Repurchase Link's shopping centres by municipal securities

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A few days ago, Link Real Estate Investment Trust (Link REIT) announced the sale of 17 malls in public housing estates for HK$23 billion to a consortium that won the bid. While Link REIT will make a considerable profit from the sale, it triggered immediate criticism from the public, who are worried that the new owner of these properties will hike up the rent in order to maximise profit.

Indeed, ever since Link REIT acquired ownership of public housing estate shopping centres across Hong Kong from the Housing Authority, we have seen a continued surge in rent for commercial properties, while popular shopping centres are being upgraded to luxury malls one after the other. Lok Fu Place, for example, recently renovated which led it to become one of the best malls in East Kowloon. Despite the major commercial rent increase, the mall enjoys great business and traffic, thanks to Link’s sound management, which in turn attracts large chain stores and high-end brands to capitalise on the renovated shopping mall. Today many of Link's shopping centres, which used to serve the local communities, have become large commercial malls.

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It is understandable that Link is gearing its shopping centres towards a more commercial direction for better returns. After all, it’s a business. In fact, after such makeovers, these malls have become more pleasant. With a wider selection of shops and restaurants, it attracts a large number of consumers, who tend to be younger and more affluent, to spend time there. 

However, we mustn’t forget that there are still many underprivileged families and senior citizens living in those public housing estates who don’t have the means to afford luxury goods. If Link's malls or supermarkets are their only shopping options, they have to fork out more money every month on daily necessities. As a result, there have been a lot of grievances accumulated over the years, and these public housing estate residents have been criticising the government’s incompetence and insensitivity on this matter. Activist groups have also called on the government to repurchase Link's shopping centres using public funds. Although Link has previously expressed that there are open to this idea, given the recent multi-billion dollar deal, it seems unrealistic for the government to repurchase all of Link's malls at once.

At the end of the day, the reason that the public is urging the government to repurchase these public housing estate shopping centres from Link is to reduce the prices of consumer goods and to alleviate poverty. From the standpoint of balancing cost and return, I believe that repurchasing Link's street markets will be a better business than their malls. Firstly, Link doesn’t seem to be overly keen on managing its wet markets anyway, and often outsources companies to manage them in order to lower the risk of having direct conflicts with street market stall owners and inducing resentment from the public. Secondly, for Link, it is the malls that are the goose that lays the golden eggs, and they are likely to face fewer challenges and controversies if they choose to sell them in the future. Therefore, I think it is wise for the government to set up organisations to issue municipal securities, as a way to amass funds and repurchase Link's street markets, while securities holders can also get reasonable returns on their investments. It can be a win-win situation.

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