State-run Taiwan Fertilizer Co (台肥), which manufactures and sells fertilizers and chemical products as well as engaging in real-estate development, plans to tighten the terms of contracts with its partners that are seeking to turn its properties in Taipei’s Nangang District (南港) into hotels as downside risks increase.
Taiwan Fertilizer president Huang Yao-hsing (黃耀興) made the company’s intentions known on the sidelines of a public event in Taipei on Wednesday.
Taiwan Fertilizer, in which the government holds a considerable stake, owns vast plots of land across the nation, according to the company’s Web site.
“It is reasonable and practical to demand higher security deposits ... now that the hospitality industry is experiencing a downturn,” Huang said.
The company struck agreements in 2014 with local hotel operators Caesar Park Hotels and Resorts (凱撒飯店) and Grand Hi-Lai Hotel (漢來飯店) to develop hotels in exchange for rental income of NT$800 million (US$26.31 million) a year.
The partners each posted a guaranty of NT$100 million, a minor sum compared with the construction costs of NT$12 billion, exposing Taiwan Fertilizer to greater risk if they should quit the project, Huang said.
Huang declined to talk about the revised amount, except to say that one party has given it favorable consideration while the other needs more time to think it over.
Taiwan Fertilizer aims to wrap up the negotiations by the end of this year, he said.
Despite a stable economic recovery, local hotels are taking a hit from the sharp decline in the number of Chinese tourists visiting Taiwan and an increasingly crowded field.
Taiwan Fertilizer is to benefit from extra rental income this year after securing a 12-year lease on Wednesday from a local fitness firm, Power Wind Health Industry Inc (柏文健康事業).
Power Wind Health is to rent 1,000 ping (3,306m2) of Taiwan Fertilizer’s new office building in Hsinchu at NT$1.2 million a month.
The building, named TFC ONE, has 14 floors above ground and three in the basement, and could generate 2,000 new jobs, said Billy Yen (顏炳立), general manager of Cushman & Wakefield Taiwan, which helped broker the deal.
In the first half of this year, Taiwan Fertilizer reported net income of NT$977 million, or earnings per share of NT$1, company data showed.
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