Hong Kong’s chief executive takes on Link Reit over rent concerns

Chief Executive Leung Chun-ying has questioned whether incentive packages for those running the real estate investment trust were designed purely to seek maximum income

PUBLISHED : Tuesday, 28 June, 2016, 10:43pm
UPDATED : Wednesday, 29 June, 2016, 11:15am

In a surprisingly combative move against one of Hong Kong’s biggest landlords, Chief Executive Leung Chun-ying has challenged the Link Reit over whether it is putting profit before people.

“They are not a developer,” he reminded the Link’s top management, as he questioned whether incentive packages for those running the real estate investment trust were designed purely to seek maximum rental income.

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If the trust, which owns and manages nearly all public housing estate shopping malls and wet markets once belonging to the government, was not serving the people who needed the facilities, his administration could look into providing alternative options, Leung warned.

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In an exclusive interview with the Post , covering a wide range of topics from Hong Kong’s relations with the mainland to local politics, the chief executive also spoke of how his family was “taking the pressure well” and fully supportive of his work.

His wife and children had never asked him to quit under pressure, even during the 2014 Occupy protests when he used Government House as a command centre, he said.

Leung did not mince words in stressing that the government had never promised the Link a monopoly over the city’s shopping mall business, although there was no plan to buy back the reit.

Leung’s tough stance on the Link came amid mounting public concerns about grass-roots retailers being priced out of its wet markets and low-end shopping malls.

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The Link, which began operations in 2005, has been accused of adopting a business practice that pushes up rents and drives out small players.

According to its annual ­reports, the Link chief executive George Hongchoy Kwok-lung ­received HK$22 million of cash ­remuneration, including HK$14.4 million variable pay in the 2015-16 financial year.

“A reit has to behave like a real estate investment trust. They are not a developer,” Leung said.

“The Link has a particular corporate social responsibility ­because it serves the needs of public rental housing tenants. Many tenants can least afford to pay high prices.”

The chief executive, former chairman of the property consultancy DTZ Asia-Pacific, said he was curious as to how incentive packages for the Link management were written into their employment contracts.

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“You could over-incentivise someone by giving the person a large portion of his package by way of variable pay bonus, and then it’s a question of how you structure the bonus,” he said.

“If you say to the person that for every HK$100 increase in rental income in that year, I will give you a big share of the increase, then you incentivise the person in a different direction.

“Then you incentivise a person in a very particular way that could carry social consequences. Bearing in mind the people that the Link serves, I think there is a case to answer.”

He said the government had a responsibility to meet the shopping needs of public housing ­tenants. “We shouldn’t expect our 70-year-olds and 80-year-olds to walk a mile every day to go to a market. ”

A Link spokeswoman rejected Leung’s argument, saying the company owed it to its shareholders to remain profitable.

She said individual remuneration would be determined by a relevant committee under the board of directors, taking into consideration performance factors such as management competency and execution of strategic plans.

Sophia So Lok-yee, chairwoman of concern group Link Watch, said she welcomed short-term measures to provide alternatives such as opening more government-owned markets.