Thu, Nov 06, 2014 - Page 14 News List

Real estate-backed security auction has mixed results

BLOCKS ON THE BLOCK:There was strong interest in the 12-floor Goldsun Group Building near Taipei Railway Station, but none for the CTCI building on Dunhua S Road

By Crystal Hsu  /  Staff reporter

Auctions of real estate-backed securities on Tuesday drew mixed results, with a full office building securing a buyer, but partial floors of another building failing to do so, despite its better location, bidding organizer Savills Taiwan Ltd (第一太平洋戴維斯) said.

However, the Gallop No. 1 real-estate investment trust (REIT) fund issued by Mega International Commercial Bank (兆豐銀行) in 2007 gained 97 percent in value.

An REIT is a security that invests its pooled capital in real estate and trades like a stock on an exchange.

Wei Sheng Development Co (為勝開發), a subsidiary of Kee Tai Properties Co (基泰建設), won the bid for the 12-floor Goldsun Group Building (國產實業大樓) near Taipei Railway Station for NT$3.97 billion (US$130 million), 13 percent higher than the asking price, Savills Taiwan said.

The building has 7,158.33 ping (23,664m2) in floor space on a plot of land measuring 529.3 ping, translating into NT$626,000 per ping, the auction data showed.

“The 100 percent-owned Goldsun Group building received overwhelming interest as five parties submitted bids, all attracted by the building’s prime location and its potential for qualifying for urban renewal within six years,” Primasia Securities Co said in a client note yesterday.

Primasia said that compared with the property’s rental revenue of NT$107 million a year, Wei Sheng’s acquisition price will reflect a robust 2.7 percent annual rental yield.

Even so, the brokerage said the buyer was acquiring the property not only for its steady annual rental revenues, but also for the growth prospects implied by its location across the street from the city’s planned Taipei Twin Towers project (台北雙子星).

Meanwhile, the Gallop No. 1 REIT fund also sold partial floors of a factory building held by High Value Information Technology Corp (漢偉資訊) in Jhonghe District (中和), New Taipei City, to the BankTaiwan Life Insurance (台銀人壽) for NT$1.54 billion, or a premium of 9 percent, Savills Taiwan said.

The REIT fund owned 67 percent of the building’s floor space.

Based on annual rental revenue of NT$47 million, the property can generate a robust 3 percent annual rental yield and easily top the 2.875 percent hurdle rate imposed on insurers by the Financial Supervisory Commission, Primasia said.

Together, the two underlying assets drew offers of NT$5 billion, 97 percent higher than their worth upon the issuance of the funds, according to Sinyi Global Management Co (全球資產管理).

However, another underlying asset — one above-ground floor and one basement floor — of the upscale CTCI (中鼎工程) office building on Dunhua S Road failed to attract any bids on Tuesday, despite its superb location and decent rental return, Savills Taiwan said.

Additional reporting by Kevin Chen

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