Far Glory Group (遠雄集團) signed an agreement yesterday with the Industrial Bank of Taiwan (IBT, 台灣工銀) and the Land Bank of Taiwan (土地銀行) to arrange the group's issuance of securities backed by its headquarters building in Taipei City's Hsinyi district.
"In the middle of next year, we plan to launch NT$3 billion-worth of seven-year beneficiary shares backed by the group's Far Glory International Center (遠雄國際中心)," Far Glory chairman Chao Teng-hsing (趙藤雄) said yesterday.
With over 30 years in the property sector, Chao said, the group's securitization plan is a worthwhile investment.
"With an estimated market value of NT$6 billion and a 100 percent occupancy rate, the Far Glory International Center has an annual fixed rental income of NT$240 million, or a 4-percent rate of return," he said.
Part of the money raised will be used to repay Far Glory's bank loans, which carry a 4 percent interest rate, as well as to develop new construction projects.
After a three-month-long appraisal, the arranging banks will finalize the profitability rate of the bonds, which will be sold in an open market to individual investors, Land Bank chairman Wei Chi-lin (
Since the government allows only the issuance of beneficiary certificates, the return on investment should be guaranteed to level out at between 4 percent and 5 percent, according to Wei.
Given the lack of medium- and long-term investment destinations in Taiwan, Wei said that the company's securitization plan is sure to attract many stock investors since property-backed securities yield higher returns than deposit accounts while taking on less risk than stock investments.
Chao expressed optimism about the upcoming property recovery and the nation's previous passage of the Real Estate Securitization Statute (
Chao said the size of the nation's securitization market is likely to amount to NT$200 billion next year.
He also said the domestic property market will be the driving force behind the nation's economic turnaround, adding the local property market has contributed to 29 percent of third-quarter GDP.
However, he said the new securitization law excludes undeveloped land held by private developers, which accounts for two-thirds of the market. If the statute can be revised to include undeveloped land, the market's size will be bigger, Chao said.
Chao has long been petitioning the government to scrap the exclusion since 80 percent of the nation's urban areas are more than three decades old and need renovation work, which requires private investors to inject capital by taking advantage of the securitization plan.