Link rents cap plan alluring but unfeasible

Editorial | Mary Ma Feb 12, 2019
Lawmaker Regina Ip Lau Suk-yee's plan to table a private member's bill to rein the Link REIT back from inflating rents at its shopping malls near public housing estates is unprecedented. It's an absolutely ill-conceived idea economically, as her proposal flies in the face of the vital principle of free economy upon which Hong Kong has thrived. However, it's a smart pick politically, generating noise in Ip's favor in the run-up to the district council election this year. That Ip has selected the "Public Enemy No 1" to batter lends credence to reports that the former security chief is prepared to parachute into Tuen Mun to run for a district council seat - paving the way for her to vie for one of the five "super seats" in the District Council (Second) constituency in the Legislative Council election next year. Ip is a member of the Executive Council, but it's unlikely that the radical idea to effectively place a publicly-listed company under special statutory control has the blessing of Chief Executive Carrie Lam Cheng Yuet-ngor. Otherwise, would Ip have jumped the gun to fire the first salvo? Nonetheless, the development shows there's a strong case for reflection by Link REIT's top management, which recently launched a mass media campaign to rebuild their image as a means of reconnecting with the community.' Link REIT has experienced tremendous success in the capital market since the Housing Authority hived off 151 malls and 79,000 parking spaces to form the publicly-listed real estate investment trust in 2004. Its share price has since soared fivefold to hit above HK$86, becoming one of the best-performing stocks. The success was achieved because entrepreneurs were able to free the true market values hidden in those properties. Ip has no valid economic reason to blame Link REIT for its success. But, as said, she has plenty of political reasons to make the strike, knowing that few in society - especially among the grassroots to whom she would have to appeal to if she's to seek election in Tuen Mun as speculated - would have sympathy for Link REIT and its alleged rent-gouging tactics. Link REIT's success in the financial world has at the same time made itself an enemy of the public due to its sound business strategy to increase rental incomes by upgrading shopping centers and replacing low-end tenants with up-market brands. It's curious that, aside from the Federation of Trade Unions, other parties including the Democratic Alliance for the Betterment and Progress of Hong Kong and the pan-democrats, have displayed reservations about Ip's proposal. Perhaps out of an awareness of the original sin that it was born with, Link REIT has been vigorous in transforming itself in recent years, selling many public housing assets to reinvest the capital in mainland alternatives. No matter what may happen to Ip's private bill, her move will likely accelerate the Link's pace to leave public housing areas. In a broader sense, Ip's move bodes ill for the SAR, as it's bound to increase the political risk for businesses over time.

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April 2019