Palace's value now in pieces

UP CLOSE

As gold price soars, builder of hall is cashing in by taking it apart

July 09, 2008|By The Wall Street Journal

HONG KONG - At $800 an ounce, the golden bathroom sink had to go. At $1,000, say goodbye to the golden horse-drawn chariot. But don't even think about touching the golden toilet.

Global economic uncertainty over the past few years has pushed gold prices into the stratosphere, and few people have felt that rise as much as Hong Kong entrepreneur Lam Sai-wing. He has spent the past decade constructing a palace of gold, decked out in six tons of the precious metal. In recent years, the palace has become an attraction mainland Chinese tour groups couldn't miss, and a boon for Lam's retail jewelry business, Hong Kong-listed Hang Fung Gold Technology.

Since gold prices hit four-digit territory earlier this year, Lam has been taking apart his hall of gold as quickly as he once raced to construct it. He is melting down golden chandeliers, armchairs and armored knights and selling gold by the ton to fuel growth plans that include hundreds of new retail outlets in mainland China. But even with the sell-off, one thing is certain: The toilet stays.

"I don't care if gold hits $10,000 an ounce," Lam says. "I'm not melting it down."

As far as Lam is concerned, the golden toilet is more than a Guinness World Record-certified, 24-karat, fully functional flushable throne.

Lam, a former goldsmith, came up with the toilet gimmick in 2001 as he was pushing his jewelry-manufacturing business into a fierce retail market. The come-on worked so well that he quickly added ton after ton to his glittering hall. At its peak, Lam's collection included a golden king-size bed, a 5-foot-8-inch-tall traditional Chinese statue of the "Guan Yin" goddess of compassion, and the 12 animals of the Chinese zodiac. He named his 7,000-square-foot display the Swisshorn Gold Palace.

As a boy growing up in Cultural Revolution-era China, Lam, now 53 years old, was obsessed with gold. He says he found himself transfixed with one sentence in Vladimir Lenin's writing: "When we are victorious on a world scale, I think we shall use gold for the purpose of building public lavatories in the streets of some of the largest cities of the world."

Lenin's words alluded to a socialist utopia with no need for money, but Lam read them as an indictment of the poverty-stricken existence he found himself in. He rarely had meat to eat, and after he turned 7, Lam struggled to help his single mother and six siblings sell bananas and peanuts.

"Life, it was tough," Lam said in a recent interview in his gold-bedecked office, decorated with golden pillars and statuary.

At age 22, Lam escaped from his impoverished hometown of Chaozhou, fleeing by foot for nearly a month before swimming across a river to Hong Kong, he recalls. When he arrived, Lam looked up some relatives and got himself an apprenticeship as a goldsmith. He soon set up a small wholesale jewelry business.

When China began opening its economy in 1979, as part of a sweeping reform movement, Lam was among the first to open a factory there, a jewelry manufacturer of about 100 workers in the southern city of Dongguan. By 1998, Lam was readying his company to go public, and to launch a new retail venture.

"Building a gold toilet, I realized, was the perfect way for me to put into reality something that has been in my head since I was 16 years old," he said. Besides, he added, gold prices were so low they could only go up; buying gold at $200 an ounce would hedge against inflation. "It would be like an investment, plus we could let people see it for an admission fee, and we could use it to launch our brand," he says.

Not everyone was on board with the plan. His board of directors balked at the idea, and his friends called him crazy. But Lam had his way, and construction - headed by Lam - began. The toilet became a smash hit.

Mainland Chinese tours made it a highlight on their itinerary, and before long, the hall was drawing as many as 100 tour groups every day. The jewelry gift shop - the company's first retail outlet - reeled in about $100 million a year in sales for the company at its peak, while sales of Hang Fung's jewelry lines pushed company profit to new highs by 2003. The attraction even drew Communist officials from mainland China, fascinated that a capitalist haven like Hong Kong could have realized Lenin's dream without having first created a socialist utopia.

When gold hit $980 an ounce in March this year, Hang Fung unloaded a ton of gold, and later slimmed down by two more tons, reaping about $64 million in the process.

"This latest rise in prices has been incredible," Frank Wu, Lam's chief financial officer, said as workers hacked away at the furniture downstairs. The price of gold came down from a March 18 peak of $1,003.20 an ounce, to $848.90 on May 1. Since then, it has bounced back yet again, to $925. This past week, it has been around $880.

If prices rebound, Wu says, the company will sell more. But not the commode.

"The toilet and the Guan Yin statue are the most valuable pieces," Lam says. "The Guan Yin is a goddess, and she is to be worshipped. As for the toilet, that's the cornerstone of our company," located though it is in the golden bathroom of the golden palace. "It's an icon. It will never be taken apart."

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.