The Link is said to have driven thousands of small shops out of business since it acquired the retail and car park spaces in public housing estates from the government in 2005.
Nine years after the listing of the Link real estate investment trust (REIT) (00823.HK), George Hongchoy Kwok-lung, chief executive of the Link Management Ltd., said he has gotten used to such criticisms while the company’s positive contributions have been largely ignored.
“Every shopping mall’s environment has improved, and there are now more choices. Objectively speaking, the effect is positive. But we need time and facts to correct the misunderstanding,” Hongchoy told the Hong Kong Economic Journal in an interview.
“The Link has more than 12,000 tenants. There must be some unhappy ones. From time to time, one to two tenants are unhappy and make noise when they move out. This will sound like a big incident,” he said.
But since The Link took over, the occupancy rate, along with number of tenants who extend their lease contracts, has been rising. It now stands at about 70 percent.
The government has been widely criticized for selling the properties to a profit-oriented company, which has sought to upgrade its shopping malls in prime locations and bring in retail chain stores that can afford much higher rents to maximize returns.
But contrary to such perception, The Link has had a positive impact on the whole community, Hongchoy insists. Over the past nine years, it has renovated about 40 shopping malls.
The Housing Authority owned and managed these malls for 20 to 30 years, but made no changes at all. As a result, it was not able to spur spending, and many clients were lost. Even tenants living in nearby estates did not want to go to those malls, Hongchoy said.
But after The Link came in and undertook renovations, visitor traffic to those malls has gone up, he said.
The 52-year-old said that the company has abandoned the “isolated island model” for the retail facilities. A shopping mall is intended not to just serve the residents of a particular housing estate but the whole community.
Hongchoy said it doesn’t matter whether the shopping mall is located near a public housing or private estate. What is important is how to make the property add value to the community.
“Having this concept in mind, the management of this property is very different. If we operate on an ‘isolated island model’ and have self-sufficiency, problems seen by the Housing Authority will arise,” he said.
Decades ago, Wo Che Estate in Sha Tin was surrounded by rice fields, while Tai Yuen Estate in Tai Po and Tuen Mun was remote. Business was poor.
But nowadays, traffic is very convenient and shopping malls and street stores can be found everywhere.
Hongchoy said customers of the shopping mall in Wo Che Estate are not only residents in the estate, but also those from the Chinese University and Ma On Shan. The same is true with Lok Fu Plaza, which provides a wide variety of products from joss papers to iPhones.
Unlike the Housing Authority, The Link cannot just rely on tenants of housing estates but must attract the most number of visitors and consumers of different needs, he said.
The Link was valued at HK$22 billion (US$2.83 billion) when it listed on the stock exchange in November 2005, less than the previous estimate of HK$30 billion. Today it is estimated to be worth about HK$100 billion.
Hongchoy refuted allegations that the government sold the properties at an underrated price.
He explained that before the company took over, the rents in the retail units were low and business was not as good as it is now.
The price assessment of the properties was conducted by professional surveyors according to the conditions of the buildings. The Link has renovated some of the buildings, and that’s one reason why their value has gone up, he said.
In June this year, The Link disposed of four of its shopping centers for a profit of HK$1.24 billion, marking its first asset sale since it was established as a listed company.
The asset disposal has prompted calls for the government to buy back The Link’s shares by using public money, but the government has rejected such calls.
“It is not possible for the government to buy back The Link,” Hongchoy said. “The Housing Authority will have to use taxpayers’ money to acquire the assets, but the government has to invest in a lot of other welfare projects,” he said.
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