URA

5 The 2017/18 financial year has seen the URA achieve good progress and results in various areas of work with unremitting efforts of our entire team. During the year, the URA recorded an operating surplus of $12 billion, most of which came from the upfront payment from the tender of Peel Street/Graham Street Project (Site C), and other projects that we originally predicted to suffer a loss but turned out the amount of loss was lowered, or even finished up a surplus, when the account of those projects was settled. However, this optimistic financial condition is exceptional, as projects like the one at Peel Street/Graham Street, which is located in the core business district of Central for commercial development as office, hotel and retail uses, is uncommon. I believe we will not have similar projects in the future that possess high development potential and can bring in such operating surplus. Notwithstanding its surplus, the URA has been facing with high development costs as the acquisition costs of redevelopment projects have been driven up by rising property prices. For instance, the acquisition offer made by the URA in accordance with the 7-year rule, which is the unit rate of a notional replacement flat of seven years old situated in a similar locality, for a project in Central and Western District in the year under review exceeded $23,000 per sq. ft., a 130% increase in the acquisition offer made at around $10,000 per sq. ft. in 2013 when I was appointed the Chairman of the URA. At the same time, in 2017/18, the total value of these types of immovable properties, which include the properties acquired and being acquired by the URA, preserved properties and the four rehousing blocks, has increased by 60% to nearly $26 billion, representing more than half of the total net assets. As the URA commences more redevelopment projects in larger scale, the amount of immovable properties acquired from projects will increase accordingly and at the same time, the amount of money that needs to be allocated for acquisition will continue to increase, thereby reducing liquidity and bringing financial pressure on the URA. Furthermore, in the face of the uncertain global economic outlook, the URA needs to be more prudent in managing its finances, so as to maintain a good financial position in the long term for ensuring sufficient resources to support the sustainable development of urban renewal. Realising Long-Term Goals of Urban Renewal Strategy through Diversified Approach to Urban Regeneration CHAIRMAN’S STATEMENT