PIDEMCO Land says American International Group (AIG) will join it in a

$1.88-billion bid for a stake in the Hong Kong waterfront property

owned by Lai Sun Development.

The government-owned property company and AIG would each hold 50 per

cent in the joint-venture, which would acquire a 65-per-cent interest

in the site, occupied by the Furama Hotel.

A week ago Pidemco said it was planning to redevelop the site into a

prime office building targeted at the financial services industry.

It said AIG planned to set up its regional headquarters for insurance

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and financial services division in the new building by taking up to

about one-third of the office space.

A Lai Sun Development deal to sell a controlling stake in the Furama

Hotel to Pidemco Land values the Hong Kong island property at $3

billion.

In a statement, Lai Sun said its carrying value for the Furama was

about $3.5 billion, a massive discount compared to the $6.7 billion

price tag paid by the local developer in 1997.

Under the agreement, Lai Sun will lease the hotel site from Pidemco at

a fixed rental of $145 million a year and continue to operate it for

up to three years from the date the sale is completed. This is

expected to be no later than July 31.

Pidemco, the largest owner of commercial properties in Singapore, said

the price paid for the 24,427 square foot, 999-year leasehold site

translated to about $7073/sq ft.

The site has an approved buildable gross floor area of 366,405sq ft

but a potential of up to 410,000sq ft.

However, an analyst with a US brokerage house said the office market

was experiencing a structural change from capital appreciation based

upon speculative investing to capital appreciation dependent on the

fundamentals of rental growth.

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