IN 1998, a year after the return of Hong Kong’s sovereignty to China, the city’s government conceived an ambitious goal for the financial hub: to build an arts district to rival some of the world’s top cultural destinations.
Today, the West Kowloon Cultural District (WKCD) – a reclaimed area on Victoria Harbour around one-tenth of Manhattan’s Central Park in size – remains unfinished. Construction sites sit alongside museums such as M+, which houses modern art, and the Palace Museum, an offshoot of the Beijing institution, as well as performance spaces such as Xiqu Centre, a concert hall dedicated to Chinese opera.
The project’s success is particularly important now, at a time when Hong Kong is struggling to restore its reputation after years of political upheavals and pandemic restrictions. But it’s also running out of money – the chairman of the WKCD Authority Board warned in May that the money could last only until June next year, and that its museums and theatres may have to open less frequently without more financial support.
“I firmly believe that this is what’s connecting Hong Kong back to the world now,” Bernard Chan, vice-chairman of the district authority board who was a former top government adviser, said of WKCD. “Now, you look at New York or London – they are not just financial centres, they are also arts and culture destinations. So people do not go there just because it’s an international financial centre. They go there because it’s everything.”
WKCD is now trying a new way to raise money. The government gave approval in July for it to auction off residential plots of land on the site to developers to build apartments, with WKCD then keeping the proceeds from land tenders. Under a previous arrangement, apartments built on WKCD land could only be rented out, with the rental income shared with private developers.
There are also sites set aside for more offices and shops, as well as hotels, which will also bring in rental income. WKCD’s completed commercial properties now include retail spaces in museums and theatres, as well as a 16-storey office building.
A NEWSLETTER FOR YOU
Tuesday, 12 pm
Property Insights
Get an exclusive analysis of real estate and property news in Singapore and beyond.
WKCD’s cultural offerings have been popular. Its museums and theatres posted 4.4 million visitors in the financial year that ended in March, while the district’s income rose 42 per cent from the year before to HK$746 million (S$125 million).
But it remains reliant on non-cultural income, and WKCD said that most of its proposed commercial projects remain under planning. It “continues to see prolonged programme mismatch” between its cultural offerings and its commercial developments, according to a presentation given by WKCD in July.
The property-driven funding model is unorthodox compared with cultural sites in other cities, which are typically supported by government funds or philanthropy. Politicians and residents in Hong Kong had long been hesitant to subsidise WKCD for fear that it would drain public coffers.
“How do we fund anything in Hong Kong? It’s always about property,” said Chan, referring to the fact that residents pay low taxes but enjoy high-quality public infrastructure because the government generates a significant amount of revenue from real estate. “This is uniquely Hong Kong. It may not work anywhere else.”
That model, however, was contingent on real estate values being on the rise continuously – and for decades, that had been the case. But an unexpectedly long property downturn in the few past years has exposed the limitations of such a funding model.
Brian Wong, a researcher at the independent think tank Liber Research Community in Hong Kong, said he was concerned that the new funding plan for WKCD risks defeating the original goal of building a sustainable financing model relatively independent of private interests.
“It is a complete reversal of the original intention of maintaining WKCD as a public asset,” said Wong, adding that selling ownership of the land plots generates one-off revenues and does not preclude the need to sell more real estate later if the reserves dry up again.
WKCD maintains that more than half of its area will remain public space and that its commercial components will continue to be rented out. It has pledged to improve its financial situation by controlling expenses and expanding revenue streams. Its deficit shrunk by 20 per cent to HK$578 million in the last fiscal year from the previous year. It also recently rebranded the district to be called WestK in a bid to highlight its global ambitions.
The policy change will allow the district authority to continue operations for about another 10 years, the Hong Kong government said. It will also monitor the financial status and performance of the authority, and work with WKCD to identify solutions to its long-term financial challenges, according to a statement in July.
The district’s financial woes are the latest in a slew of problems that stretch back to its inception. Its design went through multiple changes, with an early blueprint aborted at one point in the 2000s after pushback from the public, and there was an exodus of executives amid project delays. More recently, concerns have grown over M+’s curatorial independence as Beijing exerts greater political control over the city.
Chan said he is confident that the new residential property plan will be successful and that the current market downturn is just cyclical, but that it would take time for the Hong Kong public to understand that WKCD is a long-term investment.
“People fly all the way to New York or London to see musicals,” he said. “The same will happen here.” BLOOMBERG
