Cyber-Export
8th November 2009
Browsing through the Government press releases last week, we came across one
of the more
entertaining pieces of propaganda titled:
"Cyberport signs first deal to export know-how to help set up
New Zealand's Digital Innovation Hub"
Apparently Hong Kong Cyberport
Management Co Ltd (Cyberport), the Government-owned company
which owns a
5-star hotel, shopping
mall, cinema and offices in Pokfulam, has signed a "Knowledge Sharing and
Transfer Agreement" with the
Wellington City Council
and
New Zealand Institute of Screen Innovation Ltd. The city is building a
NZ$20m (US$14.4m) "Digital Innovation Hub" which appears to be mainly a
recording studio at which the NZ Symphony Orchestra will be based and which
others may use.
Nicholas Yang, Cyberport's CEO, said in the statement:
"this is the first formal agreement Cyberport has signed to
export its intellectual property and expertise to another country. This
agreement is not only a big step forward for Cyberport towards our closer
collaboration with international counterparts, but also confirms the
international recognition and acceptance of Cyberport's business model"
What know-how?
The announcement conspicuously omits to say what this "intellectual property"
we are exporting is worth, in the form of a price to be paid for it. If it isn't
zero, they're not saying. Hong Kong taxpayers must be intrigued to know what 26
hectares of prime sea-front land has bought them, apart from a collection of
retail, hotel and office properties and a share of profits from the luxury residential
project.
For sure, the Cyberport has a
Digital Media
Centre, but this, together with the
iResource Centre,
generated revenues of just HK$5.5m (US$703k) in the year to 31-Mar-08, far less
even than the depreciation on its assets. New Zealand should not be looking to
us for inspiration in this area. Their project is nothing like the Cyberport and
only a small fraction of its size. Incidentally, the full accounts of the
Cyberport remain an official secret. We are just quoting from extracts contained
in the latest
briefing paper to LegCo on 9-Mar-09.
As regards know-how, what New Zealanders need to know is how Hong Kong's
Government intervened in the commercial, retail and residential property markets
by creating this project, awarded without
tender to the son of Hong Kong's richest person. Apart from low rents, the
resulting property offers nothing which is not available in the private sector,
but claims to be a "unique Creative Digital Community" (with capital letters).
A low-rent neighbourhood
According to a
government response to Legco, Cyberport office rents as of January 2009
averaged HK$12.77 per sq ft per month. Round at the "Swireberport" in Quarry
Bay, you would be paying around $20-30 psf for similar "grade A" offices. No
surprise then that Microsoft
relocated its entire HK operation from Quarry Bay to the Cyberport where it
occupies "almost 80,000" sq ft, or that Federal Express
left Two Pacific Place. Just how much of this space do you think is used for
high-tech software development work, not done in the overseas headquarters of
these firms, and how much is for sales, marketing and services? Other tenants
include advertising firms DDB
and PHD (both owned by
Omnicom Group),
magazine publisher Hachette Filipacchi
Hong Kong Ltd, patent attorney/law firm
Marks
& Clerk/Anthony Evans & Co and fund manager
Excelsior Capital Asia (HK) Ltd. Even
the long-awaited Hong Kong Mercantile
Exchange Ltd can be found there.
To reduce its interventionist footprint and realise value for the public
purse, the Government should exit this project by selling off the property,
perhaps as a Real Estate Investment Trust. According to the Government paper, at
31-Mar-08 Cyberport had an independent valuation of HK$5.98bn. Under
private-sector ownership, the Cyber-REIT would raise office rents to commercial
levels and remove the subsidy that tenants in the free market do not enjoy. With
about 1.02m sq ft of offices, a 170-room 5-star hotel and a 290,000 sq ft
shopping mall, it would probably fetch a lot more than the valuation the
Government quotes.
Murray mint
Incidentally, while we are on the subject of Government-owned hotels, last
month's Policy
Address (or more aptly, the Property Address, featuring Boy Scout Donald
Tsang),
announced that tenders would be invited to convert the 1969-vintage Murray
Building which stands between Garden Road and Cotton Tree Drive
into a hotel. Currently it is Government offices which will be vacated when
they move to the water-front Tamar Palace.
Apparently the Government has decided that a hotel will be the optimal use
for the site. Surely they should let the market decide that, whether it is as a
hotel, offices or maybe even residential. Put it up for auction on those broad
terms and we will find out and gain maximum value for the people of HK. It is
stretching credulity to say that this building has heritage status - it is an
ugly white block with sides like a waffle, and if the land is worth more without
it then let it go. Physically it has already lasted longer than the Furama and
Hilton Hotels did and twice as long as the Ritz Carlton did. An imaginative
developer could probably give us something much nicer to look at.
The Government has been silent on whether it intends to retain ownership of
the property after conversion - but why should it? This would just represent
Government intervention in the hotel sector.
© Webb-site.com, 2009
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