basis.
4.12 In submitting a response to this invitation, the respondent shall be deemed to have agreed to all terms of this invitation including all Annexes and the Licence (defined in paragraph 4.14 below).
4.13 Respondents may be invited, at their own cost and expense, to attend an interview with the Government, its officers or agents, to make clarifications on the responses and invite their further ideas, views and suggestions on the Project. Respondents are allowed to retain anonymity of the information discussed at the interviews upon request.
Intellectual Property Rights
4.14 Respondents are required to sign the licence attached at Annex D to this document (“Licence”) and return such signed licence to the Government with their submissions. Failure to return the signed Licence will cause the response not to be considered by the Government.
4.15 For the purpose of the Licence, the Government agrees that it will upon demand by a respondent pay HK$1 (as referred to in Clause 3 of the Licence) to the respondent. Failure to return the signed Licence will render the response not to be considered at all by the Government.
4.16 The Government shall be entitled, without any further reference to the respondents, to disclose or make copies of any or all of the responses to this invitation and/or any views, ideas and suggestions discussed at the interview for the purpose of considering or exploring the practicality of the response, and to keep copies for record purpose.
4.17 For the avoidance of doubt, the Government shall be entitled, without any further reference to the respondents, to disclose or make copies of any or all of the responses to this invitation and disclose any views, ideas and suggestions discussed at the interview and records of such interviews for
P- 7
the purpose of considering or exploring the practicality of the responses, and to keep copies for record purpose.
5. Submission of EOI
5.1 Parties who wish to respond to this invitation should prepare an EOI in English in accordance with the requirements of Annex E. Respondents should make arrangements for two copies of their responses in a sealed envelope marked “Response to the Invitation for Expressions of Interest in the Development of a Multi-purpose Sports Complex at Kai Tak” to reach the following office before 6:00 pm (Hong Kong time) on Thursday 28 February 2013 –
Home Affairs Bureau Recreation and Sport Branch The Government of the Hong Kong Special Administrative Region 13/F, West Wing Central Government Offices 2 Tim Mei Avenue, Admiralty Hong Kong
5.2 Lengthy submissions are discouraged. To this end, we welcome submissions of no more than 15 pages of A4 sized paper from respondents. Submissions should be made in “Times New Roman” font size 14, single line spacing, with a blank line after each paragraph, margins of 2.54 cm on all sides, and all printed pages should be numbered. Respondents should note that HAB will not consider material that is presented beyond page 15 of any submission. A page of A3 sized paper will be considered as two pages of A4 sized paper. Respondents may make reference to materials on websites however HAB will not necessarily consult the websites to which the respondents make reference.
5.3 Late responses will not be considered. Respondents should allow adequate time for their responses to be delivered to the above address. In the event that a typhoon signal No. 8 or above is hoisted or a black rainstorm warning signal is issued between 9:00 am and 12:00 noon (Hong Kong time) on the date mentioned in paragraph 5.1, the closing date for submission of EOIs will be postponed to 12:00 noon (Hong Kong time) on
P- 8
the first working day of the following week.
5.4 Parties interested in submitting an EOI are invited to attend a seminar to introduce this invitation hosted by HAB (including its officers, agents or advisors). The seminar will address the following broad themes –
the Government’s objectives for the MPSC; the scope of the Project; the sports community’s view on the project; the broad planning context; and potential procurement and financing options.
The seminar will be held at the Lecture Hall of the Hong Kong Science Museum, 2 Science Museum Road, Tsim Sha Tsui East, Kowloon, at 2:15 pm on Wednesday 30 January 2013. .
5.5 Any enquiries relating to this invitation should be made in writing and sent to HAB at the above address or by email to [email protected]. The Government shall, to the extent necessary and appropriate, reply to any enquiries of the respondents regarding this invitation. The Government shall not be responsible for any misdirected letters or emails. All enquiries and answers made by the respondents and the Government respectively shall be uploaded on the HAB at http://www.hab.gov.hk/mpsc, although the source of the enquiries shall not be made public.
- END –
P- 9
Annex B
Major Facilities Proposed for a Multi-purpose Sports Complex (MPSC) at Kai Tak
Project objective
The site reserved for the Kai Tak MPSC occupies approximately 24 hectares at the Kai Tak Development (“KTD”), and is envisaged as one of the defining features of the development, which is intended to be a sports, recreation and entertainment centre for Hong Kong.
In order to create a popular and dynamic destination that will help to create a distinct identity for the new Kai Tak, the complex will essentially be a very large and modern urban park featuring a range of sports venues, recreational amenities and retail and dining outlets that will encourage nearby residents, the wider public and visitors to Hong Kong to enjoy the park throughout the day, seven days a week. As with existing large urban parks such as Victoria Park and Kowloon Park, the MPSC would have sports venues that would be primarily for community use, but that could also host major international events. It would also be the home of a new state-of-the-art stadium for Hong Kong to replace the ageing Hong Kong Stadium.
Major Facilities
It is proposed that the sports venues, amenities and other attractions at the MPSC at Kai Tak include the following –
A 50,000-seat stadium to allow Hong Kong to host major international sports and entertainment events. The stadium would have a retractable roof to allow events to be held under all weather conditions, and to contain possible noise nuisance from large-scale events such as pop concerts and product launches. The stadium would have a moveable natural turf system to allow for the greatest possible variety of sports and entertainment events to take place on an appropriate quality of surface.
A public sports ground with permanent seating for 5,000 spectators to help meet the shortfall of such facilities in Hong Kong generally, and East Kowloon in particular – i.e., Kwun Tong, Wong Tai Sin and Kowloon City Districts - which faces a shortfall of two to three sports grounds based on the population forecasts for the three 2
districts for 2018. The ground would be a venue for public jogging, athletics training and events as well as football and rugby matches and would provide a warm-up venue for some major sports events being held at the stadium.
An indoor sports centre with a main arena with permanent seating for 4,000 spectators and a secondary arena with seating for 400 people that could accommodate sports such as basketball, volleyball, badminton and table tennis. The centre would help meet the shortfall for public facilities for indoor sports, (based on 2018 population forecasts for East Kowloon, the area faces a shortfall of 5 indoor sports centres) and would also be able to host major international events requiring a large arena space, a large spectator capacity and appropriate warm-up and other ancillary facilities.
Office space of at least 10,000 square metres, which we anticipate would accommodate “national sports associations”, other sports organisations and commercial companies with an interest in sports marketing, promotion, broadcasting and event management. The presence of a large number of office workers in addition to the staff and users of the sports venues and recreational amenities would create a regular flow of people throughout the complex at all times of the day, and would contribute to the creation of a dynamic and lively atmosphere in this part of the KTD.
Commercial space of at least 31,500 square metres that could accommodate a range of retail and food and beverage outlets. We anticipate that the area would attract in particular retailers of sports and outdoor recreational equipment, sports-related fashion items, as well as sports themed restaurants, cafes and bars, many of which would be able to provide temporary outdoor seating to allow customers to enjoy the park ambience and harbour views.
Public recreational and sports facilities suitable for a park setting, such as children’s play areas, tai chi areas and fitness stations suitable for use by people of all ages. There is also scope for providing jogging and cycling tracks that would link up with wider jogging and cycling networks running throughout the KTD. Given that part of the site is adjacent to the waterfront, there is also scope for including harbour front walkways and parkland in the project. Extensive landscaping and seating would also be included in the project to provide a relaxing and enjoyable environment within the urban location of the complex.
Annex D
Licence
To: The Government of the Hong Kong Special Administrative Region (the “Government”)
Re: Development of a Multi-purpose Sports Complex at Kai Tak
1. I/We refer to the Invitation for Expressions of Interest in the Development of a Multi-purpose Sports Complex at Kai Tak (the “Project”) issued by the Government acting through the Home Affairs Bureau (the “HAB”) dated 18 January 2013 (the “Invitation”).
2. Unless otherwise defined herein, terms and expressions which are defined in the Invitation have the same respective meanings where used in this Licence.
3. In consideration of the Government agreeing in the Invitation to pay HK$1.00 to me/us upon demand, I/we hereby undertake, acknowledge and agree to the terms set out below.
4. I/We hereby give consent to the Government, its officers and agents preparing records in writing and/or making video and/or audio recordings (the “Records and Recordings”) of any meetings I/we hold with the Government, its officers and agents, in connection with the Invitation or the Project (the “Meetings”) to record the proceedings of the Meetings including ideas, views and suggestions obtained from me/us or through discussion with the Consultant at the Meetings.
5. I/We hereby grant to the Government a freely transferable, royalty free, irrevocable, worldwide, perpetual and sub-licensable licence to use, adopt (including making any adaptations within the meaning of the Copyright Ordinance (Cap. 528) (the “CO”)) and modify the submissions submitted by me/us in response to the Invitation or the Project and all other documents and materials contained in or submitted to the Consultant or the Government in connection with the Invitation, Project or Meetings (the “Submissions”) and all data, inventions, methods, processes, practices, formulae and other information obtained from me/us in the Meetings whether or not recorded in the Records and Recordings (“Information”) and all Intellectual Property Rights subsisting in the Submissions, Records and Recordings and Information for all purposes in respect of or in connection with public consultation and any subsequent tender or procurement in any way as the Government deems fit, including adapting or modifying the Submissions or Information or incorporating all or any part of the Submissions or Information with other documents, materials, data, inventions, methods, processes, practices, formulae or information, whether in relation to this Project or otherwise (the “Purposes”), on the terms and conditions of this Licence. In addition, the Government is entitled:
(a) to make use of (including reproduce and publish, display, exhibit and/or make available and to do any other acts set out in paragraphs (a) to (g) of section 22(1) of the CO) the Submissions and the Records and Recordings in whole or in part, in any form for the Purposes; and
(b) to use, adopt (including making any adaptations within the meaning of the CO) or develop any Information without acknowledging the source of the Information
6. In addition, I/we hereby declare that the Government shall have the right to make use of and disclose to any third party the Submissions, the Records and Recordings and Information, in whole or in part, in any form for the Purposes.
7. I/We hereby warrant that:
(a) the Submissions, Records and Recordings and Information do not contain any materials that may infringe the Intellectual Property Rights of any third party;
(b) the use or possession by the Government of the Submissions, Records and Recordings and Information or any part thereof for any purposes contemplated by the Invitation and/or the Purposes does not and will not infringe the Intellectual Property Rights of any third party;
(c) to the extent that beneficial ownership of any Intellectual Property 2 Rights in any component of the Submissions, Records and Recordings or Information is vested in a third party, I/we declare and warrant that the relevant beneficial owner of the third party Intellectual Property Rights has licensed and authorized me/us to hereby grant a valid and continuing licence in favour of the Government upon the same terms as those set out in Clause 5 above; and
(d) each party who executes this Licence has or shall have the full right, title, power and authority to grant the licence referred in Clause 5 above in favour of the Government.
8. I/We further agree that the Intellectual Property Rights in any materials developed by the Government on the basis of the Submissions, Records and Recordings or Information (including any alteration or modification of the Submissions, Records and Recordings or Information), shall vest in and belong to the Government absolutely and immediately upon creation.
9. I/We agree that any assignment made or licence granted by any owners of the Intellectual Property Rights subsisting in the Submissions Records and Recordings and Information shall be subject to the licence of the Government referred to in Clause 5 above. I/We shall procure that such owner/assignees also impose obligation(s) on the assignees and licensees regarding their subsequent assignment(s) of such Intellectual Property Rights to be made subject to the said licence of the Government to the intent that such obligation(s) shall apply to all subsequent assignees.
10. I/We hereby waive and shall procure all authors concerned to waive all moral rights in respect of the Submissions and Information to which they may now or at any time in future be entitled under the CO or under any similar law in force from time to time anywhere in the world.
11. I/We shall indemnify and hold the Government harmless from and against any and all claims (whether or not successful, compromised or settled) threatened, brought or established against the Government and all losses, damages, costs, charges or expenses (including all legal fees and other costs, charges and expenses) which the Government may pay or incur in connection with or arising from a breach of this Licence or any of the warranties given by me/us. 3
12. I/We shall at the Government’s request and at my/our own cost at all times hereafter do all such acts and execute all such documents as may be reasonably necessary or desirable to secure the vesting in the Government of all rights given to the Government hereunder and to assist in the resolution of any question concerning the Submissions, Records and Recordings and Information.
13. Unless the context otherwise requires, “Intellectual Property Rights” in this Licence means patents, utility models, trade marks, service marks, trade names, trade dress, design rights, copyright, domain names, database rights, rights in know-how or proprietary or confidential information, trade secrets, new inventions, designs, methods, processes, practices or formulae and other intellectual property rights whether now known or created in future (of whatever nature and wherever arising) and in each case whether registered or unregistered and including applications for the grant of any such rights.
14. I/We agree that all parties who have executed this Licence are jointly and severally liable for the obligations imposed and warranties given in this Licence.
15. I/We agree that a term or part of a term of this Licence that is illegal or unenforceable may be severed from this Licence and the remaining terms or parts of the term of this Licence continue in force.
16. I/We agree that the Government does not waive a right, power or remedy if it fails to exercise or delays in exercising the right, power or remedy. A waiver of a right, power or remedy by the Government must be in writing and signed by the Government giving the waiver.
17. This Licence shall be governed by and construed in accordance with the laws from time to time in force in Hong Kong and I/we agree to submit to the jurisdiction of the Hong Kong courts.
18. I/We agree that damages may not be an adequate remedy for a breach of any term or condition of this Licence by me/us and in addition to any rights or remedies it may have under this Licence or in accordance with any law, the Government will be entitled to seek specific performance of 4 this Licence or any interlocutory, interim or emergency measure or relief in accordance with the law from any court of competent jurisdiction.
19. This Licence is duly executed by me/us under hand on the date as shown below and shall take effect on such date.
______Signature of person authorized to sign on behalf of the participant Name of participant: Position: Date:
5 Annex E
Invitations for Expressions of Interest in the Development of a Multi-purpose Sports Complex at Kai Tak
Preparation of EOI
Section A below sets out the information required for inclusion in the EOI.
Section B sets out information which is suggested for inclusion in the EOI.
Section A: Required information
1. Identification of the Respondent
(a) Name in Chinese (if applicable) and English, of the respondent.
(b) Place and date of incorporation if the respondent is a corporation and the corresponding certified copy of the certificate of incorporation and any certificates of incorporation on change of name.1
(c) Evidence showing the respondent’s business registration with government authorities.1
(d) Details of the respondent’s contact person who is duly authorised by the respondent to answer any questions that the Government may have relating to information submitted by the respondent.
2. Information about the Organisation
(a) Brief description of the respondent.
(b) Nature of any possible partnership with other parties and information about the partners’ organisation; and
1 With reference to the recommended limit of 15 pages for submissions (see paragraph 5.2 of the invitation), this will not be considered as a page of the submission (c) Description of the respondent’s experience in or outside Hong Kong, if relevant.
3. Intellectual Property Rights
The Licence (see paragraphs 4.14 – 4.17 of and Annex D to the invitation)
Failure to return the signed licence will cause the response not to be considered by the Government.
4. Development of the MPSC
(a) Views on options for the procurement and financing of the MPSC.
(b) Views on the timetable for the development of the MPSC.
(c) Views on the scope of facilities to be provided at the MPSC.
Section B: Optional information
1. Development of the MPSC
(a) Views on the scope for private sector investment in the MPSC and the form this might take, as well as the anticipated financial return.
(b) A conceptual design of the layout of the facilities of the MPSC.
(c) An outline business plan on the operation and management of the MPSC, including the estimated annual income and expenditure over a defined operating period, and ways to enhance the commercial viability of the MPSC (if applicable).
2. Other Information
The respondent’s understanding of the Project’s objectives, views on the scope of the Project, and any other views or proposals that the respondent considers relevant to the development and operation of the MPSC, for example: the
2 inclusion of other streams of business which may generate additional revenue, the operational and commercial arrangements for the Project, aspects of the design, layout and mix of facilities of the MPSC, and the extent of community involvement in the detailed planning and design of the Project.
Home Affairs Bureau January 2013
3