Property project as art fosters fancy plan
I THINK THE Arts Development Council would do well to be more careful about its behind-the-scenes pumping of the contentious West Kowloon Reclamation project.
The project will give Hong Kong a whole new line of museums and performance venues to make the council feel itself important, which is why you can understand its eagerness to sponsor a University of Hong Kong study that says the project is commercially viable.
But the council also made sure to introduce the study with a disclaimer of any responsibility for the work and this is understandable, too.
The study says that the white elephant under glass in West Kowloon will have a commercial value of $36.4 billion on completion.
Imagine then what the public reaction will be if these calculations prove correct and yet the developer who on June 19 submits the winning proposal for the project also submits a bid of only $1 for it.
Yes, there would be screams of protest indeed. How could our government give away a valuable asset worth $36 billion for only $1?
How? Simple. It may have a market value on completion of $36 billion but at this stage it is not worth more than about a dollar.
Now let me say first that the academics who did the study seem to have done a thorough job of crunching the numbers. If their assumptions are correct, the number crunching follows and I do not quibble with it.
I do question some of the assumptions, however.
Taking the first table, while a sales value estimate of about $7,000 a square foot for the residential portion is reasonable, I shall be surprised if $6,500 per square foot for shops and restaurants or $450,000 each for car parks can be attained. This is not Nathan Road.
I also hold a question mark over the assumption that the cultural facilities can generate a profit.
In the second table I will put a further question mark over the assumption that the developer's interest costs can be held down to $4.1 billion.
The item marked trust fund, by the way, represents a fund that the developer provides to cover the costs of displays in the cultural facilities.
But let us take all these figures as given.
The biggest question is really whether a developer's pretax profit of $3.5 billion is sufficient for a five-year project so large and with so many unknown variables. No one really knows what that big glass roof will cost, for instance, and, as to maintenance of it, pick a figure, any figure.
The risks are enormous, the imponderables huge. I can quite easily see any developer who looks at these figures telling himself that $3.5 billion is the very lowest working number that he would want as potential earnings to compensate for the risk.
The government will have to be satisfied with fancy plans. Fancy bids in money terms it will not get. There is no room left for a bid of much more than a dollar.
Now this may not surprise the government. Its purpose is to build another white elephant and not, unfortunately, to generate revenue from land sales for the public purse.
It probably hopes only that the proposals it gets on June 19 will still bear some resemblance to the original Foster dreams rather than feature a high-density warren of dull-looking residential blocks. It is also why the Arts Development Council has veered on to dangerous ground when it associates its name with money talk on the project.
But when Chief Secretary Donald Tsang Yam-kuen insists, as he has continually done, that this is a cultural and not a property project, I think he is dead wrong. Of course it is a property project. Let us call things by their names. This one is about construction of buildings. That makes it a property project, plain and simple.
The difficulty is that Mr Tsang always associates culture with building projects, just as he always associates high-technology with building projects. When he talks culture he invariably talks concrete, steel and glass. It certainly gives us a cultural reputation, the wrong one unfortunately.