Property model 'to fix funding gap for transit system'

The government on Monday said its hope in adopting a "railway plus property development" model for the planned smart and green transit system in East Kowloon is to ease the financial pressure on the eventual operator. Authorities said last week three land sites will be offered to the winning tenderer to boost the project's financial viability in a move that mirrors arrangements being made for a similar transit system in Kai Tak. The East Kowloon project, which will connect Choi Hung East and Yau Tong East, is set to be put out to tender next month with the aim of opening the rail line by 2033. Speaking on an RTHK programme, Eddie Leung, a principal government engineer at the Highways Department, said the arrangement had been made after taking into account the large amount of investment needed. "Because the system spans seven kilometres and nine stations, with a large car depot in the middle, it requires huge capital to build such a large-scale infrastructure project," he said. "And if it's solely dependent on revenue from ticket sales it will definitely not be able to drive this project forward." The three property development areas being offered are the depot location in Ma Yau Tong, sites 3E1 and 3E2 in Kai Tak and a Cha Kwo Ling Road site near Kwun Tong Road. They would be handed over as private treaty grants at a nominal premium and the firm would pay the fixed sum specified in the tender. The successful bidder for the East Kowloon project would be responsible for the financing, design, construction, operation and maintenance of the network. Leung noted that the financing cycle for the Ma Yau Tong site might last much longer given its location on a hill and the ensuing complexity of construction there, leading to a "funding gap" potentially developing. "So we've [also] looked for property sites that can be developed at an earlier stage so as to reduce the financing pressure [for the operator] and to make the project more attractive to more investors," he said. "This would also give them more flexibility in their financing plans." Speaking on the same programme, Hong Kong Institute of Surveyors president Tony Wan said the government's move of granting sites on which property development could be carried out as funding support is "reasonable" and "smart" given the tight financial conditions it is operating under. But he stressed that officials must make sure that there are mechanisms in place to ensure that capital gained from the land development would be used for building the green transit system. "Everyone would be worried and say, 'I grant such a large area of land for you to develop, but what if [the operator] takes the money and leaves after the land is developed', so what should we do then?" Wan said. "But if we look at the MTR Corporation today, they have always been collaborating with developers, so this time I believe the operator of the project will also need to cooperate with developers. "And they might have mechanisms in place to ensure that when the funds are obtained, the money is definitely held in custody and used for the railway project." Wan also noted that the site at Kai Tak might be most attractive of the three set aside for property projects. The transit system, once completed, is expected to serve some 300,000 residents from 40 housing estates as well as dozens of schools, medical and social welfare facilities. Edited by Tony Sabine