Link Reit’s sale of commercial properties cannot ignore land grant conditions and public interest
I refer to Louisa Ko’s letter (“Tight controls on reits would run counter to city’s free economy”, November 2).
There is a factual error in Ms Ko’s letter – my banners do not urge tighter control on all real estate investment trusts (reits).
They urge a review of the reit code to restrict the Link Reit’s sale of properties.
The Link Reit is unique in that it is the only one whose core assets are retail and other commercial properties in public housing estates, and home ownership schemes formerly owned by the Housing Authority. All the land leases governing the grant of government land to the authority have provisions which, to varying degrees of tightness, require the lessee to provide retail, community, social, recreational, educational and parking facilities primarily for the benefit of the residents.
While there is nothing in the lease to prevent the Link Reit from replacing low-end commercial outlets with high-end ones to boost rental income, buyers of the Link’s properties (I emphasise) could be in breach of lease conditions if they replace facilities serving local needs with international schools or
for-profit homes for the elderly to boost visitor traffic and hence rental return, even though such facilities are not needed by the inhabitants.
I am fully aware that the reit code was relaxed in 2014, after consultation with the financial community, to allow reits to sell up to 10 per cent of their gross assets, as opposed to net assets pre-relaxation. There is little likelihood of putting back the clock without industry approval.
But the fact remains that the Link’s massive sale of its public housing commercial properties has caused great hardship to local residents, although that has generated handsome returns for its investors, senior management and unit holders.
As an elected representative of the people, I am duty-bound to reflect the people’s concerns and to seek remedies, notwithstanding Ms Ko’s denigrations.
As the Link is reported to be in the process of selling commercial properties in another 17 housing estates, I think the Securities and Futures Commission has a duty to remind the Link Reit and its potential buyers that lease conditions of the land grants to protect the interests of local residents must be respected, or the new buyers could face a rising backlash and moral condemnation, and possibly even a legal challenge.
Regina Ip, legislative councillor