Sogo building sale to Far Eastern Group confirmed

The Pacific Construction Co (太平洋建設) confirmed yesterday that it sold the Pacific Sogo Department Stores' Chunghsiao East Road building for NT$4.6 billion to the Far Eastern Group (遠東集團) late last week. Far Eastern is the current operator of the department store chain, and the sale winds up a battle between the two companies over the facility.

"We decided to sell the property due to financial difficulties," Shen Pei-ling (沈沛霖), spokesman for Pacific Construction, said yesterday. "The selling price is based on an average figure decided by assessors from both companies."

Although Far Eastern now owns the 16,000-ping building, Shen said the group will take over rental payments to the landlord of the property, the Liukung Farmland Irrigation Association (塯公水利會). Shen refused to reveal the land rental price.

Pacific Sogo's vice president, Lee Kuang-rong (李光榮), confirmed the deal yesterday but refused to elaborate, saying a press release would be out soon.

Pacific Construction went into debt early last year after continued declines in its construction business. It sold over half of its shares in the five outlet Pacific Sogo Department Store (太平洋崇光百貨) -- a cash cow that generated NT$28 billion in 2001 and NT$27 billion last year -- to the Far Eastern Group last October for NT$2.5 billion. Pacific Construction retains a 12 percent share in Sogo.

Sogo's Chunghsiao East Road flagship store generates the highest revenues among all Pacific Sogo branches, with NT$15 billion per year in sales, 60 percent of Sogo's total revenue.

The move made the Far Eastern Group, owner of nine Far Eastern Department Stores (遠東百貨), the largest department-store operator in Taiwan, surpassing Shin Kong Mitsukoshi Department Store (新光三越), which operates 10 stores.

Far Eastern now has a total of 16 stores.

Late last year Far Eastern allegedly stopped paying rent on the Chunghsiao East Road Sogo facility, which amounts to NT$600 million per month, in an apparent attempt to force Pacific Construction to sell, Shen said. The failure to pay rent was solved last Friday, Shen added.

A market watcher said the deal will help Far Eastern Group better integrate its department-store business.

"The merger of Sogo [with Far Eastern] will help renew Far Eastern Department Stores' seemingly outdated image," an associate manager at Marbo Securities Consultant Co (萬寶證券) said yesterday.

As of June 22, Far Eastern Department Stores's sales dropped by 5 percent,or NT$35 million, from the same period of last year, the company said in a statement to the Taiwan Stock Exchange Corp yesterday.