"Rail + Property" Development Model of MTR

Hong Kong Special Administrative Zone, China

MTR Corporation Limited

TOD; PPP; Rail Transit; Comprehensive Development

March 2015

MTR has successfully utilized income from real estate to provide capital for construction and operation of the rail system as well as improved ridership of metro by developing high-quality and mixed-use real estate projects around metro stations. From the 1970s to the 1980s, MTR Corporation Limited needed a large amount of capital for metro planning and construction, but it was already in enormous debt. Given this situation, the HK government decided to provide MTR Corporation Limited with land for rail and real estate development as a way to provide capital needed for project construction.

As the largest shareholder of MTR Corporation Limited, the HK government listed 23% of the company’s shares on the Stock Exchange of Hong Kong (SEHK) and sold the shares to private investors in 2000. MTR Corporation Limited mainly raised the capital for rail system construction by acquiring land from the government at market price before rail construction, cooperatively developing the land, and then selling it at market price after rail construction.

The success of MTR Corporation Limited is closely related to the urban planning and land management system of Hong Kong. This case study analyzes Hong Kong’s “Rail + Property” development model, capital management, market-driven approach, risk management, and. the economic influence of property development.

From 2000 to 2012, 38% of MTR Corporation Limited’s total income was from property development, 34 % was from passenger transport, and 28% was from other sources.

In 2013, MTR Corporation Limited earned HKD 6.717 billion in profits from its passenger transport business.

From 2004 to 2013, shareholder equity grew from HKD 63.5 billion to HKD 152.6 billion; the debt-to-equity ratio declined from 47.4 to 11.8; the interest coverage ratio increased from 6.1 to 11.5; the ridership grew from 842 million to 1.824 billion; and the passenger transport income grew from HKD 3.6 billion to HKD 6.7 billion.

As of 2013, the total area of property developed or currently being developed was 13,000,000m2 in 51 stations. MTR Corporation Limited had completed construction of 33 stations, 94,000 residential units, and over 2,000,000m2 of commercial real estate. In addition, MTR Corporation Limited managed 90,523 residential apartments, 13 shopping centers, and 5 office buildings.

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MTR Corporation Limited is currently conducting property development of 18 stations. New lines are also under planning and construction.

Adoption of the “Rail + Property” construction investment model promotes marketization of rail transit construction and operation, as well as operation profitability of rail transit system.

Home page of MTR Corporation Limited: http://www.mtr.com.hk/ch/customer/tourist/index.php　　

Town Planning Board of Hong Kong Special Administrative Region:

http://www.info.gov.hk/tpb/index.html

Lands Department of Hong Kong Special Administrative Region：http://www.landsd.gov.hk/