Wharf Holdings announced this week that the government had given approval for it to rent Ocean Terminal for another 21 years and that it needs to pay a land premium of HK$7.9billion.
Based on Wharf's development plan to build a four-storey new wing, the current gross floor area of 658,000 square feet will be increased to 920,000 sq ft - an additional 40per cent of floor space. If we take these figures, and construction costs estimated at around HK$1billion, the new lease would work out roughly to be about HK$35 per sq ft per month.
The rental prices at Ocean Terminal have been lower than those in the adjacent Harbour City mall. After the lease renewal, Wharf will certainly push the rent up, to be on a par with others in the area. The average retail rent in Harbour City is about HK$264 per sq ft per month. So, if the lease renewal is not government-business collusion, what is it?
In fact, the average commercial rent in Canton Road, the commercial hub of Tsim Sha Tsui, is a lot higher than that. Shop rentals have hit record highs and rents go well over HK$1,000 per sq ft. Based on these figures, the average for Ocean Terminal should be at least HK$400 per sq ft.
Even if we base our calculations on the revised gross floor area provided by Secretary for Development Carrie Lam Cheng Yuet-ngor, the land premium charged is still grossly below market rate. Lam said only 60 per cent of the 920,000 sq ft will be rentable commercial space. That means the land premium should have been about HK$15billion - double what Wharf will be paying.
The government has definitely sold our public property cheaply.
