The conflict between Urban Renewal Authority (URA) chairman Victor So and the agency’s outgoing managing director Iris Tam could have stemmed from more than just the purported differences between the two over the URA’s role and direction, according to a report.
According to Ming Pao Daily News, the discord at the top may have something to do with redevelopment proposals for the Kim Shin Lane buildings in Sham Shui Po district.
It is believed that So was wary that the URA could register a net loss of up to HK$4 billion on the renewal project at the Sham Shui Po site. Amid such concern, he is said to have recommended that the agency should consider balancing the books by purchasing some of the old flats at market price and renting out the units after refurbishment.
The initiative will help the URA avoid pay huge sums as compensation to existing occupants under the normal redevelopment process, So had argued, according to the report.
Now, some members of URA’s management disagreed with So as they felt the proposed purchases would be seen as amounting to speculative activity in the market, the report said.
The critics felt So was exceeding his rights in making the recommendation, but the latter insisted that the agency explore the possibility and put the proposal before the board, it said.
Under current regulations, URA is obliged to compensate an owner for surrendering a flat with an amount equivalent to a seven-year-old flat of a similar size. Since Kim Shin Lane is a high-density project with around 1,000 flats, the amount of compensation could be astronomical.
So’s idea had been to pursue an alternative route. Instead of buying the flats from current owners and making compensation and partnering with a property developer for total reconstruction, his proposal was to snap up flats at market prices and rent them out after refurbishing to create streams of monthly income.
The URA has estimated that it could buy around 20 such flats with an annual spend of HK$100 million. That means it can purchase around 100 flats over five years, or one tenth of the total number of flats at the site.
However, it was said that So would not rule out the possibility of going back to the traditional renewal model once the URA has bought a significant number of flats, although sources close to So have clarified that such scenario would not happen if the Kim Shin Lane project is chosen for refurbishment.
Following Iris Tam’s recent resignation, URA Executive Director Pius Cheng is said to have criticized the chairman for requesting the management team to implement projects that go beyond the existing URA laws.
A URA management team member who wished to remain anonymous told Ming Pao that the agency’s chairman and non-executive directors have in the past always avoided giving specific instructions on highly sensitive commercial issues in order to avoid conflicts of interest with their own personal businesses.
The recent decisions by So apparently violated those protocols and have therefore drawn vigorous opposition from Tam and other directors.
Other members of management are worried that URA’s cash flow will be affected if the agency purchases flats in the Kim Shin Lane project.
URA non-executive director Stanley Wong said the refurbishment and rental proposal was an attempt to go beyond the existing urban renewal framework.
There have been some discussions on whether the URA should merely take up a facilitator’s role in helping owners of old flats undertake refurbishment, or if the agency should simply buy up flats for rental purposes. However, no conclusions have been reached so far.
Wong stressed that a site could not be considered for renewal if it was selected for the refurbishment scheme, as it would create disputes as to whether the URA is trying to avoid making compensations.
Such disputes could trigger judicial reviews, he warned.
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