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Peggy Sito

THE Lands Department is believed to have asked Li Ka-shing's Hutchison Whampoa to pay a much lower-than-expected land premium for rights to redevelop its Hilton Hotel site in Central.

  It is also said to be asking for less than analysts had expected for rights to develop the first batch of land to be offered around the Mass Transit Railway Corp's (MTRC) new airport railway station on the West Kowloon reclamation site.

   According to a source close to Cheung Kong, the Government is said to be asking less than $3.1 billion in premiums for the Hilton project, compared with an original expectation of closer to $5 billion.

  For the Kowloon project, the Lands Department has asked between $3.3 billion and $3.5 billion.

  Both are far less than expected and set new benchmarks.

  As well as the former Hilton site, Hutchison's redevelopment, on the corner of Queen's Road and Garden Road, will also incorporate the adjoining public car park and Government offices at Beaconsfield House.

  As office prices and rents fall, negotiating power over land premiums is swinging back in developers' favour.

  By holding out, Mr Li has been able to negotiate a far better deal.

  Hutchison has about a month in which to accept this latest offer.

    Land premiums charged by the Government are calculated on the projected enhanced value of the site once the redevelopment has been completed. This is based on the value of typical comparable properties in the area, taking into account projected price trends.

  Based on an estimated gross floor area of about 1.2 million square feet, the accommodation value of the Hilton project would work out at about $2,600 per sq ft, assuming Hutchison accepts the $3 billion to $3.1 billion land premium now on the table.

  This is almost half the $5,900 per sq ft accommodation value being paid by a consortium led by Citic Hong Kong (Holdings) to carry out an office development on the former HMS Tamar basin naval site near Admiralty.

  Critics said Citic possibly paid too much when it bid $3.35 billion for the 37,458 sq ft site last summer.

  It is understood that the Lands Department has informed the MTRC it would like premium payments of about $3.3 billion to $3.5 billion for the first package of land developed above its Kowloon station.

  This works out at an accommodation value of $2,075 to $2,200 per sq ft.

  The first package of MTRC's Kowloon development will comprise a gross 1.59 million sq ft of residential space.

  The low land premiums being asked of Hutchison and MTRC will be used by other developers as bartering tools to negotiate deals for their own planned developments.

       George Magnus, vice-chairman of Hutchison's parent Cheung Kong (Holdings), yesterday said the group had not yet received any formal notification of the new offer from the government.

  In September, Hutchison was granted permission by the Town Planning Board to build a 60-storey office block on the site, surrounded by a landscaped park.

  By allocating a large proportion of the site as a public park, Mr Li successfully convinced planning board members that he should be allowed to build an extra-high office tower to compensate.

      Director of Lands Bob Pope yesterday said land premiums offered for the Hilton project would need Executive Council approval.

  Mr Pope said the first phase of the Kowloon station property development would cost less than $4.2 billion, which was earlier mentioned in some newspaper reports.

  He declined to disclose the exact figures, but a government source said the land premium payment was about $3.3 billion to $3.5 billion.



Land premium bonus for Li