China Development Financial Holdings Corp’s announcement late on Monday that it was selling its entire holding — 287 million shares or 19.5 percent — of Taipei Financial Center Corp (TFCC), which operates the iconic Taipei 101 skyscraper, to Ting Hsin International Group caught many by surprise.
With the acquisition, Ting Hsin — which operates the biggest packaged food maker and the FamilyMart convenience store chain in China, as well as Wei Chuan Foods Corp in Taiwan — has become TFCC’s largest private shareholder and is likely to gain two director seats out of a total of 13 at its September board reshuffle.
Taipei 101 has been a symbol of Taiwan since its opening at the end of 2004. While the 508m skyscraper is no longer the world’s tallest after the unfinished Burj Dubai in the United Arab Emirates took that honor two years ago, the TFCC deal made the headlines in local newspapers the next day. Days later, Ting Hsin said it was considering boosting its holding in the long run.
The NT$3.74 billion (US$113 million) deal was a smart purchase for Ting Hsin, with the company spending less than one-third of what it would have paid for the 19.5 percent stake in a building that cost its original investors about NT$60 billion to build.
The group, founded by the Wei family, which first made its fortune in Taiwan’s food business, has dismissed speculation that it wants to secure a majority control of TFCC’s board. The government has also promised to retain its 40 percent stake to remain TFCC’s biggest shareholder.
However, there is nothing to stop Ting Hsin from buying shares from other private shareholders, or even from government-affiliated shareholders, to secure control over Taipei 101.
The TFCC deal has generated a lot of interest amid concerns that Chinese capital might have flowed into the local real estate sector under the guise of Taiwanese investment.
In April, a low-key Taiwanese businessman surnamed Chen, an active player in China’s property market for the past two decades, beat other investors in bidding for a plot of land in Xinyi District (信義區) for NT$2.818 billion — which was 54 percent higher than the floor price of NT$1.83 billion.
Like many other overseas Taiwanese businesspeople, Chen and Ting Hsin’s Wei family are repatriating capital, lured by the potential profit that the local real estate market offers following improvements in cross-strait ties and the government’s relaxation toward Chinese investment.
But what differentiates these Taiwanese businesspeople from local real estate investors are their big funds and stronger risk appetite, as well as their penchant for famous landmarks.
With competition between new and old players heating up, property prices are expected to rise as the rules of the game are changed.
The government — under the former Democratic Progressive Party and the current Chinese Nationalist Party — has always encouraged the return of overseas Taiwanese businesspeople. However, the current administration has been remarkably lax in determining the source of funding for some of these returning investors. This could lead to the nation’s iconic landmarks or strategic industries falling into the hands of China-backed Taiwanese businesses.
With cross-strait economic activities becoming increasingly intertwined, the government should pay heed to these concerns before it is too late.