Cheung Kong reit chairman opposes 'element of risk' in government plan
Fortune Reit chairman rejects proposal to let trusts take stakes in building property, saying it could threaten the stability of their returns
The Real Estate Investment Trust controlled by developer Cheung Kong (Holdings) is opposed to a government proposal to give Hong Kong-listed reits greater flexibility to undertake development projects.
"As the chairman of Fortune Reit, I oppose the proposal," Justin Chiu Kwok-hung said in an interview with the South China Morning Post.
Chiu said Fortune Reit had made a written submission to the government to express its opposition to the proposal, which was raised by the Financial Services Development Council in November.
Allowing Hong Kong-listed reits to undertake development projects would add an element of risk to their investment status, said Chiu, since their incomes would fluctuate. "When the trusts were launched in 2008 they were created with the aim of seeking stable returns. Therefore, the idea of allowing them to invest directly in developing properties is wrong," said Chiu.
In a report released in November, the Financial Services Development Council raised the possibility that reits might be allowed to allocate up to 10 per cent of their total assets to property development projects.
They would be required to hold any development project for a period of two years from the date of completion before disposing of the project.
Other recommendations included granting Hong Kong-listed reits exemption from the 16.5 per cent corporate profits tax on rental income. They might also be exempt from paying stamp duty on the transfer of commercial property.