Oriented Development and Value Capture –Hong Kong

Transit Oriented Development and Value Capture – Hong Kong

Dr. Wing‐tat HUNGAssociate Professor

Department of Civil and Environmental EngineeringThe Hong Kong Polytechnic University

UNESCAP Regional Expert Group Meeting on Sustainable and Inclusive Transport Development and 2nd Asia BRTS Conference, 29 Sep – 1 Oct 2014, Ahmedabad

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Source: Hong Kong Railway Development Strategy 2014 The Hong Kong Polytechnic University

• 218 km• 84 MTR stations• 68 Light rail stations• 4.5 million passenger daily

(40% of total public transport patronage)

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TOD ‐ Railway Development Strategy 2014

The Hong Kong Polytechnic University3

Proposed New Lines/ extensions up to 2031

The Hong Kong Polytechnic University

2013 estimates (USD, billion)

Northern Link and Kwu Tung Station 2.97Tuen Mun South Extension 0.71East Kowloon Line 3.55Tung Chung West Extension 0.77Hung Shui Kiu Station 0.39South Island Line (West) 3.23North Island Line 2.58TOTAL 14.19

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District centre functions With High density private housing

District open space and low density land use

Traffic free high density mixed housing

District road

Local road with feeder buses

Transit Oriented Developments “TOD”

500m walk-in zone to station

District centre functions With High density private housing

High Development DensityIntensive and efficient land use within the station walk-in catchment area

Land Use DiversityEnhance the life and vibrancy of the community

High-Quality Community DesignSeamless connection and interchange, segregation of pedestrian and vehicular traffic, greening environment

“3D” Principles:

5 The Hong Kong Polytechnic University

MTR Corporation

“Seamless”


Builds railway together with property as integrated development

Value capture from property for financing the construction and running of a new railway line

Unique “Rail + Property” Business Model

Land Development Right

Land Premium on ‘Greenfield’ Basis


RAILWAY PLUS PROPERTY DEVELOPMENT FINANCING MODEL

Mass Transit Railway Corporation Ordinance passed by the Legislative Council in May 1975• An independent corporation working on prudent commercial principles

• Granting of development rights on land plots of stations

• Ensure seamless design of stations to facilitate riderships

• Property sales and rental profits covers capital investments of the railway lines

• Fare income covers the operating costs


2014/10/20 MTR Corporation Page 9

Seamless Connection between Station and Development

Depot

Rail + Property (R+P) Design Concept

Property Development

Landscape Podium

Decked Road (Private Transport)

Shopping Mall

Public Transport Interchange (PTI)

Railway Station


How Does the R+P Model Work? Conduct planning and development review for new rail extension and agree with

Government amount of property development rights Land premium is negotiated with Government on “greenfield basis”*, prior to tender

being offered to developers Competitive tender of property packages to developers MTR contributes property rights, oversees the design and construction Developers normally pay land premium and development costs Profit sharing with MTR

Percentage of profits Assets in kind

*Greenfield basis = market value ignoring the presence of the railway

Tung Chung Station Development Tseung Kwan O LOHAS Park Development

Kowloon Station Development



2014/10/20

“Rail + Property (R+P)” Developments by MTR

Hong Kong Station

Lohas Park

Tsing Yi

Kowloon Station

• 43 property projects above stations with total GFA of 13 million m2

Tseung Kwan O Station

1212


Funding arrangement of railway development in Hong KongYear of Completion

Rail Link Length (Km)

Project Cost (HK$ in billion)

Funding Arrangement

1910 East Rail 13.8 34.0 Entirely funded and owned by Government

1979 Kwun Tong Line 15.6 5.8 Funded by Government equity injection to MTRC and commercial borrowing guaranteed by Government

1982 Tsuen Wan Line 10.5 4.1 Entirely funded by commercial borrowing arranged by MTRC, partially guaranteed by Government

1985 Island Line 12.5 11.0 Funded by Government equity injection to MTRC, profits from property sales and commercial borrowing guaranteed mainly by Government

1988 Light Rail Transit 36.2 1.1 Funding arranged by KCRC

1998 Tung Chung Line Airport Express

35.3 35.1 HK$23.7 Bn Government equity injection and HK$11.4 Bn commercial borrowing arranged by MTRC

2002 Tsueng Kwan O Extension

12.5 30.5 Funded by property sales and commercial borrowing by MTRC

2003 West Rail 30.5 46.4 50% funded by Government and 50% by KCRC commercial loan

2004 Mo On Shan Link & TST extension

11.41.1

16.3 HK$8.5 Bn Government equity injection and HK$7.8 Bn KCRC borrowing; estimate HK$4.3 profits from property development

2005 Penny’s Bay Rail Link (Disney Resort Line)

3.5 2.0 Government waived dividend of HK$0.8 Billion; shortfall covered by commercial loan

2006 Tung Chung 260 5.7 1.0 A cable car project; funds arranged by MTRCL

2007 Lok Ma Chau Spur Line 7.4 10.0 Internal funds and commercial borrowing arranged by KCRC

2009 Kowloon Southern Link 4.5 8.3 Funds arranged by KCRC

The Hong Kong Polytechnic University1USD=7.75HKD 13

2017 Hong Kong section of the Guangzhou‐Shenzhen‐Hong Kong Express Rail Link 26 74.16

XRL is an express rail of a total length of about 140 km linking up Hong Kong with Guangzhou; totally funded by Government

2020 Shatin and Central Link 17 71.41 Government funded

2015 Kwun Tong Line Extension 2.6 5.32014 Southern Island Line (East) 7 12.42014 West Island Line 3 15.4 Government paid 12.7 billion funding gap

Funded by the Rail-and-Property Model with proposed property developments to support the construction costs. Government granted development rights to pay the funding gap

Financial arrangements of five New Projects under construction


MTRC residential properties along urban lines


Property Development – Tsuen Wan Station

Luk Yeung Sun Chuen


Property Development – Chai Wan Station

Heng Fa Chuen


MTRC commercial properties along urban lines


Property Development – Kowloon Bay Station

Telford Gardens , Telford Plaza I, Telford Plaza II


Property Development – Olympic Station

HSBC Centre, Bank of China Centre, Olympian City One, Island Harbourview, Park Avenue, Central Park, Olympian City TwoHarbour Green


Property Development – Hong Kong Station

One International Finance Centre, Two International Finance Centre,IFC Mall, Hotel and Suites Hotel


MTRC property developments along Tseung Kwan O Line


Property Development – LOHAS Park Station

The Capitol , Le Prestige


Property Development – Hang Hau Station

Residence Oasis


FINANCIAL PROFILE OF MTRC


MTRC PROFILE


Page 27

Creation of Financial Benefits For The Public Purse

Property development along railway lines

Land Premium $97.9b

Market Cap (76.6% share as at 31 July 2012)

$120.1b

Cash Dividends $14.1b

IPO Proceeds $10.5b

Initial Investment by Government ($32.2b)

Government Gain $210.4b

Total Value to Government In HK$ (As at 31 July 2012)

Plus Other Economic and Social Benefits

US$1 = HK7.8


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Thank You!

The Hong Kong Polytechnic University

Oriented Development and Value Capture –Hong Kong

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