DPL denies Honest Profit’s request for lease extension

Noting that the Department of Public Lands has identified several compliance issues in Honest Profit International Ltd.’s hotel project in San Antonio that appear unresolved, DPL Secretary Teresita A. Santos has denied the company’s request to extend its land lease for an additional 15 years.

In her Wednesday letter to HPIL president Chaokai Huang, Santos said that extending HPIL’s lease terms cannot be approved at this time pursuant to the Commonwealth Code because HPIL’s leased premises does not currently have an existing hotel.

Santos added that because the lease is not set to expire until July 2039, any extension pursuant to the Commonwealth Code and NMI Administrative Code is premature.

“DPL would be happy to revisit HPIL’s request for an extension once HPIL has resolved all outstanding compliance issues and has either completed construction of the hotel or is nearing expiration of the lease,” Santos said.

The Hong Kong-based HPIL announced last Oct. 17 its partnership with multinational company, Marriott International, during a hotel management agreement signing ceremony at the Hyatt Regency Saipan.

A hotel management agreement means HPIL still owns the property in San Antonio, but it will be managed by Marriott International.

Construction on HPIL’s $130-million, 312-room hotel project slowed down in 2019 for lack of foreign workers. Super Typhoon Soudelor and Yutu in 2015 and 2018, respectively, reportedly damaged the hotel complex project.

Last July 22, Huang sent a letter dated July 9, 2014, to DPL, requesting an extension of the lease agreement for an additional 15 years.

Santos said Huang states that the extension is necessary for HPIL to enter a hotel management agreement with a global brand hotel, as the hotel requires management of a long-term lease for a minimum of 20 years.

She said Article 4 of the lease grants the lessee an option to extend the lease for one additional term of 15 years, subject to the approval of the CNMI Legislature.

In citing compliance issues that appear to be unresolved, the secretary said HPIL also asked for a 15-year extension on its lease in January 2016, saying that its investor group had expressed several concerns regarding further investing in the CNMI and that the availability of funding was dependent on HPIL obtaining a 15-year lease extension.

Santos said that, in May 2016, DPL stated that HPIL’s January 2016 letter raised a cause for concern on the availability of funding and requested verifiable evidence that sufficient funds are reserved in cash or cash equivalent accounts.

She said that, on May 2, 2019, DPL extended HPIL’s deadline to complete construction of the hotel from April 7, 2019 to Sept. 6, 2020.

Santos said that, on Aug. 31, 2020, HPIL requested an additional 20-month extension.

She said HPIL’s failure to complete the required construction without a further extension is a violation of the lease.

The secretary said HPIL failed to submit to DPL its Business Gross Revenue Tax reports for the period beginning May 2020 to the present.

Under its public benefit obligation, Santos said, HPIL failed to, among other things, build two concrete pavilions at the San Antonio beach area behind the San Antonio school for the public, and pave the road leading to the school and beach area with asphalt materials.

The secretary cited other compliance issues.

Santos asked HPIL to provide DPL with sufficient documentation to determine the company’s compliance status with respect to each of these issues.