Agora Garden hotel confirms REIT talks

Agora Garden, a hotel located in the Xinyi District of Taipei, confirmed yesterday that it is in talks with several financial institutions to issue a real estate investment trust (REIT).

But the hotel refused to name the potential issuer, only saying that it would be one which "has successfully issued REITs at home and abroad," said general manager Jessica Hsieh (謝美慶) during a phone interview.

REITs have been a common investment tool abroad for more than 40 years, but the trend only started to pick up in Taiwan several years ago, with Fubon Financial Holding Co (富邦金控), Cathay Financial Holding Co (國泰金控) and Shin Kong Financial Holding Co (新光金控) the first to offer such investment products.

Hsieh said she has strong confidence in the hotel's value as Agora Garden enjoys a high occupancy rate of 84 percent on average, always ranking in the top three in Taipei City, she said.

The hotel raked in revenues of NT$700 million (US$21 million) last year, with net profits maintaining a stable annual growth rate of more than 2 percent.

The average room rate has hiked by NT$200 per annum, she added.

Agora Garden's stable performance comes from its market segmentation. It functions like a combination of a five-star hotel and "serviced apartments" as more than 40 percent of its room guests are business executives or foreign diplomatic officials who stay in the hotel for long periods of time.

Although Hsieh refused to disclose the hotel's potential value, real estate developers have put the figure at around NT$6 billion.

If the REIT deal goes smoothly, Agora Garden will become the second hotel in Taiwan to issue the investment product, after the Sheraton Taipei.

In October 2005, Cathay Life Insurance Co (國泰人壽), the nation's biggest life insurer, operating under Cathay Financial, issued its first REIT. The NT$13.9 billion property portfolio consists of Sheraton Taipei, which accounts for 75 percent, and two office buildings in Taipei.

Cathay No. 1 REIT was oversubscribed 3.5 times, and the portfolio was valued at NT$49 billion, reflecting the trust's satisfactory asset quality, long-term lease agreements, conservative financial policy, and strong links with the Cathay group.

But Hsieh said it also shows the public has a fervent interest in hotel-included REITs at a time when interest rates remain historically low.

Taiwan's market for REITs may expand fourfold in the next five years as new measures such as tax incentives boost demand, Lin Tung-liang (林棟樑), the secretary-general of the Financial Supervisory Commission's Banking Bureau said last June.

Agora Garden was built by Shen Ching-ching (沈慶京), chairman of Core Pacific Group (威京集團), nine years ago.

The group also owns a shopping mall in Taipei, Core Pacific City Mall (京華城), whose worse-than-expected sales have led to rumors that it might go bankrupt.