Link's campaign for more flexibility for reits should raise eyebrows
Albert Cheng is worried by reports that it wants to work with Housing Authority on property development, which is barred by current rules
The Housing Authority recently warned that it could become poor due to impending projects over the next four years.
In its latest financial forecasts, it said its surplus and cash balance will drop sharply and it has not ruled out having to ask for funding from the government to meet construction targets.
As someone who fought to block the authority from selling public assets on the cheap back in 2005, I am still angry over the issue. The reality today is that the authority sold public assets to The Link Reit for HK$20 billion - far below market prices. Those assets are now estimated to be worth more than HK$81 billion.
After selling off public assets that would have been the goose that laid golden eggs, the authority now has the nerve to claim it is scraping the bottom of the barrel as it is again running out of cash.
No wonder the public is outraged. Who wouldn't be incensed after witnessing the authority hand over its only cash cow to the rich and powerful property tycoons without hesitation?
After its listing on the stock market, The Link Management has been renovating old shopping centres and then raising rents in order to boost income.
It may have expanded its income, but bearing the brunt of this are small-shop tenants who can barely afford today's skyrocketing rents, as well as tenants that provide medical and community services such as clinics.
As a result, small businesses are gradually being pushed out of Link Reit-managed arcades, replaced by big chain stores that have almost unlimited financial backing. This has not only killed off the traditional "mom and pop" stores that make the arcades different, it has also created a monopoly, taking away the colourful nature of the community.
In the long run, it will affect the quality of life of public housing tenants in these communities, because higher shop rents will trickle down to consumers, increasing their daily expenses.
However, there are limits to any business development. As a real estate investment trust, The Link Reit is no exception.
Its original priority was to buy unsold Housing Authority shopping arcades or facilities, but due to rising public discontent regarding the high rents forced upon small businesses, this has been suspended. This has limited the business development of The Link Reit.
On the other hand, the Housing Authority has been seeking different revenue channels, one of which is to copy The Link Reit model by "revitalising" shopping arcades, which is an excuse for it to put up rents afterwards.
This is similar to privatisation and does nothing to benefit existing tenants, especially small businesses, which will eventually be pushed out.
In reality, the authority is paving the way for business monopolies, allowing big businesses to gobble up shopping arcades on public housing estates.
We shouldn't just be angry, we should be disgusted.
Meanwhile, in order to expand its revenue, The Link Reit is reportedly trying to join hands with the authority, buying up old shopping arcades to rebuild them.
But according to the rules for any real estate investment trust, the Link is not allowed to get involved in property development in any way.
Even in the redevelopment of shopping arcades, The Link is limited to redeveloping those retail spaces bought from the Housing Authority years ago.
The redevelopment scope for the Link can only be relaxed and expanded by its monitoring body - the Securities and Futures Commission (SFC) - otherwise it is bound by the status quo and can work with the Housing Authority with only very limited flexibility.
There is evidence to show that the cheap sell-off of public assets may be repeated. According to reports, the Link sought approval last year from the SFC to relax the rules guiding its redevelopment scope.
It all goes to show that the Link wants to go full steam ahead with the redevelopment of shopping arcades on public housing estates.
Last November, the Monetary Authority proposed relaxing the monitoring rules for the Link, seen as paving the way for it.
The Transport and Housing Bureau has not confirmed whether it has received any redevelopment application from the Link.
Those Housing Authority assets that are still unsold belong to Hongkongers and we shouldn't allow the authority to hand them over to the private sector and big business.
The bad memories associated with the Housing Authority selling off our assets on the cheap are still fresh. We should remember the consequences from the last time and make sure it does not happen again.
Albert Cheng King-hon is a political commentator. firstname.lastname@example.org