Sogo parent Lifestyle International to bet HK$14bn on a revival in Hong Kong retail sector

Sogo department store operator Lifestyle International’s decision to splash out HK$7.4 billion for a plot of land in Kowloon on which to build a massive shopping complex comes at a time when the city’s beleaguered retail landscape see initial signs of stabilisation.

The iconic mall owner agreed to pay the highest price for a government commercial site in history, even after it reported in August a 49.9 per cent interim profit plunge to HK$587 million amid dwindling tourist arrivals and lukewarm domestic demand.

“Besides Sogo department store, we will also bring in other commercial, entertainment and dining facilities in the proposed development,” said Terry Poon Fuk-chuen, chief financial officer of Lifestyle, without disclosing the total investment cost.

But experts estimated that together with construction costs and interest expenses, the development could end up costing up to HK$14 billion.

“Lifestyle had been understood to be searching for a site in Kowloon for a while, but that they were happy to pay such a huge sum did catch us by surprise,” said Mariana Kou, head of Hong Kong consumer research with CLSA. “It will be interesting to see how it is going to settle financing costs with rising debt levels.”

The East Kowloon site is designated for an iconic twin-tower project in what the city government hopes will become the second central business district, featuring high rises office blocks as well as residential quarters.