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American International Group (AIG), Singapore developer CapitaLand and Lai Sun Development unveiled details yesterday of their HK$4 billion plan to redevelop the Furama Hotel in Central into a 39-storey office tower.

AIG senior vice-chairman and co-chief operating officer Edmund Tse Sze-wing said the grade-A AIG Tower would be the group's Hong Kong headquarters when completed by 2005.

'The prime location in the heart of Hong Kong's business district in Central has special significance for AIG because it was also the location of our first office in Hong Kong in the 1930s,' he said.

The land value, construction cost and interest charges together were estimated to be more than HK$4 billion. Bank of China would arrange a HK$1.4 billion loan.

AIG and CapitaLand will each hold a 35 per cent stake and act as project managers while Lai Sun will own the remaining 30 per cent.

AIG Tower was designed by Skidmore, Owings and Merrill, which designed the Hong Kong Convention and Exhibition Centre. The building, facing the harbour at 1 Connaught Road, Central, is modelled on the sail of a junk to reflect Hong Kong's trading-port heritage.

AIG Global Real Estate Investment managing director Mark Fogle said the group was leasing more than one million square feet of office space in separate buildings in Hong Kong.

He said the group had not yet decided on the amount of space it was going to occupy after AIG Tower was completed.

'When we planned AIG Tower, we never looked at cost saving. It will be a pure investment for us to make profit,' he said.

He said rentals for grade-A office buildings in Central ranged from HK$30 to HK$35 per square foot per month but declined to predict what market rentals might be when AIG Tower was completed by 2005.

CapitaLand vice-president Cheng Shin-how said he believed the tower, providing a total area of 450,000 square feet, could generate a satisfactory return.

He said part of AIG Tower would be pre-leased in 2004 and was not concerned about the demand.

'Our partner [AIG] will take up a substantial portion. There will be no new office supply in core Central during 2004 and the first half of 2005,' he said.

Lai Sun director Julius Lau Shu-yan said the former Furama Hotel operation had generated annual income of about HK$150 million. He said the return from AIG Tower should be higher.

'AIG Tower could achieve the highest rentals in Central, taking International Finance Centre and Chater House as references,' he said.

He said Lai Sun would be able to finance the redevelopment from its annual rental income of about HK$400 million and an estimated HK$1 billion proceeds raised from selling a serviced apartment project in Tsim Sha Tsui this year.

Lai Sun paid about HK$7 billion to acquire Furama Hotel Enterprises, which owned the Central site and some other hotel operations, in mid-1997.



AIG Tower plan for hotel site sails into public view