Regal plans more for less in Cotai hotel

Poman Lo shows off a model of the Regal Galleria, to open in late 2007

Though some developers are hopeful that the laws of supply and demand will be weak enough in Macau that hotel room rates can rise even as the number of rooms more than triples, Regal Hotels International Holdings is taking a cautious approach.

Hong Kong-listed Regal plans to open a huge complex with three hotels as part of the Cotai Strip project led by United States-based casino operator Las Vegas Sands. The first of the hotels, the 1,690-room Regal Galleria, is to open in late 2007.

''We are designing our hotel with five-star quality and decor,'' said executive director Poman Lo. ''[But] the rates that we will be charging will be comparable to the three- and four-star hotels in Macau today.''

She compared the Galleria's planned furnishings to those of the company's flagship Regal Hongkong Hotel in Causeway Bay, where rates start at HK$1,000.

''For our financial feasibility studies, we have used some very conservative assumptions, [namely] HK$650 per room,'' she said. ''If we are still charging rates that are so reasonable [in 2007], we believe we will grab market share quite easily. We want to make sure this project is a very low-risk, high-return investment for our group.''

According to Macau Hotel Association figures, rooms in hotels rated three stars and above went for HK$596 a night on average in the first five months of the year.

Lo said Regal expects to invest HK$1-1.2 billion on the first phase of its Macau complex, which will include a casino and 100,000 square feet of showroom and theater space to be leased to Las Vegas Sands.

At a projected occupancy rate of 80 percent, on a par with Macau's 2004 average, the Galleria would generate HK$320 million in revenue in its first year. ``We project at least 5 percent growth on an annual basis,'' Lo said.

At this pace, Regal would earn back its cost of construction in four to five years, said Lo. That's half the time it takes for a hotel in Hong Kong to pay off, which she attributes to expected land costs in Macau amounting to a tiny fraction of those here.

Another factor will be Regal's ability to control building costs.

Regal will make use of affiliated contractor Chatwin Engineering and probably prefabricate external wall sections and room elements in mainland China, as it does on some Hong Kong projects.

The second phase of the project, which Lo expects to open by 2010, would include the all-suites Regal Palace Hotel, with 550 units, most between 700 and 1,000 sq ft, and the 1,660-room Regal Forum hotel, which Lo compared in quality to the Regal Kowloon Hotel in Tsim Sha Tsui East.

The three hotels will be built in congruent towers, coming together like three sides of an octagon but with Romanesque features that Lo admits echo the Caesars Palace casino resort in Las Vegas.

At the top of the towers will be huge apartment-like ``villas'' for VIP guests. The towers may also include standard apartments for rent or sale. The complex will include a 465,000 sq ft Roman-themed shopping mall.

Lo expects Phase II to generate HK$400-500 million in annual revenue initially and cost HK$1-1.3 billion.

The three linked hotels will enable Regal to consolidate most operational functions.

``We believe that due to the economies of scale, our profit margin will be as high if not even higher than our profit margins in Hong Kong,'' she said.

Regal posted a gross operating profit margin of 45 percent last year, which Lo said is 10-15 percentage points more than the market average and due to its ability to spread costs over more rooms in Hong Kong than any other hotelier. - by Zach Colman     THE STANDARD      15 July 2005

Paliburg to buy control of Beijing project
Boby Tsui photo
Lo Yuk-sui with his daughter Poman at Monday's profits announcement.
Paliburg Holdings plans to buy control of a multibillion-yuan hotel-office-retail-residential complex in Beijing from its mainland partners.

The company, which now owns 23 percent of the project in the Chaoyang central business district, plans to buy a majority interest, said chairman Lo Yuk-sui.

"Eventually we hope to fully own the project as the Beijing market still has good potential in light of the 2008 Olympic Games,'' he said.

Lo declined to disclose the project's cost, saying only it would cost more than associate Regal Hotels International's HK$2.5 billion hotel joint venture in Macau.

The Beijing site has been vacant for 10 years. The municipal government recently granted permission for a comprehensive project with potential gross floor area of 4.63 million square feet, embracing offices, shopping malls, residential units and a hotel. Lo expects to have to pay a land premium for the project.

After provisions, the book value of the company's 23 percent stake in the project was HK$56 million. ``A writeback is likely for the project in future,'' Lo said.

Century City International, Paliburg's parent, earned HK$803 million in 2004, up 93.8 percent from HK$414 million in 2003.

Paliburg's net profit jumped 33.3 percent to HK$517 million from HK$388 million.

A writeback of provision of HK$220 million for its 70 percent-owned Regalia Bay luxury development in Stanley helped lift Regal Hotels' net profit 190 percent to HK$603 million from HK$208 million.

Regal declared a final dividend of 0.5 HK cent, the first of the three firms to declare a dividend since 1998.

It expects to rake in as much as HK$3 billion from the sale of the remaining 38 houses in Regalia Bay. It sold 101 homes in the project for HK$4.8 billion.

Lo said he hoped Century City and Paliburg can resume dividend payment in 2005 after the completion of debt restructuring last year.

The group has temporarily scrapped plans to spin off its construction business. It said it has no need for an additional listed firm after the restructuring. - by Raymond Wang       THE STANDARD   12 Apr 2005

Paliburg looking to buy property

Debt-laden Paliburg Holdings is still on the lookout for investment opportunities in Hong Kong's property market.

Speaking after a weekend shareholders' meeting, chairman Lo Yuk-sui said a debt-restructuring plan had been completed and, after the sale of properties in Wan Chai and the United States, all of the group's debts would be paid off.

He said Paliburg was now looking at investment opportunities in the property market and other high growth industries.

The developer has faced hefty losses and been mired in debt since 1998 when the Asian financial crisis halved real-estate prices. The ongoing slump took prices to 65 per cent below their pre-1997 peak.

Despite the slump, Lo said construction costs had dropped and property investments could still have good returns.

Under Paliburg's proposed debt restructuring plan, approved in January, the developer was to transfer its 100 per cent interest in Paliburg Plaza and Kowloon City Plaza to its creditors to cancel HK$4.86 billion in debts. Paliburg also planned to buy a Lo family-owned private company - Venture Perfect Investments - which has HK$70 million in cash and has a 50 per cent stake in building security and intelligence systems provider Leading Technology Holdings.

The purchase will cost Paliburg between HK$345 million and HK$475 million, to be settled by issuing convertible preference shares at 10 cents each.

Paliburg recorded a HK$230 million net interim loss for the six months ended June last year, slightly lower than the net loss of HK$258.2 million for the same period the previous year.

In November last year, Regal Hotels International proposed issuing 310 million new shares to its parent, Paliburg, to raise net proceeds of HK$19.9 million.

Paliburg, in turn, agreed to place 155 million Regal shares at 6.5 HK cents each to institutional and individual investors.

After the share subscription, Paliburg's interest in Regal will fall to 74.91 per cent from 79.31 per cent.

Looking at the Regal Hotels business, Lo said the first phase of the Wong Ma Kok Road project in Stanley had applied for an occupation permit, and the sales would start in the mid-year.

Regal Hotels has a 70 per cent stake in the Wong Ma Kok Road project, with the rest owned by China Overseas Land and Investment. To address the debt problems, Lo said Regal Hotels might dispose of some hotels if the offer prices were good.  - HK Standard     17 February 2003 

Deals raise Lo's stake in debt-ridden firms

Debt-ridden Paliburg Holdings and parent Century City International Holdings say they have completed earlier acquisition and share swap agreements, which may tighten the grip of chairman Lo Yuk-sui over the companies.

The deals could raise Lo and his associates' stake in Century City to 73.5 per cent from 50.9 per cent or give them a 47.5 per cent stake in Paliburg, depending on the final holder of 13.8 billion exchangeable shares in a special unit and the full conversion of 3.45 billion exchangeable shares in Paliburg.

In any case, public shareholdings will be diluted to 10.5 per cent from 48.7 per cent in Century City and to 16.3 per cent from 40.6 per cent in Paliburg.

Property developer Paliburg and Century City have been mired in hefty losses and debts since 1998 as the Asian financial crisis halved real estate prices and the ongoing slump took prices to 65 per cent less than their pre-1997 peak.

Shares of Paliburg have shrunk to just one-hundredth of their high of HK$6.50 in 1998 to close at 7 cents on Tuesday.

``Century City is progressing on the discussions with its financial creditors on the debt restructuring proposals of the Century City group,'' the companies said in a joint announcement, without elaboration.

With the completion of the acquisition, the control of Venture Perfect Investments (VPI), which holds 50 per cent in Leading Technology Group and about HK$70 million cash, has been shifted to Paliburg from Lo.

VPI will lend about HK$10 million to Paliburg group to buy 155 million shares in subsidiary Regal Hotels International Holdings under the top-up placing proposal announced in November. However, the possible placing of VPI new shares had not been carried out, the companies said.

To settle the purchase, Paliburg has issued 3.45 billion convertible preference shares at 10 cents each to the companies majority owned by Lo, and these have been swapped for 13.8 billion exchangeable shares in a special unit wholly owned by Century City.

Lo and his associates will get a 47.5 per cent stake in Paliburg if they exercise the exchange rights, while Century City also has the right to acquire those exchangeable shares provided that it will issue the same number of its own new shares to the holders.

Under an earlier announced debt restructuring plan, Paliburg would sell its 40 per cent stake in its Stanley project to Regal for HK$470 million in shares. This would increase Regal's share in the Stanley development project from 30 per cent to 70 per cent.   - Hong Kong Standard         1 January 2003 

Debt-laden Paliburg Holdings says its major bondholders are in favour of a proposed debt restructuring plan under which the property developer will transfer its 100 per cent interests in Paliburg Plaza and Kowloon City Plaza to them to cancel HK$4.86 billion in debts.

A joint statement by Century City International, Paliburg and Regal Hotels International said the market value of Paliburg's interests in Paliburg Plaza in Causeway Bay and Kowloon City Plaza was estimated at about HK$650 million and HK$1.83 billion, respectively, at the end of May.

The two properties were mortgaged to secure a securitisation loan with a principal amount outstanding of HK$1.217 billion.

Upon completion of the debt restructuring plan, its exchangeable bonds of HK$1.29 billion and convertible bonds of HK$2.35 billion will be cancelled in addition to the securitised loan of HK$1.217 billion.

The companies said Paliburg's debts would be reduced by HK$4.86 billion as a result of the completion of the debt restructuring plan, which will reduce its future interest cost burden.

Paliburg will also sell its 40 per cent stake in its Stanley project to its subsidiary Regal Holdings for HK$470 million in shares, and acquire its chairman's personal investment in building security technology business.

This would increase Regal's shareholding in the 571,848 sq ft property development project in Stanley from 30 per cent to 70 per cent.

After the issue of about 1.958 billion new Regal shares to Paliburg at 24 cents apiece for the purchase, representing a 196.3 per cent premium over its closing price of 8.1 cents on Friday, the public float of Regal's ordinary shares will drop to 20.6 per cent.

Regal is 72.75 per cent owned by Paliburg, which is in turn 59.22 per cent owned by Century City.

The three listed companies are all controlled by Lo Yuk-sui.

Paliburg will acquire a 50 per cent stake in Leading Technology and HK$70 million from Lo Yuk-sui and his family for HK$345 million to HK$475 million by issuing between 34,500 and 47,500 convertible preference shares.

If converted into Paliburg ordinary shares, the new shares will represent between 59.8 per cent and 67.2 per cent of the enlarged share capital.

Century City's 59.2 per cent stake in Paliburg will be diluted to 19.4 per cent while Lo Yui-sui and his family's direct holding will rise from 0.2 per cent to 48.8 per cent if 47,500 preference shares are converted.

Paliburg also proposes to reduce the nominal value of all its issued and unissued shares from HK$1 to one cent. Regal is similarly proposing to reduce its shares' nominal value from ten cents to one cent.   -   The Standard    5 August 2002 


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