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Old November 23rd, 2007, 12:16 PM   #1
hkskyline
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Ritz-Carlton in line for offices facelift
10 April 2006
Hong Kong Standard







Lai Sun Development may redevelop the Ritz-Carlton as a hotel plus offices project to capitalize on surging office rentals in Central.

"We are studying the possible redevelopment of the Ritz-Carlton Hong Kong site," said chairman Peter Lam in the company's interim result statement Friday.

"Given the strong demand for prime office premises and the dearth of new supply in Central, prime office rentals in Central are likely to remain firm and could increase further," he added.

Lam cited the adjacent AIG Tower, which has achieved rents above HK$90 per square foot a month in tenancies signed up last year. Lai Sun has a 10 percent interest in the tower.

Lai Sun Development expects the current Ritz-Carlton site of about 15,000 square feet to provide not less than 225,000 sq ft of office space under current building regulations, which will not require paying any land premium or modifying the land lease with the government.

Ritz-Carlton Hong Kong, which is 65 percent owned by Lai Sun Development, has achieved an occupancy rate of 93 percent with rising room rates during the six months ending January 31, 2006.

Lai Sun swung back to a profit of HK$231 million for the six months ending 31 January 2006 from a loss of HK$1.17 billion in a year ago, thanks to the HK$178 million gain from revaluation of investment properties.

Rents for top-grade office space leaped 45 percent to the current average of HK$460 per sq ft per month from 2004, and very little new space is expected to come on to the market in the medium term.

As a result, rents for prime office space in the central business district are expected to jump a further 20 percent this year, according to real estate consultancy CB Richard Ellis.

The present average vacancy rate at such properties is at a rock-bottom 4.8 percent, said CB Richard Ellis.

Kenny Tang, associate director at Tung Tai Securities, said: "The site [of Ritz-Carlton] has great redevelopment value as the market estimates the supply of grade A office [space] in the near future will be scarce, and demand for grade A offices will climb due to the buoyant economy.

"The proposed office-hotel complex will be a very valuable asset that may be separately listed in the form of a REIT [Real Estate Investment Trust]. That will help boost Lai Sun's share price."

Lai Sun Development had once accumulated debts amounting to HK$10 billion after paying a record HK$6.8 billion for a 65 percent stake in the former Furama Hotel _ which was later developed into AIG Tower _ before the Asian financial crisis and the subsequent Hong Kong property market crash of 1997. But a turnaround in rentals has helped the company reverse its fortunes and its shares have so far surged almost 140 percent this year, closing at HK$0.385 Friday.

The Ritz-Carlton first signed a yearly management contract with Lai Sun to operate the Central property in 1993. It is up for renewal in the second half of the year.

Sources in the local property market do not expect the lease to be renewed this year.
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Old November 23rd, 2007, 12:17 PM   #2
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Lai Sun decides an office is better than the Ritz-Carlton
4 November 2006
South China Morning Post

Lai Sun Development will replace the five-star Ritz-Carlton hotel on the Central waterfront with an office block in a bid to boost its returns from the prime site.

"We have considered a number of options and [decided] to redevelop it as a class A office building," said executive director Ambrose Cheung.

"We reckon it is the best option to realise the value of such a prime site."

With design work already under way, building should start in about 18 months, with completion set for about 2010.

Based on a plot ratio of 15, the 15,000 square foot site is big enough to allow construction of at least 225,000 sqft of office space.

The project's cost should be HK$450 million, according to property consultants.

Mr Cheung said Lai Sun considered converting part of the hotel into offices but decided the total return would not match that provided by offices alone.

The company will not need to pay any compensation to Ritz-Carlton which has only a management contract on the hotel. Under a revised deal, the contract is now subject to renewal every six months.

The redevelopment will not cost Ritz-Carlton its presence in Hong Kong since the company already plans to open a 300-room hotel in 2009 in the International Commerce Centre being developed by Sun Hung Kai Properties on top of Kowloon Station.

Lai Sun is betting that demand for office space in Central will remain robust for some years.

With demand strong and little new space coming on the market, that seems a reasonable gamble, analysts said.

According to consultant CB Richard Ellis, average rentals for top quality space in Central rose 8 per cent in the third quarter from the second.

At the AIG Tower, next to the Ritz-Carlton, rents for whole floors exceed HK$100 per square foot, said Simon Wong, an associate director of research at CB Richard Ellis.

"Assuming that the demand remains strong, the proposed Ritz-Carlton will be well-received by multinational corporations," he said.

Lai Sun's 65 per cent-owned Diamond String bought the Ritz-Carlton building for about HK$1.12 billion in 1993.
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Old November 23rd, 2007, 12:18 PM   #3
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China Construction Bank, Lai Sun Development In HK Ppty JV
8 November 2007

HONG KONG (Dow Jones)-- China Construction Bank Corp. (0939.HK) will pay HK$1.37 billion for a 40% stake in a Hong Kong hotel property, which it plans to redevelop into an office building with Lai Sun Development Co. (0488.HK), the developer said.

Lai Sun Development will hold 60% of the venture after selling China Construction Bank a 16.57% stake in the hotel, Ritz-Carlton Hong Kong, for HK$567 million, the Hong Kong-listed developer said in a statement late Thursday.

The statement said the hotel's other three shareholders have agreed to sell their combined 23.43% stake in the property to China Construction Bank for HK$802 million.

Lai Sun Development said it expects the transactions to be completed before Dec. 17.

China Construction Bank officials couldn't immediately be reached for comment.

The developer said the hotel will be closed by the end of January and it expects the redevelopment of the property, at an estimated cost of HK$800 million, to be completed in 2011.

The planned office building will have an estimated developable area of 225,000 square feet, the company said.
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Old November 23rd, 2007, 07:20 PM   #4
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Good news.
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Old November 23rd, 2007, 07:25 PM   #5
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Well... I guess Central is changing ONCE AGAIN! Good news... but not so much for Ritz-Carlton though...

Does anyone know if they're going to have a hotel on HK Island again?
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Old November 23rd, 2007, 07:32 PM   #6
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Quote:
Originally Posted by raymond_tung88 View Post
Well... I guess Central is changing ONCE AGAIN! Good news... but not so much for Ritz-Carlton though...

Does anyone know if they're going to have a hotel on HK Island again?
Not on HK Island no, the Ritz-Carlton will be relocating to the top 14 (?) floors of ICC.

Shame, I like that building...
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Old November 24th, 2007, 03:08 AM   #7
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225,000 square feet isn't a lot is it?

How many floors would that translate to?
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Old November 24th, 2007, 05:06 AM   #8
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Quote:
Originally Posted by spicytimothy View Post
225,000 square feet isn't a lot is it?

How many floors would that translate to?
For comparison :
One ifc was completed in 1998 and comprises 784,000 sq ft set over 39 floors. By attracting such internationally renowned financial institutions, One ifc has already set a benchmark for the continuing success of International Finance Centre as a business destination. 5,000 people are currently accommodated within One ifc.

http://www.ifc.com.hk/english/onetwo.aspx
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Old November 24th, 2007, 05:08 AM   #9
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Woo! Assuming similar ceiling heights as 1IFC....... 11 floors! But the floor plates must be smaller... the plot of land that the Ritz is on is probably smaller than 1IFC... so likely a higher number of floors. I expect the same height as the current Ritz.
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Old November 24th, 2007, 02:35 PM   #10
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Wow AIG looks great.
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Old December 6th, 2007, 02:34 AM   #11
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I don't want the Ritz-Carlton Hotel demolished. It is WAY too young. Why not convert the building into offices?
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Old December 6th, 2007, 12:50 PM   #12
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Honey, it is too small. It's all about size (in this case). Read the article.
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Old December 6th, 2007, 02:54 PM   #13
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I don't want this redevelopment to go forward. If this gets demolished, I'll accuse the demolition company of murder.
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Old December 7th, 2007, 02:07 AM   #14
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You can go ahead and accuse them of murder, try to get someone to listen to you though

Anyway, any timeline for the project?
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Old December 7th, 2007, 05:07 AM   #15
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Are you sure that skyscrapers in Hong Kong are supporsed to die young? I do not want the building demolished at age 15. I want this redevelopment project cancelled!

Last edited by Jim856796; December 7th, 2007 at 05:12 AM.
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Old December 7th, 2007, 09:41 AM   #16
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The Ritz is not going to use that building anymore though as they're moving across the harbour to Union Square. However, given the floorplates, it's very difficult to convert it into a modern top-grade office building that fit today's standards. Unfortunately this one is going to die young, although the likelihood of such an instance happening again in Central is not so big. A lot of the other redevelopments that resulted in skyscrapers like Bank of China, Cheung Kong, and The Centre, arose out of demolishing much older buildings.
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Old December 7th, 2007, 02:40 PM   #17
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The current site of the Ritz-Carlton is too small for an office building. This hotel should have been built in the late 1970s for Leningrad's sake! There should be a law stating that if a building has lived a full life, its age must be at least the same number as it floor count. That's why I've decided to create a Voluntarily demolished skyscrapers thread. The AIG Tower next door sits on the former site of the Furama Hotel, which has 33 floors, but was 25 when it died. Another example is the Hennessy Centre, which has 41 floors and lived for only 27 years. The former Ritz-Carlton has never lived a full life and now it never will. In case the office building proposal gets cancelled, it should be converted into residential use.
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Old December 7th, 2007, 05:57 PM   #18
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Quote:
Originally Posted by Jim856796 View Post
The current site of the Ritz-Carlton is too small for an office building. This hotel should have been built in the late 1970s for Leningrad's sake! There should be a law stating that if a building has lived a full life, its age must be at least the same number as it floor count. That's why I've decided to create a Voluntarily demolished skyscrapers thread. The AIG Tower next door sits on the former site of the Furama Hotel, which has 33 floors, but was 25 when it died. Another example is the Hennessy Centre, which has 41 floors and lived for only 27 years. The former Ritz-Carlton has never lived a full life and now it never will. In case the office building proposal gets cancelled, it should be converted into residential use.
The developers are arguing the site is big enough for an office tower, and the location is too good to be used for residentials, which won't bring in enough profits.

A building's 'full' life in Hong Kong is far shorter than elsewhere in the world.
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Old December 7th, 2007, 06:12 PM   #19
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Anyway lets hope they will design an officebuilding that is a good addition to the great skyline as Central is now.
AIG is a fine example of that imo!
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Old January 14th, 2008, 06:22 PM   #20
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Early farewell for a five-star favourite hotel
13 January 2008
South China Morning Post

With just 216 rooms and no ballroom to host major functions, the Ritz-Carlton is one of the smallest five-star hotels in Hong Kong.

Unfortunately, at 6pm on February 1, the hotel will be no more. A victim of the booming market for prime office space, the hotel will close just 15 years after opening - destined, it turned out, to face crisis after crisis.

Owner Lai Sun Development is replacing it with an office tower. The Ritz-Carlton will re-emerge in two years, across the harbour at West Kowloon's International Commerce Centre (ICC), and in Macau.

"The purpose of the closure is economics," Mr Lettenbichler said. "The hotel was not supposed to close until the end of 2009, when it moves to Kowloon. But with the interest in office space, investors looked at the site and saw the business model and the money that can be made by making it an office tower.

"In Central throughout the years, we've seen the Hilton go, the Furama and now the Ritz-Carlton. Yes, there seems to be a little bit of a void in hotel rooms in Central. But I think economics and business sense have taken over as far as office space goes, which is unfortunate. But that's the reality of today."

When Mr Lettenbichler took over the reins at the hotel in September 1998, its future was already uncertain.

"There was a lot of scepticism in the market," he said. "I know when I arrived, everyone was saying the hotel was going to close tomorrow or be torn down tomorrow. Many rumours in the community started when the hotel was to open but was delayed.

"I told the ladies and gentlemen of the hotel to concentrate on what we can control and not worry about what's being said in the market, or we'll go crazy every day. That's what we did."

In July 1991, Ginzu Golf Service, the Tokyo-based real estate company that owned the hotel, collapsed and went into receivership. This sparked speculation that the hotel would be sold off. After wrangling over the price - with figures around HK$1.6 billion cited at one stage - Diamond String, a Lai Sun-led consortium, agreed in May1993 to buy it for almost HK$1.2 billion.

As the guests started coming, Hong Kong was hit by the Asian financial crisis, then flak from the September 11 attacks and Sars.

"I remember that evening of September 11 because we had a reception at the presidential suite for our top customers, as well as people from the US consulate," Mr Lettenbichler said.

As the hotel prepares to close, almost all the staff have found jobs with Ritz-Carlton elsewhere, particularly on the mainland, or with other hotels.

Mr Lettenbichler will oversee the opening of new Ritz-Carlton hotels. The ICC development will see the Ritz-Carlton occupy the top 16 floors of the tower with about 300 rooms. The signature restaurant Shanghai Shanghai, however, will move to another location in Central.

The hotel will auction off about 250 items including artwork and chandeliers in the week of February 11. In Macau, the new hotel will be at the Macau Studio City development.
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