Swire Properties announced today (Tuesday, 9 August 2005) that agreement has been reached with the Hong Kong SAR Government's Lands Department on the amount of land premium to be paid in relation to the Cityplaza Four, Cityplaza Three and Cityplaza One office towers.
The Lands Department's claim for premium was upheld in an arbitration award announced in January 2001. In July 2003, the Court of Final Appeal refused to grant Swire Properties leave to appeal on a point of law. Following a fresh hearing held in February 2004, the arbitrator determined that the valuation dates for the purpose of quantifying the amount of land premium on the office towers should be the dates on which occupation permits were issued for each of the buildings, and that interest should be calculated at two-thirds of HIBID from those valuation dates.
Swire Properties and the Lands Department have been engaged in discussions to settle land premium figures for the Cityplaza office towers at the respective valuation dates. Those discussions have now concluded and the amount of land premium has been agreed to be HK$2,900 million. Interest at two-thirds of HIBID from the relevant valuation dates to the date of this announcement is calculated to be HK$658 million, of which HK$500 million was charged to the profit and loss account in 2004 and the balance of HK$158 million in the first half of 2005. The total amount of premium and premium interest payable in relation to the Cityplaza office towers is therefore HK$3,558 million. Taking into account the payment on account of premium made to Government in an amount of HK$2,027 million in August 2004, a further payment of approximately HK$1,531 million will therefore be made in respect of the balance of premium and premium interest.
The amount of HK$4,250 million was provided in the Swire Pacific group accounts for the year ended 31 December 2000 in relation to the Cityplaza office towers. This compares with the total amount of HK$3,558 million now payable. The balance of HK$692 million remaining from the provision made in 2000 will be credited to the profit and loss account in the first half of 2005. Prior to 2005, this amount would have been credited to the group's property valuation reserve: following the adoption of the new Hong Kong Accounting Standards for the year commencing 1 January 2005, property valuation movements will be shown as part of the group's operating profit for the year.