TNAG-0753-FCO40-957-Future-of-Hong-Kong-1978 — Page 75

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(Each building was completed in 1978 and cost $10 million ( Land $7

million, Building $3 million ). Company B has assigned an estimated useful life of 40 years to its building and has assumed no residual value).

If both buildings were identical in size, and if both buildings were built on exactly the same date and of the same materials, the correct treatment of depreciating the buildings and land would be 19 years for the building and land on the northern side, and no depreciation for the " land on the southern side, assuming that the southern building had an unexpired lease period exceeding 50 years (including any renewable period ).

There is supposed to be a Lease for the New Territories, which specifies that at a certain date, presumably 1997, the land, theoretically, reverts back to China. For this reason, New Territories' Leases can run for only 19 years.

But, if the Government of the People's Republic of China took over the New Territories in 1997, as is their right, then would the building on the southern side of Boundary Street have any remaining useful life anyway?

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Surely, if China took back the New Territories, then it stands to reason that Hongkong's security of tenure is threatened and, therefore, no building anywhere in Hongkong has a useful life beyond 19 years.

China has already stated publicly that it does not recognise any Lease on the New Territories and, for that matter, does not recognise the Hongkong Government's right to the island of Hongkong.

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If, therefore, China wanted Hongkong, there would be absolutely no question that she could just march in and take it.

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