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LCQ1: Revitalisation project implemented at the former Police Married Quarters on Hollywood Road

Following is a question by the Hon Leung Kwok-hung and a written reply by the Secretary for Development, Mr Paul Chan, in the Legislative Council today (May 7):

Question:

PMQ is a revitalisation project implemented at the former Police Married Quarters on Hollywood Road.  Musketeers Education and Culture Charitable Foundation Limited (Musketeers Foundation) and three co-organisers have been selected to preserve this heritage site and transform it into a creative industries landmark.  PMQ has officially opened, and PMQ Management Company Limited (the management company) is responsible for its operation.  A number of budding entrepreneurs in creative industries who have moved into PMQ have complained to me that although PMQ is plagued with problems, e.g. nine out of 10 shops at the site are vacant, a lot of renovation works are still in progress, most of the eateries which can attract visitors will not commence business until June this year, and there is also a lack of vending machines, the management company requests them to start operation and pay rents immediately.  In addition, some members of the public who have visited PMQ have complained to me that apart from the poor environment due to the works being carried out at the site, the directional signs are inadequate, the toilets are not opened yet, and there has been an accident in which members of the public were injured because of the works.  In this connection, will the Government inform this Council:

(1)  of the nominal rent received from the Musketeers Foundation for the PMQ preservation project; whether it knows the annual management fee payable to the management company by the Musketeers Foundation;

(2)  whether it knows the number of units available for lease at PMQ; of the average per-square-foot area and rent of such units;

(3)  whether it knows the respective current numbers of units at PMQ which (i) have been leased out and started operation, (ii) have been leased out and have renovation works completed but not started operation yet, (iii) have been leased out and have renovation works being carried out; and (iv) have not been leased out, together with a breakdown by floor level (including the basement);

(4)  whether it knows if the management company has required all the tenants at PMQ to pay rents and start operation from April this year; if it has, of the number of tenants involved;

(5)  given that one of the terms in the authorities' invitation for proposals on the revitalisation project was "[t]o charge nominal rent for the site to encourage a wide variety of activities …[which] may not be profitable", whether the authorities will request the management company to collect rents from the tenants only after the occupancy rate of PMQ has exceeded 80% and the ancillary facilities at the site are in place, so as to support and nurture local budding creative enterprises and achieve the original objectives of the revitalisation project; if they will not, of the reasons for that, and whether they have assessed if this will cause the tenants at the site great difficulties;

(6)  of the list of the government officials and composition of the advisory committee responsible for vetting, approving and monitoring the PMQ project; whether it knows if any of the persons-in-charge or shareholders of PMQ's tenants have interests related to these officials, committee members, members of the Musketeers Foundation or the management company, or the relatives of these persons; if they have such interests, of the number of these tenants and their names;

(7)  whether it knows if any of PMQ's tenants (including the persons-in-charge and shareholders) are personnel responsible for selecting tenants or have interests related to such personnel; if there are such tenants, of their number, and why the authorities allow such a situation;

(8)  since it has been reported that a number of famous stores or renowned brands will move into PMQ, whether the authorities know the number of famous stores or renowned brands which have signed tenancy agreements with the management company;

(9)  whether it has assessed if the admission of famous brand stores or renowned brands to PMQ violates the Government's policy objective of nurturing local budding entrepreneurs in creative industries and establishing local brands through the project, and whether this will indirectly lead to an increase in the rents of retail shops in the district; whether the authorities will request the management company to immediately stop negotiating with the famous stores or renowned brands concerned on their tenancies; if no request will be made, of the reasons for that;

(10)  whether it has assessed if issues such as the air quality, hygiene conditions and noise, etc. during renovation of the shops at PMQ will affect the health of members of the public and tourists visiting PMQ or the staff of the shops; whether the Government will bear the legal liability for accidents that may be caused by such works;

(11)  whether it has assessed if the directional signs at PMQ and the staff hired by the management company are sufficient; if the assessment result is in the affirmative, of the average number of directional signs on and staff members assigned for each floor at present; if it is in the negative, the reasons for that;

(12)  whether it knows if the management company cleans the public toilets in PMQ regularly and opens them to members of the public and the shop tenants permanently; if the management company does not, of the reasons for that, and when the toilets will be opened to the public;

(13)  whether it knows if there are eateries currently doing business in PMQ; if so, of the number of such eateries and their business hours; if not, the reasons for that; and

(14)  whether it knows if vending machines have been installed on each floor in PMQ; if so, of the total number of such machines and the goods being sold; if not, the reasons for that?

Reply:

President,

The Development Bureau (DEVB) and the Commerce and Economic Development Bureau (CEDB) jointly invited proposals in March 2010 from interested non-profit-making organisations (NPO) for the transformation of the Former Police Married Quarters on Hollywood Road into a creative industries landmark.  The Musketeers Education and Culture Charitable Foundation Limited (the Musketeers Foundation), supported by three co-applicants including the Hong Kong Polytechnic University, the Hong Kong Design Centre and the Hong Kong Design Institute of the Vocational Training Council, has been selected in November 2010 to conserve and transform the Former Police Married Quarters on Hollywood Road into a creative industries landmark called "PMQ".

Following the idea of sustainable implementation of revitalisation projects for historic buildings, the "PMQ" project will be operated on a self-financing and self-sustainable basis in which the site and the premises will be managed, operated and maintained at the NPO's own expenses.  The Musketeers Foundation has set up a special purpose company named "PMQ Management Company Limited" (PMQ Ltd), which has acquired charitable status under Section 88 of the Inland Revenue Ordinance (Cap. 112), to be responsible for the implementation of the project and the day-to-day operation of the site after revitalisation, including the leasing of studio and other units.  The Government has signed a tenancy agreement with PMQ Ltd for its use of the Former Police Married Quarters on Hollywood Road and implementation of "PMQ" project.  The Government does not finance or subsidise the operating expenses of the revitalised facilities.

The works for the project to conserve and revitalise the Former Police Married Quarters on Hollywood Road and transform it into a creative industries landmark was carried out by the Architectural Services Department under the Public Works Programme.  PMQ Ltd is responsible for the other works including renovation and decoration of the interior parts, procurement of furniture and equipment, recruitment of pre-operation staff, as well as the future operating costs; whereas the co-applicants would provide advice to PMQ Ltd in relation to the organisation of various programmes/activities as well as liaison with the creative community.

As regards the questions raised by Hon Leung Kwok-hung, the replies are as follow:

(1)  The Government charges PMQ Ltd a nominal rent of $1.00 per annum.

PMQ Ltd is set up by the Musketeers Foundation and operates on a self-financing and self-sustainable basis.  The Musketeers Foundation has pledged to contribute $110 million for funding the revitalisation and operation of the "PMQ" and for the purpose of nurturing creative talents.  As the sum is a commitment undertaken by the Musketeers Foundation for the project, the sum will not be recovered in any way.

(2)  There are about 130 studio units and 8 commercial units in the "PMQ" available for leasing.

Based on the information provided by PMQ Ltd, the basic rental for studio units on 2/F or above is set by taking account of the average monthly rental for grade B offices in Central and Sheung Wan published by the Rating and Valuation Department in 2012.  The rental of a standard studio unit (approx. 40 sq.m.) is set at $18,000 per month.  Local emerging designers and create-preneurs will be entitled to 20%-50% discount off the rent according to their needs for support.  An additional 5%-10% discount will be offered to tenants on higher floors and the actual discount will be determined on an individual basis.  Apart from rental, PMQ Ltd also subsidise the management fee and utilities fee (including water, electricity and air-conditioning, etc.).  Tenants of the studio units and commercial units on G/F and 1/F are required to pay market rent, and are not entitled to any subsidies on management fee and utilities fee (including water, electricity and air-conditioning, etc).

(3)  PMQ Ltd advised that "PMQ" would provide about 130 studio units and 8 commercial units after the completion of revitalisation works.  At present, about 10% of the studio units have not yet been leased out.  As the dates of lease commencement, dates of taking over of studio units by tenants, fitting-out period and start-up time are different for individual studio units, each studio unit will commence operation at different times. This is in accordance with the normal practice in the market.

(4)  Based on the information provided by PMQ Ltd, all the leases signed with studio tenants provide for a two-month rent-free period.  The rent-free period commences on the date of taking over of the units by the tenants.  In view of the actual circumstances, PMQ Ltd has decided that the commencement of rental period shall be revised to start from May 1, 2014.

(5)  Based on the information provided by PMQ Ltd, PMQ Ltd has proactively launched a series of publicity events and promotional activities since the partial opening of the "PMQ".  Various activities have also been organised to attract more visitors and increase the visitor flow.  According to a survey conducted by PMQ Ltd on site since the partial opening of "PMQ" in mid-April 2014, the number of visitors for the first 13 days is about 71,000.  Some tenants reflected that the visitor flow and sales performance during the partial operation period are in accordance with their expectations.  PMQ Ltd will continue to communicate with the tenants and provide appropriate support to the tenants.

(6)  The "Advisory Committee on Revitalisation of Historic Buildings" (AC), appointed by the Secretary for Development (SDEV), was responsible for assessing the conservation and revitalisation proposals received for the transformation of the Former Police Married Quarters on Hollywood Road into a creative industries landmark and making recommendations to SDEV.  The AC, comprising members from the fields of historical research, architecture, surveying, social enterprise, finance etc., provided advice on the revitalisation of historic buildings to SDEV.  In order to fully grasp the policy objectives of promoting the development of creative industries and heritage conservation, the AC had invited CEDB to provide the latest analysis and information on the creative industries in Hong Kong in respect of their current position and way forward.  Moreover, SDEV had appointed four experts who have deep understanding of the creative industries as co-opted members of the AC to take part in the assessment of the proposals.  The membership list of the AC and its co-opted members is at Annex.

DEVB and CEDB are responsible for monitoring the "PMQ" project.  To monitor the business performance of the project during the operation phase, PMQ Ltd shall submit to the Government mid-year progress report (including financial reports and cash-flow statements) and the year-end annual report (including the annual audited financial statements) and the final evaluation report (including the final audited accounts) upon expiry of the project tenancy agreement. Both the annual and final evaluation reports should include audited accounts and auditor's reports for the Government to examine the financial position of the project.  If PMQ Ltd fail to submit reports or if the submitted reports contain insufficient, incomplete or false information, the Government may terminate the project tenancy agreement.  The Government shall also provide the latest information of the "PMQ" project to the AC and obtain the AC's views to ensure compliance of the requirements in the project tenancy agreement and meeting the objectives of the project.

PMQ Ltd advised that they have set up two tenant selection committees to be responsible for the selection of commercial and studio tenants respectively.  Members of the tenant selection committees have already made declaration on any conflict of interest with respect to tenant selection.  It was noted that no conflict of interest was found during the tenant selection process.  The Board of Directors of PMQ Ltd were also required to declare any conflict of interest during the endorsement of selection results recommended by the tenant selection committees.  According to records, one of the directors of PMQ Ltd had made a declaration on the relationship with one of the tenants and abstained from the selection process.  If fact, according to records, the Board of Directors had never overturned any selection results recommended by the tenant selection committees.

(7)  PMQ Ltd advised that they have set up two tenant selection committees to be responsible for the selection of commercial and studio tenants respectively.  Members of the tenant selection committees have already made declaration on any conflict of interest with respect to tenant selection. It was noted that no conflict of interest was found during the tenant selection process.  During the tenant selection process for studio units, PMQ Ltd invited 52 industry leaders in the creative industries to form an assessment panel.  The application proposals were distributed to members of the assessment panel for assessment based on the results of a ballot.  The assessment results were submitted to the tenant selection committee for making a decision.  The marks awarded to each proposal were given by not less than five members of the assessment panel in two assessment stages.  The assessment panel members have no right to make any decision on the tenant selection, and they also needed to declare any conflict of interest.  According to records, there was no conflict of interest found during the assessment process.

(8) & (9)  PMQ Ltd is responsible for the operation and lease management of the "PMQ" project.  The "PMQ" project mainly provides studio units to local designers and start-up create-preneurs.  To enhance mutual exchange and foster brand building, a couple of well-established creative enterprises and brand names can also be found at "PMQ".  Positioning itself as a new design and creative landmark of Hong Kong, "PMQ" needs to unify different types of design and creative elites including well-established designers.  Besides, PMQ Ltd has acquired charitable status under Section 88 of the Inland Revenue Ordinance (Cap. 112) and operates on a self-financing and self-sustainable basis.  In this connection, there is a need to generate income through commercial activities to meet the operating expenses and provide subsidies to the studio tenants including rent, management fees and utilities fees (water and electricity).

PMQ Ltd advised that "PMQ" promotes innovation and "co-creation" and provides a sharing and inter-active platform for experienced and emerging designers.  Local design talents, who would be the future pillars of Hong Kong's creative sector, are nurtured through the adoption of a mentoring strategy which brings together well-established designers and emerging designers.  To suit the positioning and concept of "PMQ", most of the commercial activities within "PMQ" will include design and create-prenuer elements.  "PMQ" also encourages and facilitates collaboration between designers and the commercial sector, so as to help emerging designers to establish their own brand name for sustainable development.

(10)  PMQ Ltd advised that the relevant safety guidelines have been issued to the tenants.  Small parts of the common area where required maintenance works have to be carried out have already been cordoned off to prevent visitors from entering the concerned areas.  The property management company will also have regular patrol to those areas to minimise the impact of works to the tenants.

(11)  PMQ Ltd advised that the "PMQ"is currently under partial opening stage. A questionnaire survey and an internal assessment have already been conducted to review the needs for directional signage.  Further enhancements, such as increasing directional signage on the site and duty officers at the main entrances, have been made according to the survey findings.

(12)  PMQ Ltd advised that they have appointed a property management company to manage the public facilities inside the "PMQ" project site.  The toilets within the site are open for use by PMQ tenants and visitors daily during the operating hours of the site from 7am to 11pm.  PMQ Ltd will monitor the work performance of the property management company.

(13)  PMQ Ltd advised that the "PMQ" project has two sole restaurant units provided with seating.  There are some takeaway shops and also several concept stores with eatery facilities.  Overall, the project has provided different options of catering services.  The first restaurant in "PMQ" commenced operation at the end of April 2014. Other restaurant units will progressively commence operation after early May 2014.

(14)  PMQ Ltd advised that the "PMQ" is still under partial operation stage, and vending machines are yet to be provided. However, PMQ Ltd will conduct regular reviews and enhance the project facilities.

Attachment:

Ends/Wednesday, May 7, 2014
Issued at HKT 15:09

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