There could be no question of legislator Albert Chan Wai-yip's opposition to the Housing Authority's proposed privatisation of its shopping centres and car parks at Monday's Legislative Council meeting. Be it fear of rent rises, the evils of market forces and monopolies, he was unequivocal in his disdain. Other legislators such as Howard Young cut to the chase: 'What we are concerned about is the impact on the users.' Under a planned $20 billion securitisation, the authority's retail and parking facilities would be sold to a private company and then listed - either in the form of a property company or a real estate investment trust (reit). Retail tenants are wary of rent increases; residents in turn fear increased charges. There is also the possibility of job cuts resulting from the privatisation, with the political ramifications of 700 employees to be considered. The issue was not broached on Monday - it is perhaps early days. Panel members were, however, left with no questions as to the Housing Authority's bleak financial situation and its desperate need for cash. In the past financial year, the authority racked up a deficit of $1.73 billion. It also has the prospect of having to pay $4.5 billion in refunds to tenants following a High Court ruling this summer. The authority is thin on alternatives to this cash crisis. In July, it announced the securitisation plan, hoping to capitalise on the low interest-rate environment and investor appetite for safe, steady yields. A listing of the portfolio of the authority's 100,800 parking spaces and one million square metres of retail facilities would enter the history books as the largest real estate IPO on a global scale. Timing is a key variable should the authority decide to pursue the reit route as the market improves and investors absorb more risky offerings. Permanent Secretary for Housing, Planning and Lands Leung Chin-man on Monday said the authority would aim for an IPO at the end of next year. This leaves just 12 months for some major restructuring. The challenge is to turn what appears to be a highly inefficient operation into a commercial, streamlined candidate for an IPO. According to investment bankers familiar with the government's proposal for restructuring the shopping centre and parking facilities, the cost to income ratio is about 66 per cent. 'So for every dollar they make, they pay 66 cents out,' one banker said. 'Any good retail operation would be in the 30 to 40 per cent range. 'They are well out of the ball park.' The operating expenditure of the authority's retail premises, car parks, flattened factory estates and welfare/community premises was about $3.1 billion for the past financial year. One of the main sappers is salaries: personal emoluments accounted for 24 per cent of the commercial business operating expenditure. Over the past financial year, however, the cost to income ratio has risen from 61 per cent previously to 66 per cent. The authority said in a recent internal paper that it would not be appropriate to compare this figure with the private sector, as it is 'required to manage these properties ... with specific policy objectives and unique operational mode, rather than for investment purposes'. Bankers pointed out the authority had increased the square footage of space under management by a compound 9 per cent each year. Rents, in the meantime, have decreased by 7 per cent over the past year - so they have more space, but less money. An example of the authority's inefficiency in relation to its parking spaces was raised during the housing panel meeting on Monday: in some estates, there are vacancy levels of up to 80 per cent. Tenants from neighbouring estates desperate for a slot are, however, barred from using these spaces. Walter Chan Kar-lok, chairman of the Housing Authority Supervisory Group on Divestment, is waiting for answers from the government. 'We want to make it more flexible.' The supervisory group will monitor other tasks being undertaken to get the shopping and car park facilities ready for listing such as valuations and the protracted issue of legal title. The authority will need to acquire the relevant land leases from the government in respect of some 130 rental estates. The processing and transfer of these documents will take three years, slated to be completed by the end of 2006. In the meantime, there is a need for physical inspections of all the sites to ensure they comply with Building Ordinance requirements, a sizeable task. Feelers were, however, out for a chief executive to run the future private entity, Mr Chan said. A headhunter has been appointed to seek a suitable candidate. This person would have experience in commercial property management 'and political skills', Mr Chan said. While legislators such as James To are pragmatic over the pros of taking an inefficient operation private, he does not underestimate the political dimension. 'If you go down to the grassroots level of people living in these estates, they have quite big concerns. You may not share these if you are not living in that housing estate.'