Hong Kong lawmakers are proposing an amendment to ordinances to limit rent increases for stores in malls managed by the Link Reit, Asia’s largest real estate investment trust that owns a number of properties in Hong Kong.
Last Sunday, New People’s Party chairwoman Ms Regina Ip and Federation of Trade Unions lawmaker Ms Alice Mak Mei-kuen proposed a private bill with an aim to amend the Housing Ordinance and the Inland Revenue Ordinance.
By doing so, they aim to restrict Link Reit from raising rents ‘dramatically’, prioritize lease renewal with existing tenants and impose a levy on Link on shops left vacant in malls under the investment trust.
“Since the government sold its commercial facilities and car parks to Link Reit in 2013 and Link Reit listed in 2015, there has been great socio economic damage. Residents from the public housing estates face hefty rents and SMEs are forced out,” says New People’s Party in a statement.
According to the party, rents for shop space at Link malls surged 132 percent from HK$25.4 to HK$58.9 per sq ft between 2005 and 2017. In comparison, the rise in the market at large was 72.8 percent. However, rents in the mall were below market rent prior to the privatisation.
On Tuesday, Mrs Carrie Lam says she understands why the lawmakers made this move, but refuses to express her stance on the matter.
“It is a special move to use the Private Bills Ordinance to address such an issue. It has to be handled very carefully,” she says.
Back in 2016 when serving as chief secretary, Mrs Lam called Link Reit one of the “three mountains” – the major sources of contention in Hong Kong society – that the government had to address.
The proposal is not supported by pro-business Liberal Party.
“Ip could win public applause,” says party leader Mr Felix Chung Kwok-pan. “But I’m sure the city would no longer be ranked the world’s freest economy if the bill is passed.”
Mr Chung believes that Link Reit, now a listed company, has no responsibility to take residents’ interest into account.
It remains to be seen if the bill can be passed in LegCo.
Link Reit owns a number of shopping malls, car parks and housing estate parking lots in Hong Kong. It is the largest real estate investment trust in the Asia-Pacific by market capitalization.
The investment trust was created by the Hong Kong government, which decided to privatize a portfolio of shopping malls, car parks, and fresh produce markets mainly within public housing estates for HK$22.2 billion in 2013.
After it was privatized, Link Reit stayed tied to terms in existing tenancy agreements, but it would no longer need the government’s approval to increase rents for new leases.
Its profit-driven approach often comes under fire and has resulted in its reputation as a “corporate monster” in Hong Kong.
Last year, Convenience Retail Asia, operator of Circle K stores and cake shop Saint Honore Cake Shop, said the rents in shopping malls of Link REIT surged dramatically from their previously depressed, government subsidised rates.