Building on Solid Foundations World-class Design, Planning and Management Executive Management’s Report All units at The Capitol at LOHAS Park were pre-sold. Property and Other Businesses The Hong Kong property market performed strongly in the first half of 2008. Both office and retail markets enjoyed steady growth. However, with global credit market uncertainties developing into a global economic downturn, market activities slowed noticeably in the second half. Sale prices for residential units declined, and commercial rents started to consolidate. 48 MTR Corporation Annual Report 2008 Profit from property development was HK$4,670 million in 2008, Property Development while revenue from property rental, management and other businesses grew by 47.9% to HK$2,712 million. HK$4.67 Billion Property Development Profit Property Development Profit on property development for 2008 was HK$4,670 million, 2 Property Tenders a decrease from the HK$8,304 million recognised in 2007. This Awarded decrease was mainly due to very significant development profits with a Total GFA of 203,719 sq.m. booking in 2007, particularly for Le Point in Tseung Kwan O. The major contributors to property development profits were from profit recognition relating to The Capitol at LOHAS Park and The Palazzo in Shatin, as well as the sale of units from inventory at Property Rental Harbour Green and The Arch. In addition, there was deferred income recognition, mainly from properties along the Airport 48.4% Increase Railway, such as Coastal Skyline and Caribbean Coast in Tung in Rental Income Chung Station, and Elements in Kowloon Station. Phase 2 of Elements Property sales continued to perform well, with the pre-sale of all on 1 November 2008 2,096 units of The Capitol at LOHAS Park as well as about 80% or opened 1,100 units of the 1,375 units available at The Palazzo in Shatin. These property sales took place in the first half of 2008 with final Cinema complex settlements for units sold under the “stage payment” method at Telford Plaza I reopened not due until issuance of Consent to Assign or Certificate of on 19 August 2008 Compliance, expected for both developments by June 2009. There was also a successful pre-sale of over 470 units at Le 273,122 sq.m. Bleu Deux in Tung Chung where the Company has a nominal of Investment Properties in Hong Kong financial interest. In our property tendering activities, the development package for Che Kung Temple on the Ma On Shan Line was awarded Property Management to a subsidiary of New World Development Company Limited (Deluxe Sign Limited) in April. Similar to LOHAS Park Package 73,947 1, The Capitol, we paid half of the land premium for this HK Residential Units development in return for a larger share of profits. As an agent for West Rail Line property development, Tsuen Wan West 770,556 sq.m. Station TW7 property development package was awarded to of HK Commercial Properties a subsidiary of Cheung Kong (Holdings) Limited (Queensway Investments Limited) in September. 1,158,254 sq.m. Following the Government’s decision to proceed with the of managed GFA in Mainland China planning and design of South Island Line (East) and the Kwun Tong Line Extension, consultancies commenced on the preliminary property scheme design for potential sites along these new lines. MTR Corporation Annual Report 2008 49 Executive Management’s Report Property and Other Businesses Airport Railway Property Development Plan Property Rental, Property Management and and Progress Other Businesses There was deferred income recognition from properties along the Airport Railway in 2008. Total revenue from property rental, property management Gross oor area Thousand sq.m. and other businesses increased by 47.9% in 2008 to HK$2,712 million (29.8% increase over the equivalent Combined Hong Kong 254 102 60 416 Non-fare Revenue). 416 416 Kowloon Property Rental 608 232 167 89 1,096 917 179 1,096 Demand for both office and retail space was strong in the first Olympic 493 111 78 682 half of the year, but the rate of growth began to slow in the Residential 682 682 second half. Property rental income was HK$2,346 million, Tsing Yi Oce 246 47 293 Hotel / Serviced an increase of 48.4 % over 2007 (28.8% increase over the apartment 293 293 equivalent Combined Non-fare Revenue). Number of visitors Tung Chung 15 22 Retail and others 936 58 1,031 Construction completed to the Company’s retail centres remained strong throughout 1,031 1,031 Under construction the year. Our commitment to the continuous enhancement of our shopping centres and other investment properties, as well as our emphasis on providing “Premier” management services, Tseung Kwan O Line Property Development enabled us to capitalise on Hong Kong’s strong consumer Plan and Progress sentiment and robust tourism growth. The average increase in The completion of The Capitol at LOHAS Park contributed to the property development prot in 2008. rental income of retail properties on renewal of leases or Gross floor area Thousand sq.m. re-letting was 20% as compared to rental income achieved in Tiu Keng Leng the previous lettings. 237 17 254 254 254 We maintained close to 100% occupancy of our shopping Tseung Kwan O 5 centres. The Company’s 18 floors at Two International Finance 191 58 36 290 Centre were fully rented out. 127 163 290 Hang Hau 3 Residential At the end of December 2008, the Company’s attributable share 139 142 Office 142 142 Hotel / Serviced of investment properties was 221,661 square metres of lettable apartment floor area of retail properties, 41,059 square metres of lettable LOHAS Park Retail and others 1,603-1,61342-52 1,655 Construction completed floor area of offices, and 10,402 square metres for other usage. 140 440 580 Under construction We continued to renovate our shopping centres in 2008 to enhance their market appeal and competitiveness. These works East Rail Line, Ma On Shan Line, Kowloon Southern Link included the redevelopment of the cinema complex at Telford and Light Rail Property Development Plan and Progress Plaza I to create an iconic building for the area. The completion of The Palazzo also contributed to the property development profit in 2008. Our shopping centres were once again honoured with a broad Gross oor area Thousand sq.m. spectrum of local and international awards. Our flagship luxury Ho Tung Lau 2 121 123 shopping mall Elements, situated above Kowloon Station, won 123 123 Tai Wai Station the Marché International des Professionels d’Immobilier (MIPIM) 190 63 253 Asia 2008 award for the best shopping centre at the world’s Wu Kai Sha 4 169 173 premier real estate summit in Cannes, France, as well as the 173 173 Urban Land Institute’s 2008 Award for Excellence: Asia Pacific. Tai Wai Maintenance Centre 314 314 Residential The development was also named Project of the Year (Retail) 200 200 Oce Che Kung Temple Station in the Asia Pacific Real Estate Awards and won an EFFIE Bronze 0.9 Hotel / Serviced 90 90.9 apartment Award Hong Kong 2008 in the Real Estate Agents / Real Estate Tin Shui Wai Light Rail Terminus Retail and others 91 91.2 0.2 Development category. Telford Plaza won the Prime Award for Construction completed Kowloon Southern Link Site C & D 105 21 126 Under construction 50 MTR Corporation Annual Report 2008 Elements shopping mall won several international awards. Eco-Business 2008 sponsored by Prime Magazine and the Hong West Rail Property Development Plan Kong Service Award sponsored by East Weekly, while Maritime The Company acts as development agent for the West Rail property projects. Square won the Progressive Award (Shopping Mall) – Caring Environment issued by the Caring Environment Recognition Site Area (in Hectare) Scheme 2007. A number of innovative promotions were launched in our 2.65 Tuen Mun 4.62 Nam Cheong shopping centres to attract more shoppers. Elements organised 5.60 Tsuen Wan West (TW5) a summer campaign, “Flirting with Sound”, between July and 1.39 Tsuen Wan West (TW6) September, which started with a redemption programme 2.37 Tsuen Wan West (TW7) Yuen Long and finished with a Party on Ice and a jazz concert. This event 3.47 1.12 Long Ping (North) won the 2008 Grand Kam Fan Award. Elements also joined 1.49 Long Ping (South) hands with HSBC Platinum and Premier cards to offer attractive 3.48 Tin Shui Wai spending incentives including cash rebates and Asia Miles, 9.85 Kam Sheung Road Pat Heung Maintenance recording excellent results. Maritime Square lined up with 24.00 Centre 1.92 Kwai Fong Disney to launch “Mickey’s Magic Chinese Palace” during Chinese New Year, exhibiting the largest gold Mickey Mouse MTR Corporation Annual Report 2008 51 Executive Management’s Report Property and Other Businesses NP 360 cable car brings increasing crowds to the associated theme village. in town. A “Saturday Shopping Fever” event was held every income increment for lease renewals and re-lettings was 15% Saturday from September to November in Telford Plaza and compared to 2007 and occupancy was 100%. The shopping Maritime Square, featuring rewards with hampers and gift sets centre received many awards and honours in its first full year for spending more than HK$1,000. of operation. These included being ranked No. 2 amongst the 156 major shopping centres and department stores in Beijing New tenants in our shopping centres included PLUSIT, Church’s in a Customer Satisfaction Survey conducted by the Beijing and Lenscrafters at Elements; Marks & Spencer, MOS Burger, CD Municipal Commerce Bureau.