To many observers, last week's decision by Lai Sun Development to sell
its 32.75 per cent stake in Asia Television (ATV) to the broadcaster's
chief executive, Chan Wing-kee, for HK$360 million in cash and reports
that it had also disposed of its stake in Sunday Communications came
as no surprise as the company heaves under HK$6.19 billion of
outstanding loans at the end of September, or about 70 per cent of its
Nor was it particularly surprising that the move was met by a
management indifference that has come to characterise the ailing
Peter Lam, Lai Sun's chairman and president, was busy playing movie
mogul with his production company, Media Asia Group, and promoting his
latest release, Infernal Affairs.
His tycoon father and the company's 89-year-old honorary chairman, Lim
Por-yen, remarked: "I don't care much about ATV and Lai Sun
Development, as it's now up to Peter to make decisions."
The source of much of Lai Sun's troubles, and the final nail in its
debt-laden coffin, stems from the almost HK$7 billion the company paid
in June 1997 for the Furama Hotel, famous for its revolving
restaurant, when it came up for sale.
At the time, the deal made sense as Lai Sun already owned the
Ritz-Carlton Hotel next door and the two plots could be combined into
a prime office location.
But then the Asian economic crisis struck, the property market
nose-dived and Lai Sun embarked on a painful and drawn-out process of
disposing of its non-core assets to repay its loans.
The fact that Lam finalised the deal without consulting his father has
been a bone of contention between the two of them ever since.
"I wish I had been informed before Peter cut the deal, then I could
have stopped it," Lim said. "An acquisition which drives debt to
dangerous levels is nothing but poor risk management."
At the time, Lim was preparing to board a flight back home from Taipei
after attending the Golden Horse film awards ceremony when agents from
Taiwan's Bureau of Investigation arrested him following accusations
that he offered NT$200 million (HK$44.94 million) in bribes to several
officials of the Taipei County Land Administration Bureau, including
its former director, Chuang Yu-kun, to persuade them to rezone land he
The site was originally slated for farming and industrial use but,
after Lim bought it, officials allocated the land for the new National
Taipei University and he sold it back to Taipei County for more than
NT$890 million, an estimated NT$300 million above market value. Lim
denied any wrongdoing.
"I did nothing wrong. I didn't bribe Chuang, who is only an
acquaintance I met at several banquets," he said.
The court, however, found him guilty on charges of giving bribes and
laundering money through the land deals but reduced his prison
sentence of 38 months by one year.
But Lim's troubles with cash-strapped Lai Sun were far from over. The
HK$7 billion Furama purchase was partly funded by two convertible
issues for HK$265 million.
However, the downturn in the property market forced Lai Sun to take a
multibillion-dollar loss when it sold 65 per cent of its stake in the
hotel to CapitaLand for HK$1.88 billion in March 2000.
Under the deal, a joint venture called the Bayshore Development Group
was formed between Lai Sun and CapitaLand, Singapore's second-largest
developer, and financial services firm American International Group
(AIG) to construct a HK$4 billion 39-storey commercial office block on
the site. It will be named AIG Tower and is due to open in 2005.
The HK$4 billion investment includes the land premium, construction
costs and interest payments.
Although financing of HK$1.38 billion has already been arranged with
Bank of China, Lai Sun plans to sell Furama Court, a serviced
apartment project in Tsim Sha Tsui, to generate about HK$1 billion and
The company also pockets HK$40 million through its various rental and
hotel businesses. Lai Sun's major assets include Causeway Bay Plaza I
and II and Cheung Sha Wan Plaza.
According to the company's director, Julius Lau, the joint venture
expects to earn more than the Furama's 2000 annual profit of about
It is hard to predict the revenue because hotel and commercial office
operations are totally different. But usually running an office
requires less operational costs, so it can turn a relatively higher
But Lim was running out of patience. Several months ago, he
effectively transferred control of Lai Sun to Lam after selling parent
company Lai Sun Garments' 42.25 per cent stake in the property
developer to his son. Following the reorganisation, Lai Sun's debt
will no longer be consolidated in the holding company's balance sheet.
Still, Lai Sun does have its upside. Since the 1990s, the company has
invested about 20 per cent of its assets into the mainland property
Its first major investment was in 1995 when it developed Hong Kong
Plaza, a 1.03-million-square-foot project on Shanghai's Huaihai Road.
The company also invested in Eastern Place, a 3.24-million-square-foot
development in Guangzhou. To date, Lai Sun's mainland investments
total HK$5.5 billion and cover a gross floor area of 15 million square
Although the first phase of Hong Kong Plaza and Eastern Place have
produced a profit, not every mainland investment has turned out that
In May 2002, media reports revealed that Lim's estranged socialite
daughter, Pearl, and his third wife, were being sued for HK$1 billion
over a loan for a failed residential investment in Shanghai. The loan,
co-signed by Lim, is believed to have been arranged by Hang Seng Bank
and Bank of East Asia and ballooned out of control after a renovation
spending spree by Pearl. According to reports, Lim was willing to put
in an additional HK$240 million in the hope that the two of them could
turn the investment around but Pearl instead asked her father to buy
it back for HK$1 billion. He refused and she accused him of slander.
Lim's family misfortunes also extend to his sons. Lam, his second son,
has been married twice but is better known for a string of
high-profile girlfriends that included Taiwanese actress Joey Wang and
former socialite Nancy Lin, who was reportedly paid a HK$1 million
annual salary while working at Lai Sun. His current girlfriend is
Monica, a Taiwanese model with whom he has a daughter.
Although Lam now controls Lai Sun, he has shown little interest in
running it. Instead, much of his time is spent managing the careers of
movie stars Andy Lau and Tony Leung through Media Asia Group and
tending to his Red Chamber Cigar Divan in the Pedder Building just
above Shanghai Tang.
Lim's eldest son, Lam Kin-ming, is more low-profile but hit the
headlines in 1994 when staff of a Taipei escort agency apparently
knocked him unconscious, videotaped him having sex with a man and then
blackmailed him for HK$1 million. He refused to pay, claiming that no
one would believe he was homosexual given his reputation for
womanising. The blackmailers were subsequently arrested.
Still, Lim can count on his garment empire as one of his success
stories, having earned himself the nickname of "African King" in the
1950s when he exported cheap military uniforms to African countries.
His second wife, U Po-chu, is a 50-year veteran of the garment
manufacturing business and is a non-executive director of Lai Sun
Garment while his first wife, Lai Yuen-fong, to whom he is legally and
officially married, lives a pampered but reclusive life in Beacon
With so many mouths to feed, it is little wonder that Lim only spends
about HK$20 at McDonald's for lunch each day.
Lai Sun plunged almost 12 per cent to close at 3.7 HK cents on Friday.
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