Cathay Life Insurance Co (國泰人壽), the nation’s largest insurance company by market share, yesterday made another conquest — winning an auction for a real-estate asset trust (REAT), or a 62 percent stake, in a 12-story building that houses the popular Eslite Bookstore (誠品書店) on Dunhua S Road in Taipei.
The insurer, the flagship unit of Cathay Financial Holding Co (國泰金控), won the auction with a bid of NT$9.6 billion (US$316 million), 68 percent higher than the floor price, beating heavyweight rivals, including Fubon Life Insurance Co (富邦人壽) and Shin Kong Life Insurance Co (新光人壽), which issued the trust in 2005.
RECORD HIGH
That translated into NT$1.32 million per ping (3.3m2) for 9,217 ping of floor space from the third to the 12th floors, a record high for a 27-year-old office building in the district.
Cathay Financial spokesman Alan Lee (李偉正) said the purchase is intended for self-occupancy after existing rental leases expire.
“As such, I cannot comment on potential returns,” he said by telephone.
The market had put reasonable prices at between NT$7.5 billion and NT$8 billion in order to maintain decent rental yields. The REAT reported NT$165 million in annual rental income last year.
The result of the auction means Shin Kong Life realized a profit of about NT$7.3 billion, more than triple the NT$2.2 billion raised when the REAT was issued six years ago, Shin Kong Life senior vice president Sunny Hsu (徐舜鋆) said.
Shin Kong Life, a subsidiary of Shin Kong Financial Holding Co (新光金控), plans to book the earning in the first half of next year. It retains 38 percent ownership — including the basement floors and the first and second stories — in the building.
“We’ll continue our efforts to strengthen our real estate investments at a reasonable cost,” Hsu said by telephone.
Ideally real estate must generate rental yields of at least 2.5 percent or promise strong capital gains in the future, he said.
BRIGHT OUTLOOK
Michael Wang (王維宏), an account manager at Sinyi Realty Inc’s (信義房屋) asset department, said the auction outcome bodes well for the commercial property market in Taipei.
“Real estate properties in prime locations remain attractive long-term investment tools as seen by the fierce competition [in the auction],” Wang said by telephone.
Three bidders offered more than NT$9 billion for the REAT, suggesting an upside to commercial property prices going forward, he said.
Fubon Life offered NT$9.06 billion, while another developer, an affiliate of China-based Taiwanese food company Ting Hsin International Group (頂新集團), offered NT$9.1 billion, Wang said.
The real estate market next turns its focus to the auction on Wednesday of China Bills Finance Corp’s (中華票券) building on Dunhua S Road.
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