********************************************************
Following is a question by the Hon Alice Mak, and a reply by the Secretary for Transport and Housing, Professor Anthony Cheung Bing-leung, in the Legislative Council today (January 23):
Question:
Earlier on, some tenants of the shopping centres under the Hong Kong Housing Society (HS) sought my assistance, claiming that recently, HS had, without notifying them, invited tenancies by way of open tender for the retail premises currently leased to them and HS had even led interested parties to inspect such premises. HS has not discussed lease renewal with the tenants, and it has even issued to them notices for non-renewal of leases. These tenants consider that HS is forcing them away and throttling the room for survival of small businesses. In this connection, will the Government inform this Council:
(a) whether it knows the total rental income generated from HS's retail premises, the rate of rent increase, the lease renewal rate and vacancy rate of its retail premises in each of the past five years; the number of retail premises leased out by HS through tender during the same period; the numbers of such retail premises leased to the original tenants and new tenants respectively;
(b) given that HS's representatives have indicated after meeting with tenants' representatives and me that HS would consider inviting tenancies for some individual retail premises by open tender if the leases have been renewed with the tenants of such premises for a period of time, particularly when other business operators have enquired about the leasing of such retail premises, whether the Government knows if HS has made such tenancy invitation arrangement in accordance with its established policies; whether "a period of time" means the number of years for which the tenants have renewed their tenancies or the number of renewals; when HS started leasing its retail premises by open tender; the factors and criteria which HS takes into account in selecting its tenants; and whether existing tenants enjoy any priority right or advantage in renewing their leases; if not, the reasons for that; and
(c) given that most of HS's residential development projects received land grants from the Government with land premiums reduced or waived, whether the authorities are aware of and monitor the arrangements under which HS leases its retail premises; if so, whether the authorities have looked into the impact of such tenancy invitation arrangements on the operation of small businesses and the residents concerned; if the authorities are not aware and have not monitored, of the reasons for that; given that in addition to open invitation for tenancies, HS has even leased the entire shopping centre in one of its housing estates to a single operator in recent years, how the authorities prevent the majority of HS's retail premises from being leased to large chain stores ultimately, similar to those under the management of The Link Management Limited, so as to ensure that a diversity of common household goods are available for sale in the retail shops for the choice of the residents?
Reply:
President,
The Hong Kong Housing Society (HKHS) provides subsidised housing for those in need in Hong Kong, including both public rental units and subsidised sale units. The Housing Society provides non-domestic facilities in some of its public rental estates and subsidised sale estates to meet the daily needs of the residents, which include commercial facilities and community facilities for welfare uses. According to the HKHS, the commercial properties (which include retail premises and market) have a total internal floor area of about 70 000 square meters, whereas that of the community facilities for welfare uses (such as youth centres and day care centres for the elderly) is about 30 000 square meters. The premises for commercial uses are operated on prudent commercial principles, with rentals determined with reference to the market value. This is similar to the leasing policy of the Hong Kong Housing Authority in respect of its commercial facilities in its public rental housing estates.
My reply to the various parts of the Hon Alice Mak Mei-kuen's question, which is based on information provided by the HKHS, is as follows:
(a) The total rental income generated and the rates of rent increase in the past five financial years in respect of the HKHS's non-domestic facilities (breakdown by commercial facilities and community facilities for welfare uses) are set out at the Annex. The Annex also provides the overall lease renewal rates and vacancy rates of the non-domestic facilities, from which it can be seen that the renewal rate in recent years was over 90%. The established practice of the HKHS is that retail premises will be leased out by way of open invitations if the original leases are not renewed. The number of new tenants leasing retail premises through such open invitations is also included in the Annex.
(b) According to the HKHS, its retail facilities are operated on commercial principles. In general, the leases signed with tenants are on a two or three-year term. An original tenant will not have priority in renewing the lease after expiry. The current leasing policy of the HKHS is that, for retail premises which have been leased to the same tenant for six successive years or more, if the tenant has breached any leasing condition, or if other operators have expressed interest in applying to lease the retail premises concerned, the HKHS would invite applications through open invitation for the relevant premises. That said, in case of an open invitation, while according to the lease an existing tenant will not enjoy any priority in lease renewal, the HKHS will carefully consider his or her application. Furthermore, the HKHS retains the discretion to consider any special factor put forward by a tenant to substantiate his or her application. In fact, the rental level is not the sole factor for consideration; the HKHS will appraise all applications by considering the experience of the applicants in running the proposed business, the proposed rental level and nature of business, the leasing conditions, as well as other relevant leasing terms, in order to select the most suitable tenants. The HKHS considers that the leasing policy as mentioned above, which includes the six-year requirement, has struck a right balance between protecting the investment of tenants and satisfying new operators' demand for the HKHS's retail facilities.
(c) The Government has charged the HKHS a discounted land premium for developing public rental housing, and requested the HKHS to provide commercial facilities to cater for the needs of the residents. For other retail facilities operated by the HKHS (such as those within Flat-for-Sale Scheme estates), market premium has been charged. The HKHS said that the leasing of its retail premises has all along been operated on commercial principles.
The shopping arcade of the HKHS in Bo Shek Mansion, Tsuen Wan, has been leased to a single operator since 1996 by way of six-year term contracts which have been renewed afterwards. Until last year, the operation of the shopping arcade was awarded to a new operator by open tender. The new operator has subsequently renovated the shopping arcade and leased out the retail premises. According to the HKHS, it is the only shopping arcade contracted out to a single operator, and that the HKHS has no plan to extend such an operation mode to other shopping arcades. For the shopping arcade in Bo Shek Mansion, apart from a few chain stores, most of the retail premises are run by small businesses, providing a large variety of catering and shopping facilities to the local community.
President, both the Government and the HKHS agree that as most of the HKHS's commerical facilities are located in its public rental estates, their target clientele should be the residents of these public rental estates as well as those living nearby. Their mode of operation will therefore meet the needs and consumption pattern of these consumers. The HKHS is fully aware that the public expects it to operate its retail facilities based on the above mentioned principle, in order to meet the consumption needs of the local community. The HKHS will continue to adhere to this principle in operating its retail facilities.
Thank you.
Ends/Wednesday, January 23, 2013
Issued at HKT 17:36
NNNN
