Hong Kong's PCCW Would Like To Float Real Estate Interests

by Mary Swire, Tax-News.com, Hong Kong

20 January 2003

It's becoming clear that Richard Li's debt-ridden PCCW is planning a separate listing for its property assets, with the Cyberport development as the jewel in the crown. Sales of retail housing units are about to begin at Cyberport, but the underlying motor of the group's property interests would have to be its collection of city-centre telephone exchange buildings, which are now becoming redundant as digital exchanges take over from space-hungry electro-mechanical switching centres.

PCCW's property interests are being grouped together in PCCW Infrastructure, which might be able to attract investment independently of PCCW's main telephone business, helping to reduce the group's debt, still seen as too high by the market.

"Our overall aim is to create greater transparency for a separate and distinct business division, namely telecoms and real estate," PCCW Infrastructure chairman Robert Lee Chi-hong said. "A separate listing has always been a topic for PCCW. But we have no immediate plan."

Mr Lee said PCCW was still considering bids from local and foreign investment funds to buy more than 100 out of the first 544 Cyberport residential units, but did not want to sell them cheaply. Construction of the Cyberport, a joint venture project between the government and PCCW, commenced in May 2000 and it is opening in phases between mid-2002 and the end of 2003. It is serviced by a state-of-the-art telecommunications infrastructure, supported by offices and accommodation of "a world class standard", says the goverment.

The government said in August that it had leased 80 per cent of about 448,000 square feet of office space in the first phase of the project, but it needs to find more tenants to fill the next 760,000 sq ft. Cyberport's first phase has five tenants - PCCW, Microsoft, General Electric Info Services, Sonera and ESRI - who are paying rentals of between HK$11 and HK$13 per square foot.

When completed by the end of 2003, Cyberport will include 1.1 million sq ft of offices, a 270,000 sq ft commercial centre and a hotel. The residential development will consist of 2,800 luxury flats and will be completed between 2004 and 2007.

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