Lai Sun Development has formed a joint venture with CapitaLand and insurance services provider American International Group (AIG) to build a prime commercial building on the site of the former Furama Hotel in Central.
The three companies have formed the Bayshore Development Group to
oversee construction of a HK$4 billion, 39-storey commercial office
block with a gross floor area of 450,000 square feet.
ADVERTISEMENT
Despite the downturn in the property market, they expect to earn more
from the development than the Furama Hotel's annual profit of about
HK$150 million.
"It's hard to predict the revenue because hotel and commercial office
operations are totally different," Lai Sun development director
Julius Lau said. "But usually running an office requires less
operational costs, so it can turn a relatively higher profit."
It was also difficult to predict what the office rental market would
be like in 2005, when the building is due to open.
AIG and CapitaLand will each own 35 per cent of the building, to be
named AIG Tower, and Lai Sun will own 30 per cent.
The HK$4 billion capital investment includes land premium,
construction costs and interest payments. Finance of about HK$1.4
billion has been arranged with the Bank of China.
Lau said Lai Sun Development would clear debt of nearly HK$1 billion
by the end of the year and could manage to repay the borrowing through
non-core businesses.
"The company plans to sell Furama Court, a serviced apartment project
[jointly developed with Guoco Group] in Tsim Sha Tsui to generate
about HK$1 billion," Lau said.
"In addition, we pocket HK$40 million through rental and hotel
business."
Lai Sun Development is a member of Lai Sun Group, which listed in Hong
Kong in 1972, specialising in property development and hotel and media
investments.
CapitaLand is Singapore's biggest property developer and has
developments in China.
AIG's senior vice-chairman and co-chief operating officer, Edmund Tse,
said the company recently participated in some luxury apartment
projects and was confident about the Central project.
