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IOI Properties’ Taipei 101 buy caught up in politics

KUALA LUMPUR: IOI Properties Group Bhd is facing a major hurdle in acquiring a 37.17% stake in Taipei Financial Center Corp (TFCC), which owns the iconic Taipei 101 building in Taiwan, after the republic’s government said it was opposed to foreign control of the national landmark. Last Friday, IOI Properties announced plans to buy the stake in TFCC for NT$25.14 billion (RM2.74 billion) from Ting Hsin International Group.

While the outcome of the proposed acquisition remains uncertain, TA Securities analyst Thiam Chiann Wen is of the view that Taipei 101 is a matured asset, which implies limited rental upside. Thus, she feels that if the deal falls through, it would be favourable for IOI Properties.

Thiam noted that the rental yield in Taipei’s central business district is some 2% to 3%, lower than the research house’s estimated dividend yield of 4% to 5%. “Despite the investment being a rare opportunity, that is, to acquire a piece of a prized iconic building in Taiwan, we are mildly negative on the deal,” she told The Edge Financial Daily yesterday.

BIMB Securities head of reseach Kenny Ye, however, reckoned that the proposed acquisition would be “quite positive” for IOI Properties as the property’s yield is favourable. “We are quite positive on this deal because the rental yield for Taipei 101 is around 8% to 9%, so we see it as an exposure for IOI Properties to invest in a ‘Class A’ property in Taiwan,” he told The Edge Financial Daily.

Shares in IOI Properties retreated 7 sen or 2.93% to RM2.32 yesterday, with more than 2.448 million shares traded, giving it a market capitalisation of RM7.51 billion.

According to Reuters, Taiwan’s Finance Minister Chang Sheng-ford told parliament yesterday that TFCC should not be controlled by foreigners as it is a national landmark. “Our evaluation shows that IOI is seeking management control rather than just a financial investment,” he reportedly told lawmakers.

Taiwan’s Investment Commission also chimed in yesterday, saying it will “give a strict review” of the deal.

Reuters said IOI’s corporate communications department in Kuala Lumpur did not answer phone calls and did not immediately respond to an email requesting comments on Taiwan’s stance.

 

This article first appeared in The Edge Financial Daily, on December 9, 2014.

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