HKR is ripping us off

HKR (Hong Kong Resorts company) is a typical HK property developer which, though listed on the HK stock exchange, is controlled by a single family, in this case the Cha family, which is lead by its 91 year old patriarch, Dr. Cha.

The Chas are a typical property business family in HK, wielding political as well as economic power. Dr Cha is well-connected on the mainland as he is a CCPPC member.

HKR is the owner and operator of Discovery Bay. Through their various subsidiaries, such as the transport company and commercial leasing, they make money from the operations of the community, and of course from the sale of new flats in the new "phases" that are built regularly.

We are not sure about the longterm return on equity that HKR delivers to its minority shareholders, but based on the inconsideration shown to their minority shareholders and stakeholders in DB itself (that is, the small owners, tenants and resident owners,) I would bet they manipulate the company and trample on minority shareholder rights as well. This is common practice in these typical family-run listed companies in HK. Caveat Emptor; invest at your peril.

HKR has run DB as it has pleased for years. According to our experience they dominate the Owner's Committees to ensure that whatever they wish is implemented, and they feel confident that they can do so without significant repercussions.

Their attitude is that with so many "short-termed" expat residents, and with so many owners being non-resident investors, and with most local resident-owners residing in newer phases, that there is no one who can, or will, rock the boat by protesting too loudly or forming any opposition group to their building plans.

As long as they don't threaten the steady rental income from the new crop of expat families moving here every year, few of the current owners will complain too loudly for the sake of either their tenants or themselves.

When an person buys a flat in DB they have to sign their rights away. DB is allowed to make an extensive renovation every 7 years and these are funded mostly by the owners, with only a small amount coming from a residual fund.

Now that real estate values have recovered somewhat, HKR wants to rush through several new phases and extensive renovations in order to increase their profit margins on sales of flats.

This is good for HKR and speculators, but not as much for other owners, and even less for tenants. But since so many residents in the older phases are expat families that leave within 1-3 years, HKR is not concerned about the immediate impact of renovations, as this group has no power or voice within the HK community.

In the last 6 years we have had Siena building, external renovations on several phases, the renovation of the residents Club and of course, our personal favorite (not!) in demonstrating the greed and incompetence of the company: the Plaza renovation.

Everyone in DB knows the stupidity associated with the Plaza renovation: the jagged tiles, the noise, the massive disruption, the loss of our restaurants and lifestyle for almost a year. I think most people have figured out that this renovation was mainly to increase HKR's commercial leasing revenues, primarily from new restaurants, as the economy picks up. "C With an E" and Jaspa's restaurants proved to HKR that upscale western restaurants could work here. Our prediction is that with the re-opening of the plaza and the subsequent large numbers of new commercial units, there will soon be more new restaurants than the community can support, each paying high rents, and within 2-3 years many will close only to be replaced by low-quality, local "kitchen"-type places. This is what occurred in the 90's, when there was little western food available, and 'local' places were of low quality.

The economic value of the Plaza renovation to HKR is obvious, but it would be interesting to know the extent of what HKR gains from the Beach Village renovation.

Anyway, we are pretty sure that THEY are benefiting while we are paying the price, and we know THAT is a rip-off.