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Bank bolsters bid for old Bund office

HONGKONG Bank held its first board meeting in Shanghai yesterday - its first outside Hong Kong in 129 years - lending weight to its proposed bid to reoccupy the old headquarters on the Bund.

The meeting came as directors learnt that the Shanghai municipal government had sweetened the tender by allowing successful bidders to sub-let the large building on the western bank of the Huangpu River.

'I haven't seen the tender documents, but my understanding is that anyone who leases one of the main buildings [in Shanghai] will have the right to sub-let,' said Anthony Russell, head of the bank's China operations.

Although it claims to be the most active and profitable international bank in China, Hongkong Bank does not have a big enough operation yet to justify the use of the entire 16,500 sq metre building.

'It's too big. We can't occupy the entire building initially. But we hope, as our operations increase, we may be able to do so at a later stage,' said Mr Russell.

'What the Shanghai government is really concerned about is that the end-users really want to use the buildings themselves, and not for speculative development.' That removes a key concern among prospective bidders, who are keen to build up a substantial long-term presence in Shanghai but whose current operations are not big enough to justify the colossal investment in these old buildings.

The old Hongkong Bank headquarters - now the seat of the municipal government - is one of 37 historical buildings constructed by the British and French in the 1920s and 1930s, lining the Bund, and earmarked to be leased out.

Former tenants, 220 foreign firms which were mostly banks, were booted out by the communists in 1949.

Hongkong Bank was, however, allowed to remain, although it was relocated to an inconspicuous site.

Bank chairman John Gray said: 'In Shanghai, we never closed our branch, except when we were forced to, briefly, during World War II.' But, as Shanghai seeks to reassert itself as the country's financial centre, Hongkong Bank is hoping to re-emerge as China's premier international bank through its bid to become again the main tenant of the old headquarters.

'It would be a significant investment and would certainly make an impressive office for us,' said Mr Gray.

Estimates for a 50 to 70 year lease for the building were said to be as high as US$150 million. The investment would be higher if extensive renovation was made to modernise the building without altering the original facade.

Bank officials are reluctant to estimate the size of the investment, saying that this would depend on the competition.

Although there had been reports of other British, Taiwanese and domestic interests in the building, Hongkong Bank was seen to be the only serious contender.

Analysts said a successful bid by the bank would strengthen its moves to expand business in the area.

Sam Crispin, Brooke Hillier Parker's China business development officer, said: 'By investing in such a building, it could improve its [the bank's] business prospects considerably.' Hongkong Bank has five branches and four representative offices in China.

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