Antai Life Insurance Co (安泰人壽), a new subsidiary of Fubon Financial Holding Co (富邦金控), yesterday won the auction for the Shin Kong Mitsukoshi A11 department store building with a bid of NT$11.6 billion (US$347 million), NT$1.6 billion higher than the floor price.
The auction, held in the headquarters of Shin Kong Life Insurance Co (新光人壽), owner of the building in Xinyi District (信義), drew two other bidders, Cathay Life Insurance Co (國泰人壽), the nation’s largest insurer, and Tinghsin International Group (頂新集團), the instant noodle giant.
Fubon Financial president Victor Kung (龔天行) said he was glad Antai Life won the bid as it would enhance the insurance company’s asset portfolio.
“The building is expected to generate near 4 percent of annual rental yield on the premium,” Kung said by telephone.
Kung said the purchase of the Shin Kong building fell in line with Antai Life’s goal of raising its stake in real estate properties. Property investment accounts for barely 3 percent of its total investments and the company intends to boost the figure to between 5 percent and 10 percent over the next few years, he said. Shin Kong is expected to book an estimated gain of NT$7.3 billion from the sale, it said in a statement to the stock exchange yesterday.
The building sits on 2,534 ping (8,377m2) of land with total floor space of 19,205 ping (63,489.11m2) and will continue to house the department store as the lease will not expire for four years.
Jeffrey Huang (黃增福), head of research at Evertrust Rehouse (永慶房屋), called the deal a bargain, adding that commercial properties remained attractive.
“The building is a worthy investment choice for business groups with ample idle funds,” Huang said by telephone. “But only buyers with deep pockets can afford to take part in the bid.”
It cost Antai NT$3.7 million per ping for the land alone, the third highest price in the district.
Shin Kong Life, while losing money in recent years, reaped a large profit of NT$7.28 billion from the sale. The third-largest insurer acquired the land in 1988 for NT$2.8 billion and spent another NT$1.52 billion to construct the building, a company official said, asking not to be named.
“The gain did not include rental income over the years,” he said by telephone. “The company sold the property to strengthen its capital structure and adjust its real estate portfolio.”