Apex Benchmark attacks Midland management over record loss
Real estate fund blames high rebate incentives and rental expenses for the realtor's record loss
Real estate fund Apex Benchmark, the second-largest shareholder of Midland, yesterday launched a virulent attack on the realtor's performance and management following its poor results.
The fund said unreasonably high rebate incentives, huge increases in rental expenses and rising finance costs had dragged Midland into its biggest loss since listing in 1995.
On Friday, the realtor posted a loss of HK$204.03 million for last year, exposing the problems faced by the management led by Freddie Wong Kin-yip.
"Will anybody take responsibility for this big loss? We are a major investor and Midland owes us an answer," said Mau Wang-bong, a former Midland employee and the chief operating officer of Apex.
The fund raised its stake to 9.57 per cent last week from 7.5 per cent in October and is demanding a reply from Midland within two weeks.
"We have asked for a meeting with Midland but there is no response from the company so far," Mau said at a media briefing with three former Midland directors.
Apex has appointed Vincent Chan Kwan-hing, a former executive director of the residential department at Midland, as its residential consultant.
The move came on the heels of the fund's appointments of Billy Fung Yui-sum, Midland's co-founder and former deputy chairman, as strategic consultant and Joseph Ling Kwok-fai, Midland's former executive director, as financial consultant.
Mau said Midland's rebates shot up nearly 82 per cent to HK$311 million in the second half of last year. "Incentives to buyers went up dramatically even as sales revenue fell," he said.
Chan, who resigned as executive director in August last year after 23 years at Midland, said rebate incentives were unavoidable in order to speed up deals. "But such a sharp rise in just six months is rare. This is no different from distributing cash to generate business!" he said.
At the same time, Mau said, the property broker's rental expenses went up an astounding 30 per cent.
"Last year, retail rents did not rise that much. The firm has sufficient cash reserves to have its own premises instead of renting shops. We heard a number of the firm's outlets are owned by the chairman," he said.
Midland has said it had HK$1.43 billion of cash and bank balances in December.
Mau warned Apex could call for an extraordinary shareholders' meeting once its stake in the realtor rose to 10 per cent in order to subject the company's accounts and directors to greater scrutiny.
"We heard Metty Tang Mei-lai, the wife of Freddie Wong, seldom reports for work but has been getting tens of millions of dollars in salary for the past couple of years," he said.
Tang is an executive director of Midland and the chairman and managing director of listed subsidiary Midland IC&I.
Responding to the allegations by Apex, Midland said rebate incentives had been driven up by an increase in new home sales, an industry norm. Higher rental expenses, it said, were required to maintain a certain scale of branch network to fend off rivals.
The firm also said Tang had received a total of HK$29.82 million as salary for the past five years in Midland and Midland IC&I. Under her management, Midland IC&I had posted profits for these five years, it said.
Midland IC&I profit fell 86 per cent to HK$24.9 million last year.