URA faces cash-flow headache

The Urban Renewal Authority may see a HK$15 billion cash flow deficit after spending all HK$30 billion of its currentcash reserve for six major redevelopment projects in five years, managing director Wai Chi-sing said.

In a blog post yesterday, Wai said that at the end of the last fiscal year ending March, the authority has cleared seven redevelopment projects and received HK$20 billion cash from joint venture developers, in addition to its existing HK$10 billion reserve.

But that HK$30 billion reserve is expected to be used up for acquisition and compensation expenses for six upcoming projects in the coming five years, including two on To Kwa Wan’s Shing Tak and Wing Kwong streets, two on Kowloon City’s Sa Po and Kau Pui Lung roads, as well as Thistle Street in Mong Kok and Kim Shin Lane in Sham Shui Po.

The projects on Wing Kwong Street, Kau Pui Lung Road and Kim Shin Lane covers 1,600 residential units and 150 businesses. Acquisition will commence following the government’s approval, while the other three projects are already under way.

“After the URA’s HK$30 billion cash flow is all spent on acquiring old properties for the redevelopment projects, there will not be sufficient cash flow to support our daily operations,” Wai wrote.

He added that the large-scale projects that will commence this year – covering 200 tenement buildings with 1,500 residential units and 200 stores – will also enter the peak of the acquisition procedures in two to three years.
“If, after a few years, there are no projects that can be tendered to generate cash for the URA, the URA will have a cash flow deficit of up to HK$15 billion.” Wai said.

He added that the authority is expected to bear an additional HK$120 billion expense in the next five years for more works that will build 22,000 residential homes on more than 200,000 square meters of land in old districts.

Wai said the authority will speed up some of its projects, particularly in Yau Ma Tei and Mong Kok to generate income to support upcoming redevelopments.

“The URA will maintain a conservative but flexible attitude to push forward urban renewal works, improve living environments in old districts and people’s livelihood,” he said.

Architectural, surveying, planning and landscape sector lawmaker Tony Tse Wai-cheun, who is also a non-executive director of the authority, said he is still optimistic about the URA’s future development as cash flow is affected by the scale and time of acquisitions.

When it is necessary, the government can provide subsidies to the authority, or it can borrow loans.
Tse said many URA projects in the past have seen healthy revenue, so he believed the financial status of URA in the
next few years should be fine.