Cathay Life Insurance Co (國泰人壽), the nation’s largest insurer by market share, yesterday bought debt-ridden Prince Motors Group’s (太子汽車) foreclosed office building in downtown Taipei for almost the same as the asking price.
Cathay Life acquired the building, measuring 7,363 ping (24,340m2) in floor space with 110 parking spaces, for NT$9.1385 billion (US$309.81 million), or NT$8 million higher than the floor price of NT$9.1305 billion, auction data showed.
With 17 floors aboveground and five underground, the 15-year-old building on Dunhua S Road Sec 2 failed to draw any bids in two previous auctions this year and two privately organized sales, as a floor price of more than NT$10 billion and likely legal disputes discouraged potential buyers, analysts said.
“The building is partially occupied now and we intend to lease all the floor space later,” Cathay Financial Holding Co (國泰金控) spokesman Alan Lee (李偉正) said by telephone.
Cathay Life is a flagship unit of Cathay Financial.
He said the deal would generate rental yields of 2.15 percent, higher than the minimum requirement of 2.125 percent set by the Financial Supervisory Commission.
Prince Motors and main creditor bank Cosmos Bank (萬泰銀行) occupy some floors and the new owner cannot legally evict unwanted occupants upon closing the deal.
That did not scare away Cathay Life, the sole bidder yesterday, after acquiring Prince Motors’ New Taipei City (新北市) plants through an auction held in May for NT$4.39 billion.
Michael Wang (王維宏), an account manager at the asset division of Sinyi Realty Inc (信義房屋), attributed the insurer’s increase in real estate investment to sustained need to reduce its amount of idle funds.
Other domestic insurers are in the same position, which will continue to boost commercial property transactions this year, despite sluggish trading in the residential market, Wang said.
Cosmos Bank, which has about NT$5.6 billion in outstanding secured loans to Prince Motors, may see its bad loan ratio drop significantly after the auction of the Dunhua building.
The bank is the only Taiwanese lender with a non-performing loan ratio above the 2 percent threshold as of July —at 6.92 percent — compared with the averaged 0.55 percent for the sector, government data showed.