Link Reit’s sale of commercial properties cannot ignore land grant conditions and public interest

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.