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Following is a question by the Hon Frederick Fung and a oral reply by the Secretary for Transport and Housing, Ms Eva Cheng, in the Legislative Council today (December 9):
Question:
Last year, under the impact of the financial tsunami, the social, economic and other aspects of Hong Kong were seriously affected, especially the livelihood of the middle and lower classes. However, The Link Real Estate Investment Trust ("The Link REIT") still managed to achieve substantial profits, with a revenue of $2,438 million for the first half of this financial year, and the profits from the rents of retail properties even amounted to $1,333 million, representing a growth of over 10% and 25% respectively as compared to the same period last year. On the other hand, tenants of shopping malls and markets under The Link have continued to complain for many years about its disregard of social responsibility and frequent outrageous increases in rents which were unaffordable to them and resulted in their going on strike time and again, thus causing social disputes. At the same time, some public rental housing ("PRH") tenants have commented that since The Link REIT took over the management of the shopping malls and markets of public housing estates, prices of commodities have surged continuously, shops lack varieties and there is little room for survival for small shop tenants, resulting in fewer shopping choices for the residents. In this connection, will the Government inform this Council:
(a) whether, in response to the social disputes caused by The Link REIT in the past as well as the experience and lessons brought by the financial tsunami (e.g. certain enterprises only care about making profits and ignore public interests), the Government has conducted any comprehensive review of the issues relating to privatisation of government assets, including whether there is over-reliance on free market, how public interests can be protected and how a balance can be struck between enhancing corporate profits and fulfilling corporate social responsibilities; if it has, of the outcome; if not, the reasons for that; of the authorities'latest strategy on privatisation and their medium and long-term privatisation plans; and
(b) of the substantive assistance provided by the authorities to the tenants of The Link REIT and the affected PRH tenants hitherto; whether the authorities have recently assessed the impact of The Link REIT taking over the shopping malls and markets concerned on the interests of PRH tenants, and if the current situation is contrary to the original intention of providing these shopping malls and markets to serve the PRH tenants; whether the authorities have formulated remedial measures to protect the interests of PRH tenants?
Reply:
President,
Having incorporated the input of the Financial Services and the Treasury Bureau, my reply to the two-part question is as follows:
(a) The main objective of the Government's Asset Disposal and Securitisation Programme is to focus resources on the delivery of public services that must be provided by the Government. It also allows non-government organisations to undertake services that are more suitable to be delivered in a commercial manner. Under the principle of "big market, small government", we believe that the programme would help enhance efficiency. This will be beneficial to Hong Kong as a whole, including the taxpayers as well as the development of market economy.
The Government reviews the Asset Disposal and Securitisation Programme from time to time. When considering selling our assets, we will take into account a number of considerations, including the suitability for the relevant assets to be operated by the market, the possible impact to be brought about to the community, different methods of disposal and market conditions. We will also consider the views of all sectors of the community to ensure that the Programme is in the overall interest of Hong Kong.
We will announce the details of individual items included in the Asset Disposal and Securitization Programme when there are more concrete proposals.
(b) The main objective of the Hong Kong Housing Authority (HA) in divestment of its commercial and car park facilities is to enable the HA to withdraw from commercial operation, so that it can focus on its function as a provider of subsidised public housing. The Government's policy objective is to focus resources on the provision of public rental housing to low-income families who cannot afford private rental accommodation.
After the HA divested the majority of its commercial and car park facilities through the listing of The Link Real Estate Investment Trust ("The Link REIT") in November 2005, The Link REIT may determine its own business strategies, mode of operation and trade mix, just like any other private entity. The Government and the HA cannot and would not intervene.
However, to ensure that The Link REIT will continue to provide commercial and car park facilities for the residents after divestment, the Government and the HA have specifically arranged the following measures for proper regulation.
The land use of the relevant lots is stipulated in the Government leases (commonly known as land leases) relating to the properties acquired by The Link REIT from the HA. If The Link REIT wishes to change the land use specified in the Government leases, it has to obtain prior consent from other owners of the lots and approval of the Lands Department. These lease restrictions ensure the continued provision of commercial and car parking facilities in public housing estates or courts to meet residents' shopping and car parking needs. The land use condition in the aforesaid lease remains effective and must be observed by successors in title whether or not such facilities are held by The Link REIT in future. In other words, any change to the management or control of these properties will not affect the continued use of the relevant facilities for commercial or car parking purposes.
In designing the divestment vehicle, the HA has taken into account the availability of suitable mechanisms to restrict The Link REIT from selling its assets arbitrarily. To this end, the Property Agreement between the HA and The Link REIT contains restrictive covenants applicable to the divested properties. Under those covenants, each shopping centre or car parking facility within a public housing estate can be sold by The Link REIT only as a whole but not in part. Such a requirement will apply in the same way to any third party who purchases any such facilities from The Link REIT.
Besides, to ensure that educational and social welfare facilities which have been operating in shopping centres will continue to deliver services to the public after the divestment, the HA entered into covenants specifically drawn up for the sale of its properties with The Link REIT requiring it to continue to let a certain amount of floor area at concessionary rent to non-profit making organisations for social welfare or educational purposes.
President, as an organisation operating on commercial principles, The Link REIT, just like any private organisation, would take suitable action to respond to the economic and market situation in order to maintain its viability in the market. Given the fact that The Link REIT's shopping centres are located in public housing estates and its clientele are mainly public housing tenants, they must cater for their needs and affordability. The Link REIT also has to endeavour to enhance the operation of the facilities so as to provide the public housing tenants with the services they need.
At the Special Meeting of the Legislative Council Panel on Housing held on September 28 this year, the Executive Director and Chief Executive Officer (ED/CEO) of The Link REIT stated that The Link REIT would formulate an appropriate trade mix for its shopping centres and would be willing to consider the individual requests of retailers during renovation of the shopping centres. The ED/CEO said The Link REIT understood it had to serve the residents of public housing estates. In the fixing of rent, the ED/CEO advised that The Link REIT had to take into account the performance of the retailers and the market trend, but it would try its best to maintain the rent at an affordable level and consider the circumstances of individual cases.
Ends/Wednesday, December 9, 2009
Issued at HKT 17:16
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