Continental Development Corp (CDC, 大陸建設) is to avoid branching out into non-core business operations while seeking to diversify its income sources.
The Taipei-based developer said it prefers a cautious strategy and limiting its role to a landlord position in joint ventures with hoteliers to tap the hospitality market in Taiwan and abroad.
“The protracted sluggishness in the housing market in Taiwan warrants a shift of business focus away from developing upscale residential projects alone,” Continental Development chairman Christopher Chang (張良吉) told a media briefing in Taipei on Wednesday.
The developer expects the market to remain soft, with modest price corrections for the rest of this year and beyond, although buying interest has improved a little after the central bank eased mortgage restrictions in March.
Continental is to seek to develop office buildings, retail spaces and hotel rooms to stay viable and profitable, Chang said.
The endeavor explains why the company has joined forces with My Humble House Hospitality Management Consulting Co (寒舍餐旅) to tear down an old office building on Taipei’s Songjiang Road and raise a mixed-use boutique hotel on the site.
Decent hotel rooms remain in short supply, especially in Taipei, judging from the number of arriving visitors, Chang said, adding that other companies have also recognized the trend and converted existing office and residential buildings into lodging facilities.
Cathay Real Estate Development Co (國泰建設), an affiliate of Cathay Financial Holding Co (國泰金控), has established two hotel brands — Hotel Cozzi (和逸) and Madison Taipei (台北慕軒) — to cater to business and leisure travelers with middle-to-high budgets.
Fubon Hospitality Management Co (富邦旅館), an affiliate of Fubon Financial Holding Co (富邦金控), is to open its first Folio Hotel in Taipei’s Daan District (大安) later this year with more to follow in coming years.
Boutique Hotel Continental is under development and would stand out, as the entire building is tailor-made for brand-new hotel rooms and serviced apartments, Chang said, adding that Cathay and Fubon simply converted idle buildings into hotels.
Continental would limit its role to a landlord and leave hotel operations fully to My Humble House, Chang said.
The two have inked a 20-year leasing contract. Chang declined to provide figures on rental yields.
The developer has signed another contract to develop a business hotel in Kuala Lumpur and authorities there might approve the project later this month, Chang said.
In Taiwan, Continental has NT$40 billion (US$1.24 billion) worth of housing projects on hand that might take a few years to digest, Chang said.
Continental Development is the main source of income for listed Continental Holdings Co (欣陸控股), whose business interests include Continental Engineering Corp (大陸工程).
Its parent company posted NT$573 million in net profit last year, or earnings per share of NT$0.65, because losses at the engineering branch eroded nearly all profits generated by its development subsidiary, Continental Holdings chief executive Ken Hung (洪義乾) said.
Continental Holdings is to distribute a cash dividend of NT$0.5 per share, which translates into a yield of 4.65 percent based on its closing price of NT$10.75 on Wednesday.
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