Prominent Hong Kong businessman Allan Zeman, who has made his name famous through high-end restaurants and is a significant landlord in Central, says he is open to cutting rents to help tenants survive the protests that have rocked the city.
Business for some restaurants is off by as much as 40 per cent, estimated Zeman, who said he remains bullish on the city’s future despite the grim economic toll that the US-China trade war and months of protests have taken on its economy.
Retail outlets have been hit even worse due to their greater exposure to mainland Chinese tourism, Zeman noted in a wide-ranging interview with the SCMP. He added that the slide began before the protests, but has worsened since they started in June.
“In general, there’s been a huge fall in foot traffic. People tend to stay home more because of the protests,” he said.
The protests began when the government introduced a bill allowing for extraditions to China, which was met with a peaceful protest that had an estimated two million marchers – a figure he disputes. Protests have since widened to other grievances, including the lack of affordable housing in the city.
City leader Carrie Lam has said the bill is “dead,” but has stopped from saying it is withdrawn, as protesters have demanded.
Zeman, a 48-year resident of Hong Kong and Lam adviser, says the effort to pass the bill is over.
“Trust me, it’s 1,000 per cent dead. It’s never coming back, I can tell you that much. No one in their right mind would ever think of bringing it back.”
He compared it to Article 23, a national security law prohibiting treason and secession, which has been shelved for over 15 years.
Asked if Carrie Lam had told him that the bill was dead, he said that “she’s been clear not just with me, but with the public. Why she can’t say ‘withdraw’, God only knows.”
Zeman said the bill was a local effort by the Lam administration and was not demanded by Beijing.
“I sit on the boards (of companies) in many different industries. I can feel the damage from every part of the city,” said Zeman, the founder of LKF Group, which owns restaurants in Hong Kong and has significant retail and office property holdings.
The tourism sector is being hit particularly hard, Zeman said, badly damaging prospects for hotels and theme parks.
Hong Kong government data for the second quarter of 2019, before the protest began, showed total receipts of Chinese restaurants down by 2.1 per cent in value compared to the second quarter in 2018, while non-Chinese restaurants decreased by 1.6 per cent and bars decreased by 4.4 per cent.
“Hong Kong was already starting to slow down, and now this. It’s like having a heart attack first, and then another massive heart attack.”
He said Hong Kong’s small to medium size enterprise sector probably doesn’t have the resources to weather an economic slowdown, and that they would be asking for rent reductions or face closing offices.
Zeman, a significant landlord in Central, said he might “help a little bit,” depending on whether the tenant normally pays on time or not.
“I mean, you also have your own expenses … I think I’ve always been known as an understanding landlord. That’s always been my motto: If I can help, I will.”
He said some of his tenants have asked for rent reductions.
He remains confident that Hong Kong’s connections with China will help it overcome its present difficulties. He believes that China’s leadership, at first nervous about the trade war, has become more comfortable with trade tensions as it cultivates its domestic market.
“I remain bullish on Hong Kong. Those people who have not (been), have always lost out – those people who moved away after ‘97 (the Asian financial crisis) or other times I’ve seen an exodus of people. Hong Kong bounces back pretty quickly, because of China.”
Zeman indicated he will look at further property purchases if prices come down.
The main problem that needs to be fixed is Hong Kong’s housing crisis and property market, which Zeman says has led to the unhappiness of young people who are now at the front lines of the protests.
Zeman said that the root of the unrest was the lack of affordable housing.
Home ownership rates in Hong Kong have fallen from 53.5 per cent in 2010 to 49.2 per cent in 2018, according to government statistics. In Singapore, home ownership is at 91 per cent in 2019.
“People don’t see the future. If you have a house and if you’re happy, you love the government, you love China, because life is good.”
Zeman said Hong Kong would have to get creative more about its housing supply problems to avoid further unrest.
He faulted the government for not paying attention to people’s concerns and being too focused on the concerns of property developers.
“We need rules on property developers. Governments are about providing a better life for people … it’s listening to the people and finding out what the problems are all the people, not just developers.
“At the end of the day, we have people living in nano-flats; you’re forcing people into the streets.”
Zeman expects Lam will address such issues in a policy address in October, when he expects a significant boost in government spending to help the economy, similar to the spending package undertaken by the government in the wake of the SARS epidemic.
On Friday, Financial Secretary Paul Chan unveiled a HK$19.1 billion spending package to boost the economy, which he predicted would enter a recession, with a growth forecast of between zero and one per cent.
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This article Allan Zeman says he’s open to cutting rents to help Hong Kong businesses get through protest turmoil first appeared on South China Morning Post