Lai Sun to spend HK$600m on hotel-to-office project

PUBLISHED : Saturday, 23 December, 2006, 12:00am
UPDATED : Saturday, 23 December, 2006, 12:00am

Lai Sun Development, which is converting much of its Ritz-Carlton hotel in Central into offices, is to spend a higher than expected HK$600 million on the project.

The medium-sized property company, which owns 65 per cent of the Ritz, said it might also buy the rest of the property from the premise's minority stakeholders.

The redevelopment cost is about 30 per cent more than the HK$450 million estimated by property consultants, who gave the estimate based on a plot ratio of 15, meaning the 15,000 square foot site could house at least 225,000 square feet of grade A office space.

'The rental returns of the new office development will double the site's returns,' Lai Sun chief executive Julius Lau Shu-yan said.

The Hong Kong-listed company had yet to finalise the office development plan with the premises' minority stakeholders, Mr Lau said.

'We will study buying the remaining interests from the minority stakeholders,' said Mr Lau, who would not identify the stakeholders.

Building should start in about 18 months, with completion set for about 2010.

Commenting on the business potential of the office development, Mr Lau said the neighbouring AIG Tower had been fully rented out and was fetching between HK$130 and HK$140 per square foot.

Meanwhile Lai Sun Development's 34.83 per cent-owned eSun Holdings is in negotiations with the Macau government to increase the development area of eSun's 60 per cent-owned Cotai casino-hotel-shopping centre venture to six million square feet, from the previously agreed 3.6 million square feet, according to Ambrose Cheung Wing-sum, an executive director of eSun and Lai Sun.

Hong Kong-listed eSun, which in turn owns 40.8 per cent of Lai Sun, said the total investment cost of the Macau project would be HK$15.5 billion after boosting the development area.

The other 40 per cent of the Macau venture is owned by Silver Point Capital, which is significantly owned by former Las Vegas Sands executive David Friedman, who bought the stake for HK$1.31 billion or HK$900 per square foot.

The project is opposite Las Vegas Sands chairman Sheldon Adelson's US$3.5 billion resort on the Cotai strip, creating head-to-head competition with the United States gaming giant.

Last month, Lai Sun Development sold HK$524 million worth of shares to fund the acquisition of a site in Wan Chai, which Lai Sun and AIG Global Real Estate Investment (Asia) agreed to buy in September, for residential development.

Lai Sun said the total project cost would be about HK$1.5 billion, including the land price of HK$595 million and construction cost of HK$920 million.