EXECUTIVE MANAGEMENT’S REPORT PROPERTY The Company plays a pivotal role in the establishment of new or lease of the properties, the sharing of assets in kind built communities centred on rail access and implementing new under the development, or through up-front cash payments concepts for a modern living environment. By establishing from developers. Profit sharing arrangements are structured in high building and environmental standards, we enable accordance with prevailing market conditions, allowing us to property developers and users to benefit from the value maintain a flexible approach for each development package. created by the Company’s integrated rail and property Adopting land use, site planning and phasing strategies development initiatives. that are realistic for each development site form the basis of our low-risk approach to the development process. Clearly Property and the operating agreement defining key interface works and essential design controls The Operating Agreement provides the basis for Government further reduces uncertainty. Coupled with careful choice of and the Company to agree on property development rights to timing for the invitation of tenders from qualified developers, be provided to the Company in order to plan and build new the Company is able to optimise its risk and return from railway projects. Such rights will be subject to payment of property projects. Government land premiums and land premium at full market value, although such assessment development costs are normally the responsibility of the is made ignoring the presence of the railway. This is a appointed developer. continuation of the successful practice previously adopted between the former Mass Transit Railway Corporation Development properties and Government. The award in September 2000 of the Kowloon Station 30 Packages Five, Six and Seven to a company in the Sun Hung Proven strategy to optimise value of assets Kai Properties Group marked the completion of a six- The Company optimises the value of its property assets by year tender programme for the Airport Railway property structuring joint venture arrangements with developers to development projects that commenced in 1994. All maximise its potential profits while minimising downside risk. Airport Railway related sites are now under various stages Our profits are derived from the sharing of realised profits of active development, with some already completed with property developers in agreed proportions from the sale and occupied. AIRPORT RAILWAY PROPERTY AIRPORT RAILWAY PROPERTY TSEUNG KWAN O EXTENSION DEVELOPMENT PLAN DEVELOPMENT PROGRESS PROPERTY DEVELOPMENT PLAN Gross floor area in thousand sq.m. Gross floor area in thousand sq.m, as at 31 December 2000 Gross floor area in thousand sq.m. 300 600 900 1200 1500 300 600 900 1200 1500 500 1000 1500 2000 Hong Kong Hong Kong Tiu Keng Leng 254102 416 331 85 416 238 251 60 13 Kowloon Kowloon 608236 163 90 1,097 949 148 1,097 Tseung Kwan O 290 Olympic 62 Olympic 111 103 76 390111 79 642 577 642 65 Hang Hau Tsing Yi Tsing Yi 139 142 246 293 293 293 3 47 Tung Chung 1558 Tung Chung Dream City 40 936 1,031 719 312 1,031 1,600 1,640 22 Residential Hotel/Serviced apartment Under construction Residential Retail Office Office Retail and others Construction completed or near completion Tendering of Airport Railway development Developments at the five stations progressed as Developments at the four stations/depot will packages was completed comprising some scheduled. Projects completed or near provide some 2.3 million sq. m. of gross floor 3.5 million sq.m. of residential, commercial, completion, mainly residential sites, represented area, including 2.1 and 0.2 million sq. m. of hotel and retail space. some 40.5% of total gross floor area at year-end. residential and commercial space respectively. 44 shoppingshopping malls,malls, 36,70136,701 residentialresidential flatsflats andand 370,022370,022 squaresquare metresmetres ofof commercialcommercial spacespace alongalong thethe MTRMTR systemsystem bringbring convenienceconvenience andand serviceservice toto thethe communitycommunity EXECUTIVE MANAGEMENT’S REPORT PROPERTY (CONTINUED) The Packages Five, Six and Seven mixed development negotiated basis in view of its close integration with a much scheme includes the 102-storey landmark tower, likely to larger development scheme being undertaken by the be the most prominent building in Hong Kong. Together developer on the remainder of Area 57. Tendering on an open with the 88-storey tower currently basis for the remaining TKE packages INVESTMENT PROPERTIES under construction above Hong Kong is expected to commence in 2001 Station, it will deliver the “gateway” In HK$ million subject to market conditions, with all vision of landmark commercial towers the property development projects 100 200 300 400500 600 700 above the Airport Railway stations on 2000 scheduled for completion by 2012. 666 each side of the Hong Kong harbour. 10.2 Taking a leading role, in liaison with 99 The Kowloon Station development 589 Government’s Buildings Department 8.9 98 will be at the centre of the future new 553 and other organisations, the Company 8.3 urban district of Tsim Sha Tsui West. 97 has incorporated into the design and 485 7.7 Our share of Packages Five, Six and 96 planning of these properties timely and 414 Seven will be a majority interest in the 6.7 imaginative solutions for the sustain- 2468101412 83,800 square metres retail centre, In HK$ billion able development of Hong Kong. At Net rental income (top scale) which we expect will be added to our Value of investment properties (bottom scale) the Area 86 “Dream City” complex, investment property portfolio. which will be Hong Kong’s single Certain strategic properties are retained for The Company is taking forward the investment, the rental of which provides recurrent largest private property development 32 income. The value of the investment property development of the Tseung Kwan O to date, a new model for high-density portfolio totalled HK$10.2 billion at year-end. Extension (TKE) property sites in a community living with segregated areas DISTRIBUTION OF PROPERTY commercially prudent way similar to MANAGEMENT INCOME for automotive and pedestrian move- that for the Airport Railway. Located at ment and large-scale open areas for three stations, Tiu Keng Leng, Tseung leisure activities will be created. This Kwan O and Hang Hau, and at the future complex will incorporate a full range 27.7% 24.1% depot and adjacent station at Area 86, of amenities and community and 61.7% these four property sites will be at the 56.6% 13.2% 11.4% supporting facilities including schools, hub of the high-density community clubhouses and shopping centres. To 2.5% 2.8% districts in the Tseung Kwan O New optimise the environmental benefits of 99 2000 Town. The MTR will be the principal the surrounding geography, the layout Residential Office mode of transport for these com- Retail Car park of the planned 50 residential towers munities, linking them directly to the has been designed to maximise the commercial and business centres of the From its portfolio of managed residential flats, airflow and view corridors. car parks, office and retail centres the Company Hong Kong harbour waterfront. Consistent with the approach of earned HK$60 million, an increase of 20% For the TKE project there will be 23 from 1999. adding value to our developments, we property development packages offering believe such improved designs will a total of some 2.3 million square metres of residential, become a standard for consumer demand in future and we commercial and retail space. These packages are envisioned will continue to competitively position our development to be of various sizes and mix to allow for participation from a schemes accordingly. We shall continue to work with broad spectrum of property developers. During the past year Government and the industry to ensure the emergence of such one very small package, at Area 57a, was awarded on a “green initiative” designs for inclusion in future properties. 52,43552,435 corecore kilometreskilometres ofof fibrefibre opticoptic cable,cable, 377377 retailretail outletsoutlets andand 7.17.1 millionmillion OctopusOctopus cardscards enhanceenhance ourour customercustomer servicesservices EXECUTIVE MANAGEMENT’S REPORT PROPERTY (CONTINUED) Further asset development opportunities A re-zoning application for the Chai Wan Depot was made Expressions of interest were invited from developers at year- to the Town Planning Board, seeking approval for a primarily end for the development of a primarily residential scheme residential development to be built over the open-air section with a limited retail component above Choi Hung Station. of the depot. This would effectively extend the existing Heng Strong interest was received. Because of its strategic transport Fa Chuen community and achieve environmental benefits. location, a park-and-ride car park and a major improved bus, Subject to the re-zoning decision being made in early 2001 mini-bus and taxi interchange with the MTR station are and the completion of other statutory approval procedures, included in this scheme. The scheme comprises 17,131 square construction could commence in 2003/4, extending over four metres of gross floor area of residential space, 2,400 square to five years. metres of commercial/retail space, 450 public car parking A further re-zoning application, for airspace residential and spaces and a two-storey public transport interchange. Tender amenity development whilst incorporating existing uses, was and award are expected during the first quarter of 2001. made for a site adjacent to Tsing Yi Station that is currently AIRPORT RAILWAY PROPERTY DEVELOPMENTS (PACKAGES AWARDED) Gross floor No. of Expected Location Developers Type area (sq.m.) parking spaces completion date Hong Kong Station Sun Hung Kai Properties Ltd. Office 254,190 By phases 34 Henderson Land Development Co. Ltd. Retail 59,460 from The Hong Kong & China Gas Co.