31 January 2002
Development of Light Rail site at Hung Shui Kiu
In reply to media enquiries on the Hung Shui Kiu development, a spokesman for the Kowloon-Canton Railway Corporation (KCRC) said -
1. In 1995, after inviting open competitive tenders for the development of a site in Hung Shui Kiu, a joint venture agreement (JVA) was executed with Cheung Kong (Holdings) Limited in November 1996.
2. KCRC’s purpose in the JVA was to find a developer who would be willing to help finance the capital cost of an emergency Light Rail/Bus transfer and stabling facilities.
3. The JVA allowed the parties to cancel the Agreement if the Conditions of Grant had not been agreed for execution by 31 December 2000. The fact that this is a most unusual arrangement, and not a standard provision in KCRC joint venture agreements, is because KCRC did not own the site. (The KCRC merely owned the land on which the Light Rail tracks are situated.) This provision in fact gave protection to both parties in the event that the land could not be secured.
4. By 31 December 2000, no agreement as to the Conditions of Grant had been reached. The JVA was therefore terminated.
5. In planning for the potential property development, KCRC had spent $1 million in staff costs and $5 million in consultancy and legal costs. These costs have not been incurred in vain. The site remains developable and the design and other data resulting from these studies remain useful, should an opportunity arise for developing the site in future.
6. In addition, Cheung Kong had paid KCRC an initial deposit of $30 million after entering into the JVA. Although this deposit was returned to Cheung Kong after the termination of the JVA, it was returned without interest. The Corporation has thus earned interest of some $8 million on this initial deposit.
7. Part of the site for the potential development is owned by the Government. Since December 1992, KCRC has been renting this part of the site for operational purposes, (i.e. a Light Rail Transit Emergency Loop and a bus parking/transfer area) through two short-term tenancies. Up to the end of 2001, KCRC paid a total of $13 million in rent in respect of the two tenancies. It should be emphasized that this land would have been necessary for operational purposes even if a JVA had not been entered into. The Corporation continues to utilize this land for operational purposes.
8. KCRC had not suffered any loss on the project.