Rail-led development Hong Kong-style

When it comes to rail-led property developments, Hong Kong-based MTR is probably in a class of its own. It also runs one of the few truly profitable public transport systems in the world.

MTR (Mass Transit Railway) Corporation was established by the Hong Kong government in 1975, and was partially privatised in 2000 (the state still holds a majority 77% share). It runs nine rapid transit lines, the Airport Express, an LRT system plus some bus feeder services. It carries five million passengers a day.

MTR also operates metro style services in Sweden, Australia and China, and shares management of the London Overground with Arriva. The company has submitted bids for the Crossrail, ScotRail, Thameslink and Essex Thameside rail franchises in the UK.

The key to MTR’s success has been the integration of rail with a wide property portfolio, ranging from residential and retail to hotel and office developments.

CEO Jeremy Long, explained MTR’s successful business model: “MTR acquires the land rights, prepares the overall design of the scheme – including that of the railway – then goes into partnership with development companies to develop the space. MTR oversees the construction, and shares the profit when the property is sold, though it may retain the estate management rights.” 

MTR has 51 developments at stations and investments in 13 shopping malls. Its farebox: property split  is roughly 50:50. Long said that although raising capital in the private sector would always be more expensive than from public sources, this was offset by better private sector know-how and management.

“We manage to run a modern network without any subsidy, and the government has benefited as we have contributed land premiums of £8bn, and profits/value from MTR of £10bn.”