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URA: Facilitator Role in redevelopment

The Board of the Urban Renewal Authority (URA) today (Monday) approved the framework for URA taking up the role of a facilitator in redevelopment, an initiative set out in the new Urban Renewal Strategy (URS) promulgated by the Government in February this year.

In accordance with the URS, redevelopment will take more diverse forms with URA as "implementer" or "facilitator" to help tackle the problem of urban decay in Hong Kong.

Outlining the details of the framework at a media briefing this afternoon, the Chairman of the URA, Mr Barry Cheung, said in-depth deliberations have been made to the new initiative with regard to the URA taking up a facilitator role, and the Board has come up with arrangements for implementation as a pilot scheme.

Mr Cheung said: "We know that some property owners of old buildings would like to band together in a joint sale of their combined interests to investors or developers with an objective to release the redevelopment value of their properties, or to achieve their financial gains or to improve their living condition.  However, they might not be savvy in sale or redevelopment matters."

"Moreover, they would like to have an independent party with credibility to assist them going through the technical and complicated process of joint sale.  The involvement of a public body such as the URA would help boost the confidence of property owners to go ahead with their plan.  Indeed, this is a message which we have heard during the public consultation of the URS Review," he said.

It is to these owners that the URA would like to extend a helping hand.  The participation of URA as a facilitator would definitely help to speed up urban renewal and tackle the problem of urban decay in old dilapidated areas, Mr Cheung added.
Redevelopment remains a very effective way of alleviating the hardship of residents living in dire conditions, and also providing possibly much needed public open space and GIC facilities to a neighbourhood, he added.

Mr Cheung said the proposed facilitation model and its scope will need to be fine-tuned in light of actual experience after trying out one to two small scale pilot facilitation projects.

He then outlined the four principles of facilitation as follows:

  • URA's facilitation will not involve the acquisition of any interest in the subject building(s) as clearly stated in the new URS.

  • The URA will not compensate any tenants in the buildings under facilitation arrangement as joint sale is a commercial deal by the property owners, who should make proper arrangements for their tenants. 

  • The URA will not entertain an application if the owners have already reached an advanced stage in preparing for a joint sale of their interests.

  • The URA and the owners will agree on a reasonable timeframe at the outset, and if key milestones stated in the standard Facilitation Agreement could not be met, either party will be able to terminate the Agreement. 

In short, the role of the URA is strictly confined to one of a co-coordinator so as to maintain its credibility and impartiality throughout the process.
Prior to any consideration for facilitation by the URA, owners will first have to comply with the following conditions:

  • URA-initiated redevelopment projects will not be considered for facilitation once such projects have been commenced by the URA.

  • Each lot should have at least owners of 50% or more of the undivided shares of the interests of a site submitting a joint application to the URA to facilitate the project.

  • Project situated within redevelopment zones identified by the District Urban Regeneration Forum ("DURF") if applicable, or not within the "preservation zones" identified by DURF.

  • Conditions of buildings are identified as "poor or varied".
    Not industrial buildings or buildings where 50% or more of the floor area are used for commercial purpose.

In the first two pilot facilitation projects, the URA will collect initial contributions amounting to $20,000 from owners of each lot in the site.  The more owners there are in the lot joining the project, the less contribution will be from each owner.

The money collected will go towards contributing part of the "Work Expenses" including valuation and related professional costs up to the completion of the joint sale.  Any shortfall will be covered by the URA, which may range from tens of thousands to over a million dollars depending on the size of the project.

When the owners of 80 to 90 percent of the undivided shares of the lot(s) of a site agree to a joint sale of their interests, they have to sign an agreement with the consultant responsible for the auction and where a reserve price will be set.

When joint sale eventually materializes, sale proceeds will be distributed to the participating owners. URA intends to ask the participating owners to contribute 1% of the sales proceed (inclusive of their contribution to the "Work Expenses").  This fund will be utilised to help facilitate other projects in future.