First REIT draws huge demand

Shin Kong Financial Holding Co (新光金控), the nation's seventh-largest financial services provider, said its NT$9 billion (US$268 million) real estate investment trust (REIT) drew more than double that amount in demand, according to a press release yesterday.

This, in addition to the stake held by Shin Kong Life Insurance Co (新光人壽), the conglomerate's flagship company, would put the total amount of its No. 1 REIT at NT$11.3 billion.

Shin Kong Financial's first REIT consists of four properties -- the Shinkong Jasper Tienmu Building (52 percent of the portfolio), Tainan Shinkong Mitsukoshi Building (28 percent), Shinkong International Building (10.1 percent) and Taiwan Securities Building (9.9 percent).

Capital gains

REITs, which invest in properties such as offices, hotels and hospitals, pay out almost all the income they earn in dividends, making them attractive to investors seeking regular returns with the possibility of capital gains.

Taiwan Ratings Corp (中華信評), the local arm of Standard & Poor's Ratings Services, last month assigned preliminary long-term "twAA" and short-term "twA-1" corporate credit ratings to Shin Kong's first REIT, considering "the adequate performance history of its property portfolio in terms of rent rolls and high occupancy rates."

Target surpassed

Shin Kong Financial said although the profits gained from this REIT might not be booked into this year's accounts, the company's performance prospects remain rosy as its unaudited after-tax profit as of October had already achieved 101.4 percent of its whole-year target of NT$7.4 billion, the statement said.

In early October, the company acquired 100 percent of local lender Macoto Bank (誠泰銀行) and merged it with Shin Kong Commercial Bank (新光銀行), boosting the holding company's total number of banking branches to 108 nationwide.

To strengthen its banking unit's asset quality, Shin Kong Financial plans to set aside a reserve fund of between NT$800 million and NT$900 million to write off bad loans in hopes of lowering its non-performing loan ratio to below 2.5 percent and raising its bad loan coverage ratio to 40 percent next year.

This should not affect its full-year financial forecasts, the company said.