International real-estate firm LaSalle Investment Management Inc is not planning to purchase property in Taiwan with its US$1.25 billion Asia Recovery Fund because it believes that market conditions are still too unattractive here, a senior executive from the company said.
Christopher Peacock, president and CEO of Jones Lang LaSalle, which is the parent company of LaSalle Investment, said the market is not liquid enough to attract investment by the fund.
"It's a little premature to be putting money in at this time," said Peacock, who visited Taipei last week to sign up his firm as lead agent for the Taipei 101 building.
Earlier this year the Cabinet lifted decade-long restrictions on foreign nationals and companies purchasing property in Taiwan in the hope that an influx of foreign dollars would bolster the stagnant real-estate market.
But low rental yields and scant prospects for realizing significant returns on investment have kept foreign companies away.
"Obviously, if you're going to invest in somewhere like Taipei, you need to know there's a market where you're able to sell as well. You've got to be able to exit as well as put money in," he said.
Taiwan's property market has remained locked in a recession for around a decade following rampant overbuilding in the 1980s and early 1990s, which resulted in an oversupply of housing.
According to government figures, there are approximately 1.23 million vacant houses nationwide, the prices for which remain high despite the glut, making them difficult to sell.
Created last year by LaSalle Investments -- which manages around US$22 billion in real-estate investments -- the Asia Recovery Fund has been investing in mostly commercial real-estate around Asia, with purchases in Seoul and Tokyo.
"We're looking for better than 20 percent [return on investment], so it's a question of picking the right markets," Peacock said.
"We're also looking at other projects at the moment in Hong Kong and Singapore."
LaSalle Investment purchased a total of four major buildings in Seoul and Tokyo earlier this year, which will be leveraged at around 60 percent, according to Peacock.
"Typically, that will be a five to seven year co-mingled fund," he said.
"So you buy the properties, manage the properties, refurbish the properties if necessary, and at the right time you sell the properties for your clients and we co-invest ourselves," he said.
LaSalle Investment made its first acquisition for the fund with the US$57 million purchase of the Chokson Building, a 12-story Class A office building located in the core part of the Central Business District of Seoul.
Bought from Hyundai Merchant Marine Co, the Chokson Building has a gross floor area of approximately 112,000m2, with 277 parking spaces.
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