Shin Kong Life pays 10 percent premium to win REIT auction

By Crystal Hsu  /  Staff Reporter

Thu, Oct 13, 2011 - Page 12

Shin Kong Life Insurance Co (新光人壽) yesterday won the auction of a real-estate investment trust (REIT) issued by Kee Tai Real Estate Co (基泰建設) by adding a 10 percent premium, affirming the popularity of commercial properties despite sluggish housing transactions in recent months.

A REIT is a security that invests its pooled capital in real estate and trades like a stock on an exchange. Kee Tai issued the real-estate backed security in 2006.

Shin Kong Life, the flagship subsidiary of Shin Kong Financial Holding Co (新光金控), won with a bid of NT$3.33 billion (US$109.5 million), 9.8 percent higher than the floor price of NT$3.03 billion, said the organizer of the auction, Savills Taiwan Ltd (第一太平洋戴維斯).

The underlying assets of the REIT include a 30 percent stake in an office building on Hengyang Road near Taipei Railway Station, as well as an entire building housing the City Lake Hotel (麗湖大飯店) in Neihu (內湖), auction data showed.

“There is always demand for commercial properties in convenient locations,” Savills Taiwan managing director Gordon Kao (高銘頂) said after the auction, which drew two bidders.

Both buildings would generate 2.5 percent rental yields for Shin Kong Life based on their current worth, Kao said.

The auction raised the value of the office building near the train station by 47 percent and the hotel building in Neihu by 24 percent when compared with five years ago, Kao said.

Kao expects the bidding next month for another REIT auction to heat up the commercial property market further, as major domestic life insurers aim to increase their real estate portfolios amid historically low interest rates and excess liquidity.

Shin Kong Life, which owns more than 100 landmark buildings nationwide, remains hungry for more real estate that generates rental yields of 2.5 percent or more, or that offer significant capital gains, senior vice president Sunny Hsu (徐舜鋆) said last month.

Yesterday’s bid translated into NT$600,000 per ping (3.3m2) for the office building on Hengyang Road and NT$430,000 per ping for the hotel building in Neihu, in line with market values, said Michael Wang (王維宏), an account manager at Sinyi Realty Inc’s (信義房屋) asset department.

Meanwhile, the housing market seems to have lost some steam after a survey by Evertrust Rehouse Co (永慶房屋) showed more people were conservative about house prices in the coming year when compared with three months earlier.

“People are now evenly divided about the trend” after global equity market jitters unnerved investors in August and last month, Evertrust general manager Yeh Ling-chi (葉凌棋) told a media briefing.

A total of 55 percent of the respondents thought it would be better to enter the market next year, while 25 percent intend to wait until 2013, the quarterly survey found.

The cautious sentiment is likely to dampen transactions by 30 percent this quarter when compared with last year, Yeh said, adding that the impact may be bigger for smaller brokers.