Fri, Jan 28, 2005 - Page 11 News List

Demand for new property fund passes share offering

INVESTMENT Fubon Securities expects the nation's first real-estate fund to be several times oversubscribed when the offer ends and may seek to create a new fund


Fubon Securities Co (富邦證券) said investor demand for Taiwan's first real-estate fund exceeded the NT$5.83 billion (US$183 million) worth of shares on offer.

"Demand for the fund is overwhelming. Investors are lured by the steady annual returns and a chance for capital gains," company spokeswoman Teresa Cheng (程芝萱) said in an interview.

Fubon Securities, the brokerage arm of Fubon Financial Holding Co (富邦金控), will use the proceeds to buy three properties held by companies controlled by the Tsai Wan-tsai (蔡萬才) family, Cheng said yesterday.

The fund, which is scheduled to start trading on the stock exchange in March, would generate an annual return of 4 percent on rent proceeds, Fubon said in a prospectus. The three buildings are fully occupied by tenants, it said.

Property funds "offer a more liquid channel for investors to tap the property market," said Mike Shiao (蕭光一), who manages the equivalent of US$66 million at Invesco Taiwan Ltd (景順投信) in Taipei.

Fubon Securities expects the fund to be a "few times" oversubscribed when the offer closes on Feb. 2, Cheng said. The company may seek government approval to create another real-estate fund to meet demand, she added.

Shares of Fubon Financial were unchanged at NT$31.30 at 12:50pm in Taipei yesterday.

The Hong Kong Housing Authority's US$2.7 billion real-estate investment trust, which was postponed after a series of legal challenges, attracted orders equal to 28 times the amount of stock on offer last month. Hong Kong residents placed a record US$36 billion of orders while institutional investors were ready to commit US$40 billion.

While there is interest in the new investment vehicle in Taiwan, some investors are not convinced.

"Investors have to evaluate if a 4 percent annual return is worth the risk of property market fluctuations," said Liu Juming, who manages the US$34 million Fund of Funds at Fuhwa Securities Investment Trust Co (復華投信) in Taipei.

"The property market had a great year in 2004, but will it last?" Liu said.

Property prices on average rose 11 percent last year on reduced capital gains taxes on land sales and as investors took advantage of low interest rates, Sinyi Realty Co (信義房屋), the largest real-estate agent company, said in a Jan. 24 report.

Parliament on Jan. 21 cut capital gains tax on land sales, extending a three-year measure to boost the property market, which had been swamped by 1.2 million excess homes built during a real-estate boom in the 1980s.

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