Hong Kong’s Link Reit issues green bond amid criticism over profit-driven business model

Real estate investment giant Link Reit plans to use the US$500 million it raised from its first green bond to help finance its Kowloon East commercial development project and to add environmentally-friendly features to some of its existing properties, the trust’s management announced Monday.

The 10-year bond, the first of its kind in Hong Kong, comes amid heightened criticism from politicians and government officials – ahead of the upcoming Legislative Council and chief executive elections – about the reit’s profit-driven business model of pushing up rents and driving small tenants out from its public housing malls and markets.

But Link finance director Hubert Chak did not respond directly when asked whether the bond – which will mature in 2026 – was a publicity stunt to improve its image.

“Sustainable development is one of the core values of our company,” said Chak. “More investors are focusing on the concept of sustainable development. We had been considering [issuing a green bond] for over a year based on our finance consultant’s opinions and the consideration of market developments.”

The bond, issued last week at a fixed rate of 2.87 per cent, was oversubscribed by four times. Chak said the company hoped an application to list the notes on the Hong Kong Stock Exchange could be approved on July 22.

The HK$10.5 billion Kowloon East development project on Hoi Bun Road in Kowloon Bay is expected to be completed by June 2020, with the Link paying 60 per cent and Nan Fung Development contributing 40 per cent. The 884,000-square-foot development will include retail space, offices and a car park.

Chak said upon completion the project is expected to meet green building standards including the Hong Kong Building Environmental Assessment Method and the US-based Leadership in Energy and Environmental Design, which will be verified by a third party.

Another project covered by the proceeds of the bond is the renovation of a commercial complex at 700 Nathan Road atop Mong Kok MTR station.