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SCMP Reporter

Singapore's state-linked property company Pidemco Land has agreed to pay Lai Sun Development (LSD) $1.88 billion for a 65 per cent stake in the Furama Hotel in Central.

 The price compares with the $7 billion LSD paid for Furama Hotel Enterprises, whose main asset was the Central hotel, at the height of the property boom in mid-1997.

 Pidemco said yesterday it intended to redevelop the hotel in Connaught Road into a prime office building in conjunction with LSD, which would retain a 35 per cent share.

 The deal places in doubt LSD's $1.9 billion sale to subsidiary Lai Sun Hotels International of the hotel portion of the proposed redeveloped Furama.

 LSD had planned to build an office-hotel-retail tower on the site, with 198 hotel rooms and some retail space to be held by Lai Sun Hotels.

 Lai Sun Hotels immediately paid $964.92 million to LSD for the Furama stake, with the balance due on completion, expected in 2004.

 Critics had charged that the transaction was designed to help bail out LSD, which had been battling debt and liquidity difficulties stemming from the 1997 Furama deal.

 The aggressive purchase was intended to catapult Lai Sun into the first tier of developers but it financially crippled the group when the regional crisis sent the Hong Kong property market into a severe downturn in late 1997.

 In November, LSD reported a $6.83 billion net loss for the year to July last year, believed to be the biggest loss in Hong Kong corporate history.

 The group has sold a string of assets and held a series of rights issues during the past two years in an attempt to bolster its financial position.

 Shares in LSD, group parent Lai Sun Garment and Lai Sun Hotels were suspended from trading yesterday pending an announcement on the Pidemco deal.

 'This acquisition is part of our ongoing strategy to build up a significant presence in gateway cities,' Pidemco managing director Liew Mun Leong said.

 'Our intention is to develop a state-of-the-art office building which is reflective of Hong Kong as a financial hub in North Asia.'  Last September, Pidemco paid $962 million for a residential block at Parkview in Tai Tam.

 It was the largest luxury deal in the SAR of the year.

 It also formed a joint venture with the Hong Kong arm of quantity surveyors Davis Langdon & Seah to look for further investment opportunities.

 Pidemco, part of the Singapore Technologies group, has been expanding aggressively at home and abroad.

 Earlier this week, it signed a deal to buy 24.9 per cent of Singapore's DBS Land for S$966 million.

 It has also been on the lookout for opportunities in London, Tokyo and parts of the United States.

 The Furama site has a land area of 24,427 square feet and is one of a few sites in Central with a 999-year leasehold.

 Mr Liew said: 'This is a superb site.'  Subject to planning approval, Pidemco and LSD will build a 410,000 sq ft grade-A office block on the site.

 The price paid by Pidemco would translate to $7,073 per sq ft should such a building ratio be achieved.

 While planning permission is sought, the 500-room hotel will continue to operate.

 Pidemco will receive an annual rent equating to $145 million in the interim, providing a 5 per cent net yield on its investment.



Lai Sun gets $1.88b for Furama