Land sale lifeline for cultural hub

Wallis Wang

The government has permitted the sale of land parcels for residential developments in the cash-strapped West Kowloon Cultural District in a move expected to fund the hub's operations for 10 years.

The net cash balance of the West Kowloon Cultural District Authority stood at HK$5.2 billion as of March, and it is expected to run out by mid-2025, according to a government document submitted to the Legislative Council yesterday.

To help avert this, the government lifted a "build-operate transfer" restriction set in 2016 for residential developments within WKCD.

Under the restriction, private developers should undertake to finance, design, construct and operate hotels, offices or residential projects, as well as share rental revenue with the district during a contract period. The projects will be reverted to the WKCDA once the contract expires.

Secretary for Culture, Sports and Tourism Kevin Yeung Yun-hung said the government had hoped the BOT mode would bring recurrent income to the district, but the market response was more lukewarm than expected.

So to help overcome the hub's financial challenges, Yeung added, the government decided to lift the restriction and allow the WKCDA to keep all proceeds received from private developers.

"We expect the new arrangement to provide the authority with enough money for around 10 years. The authority will also make use of the valuable time to accumulate experience, expertise and assets to come up with measures to generate revenue," he said.

"The relaxation provides economic conditions for the WKCD to solve the current capital flow problem," Yeung said, adding the authority must utilize the land resources and ensure financial sustainability to achieve self-financing.

The hub is required to set up a separate designated bank account to hold the proceeds received from tenders awarded to private developers, and strictly observe key performance indicators on financial discipline set by the government, including a triennial cap on operating deficits.

The WKCDA should also prove to the government that its cost estimates for new projects are reasonable, and work out tender schedules with the Development Bureau.

WKCDA board chairman Henry Tang Ying-yen thanked the government for the relaxation, saying it is "the best method to address the authority's cash flow issues without increasing the financial burden of the government."

But Tang said a tender will not be launched until the completion of the basement construction of the area, which would take at least two years.

With the new arrangement, the district no longer has to consider "worst scenarios" - including having museums closed for more days per week, he said.

Tang added the authority is considering other ways to increase income without impacting the museums' operations such as increasing admission tickets and renting the M+ museum's giant screen for cultural and artistic purposes.

Ryan Ip Man-ki, vice president of Our Hong Kong Foundation, said the government's "practical move" will help the district mitigate potential funding shortfalls.

Ip hoped the development projects could complement other cultural facilities in the district.

This may include building a new landmark by integrating artistic elements into architectural design, which will also reflect the high-end status of the district and maximize the price of the residential units, he said.

wallis.wang@singtaonewscorp.com