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Sogo operator takes 50pc of Suzhou mixed development in tandem with state enterprises

Sogo department store operator Lifestyle International Holdings plans to take a 50 per cent stake in a proposed US$100 million Suzhou shopping centre and office project to be developed with the local government.

It agreed to set up a joint venture with two government-owned firms to develop the shopping centre on a 53,192 square metre site and the office building on a 13,843 square metre plot.

Lifestyle  said the shareholding was still being finalised.

Chief financial officer Terry Poon Fuk-chuen said Lifestyle  planned to own about half of the development and 100 per cent of the mall's operation.

Lifestyle said it would  finance the deal with  internal resources.

Mr Poon said construction on the project, which the company intends to eventually  own entirely, should start 'soon'.  The mall is due to be open in the fourth quarter of 2008.

However, analysts warned that the deal would negatively affect the retailer's earnings because the mall, in an industrial park east of Suzhou city centre, is not in a prime location.

After the  announcement, the company's share price, which has risen 65.5 per cent so far this year,  inched up 0.45 per cent to HK$17.88.

The Suzhou development is part of  Lifestyle's plan to open three high-end shopping centres in the mainland  in the next four or five years.

Mr Poon said that it was looking at sites in Beijing, Guangzhou, Hangzhou and Shenyang.

The company  has a similar strategy for its Suzhou mall, and for its Jiuguang store in Shanghai, in which it owns a 65 per cent operating stake and a 50 per cent property holding.

It plans to raise these stakes to  100 per cent.

The company said the Jiuguang store, which posted 52.5 per cent rise in same-store sales in the first half, would become its earnings driver.

Jiuguang made a net loss of  about HK$10 million in the first half.

'We expect Jiuguang to break even this year,'  Mr Poon said.

Lifestyle's net profit rose 30 per cent to HK$305.37 million for the six months  ended June.

Turnover gained 22.1 per cent to HK$1.18 billion.

Its main store in Causeway Bay contributed 82.5 per cent of   revenue while  Tsim Sha Tsui Sogo, which opened in September last year, accounted for 7.5 per cent of  sales.

Managing director Thomas Lau Luen-hung, who in September was found guilty of dealing in Asia Orient Holdings shares using insider information, last week pleaded with the Insider Dealing Tribunal to let him stay on to run Lifestyle, arguing that his departure would seriously affect its operations.



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Lifestyle International Holdings

Lifestyle in US$100m venture