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May 28, 2017

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Prospective buyers fail to bid in Xinyi District's A25 auction

TAIPEI, Taiwan -- A highly prized land parcel failed to secure a buyer by the end of a recent auction, marking the first instance in the past 11 years in which prospective buyers refrained from placing a single bid for land in the coveted Xinyi District (信義區).

The Department of Finance, Taipei City Government held an auction on March 11 for the surface rights of the land parcel, with bids set to begin at NT$24.087 billion. The property, named plot A25, spans across 18,022 square meters, or 5,452 ping, and is bordered by Song Yong Road (松勇路), Song Gao Road (松高路) and Section Five of Zhongxiao East Road (忠孝東路五段). A ping is approximately 3.3 square meters.

Contrary to expectations, the A25 parcel failed to draw a single bid during the auction despite its status as the last publicly held idle land plot in Xinyi District and other stellar attributes such as its prime location and sprawling surface area.

The Department of Finance last year held an auction for the same property with a beginning bid of NT$18 billion that also failed to find a buyer.

Reports indicate that life insurance companies, who are also the most eligible bidders capable of taking on such high-priced properties, exhibited little interest in the past two rounds of auctions because of legal constraints. Existing regulations do not allow life insurance companies to set up parking lot operations. Despite recent deregulatory efforts, life insurance companies are still required to partner with a third party in setting up parking lot operations, and these partnerships are subject to lengthy approval processes.

Industry observers remarked that an increase of NT$6 billion, or 33 percent, of the base bid of the A25 parcel did little to make the deal more attractive to prospective buyers who balked at the price range from last year's auction. Other concerns included the possibility that the government may raise annual tax rates on the surface rights of land parcels, the difficulty of seeking investment partners in building and operating hotels on the property as well as the additional investment in public infrastructure mandated by the government, said industry observers.

The total investment amount is expected to reach a staggering number, ranging between NT$35 billion and NT$40 billion, and leaving but of few of the most well-endowed enterprises with the ability to undertake the development of the A25 land parcel, industry observers said.

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