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June 24, 2017

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Cathay Life Insurance buys prime London property

Cathay Life Insurance (國泰人壽) yesterday announced that the company has purchased a prime property in London, marking the first acquisition by a Taiwanese life insurance carrier since the Financial Supervision Commission's (FSC,金融監督管理委員會) approval of overseas real estate investments for the sector.

Reports indicate that Cathay Life Insurance purchased the Woolgate Exchange, a commercial office and retail high-rise building from a partnership comprised of Canada's Ivanhoe Cambridge and Texas-based TPG Capital for 311 million pounds, or about NT$15.8 billion.

According to the company, the newly acquired London property is currently at 100 percent rental capacity, and expected to yield rental returns exceeding 5 percent, and that its purchase conforms fully with profitability requirements for overseas real estate investments stipulated by the FSC.

The Woolgate Exchange spans across nine floors and 9,869 ping (a ping is approximately 3.306 square meters), with Cathay Life estimated to have spent about NT$1.6 million per ping.

In addition, the company noted that the UK government and regulating bodies have furnished international investors with favorable taxation terms and transparent registration processes that meet the stringent requirements of the FSC.

UK's JPUT Vehicle for Foreign Investors

Most notably, the company stated that the Jersey Property Unit Trusts (JPUT) is a tax efficient vehicle for holding interests in UK commercial real estate properties. The JPUT vehicle has numerous advantages such as transparency for income tax and exemption from British capital gains tax on the sale of the underlying property. In addition, JPUT as an investment instrument offers its owner a degree of flexibility as the underlying property may be transferred free of any stamp duty or land tax charges if the transaction is structured as a sale of JPUT units rather than as a conveyance of the actual underlying property.

Cathay Life Insurance is an arm of the Cathay Financial Holdings, one of Taiwan's largest financial conglomerates, and has risen to become a bellwether of Taiwan's real estate market, its every investment decision scrutinized by the investing public. As of the end of the first quarter of this year, the company is estimated to own more than 200 real estate properties worth about NT$250 billion.

In February this year, the company's decision to sell a 4,265.32-ping land parcel in Kaohsiung's Renwu District (仁武區) for NT$1.25 billion caused a stir in the local real estate market. Cathay Life Insurance at the time stated that the move is part of an initiative to revitalize a number of poorly performing real estate assets, and shift away from the company's buy-and-hold properties investment doctrine, inline with the Cathay Financial Holdings Chairman Tsai Hong-tu's (蔡宏圖) remarks made earlier just prior to this year's Lunar New Year's holidays.

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