Hong Kong’s private commercial landlords join big guns in offering rent relief to tenants hit by fifth wave closures

Tai Hung Fai Enterprise says it will help its tenants, who are its ‘bread and butter’
All tenants except one since 2019 ‘are still with us’, says Causeway Bay landlord H Development Holdings

Hong Kong property

Sandy Li

Published: 8:30am, 15 Mar 2022

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Hong Kong’s private commercial landlords are joining the city’s big guns in offering rent relief to their tenants.

Tai Hung Fai Enterprise, a property developer that has more than 1,000 tenancy agreements all over Hong Kong, including offices, serviced flats, warehouses and about 200 shops, said it would help its tenants, who are its “bread and butter”.

“We will work out a solution with tenants on a case-by-case basis,” said Edwin Leong Siu-hung, the developer’s founder. Instead of purely cutting rents, he said a temporarily lower base rent and higher turnover rent, such as 30 per cent to 35 per cent of sales, would be a solution that is fair to both landlords and tenants. Base rents are fixed, but turnover rents are based on sales revenue.

Hong Kong’s fifth wave of the Covid-19 pandemic has plunged the city into an unprecedented crisis, and Tai Hung Fai’s offer of rent relief comes after MTR Corporation – the city’s sole transit operator and owner of significant commercial property – said last month that it would offer concessions across the 97 subway stations and 13 shopping centres it owns. Link Reit, which operates 11 million sq ft of retail space in the city, said it too would offer “support on a case-by-case basis” across its properties. Developers Swire Properties and Hongkong Land said they would fully waive rents for tenants subject to mandatory closures imposed by the government to stop the spread of Covid-19 in the city.

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“Most tenants have accepted the turnover rent arrangement, as they can afford to pay more when sales rebound – and less during a decline in sales,” said Leong, who, with an estimated net worth of US$4.4 billion, is Hong Kong’s 22nd richest man this year, according to Forbes.

Tai Hung Fai’s tenants include restaurants, gyms, private tutoring schools and fashion retailers. The concessions it will offer will depend on the impact of Covid-19 on individual tenants’ sales, Leong said. “During this difficult period, landlords and tenants have to join hands to overcome this crisis, which may yet last for several months,” he added.

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Leong said he was confident that sales would return to normal once the pandemic had been brought under control, in May or June. At the same time, the government handout of HK$10,000 (US$1,280) in digital vouchers to 6.6 million eligible Hongkongers, with the first half to be distributed next month, would also help.

“People will start spending again. Sales in the second half of this year will be better than during the first six months,” he said.

The government’s rent deferral scheme will, however, only benefit about 10 per cent of Tai Hung Fai tenants. But Leong said he supported the scheme as most tenants had paid two months’ rent as deposit to landlords, whose risk was thus reduced.

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Elsewhere, H Development Holdings, a developer with a portfolio of 300 tenants largely in Causeway Bay, said it would offer rent cuts of between 10 and 50 per cent.

“All our tenants except one are still with us since footfall dwindled in 2019, when the city was gripped by the anti-government protests, followed by more than two years of the Covid-19 pandemic,” said Eric Ng, H Development’s chairman. The company has a portfolio worth HK$20 billion in Hong Kong, comprising five completed commercial buildings and another three under construction.

“Most people are staying at home or are working from home in a bid to avoid being infected by the Covid-19 pandemic. There are hardly any people to be seen in Hong Kong’s major districts such as Causeway Bay, Tsim Sha Tsui and Central [these days],” he added.