Tue, Aug 01, 2006 - Page 12 News List

Taipei 101 operator considering REIT

By Amber Chung  /  STAFF REPORTER

Consumers may soon not only be able to visit Taipei 101, but also own part of the world's tallest skyscraper. The Taipei Financial Center Corp (TFCC, 台北金融大樓公司) which operates the building said yesterday that it was considering securitizing the complex.

"We are in an early stage of evaluating the possibility of issuing real estate securitization products backed by our complex," TFCC's assistant vice president Michael Liu (劉家豪) said in a phone interview yesterday.

This is a mid-to-long-term plan that could materialize three years from now at the earliest, Liu said.

The Chinese-language Economic Daily News reported yesterday that the company was thinking about issuing the real estate investment trust (REIT) product backed by a package of the Taipei 101 office building, the adjacent shopping mall and the observatory, citing TFCC chairwoman Diana Chen (陳敏薰).

It could become the world's largest-scale property securitization product backed by a single complex if the plan comes to fruition, according to the report.

The strategy aims to further strengthen the branding of Taipei 101 worldwide through the issuance of such a massive REIT, in view of its uniqueness as the tallest building in the world, Liu said.

Considering single branding, TFCC would not securitize the already fully occupied shopping mall before the half vacant office building. As a result, the whole batch of the securitization product could amount to tens of billions of NT dollars, he added.

The occupancy rate of the Taipei 101 office building is about 60 percent. The company hopes to boost the rate to 70 percent to 80 percent by the year's end after concluding talks with several groups of interested foreign financial institution clients, Liu said.

Fixed-income property securitization products that bring an average 4 percent return to investors have been a popular novel derivative in the local market and have often attracted excess subscription amid a volatile stock market and low interest rate environment in recent years.

There have been six batches of such products listed so far since the NT$5.8 billion (US$178 million) Fubon No.1 REIT, the nation's first real estate fund, hit the market early last year. Shin Kong Financial Holding Co's (新光金控) second property fund is in the pipeline and could be rolled out late this year or early next year.

However, to manage the quality of the hot derivative products, the Financial Supervisory Commission tightened requirements last month, including an average occupancy rate exceeding 85 percent over the preceding three years, making the road ahead bumpier for TFCC.

The company also has to become profitable bolstered by ideal occupancy and rental before it can offer a yield of 4 percent to 5 percent that is attractive enough to investors, said Victor Chang (張欣民), director of the research and development division at Sinyi Real Estate Inc (信義房屋).

The skyscraper's owner currently offers a discount of up to 30 percent on its rental rate of NT$3,200 to lure potential tenants, according to Sinyi Real Estate.

"In general, it could take at least another five years, based on the most conservative estimate, before the company's REIT plan materializes," Chang added.

Despite its financial struggles, TFCC so far has no plans to raise more funds from original shareholders or interested foreign investors, Liu said.

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