TNAG-2960-FCO40-4239-Future-of-Hong-Kong-British-Consulate-General-building-incl-1993 — Page 24

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Reference...

assume that rents rise faster than inflation in the rent option.

I believe it would be worth referencing exchange rate risk noting that there is a margin between assumed rate of exchange and the current rate. The assumed rate, which I take to be that prevailing at end March 1993, is realistic.

7.

It would be worth considering, perhaps at a later stage, a worst case scenario with escalated costs and under utilisation of space to show that the proposed build option is still the most cost effective.

8.

DCF

9. The DCF is in constant 1993 prices. It may be worth stating what the implicit deflator is used. As real costs do not change over the period the deflator should relate to building/renting prices. This is likely to be higher than retail inflation or the GDP deflator.

10. The residual value of the CG building should be stated as zero in 2047. I believe the discount factor for the mont costs should be 15.01 not 14.16 as shown cf. office service charges in the rent option.

сител пи

Christopher Lane Economic Advisers WH426b 270 2727

7 June 1993

CC: Mrs Barnes-Jones, HKD

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