Shin Kong Life Insurance Co (新光人壽), the nation’s third-largest life insurance company, said its board yesterday approved a proposal to sell a department store building in Taipei’s Xinyi District (信義) and securitize two office buildings in the Neihu Technology Park (內湖科技園區).
The life insurer said in a statement that the move could “increase the company’s capital gains, strengthen its financial structure and allow more flexible and effective use of its capital.”
It also followed a statement last week by its parent company, Shin Kong Financial Holding Co (新光金控), that it would consider liquidating investments in properties or equities for one-time capital gains after incurring a record NT$21 billion (US$598.4 million) in losses last year.
In filings submitted to the Taiwan Stock Exchange yesterday, Shin Kong Life said the company had authorized its chairman, Eugene Wu (吳東進), and management team to negotiate terms and proceed with the planned deals.
The company is scheduled to auction its Shin Kong Mitsukoshi A11 department store building on April 3, Sunny Hsu (徐順鋆), an acting spokesperson at Shin Kong Financial, said by telephone.
Hsu declined to specify how much the company would earn from the sale of the department store building, which was completed in 1997 on a 2,534-ping (8,362m²) lot with total floor space of 19,205 ping.
“We expect more than NT$10 billion in final transaction from the planned auction,” Hsu said.
The company will book the asset gains in the second quarter, he said.
This estimate is similar to an appraisal made by DTZ Debenham Tie Leung (戴德梁行), Yang Chang-dar (楊長達), a real estate appraiser at DTZ, said by telephone, considering the land was purchased at a relatively cheap price and with the property market now in a slump and competition from nearby office buildings.
The deal, once completed, is also expected to boost Shin Kong Financial’s capital adequacy ratio to 110 percent from 102 percent at the end of last year, and lower its debt-to-equity ratio to 43 percent from 48 percent as of December, the company statement said.
As for the securitization of the two office buildings in Neihu, Hsu said it was part of the company’s plan to launch commercial mortgage-backed securities to boost investment returns for its shareholders.
Profits will be booked in the fourth quarter, Hsu said.
The company did not say how much it expected to gain from the securitization offering, but said the proceeds would be used to invest in high-yield quality commercial real estate from which it could draw fixed annual rental income.
“We will continue investing in quality real estate in Taipei, especially office buildings in the Neihu Technology Park and Xinyi District,” Shin Kong Life said in the statement.
Shares of Shin Kong Financial ended 0.45 percent higher at NT$6.73 yesterday before the planned disposal of the real estate was announced.
ADDITIONAL REPORTING BY JERRY LIN AND JOYCE HUANG
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