REAL ESTATE

Hong Kong's Link Reit looks to brush up its image 10 years on from controversial stock listing

Real estate investment trust has seen steady expansion since controversial privatisation

PUBLISHED : Monday, 12 October, 2015, 12:01am
UPDATED : Monday, 12 October, 2015, 12:01am

A decade on from the controversial listing of Link Reit on the local stock market, the company's chief executive George Hongchoy has his sights set on expanding its mainland business and repositioning its local brand image.

Hong Kong's first real estate investment trust was derided as a "bloodsucker" 10 years ago when it took over the running of retail and parking facilities at local public housing estates with the privatisation of assets operated by the Housing Authority.

This central position serving the everyday needs of the city's grass-roots communities meant privatisation and the lucrative listing on the stock exchange was mired in protest, with public housing tenants worried the sell-off would lead to rising rents, higher prices in shops and a dominance of chain stores.

Since its bumpy start the trust has gradually diversified its investments, this year striking three landmark deals to expand its property portfolio.

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For the first time it took part in a government land tender and won a large commercial site in Kwun Tong in a joint venture with Nan Fung Development, surprising market watchers.

Eyebrows were raised again when it jumped into its maiden investment across the border, acquiring a Beijing shopping centre for 2.5 billion yuan (HK$3.05 billion). That was soon followed by two Shanghai commercial towers for 6.6 billion yuan.

Hongchoy, chief executive of Link Asset Management - the manager of the trust - said the firm had also been eyeing a mixed-use property in Guangzhou as a possible investment. It is also setting up an office in Shanghai - its first on the mainland - to open early next year.

But he stressed Hong Kong would stay its base, and the firm had laid down a rule that its mainland investments, currently 7 per cent of its total holdings, should not account for more than one eighth of its portfolio.

Locally, he said the company might join bidding processes for land again if the government released suitable sites for office or shopping centre use, but he ruled out the possibility of entering the residential property market.

"We develop assets for long-term investments … A developer, in the normal description, is who develops and sells. We are not turning into a developer in the normal definition. We buy land and hold it in the long term, whether for offices or retail," he said in the run-up to Link's celebration of the 10th anniversary next month of the trust's initial public offering.

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He added that the firm would not expand its property development arm by too much because its code had put a cap on the business of 10 per cent of its gross asset value. The percentage currently stands at four. The reit has also been upgrading its shopping malls and wet markets and selling off some properties.

Despite the financial successes of its expansion however, Link's business strategy has drawn criticism from some.

In July, activist group Link Watch released a study report which said big chains made up 76 per cent of the 2,075 shops in 22 malls run by the firm. Yesterday, several concern groups protested against its recent decision to close a wet market in Tin Shui Wai for an upgrade, which they fear will bring about higher rents.

But Hongchoy disputes these claims. "We actually have more small shops … We continue to maintain roughly 60 per cent of our shops leased to smaller operators."

He argued that by renovating its malls and markets, Link offered more choice to shoppers, and that the introduction of high-end goods co-existed with cheaper options.