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June, 2010:

Urban Renewal Authority opens its books to reveal a HK$2b profit

South China Morning Post — 15 Jun, 2010

Surplus from projects up to 42 times redevelopment costs

The Urban Renewal Authority has opened up previously closed records that show it made a net profit of HK$2 billion from eight completed projects in the past five years.

Details of its individual projects – revealed for the first time in response to criticism that it has been too secretive – show the surplus from a project can be as much as 42 times the redevelopment cost.

In the most extreme case, the authority obtained more than HK$460 million from the Merton project in Kennedy Town without having to pay any redevelopment costs.

But the authority points out that with increasing public demand for more conservation projects and less dense developments, future redevelopments may not be so lucrative.

It is now likely to come under pressure to justify the profits and say how it will use the money for the public good. The URA has been criticised for withholding details from the public since its establishment in 2001, when it took over projects launched by its predecessor, the Land Development Corporation.

It only made public its yearly financial results, which were seen as meaningless since they are subject to short-term fluctuations. Yesterday’s disclosure fulfilled a promise last year after lawmakers and concern groups urged more transparency.

Authority chairman Barry Cheung Chun-yuen said the balance sheets looked good as six of the eight projects disclosed yesterday were launched by the Land Development Corporation, which operated under different rules.

“Co-developers were asked to pay for the acquisition in most cases, which would eventually reduce the redevelopment costs borne by the corporation,” Cheung said.

Now the URA takes full responsibility for the acquisition but is exempted from land premiums.

At least HK$4.5 billion in land premiums has been waived in 14 redevelopment projects over the past six years. Without this, for example, the authority would have had to pay HK$2 billion for the Lee Tung Street project in Wan Chai.

Cheung said the surplus would be injected into unprofitable projects, including the conservation of Central Market, the revitalisation of tenements in Mong Kok and the provision of flats in Ma Tau Wai Road, where an old tenement collapsed.

He rejected the criticism that the authority had offered too little compensation to affected residents while earning such sums.

“We don’t know how much we will gain until the moment we sell the flats. We can suffer a loss if the property market goes down.”

The authority recorded a record-breaking operating surplus of HK$6.9 billion in the last financial year, in contrast to a deficit of HK$4.5 billion in the preceding year.

Law Chi-kwong, a professor who studies renewal issues at the University of Hong Kong, said that whether the HK$2 billion surplus exceeded normal profits would depend on the projects’ life span and the economic cycles involved.

“A project lasting for 10 years will have a higher value as land value increases by 10 per cent yearly on average.” He said a private developer usually expected a profit margin of about 30 per cent from a development.

Ko Tak-leung, who sold his home for less than HK$2 million to the Land Development Corporation to make way for the Langham Place project, said he could not buy a decent home in Mong Kok. He lives in a rented Shanghai Street shophouse which is also facing a revamp by the URA.

URA opens its books to reveal a HK$2b profit
Surplus from projects up to 42 times redevelopment costs

Oil smugglers see $200m frozen in slick customs op

The Standard – 8 June 2011

Tough laws designed to hit gangland crime bosses where it hurts have been used for the first time to freeze the assets of a multi-million dollar cross-border diesel-smuggling syndicate.

Tough laws designed to hit gangland crime bosses where it hurts have been used for the first time to freeze the assets of a multi-million dollar cross-border diesel-smuggling syndicate.

Customs Department chiefs have invoked the Organized and Serious Crimes Ordinance to freeze HK$200 million of the smuggling gang’s assets, including bank accounts, property and cars.

“Freezing their assets means we impose a more stringent punishment,” customs special task force group head Chong Wai-ming said. “If we don’t, the people involved can spend their money and enjoy their ill-gotten gains when they are released from jail. This stops them from doing so.”

Mainland and Hong Kong customs had been investigating the syndicate of several Hong Kong companies since the end of last year.

The companies bought dyed diesel – which is exclusively for the Hong Kong marine market and not subject to SAR duty – from Hong Kong companies and smuggled it to the mainland using fishing boats with enlarged oil tanks.

The dye would then be taken out and the fuel sold as normal diesel in bulk to petrol stations there.

Investigators estimate 130 million liters of dyed diesel had been smuggled over three months.

Intelligence bureau head Kwok Ngan-ping said the incentive to smuggle dyed oil was great because of the price difference.

Dyed fuel is sold at around HK$4 (5 yuan) per liter, while diesel in the mainland is sold for around 7 yuan per liter.

“This is about a two-dollar difference per liter of oil. The incentive for smuggling is, therefore, the huge profit,” Kwok said.

Mainland customs mounted an operation on January 31 in Shenzhen, Huizhou and Heyuan, seizing 600,000 liters of dyed oil and more than 4 million yuan, as well as arresting 134 people.

With the help of mainland customs, Hong Kong then instigated “Operation Bottsand” on May 3.

They arrested 19 people after searching 19 premises in a territory-wide operation.

Oil barges, offices and homes were raided in a series of swoops.

Those arrested include the suspected mastermind, company directors and oil barge workers.

Smuggling proceeds of HK$200 million worth of assets were also uncovered and frozen.

“As the supply of oil was from Hong Kong, but the distribution was in the mainland, smashing the syndicate needed a lot of cooperation,” Kwok said.

All those arrested have been released on bail.