LCQ12: Management and operation of PMQ
Following is a question by the Hon Chan Chi-chuen and a written reply by the Secretary for Commerce and Economic Development, Mr Gregory So, in the Legislative Council today (January 6):
PMQ, which is a new creative landmark developed from the revitalisation and transformation of the former Police Married Quarters on Hollywood Road, opened for business in April 2014. The Development Bureau has entrusted through a tenancy agreement the operation of PMQ to PMQ Management Company Limited (PMQ Ltd). Recently, it has been reported that as some tenants of PMQ are dissatisfied that PMQ Ltd has neither provided adequate support for them nor actively promoted PMQ, which has resulted in their business hardships and dim business prospects, and coupled with the pressure of having to submit monthly business updates to PMQ Ltd, these tenants have openly stated that they will not renew their tenancies upon the expiry of their two-year tenancies next year. Hence, a trend of termination of tenancies may happen at any moment. In this connection, will the Government inform this Council:
(1) whether it knows the current number of PMQ units which are not rented out, and set out in a table (i) the areas of those units and (ii) the per-square-foot rents of those units determined by PMQ Ltd as well as how such amounts compare with the open market rents in the same locality;
(2) whether it knows the amounts of management fees and other charges (including water, electricity and air-conditioning charges) currently levied by PMQ Ltd on PMQ tenants; whether PMQ Ltd has provided any subsidy to encourage the anchoring of new creative entrepreneurs; if PMQ Ltd has, of the details; if not, the reasons for that;
(3) whether it knows the respective current numbers of PMQ tenants who have left their rented units unused, who intend to terminate their tenancies prematurely, or who have indicated that they will not renew their tenancies; the reasons for those tenants taking such courses of action; if it does not know the reasons for that, whether it will request PMQ Ltd to conduct an investigation in this regard and take measures to improve such situation;
(4) as I have learnt that some PMQ tenants have cut their operating hours due to low visitor flow, whether it knows the average operating hours per week of PMQ tenants; if it knows, of the details; if not, whether it will request PMQ Ltd to compile the relevant statistics;
(5) whether it knows (i) the average number of visitors per month, (ii) the average number of activities such as exhibitions and performances organised per month, and (iii) the average number of visitors attracted by such kind of activities on each occasion, since PMQ opened for business;
(6) as some tenants have relayed to me that during PMQ's initial period of operation, the promotional events organised by PMQ Ltd, including an exhibition of over 1 000 paper mache pandas, did successfully attract quite a number of visitors, but PMQ Ltd has failed to continue organising such events to attract visitors to PMQ afterwards, and that since most of the recent activities held in PMQ were targeted at families, such activities could not open up new visitor sources in tune with PMQ's positioning on culture and creativity, and hence were not conducive to addressing the business hardships faced by the tenants, whether the authorities know the strategies currently adopted by PMQ Ltd for promoting PMQ; whether PMQ Ltd has any plan to invite different renowned cultural and creative artists to conduct activities there in order to attract visitors; if PMQ Ltd does, of the details; if not, the reasons for that;
(7) whether it knows the criteria based on which PMQ Ltd assesses the business performance of PMQ tenants; whether PMQ Ltd has provided any assistance to tenants with substandard business performance; if PMQ Ltd has, of the details; if not, the reasons for that;
(8) as the first batch of tenancies signed between PMQ Ltd and PMQ tenants will soon expire one after the other, whether the authorities know if PMQ Ltd has any plan to offer more concessions on rents and other charges to tenants, and undertake to organise more activities which may attract the suitable clientele so as to increase the incentives for tenants to renew their tenancies; if PMQ Ltd does, of the details; if not, the reasons for that; and
(9) as the present low visitor flow of PMQ has resulted in the poor business of PMQ tenants, whether the authorities have currently put in place any mechanism to penalise PMQ Ltd for its ineffective operation and even to terminate the relevant tenancy agreement; if the authorities have, of the details; if not, how the authorities will step up its monitoring of the performance of PMQ Ltd?
Situated at Aberdeen Street, Central, PMQ is the Former Police Married Quarters on Hollywood Road (the Former Police Married Quarters). The project covers both heritage conservation and promotion of creative industries. In March 2010, the Development Bureau (DEVB) and the Commerce and Economic Development Bureau (CEDB) openly invited proposals from interested non-profit-making organisations for transforming the Former Police Married Quarters into a creative industries landmark. In November of the same year, the "PMQ" proposal submitted by the Musketeers Education and Culture Charitable Foundation Limited (the Musketeers Foundation) in collaboration with three co-applicants was selected as the one which most satisfied the transformation objectives. The Musketeers Foundation has also become the operator responsible for conserving and revitalising the Former Police Married Quarters.
The Government adopts a partnership approach whereby the Architectural Services Department, with funding approval from the Finance Committee of the Legislative Council, undertook the conservation and revitalisation works of the Former Police Married Quarters under the Public Works Programme. The Musketeers Foundation has pledged to contribute $110 million for funding the operation of the PMQ, with a view to support the nurturing of creative talent. The Musketeers Foundation has set up the PMQ Management Company Limited (PMQ Ltd), which is responsible for the day-to-day operation of the PMQ, including the leasing of studio and other units. The PMQ is operated on a self-financing and self-sustaining basis, under which the site and the premises are managed, operated and maintained at its own expenses.
After revitalisation, the original quarters units of the Former Police Married Quarters have been converted into studio units, pop-up stores and co-working spaces for leasing to more than 100 budding create-preneurs as well as some international and local designer brands for showcasing and marketing their products and services.
My reply to the Hon Chan Chi-chuen's question is as follows:
(1) to (3) To provide tenants with stable and affordable rental terms, PMQ Ltd sets the base rent for studio units on 2/F or above with reference to the average monthly rental for grade B offices in Central and Sheung Wan published by the Rating and Valuation Department in 2012. The unit size of the studio units concerned is about 400 square feet with the base rent set at $18,000 per month (management fees and water and electricity charges excluded). Local designers (except prominent designers) are entitled to a 20 per cent to 50 per cent discount. The actual discount is determined on an individual basis. PMQ Ltd determines management fees as well as water, electricity and air-conditioning charges with reference to the standard market practice of calculating the management fees on the basis of the area of the units concerned. It also provides subsidies on the fees and charges for the tenants concerned. 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 concessions on management fees as well as water, electricity and air-conditioning charges.
Based on the latest information provided by PMQ Ltd to the Government, the overall occupancy rate of PMQ as at mid-March 2015 was 92 per cent. During the handover period, it would take new tenants time to complete preparatory work and renovate studio units before commencing business.
As regards tenancy renewals, the first batch of studio tenancies of the PMQ will expire by the end of April 2016. PMQ Ltd is negotiating with the tenants concerned on tenancy renewals. Since tenancy renewals involve commercial considerations of both PMQ Ltd and the tenants concerned as well as negotiation details, PMQ Ltd is unable to provide further information on tenancy renewals at this stage.
(4) Under the tenancy agreements between PMQ Ltd and the tenants, the basic operating hours of all studio units shall run from 1pm to 8pm whereas those for commercial and restaurant units shall run from 11am to 8pm. Individual tenants may occasionally adjust their operating hours to meet their operational needs.
(5) and (6) Since its commissioning in mid-April 2014, the PMQ has attracted more than 5 million visitors as at end-November 2015. During the same period, 112 activities were held at the PMQ. Given different scale and nature of the activities, the number of participants for individual activities varies.
A wide range of creative activities are regularly held at the PMQ. World famous designers and artists are invited to hold exhibitions and seminars for sharing their experiences in creativity. In the past six months, creative activities held at the PMQ included Our Hong Kong, Our Talents - "Play Me, I'm Yours", the exhibition entitled "New British Inventors: Inside Heatherwick Studio" and deTour, etc., with different types of visitors targeted. The PMQ also strives to promote exchanges between local and overseas creative industries through various activities, which include, inter alia, the recently launched staircase art programme which is an exhibition involving collaboration of local and overseas artists. In organising various creative activities, the PMQ will consult its board of advisors, which comprises members of creative industries.
(7) The objective of the PMQ is to nurture more local create-preneurs and designers. Under the tenancy agreements between PMQ Ltd and the tenants, the tenants are required to submit monthly returns on their business turnover. By comparing the turnover projections made by the tenants in their business operation plans with the actual situation, PMQ Ltd has a grasp of the operation of the tenants. If it is found that there is a great discrepancy between the actual situation and the projections, PMQ Ltd will approach the tenants concerned in a timely manner for understanding the situation and discussion, with a view to offering assistance where appropriate.
(8) The PMQ is a project operated on a self-financing and non-profit making basis, with rental receipts being its main source of income. According to PMQ Ltd, matters concerning the setting of rents and the offer of discounts and other concessions will be determined according to the established mechanism. As regards organisation of activities, PMQ Ltd will continue to closely liaise with the tenants and listen to their opinions, with a view to optimising the mix of activities.
(9) A tenancy agreement for a fixed term of 10 years, renewable for another 5 years, has been signed between the Government and PMQ Ltd to facilitate the operator's longer-term business planning for the creative industries landmark. The CEDB and the DEVB hold regular working meetings with the PMQ's management to monitor the operation of the PMQ, and to advise on various activities and programmes and ways to boost visitor flow. In addition, Government officers conduct site visits to the PMQ regularly.
Ends/Wednesday, January 6, 2016