Lai Sun Garment International is restructuring by bringing a huge Shanghai property project into its mainland property arm, Lai Fung Holdings, and taking on the financing of the $1 billion redevelopment of the Crocodile Building. The moves are aimed at making the group more business-focused and at the same time unlocking value in its local and mainland property investments, said a source. Lai Sun, its 45 per cent-owned Lai Fung and its 55 per cent-owned Crocodile Garments were all suspended from trading yesterday pending more details of the restructuring. Their shares were all up, at 77 cents, 39 cents and 64 cents respectively, before trading was halted. Lai Sun's 95 per cent stake in the Shanghai development will be put into Lai Fung. Located at the junction of Da Tong Road and Zhi Jiang Xi Road in the Zhabei district of the city, it is a 22,036 square metre mixed-use site which is being turned into a residential and commercial complex with a gross floor area of 133,000 square metres due for completion in 2008. Lai Fung announced it would issue new shares to cover the acquisition costs. The company has $493 million cash in hand, a rental income of $155 million in the current financial year and gearing of only 11.7 per cent. Kevin Yim, an analyst from SHK Financial, said as Lai Sun was only receiving new shares, it would need to arrange its own financing for local property projects such as the Crocodile Building redevelopment. 'It can raise money by leveraging its China property investments, given that the market sentiment towards mainland property stocks is favourable,' said Mr Yim. Sources said Lai Sun would shoulder the development cost and the land premium of $274 million for turning the 10-storey Crocodile Building factory into a $1 billion commercial complex with a shopping centre by 2009. The gross floor area for the new building on Hoi Yuen Road in Kwun Tong is expected to total 240,000 square feet.
