The Rundown: Offshore Wind, Mediatek Deal, and Commercial Real Estate

A bi-weekly snapshot of Taiwan business news stories brought to you by CommonWealth and AmCham Taiwan’s TOPICS

Ørsted signs investment agreement for Taiwan wind farm

Danish wind power developer Ørsted signed an investment agreement in late December with Canadian institutional investor CDPQ (Caisse de dépôt et placement du Québec) and local investor Cathay PE. Under the agreement, the latter two organizations will acquire 50% of Ørsted’s 605 MW Greater Changhua 1 Offshore Wind Farm. Ørsted will retain the other half.

The total investment amount stipulated in the agreement is NT$75 billion, a major part of which will be used to pay for the cost of constructing the site. The agreement has yet to be approved by the Taiwan authorities.

Greater Changhua 1 is the first stage in Ørsted’s buildout of a 900 MW installation off the coast of Central Taiwan. The project is slated to be completed in 2022.

Ørsted Taiwan General Manager Christy Wang said that the successful conclusion of the agreement with CDPQ and Cathay was possible given Ørsted’s extensive record and experience in the development, construction, operation, and maintenance of large-scale offshore wind farms. She added that the company assumed all possible risks during the development phase of Greater Changhua 1, as well as most of the risks incurred during the construction period.

Mediatek to acquire Ethernet chip designer IC Plus

Taiwanese fabless chip designer Mediatek is aggressively expanding its broadband business. On December 27, the company announced that its subsidiary Airoha Technology Corp. had offered to buy 100% of shares of Hsinchu-headquartered broadband chip supplier IC Plus at NT$22 per share, a 15.79% premium on its NT$19 share price. The total acquisition price would come to NT$1.51 billion.

IC Plus mainly specializes in the development, design, and distribution of high-speed Ethernet transceivers and switches. It has been awarded over 70 international and domestic patents for its Ethernet applications.

However, IC Plus’ operating revenue for the first 11 months of 2020 totaled NT$771 million, a drop of 13.4% from the same period the year before and the company’s lowest recorded revenue in five years. In the first three quarters of 2020, IC Plus experienced losses per share of NT$1.48. It has only turned a profit in three out of the last 11 years.

The proposed acquisition is expected to be concluded on April 4, pending the approval of an extraordinary meeting of IC Plus’ shareholders in February.

COVID-19 impacts Taipei’s commercial real estate market in 2020

The Taiwan government’s decision last year to close the borders following the outbreak and global spread of COVID-19 caused international visitors to the island to drop significantly. According to statistics compiled by the Ministry of Transportation and Communications, visitors to Taiwan in the first 10 months of 2020 totaled 1.33 million, an 86% drop from the same period in 2019.

The absence of international tourists has had a severe impact on Taipei’s commercial districts. The Taipei City Government’s Department of Land Administration recently announced a change in current land value due to the pandemic. Business has been affected so heavily that Ximen, East District, Shilin Night Market, and other business districts have experienced a rare drop in land prices.

Online real estate platform Ubee notes that storefronts in Ximen are undergoing a huge selloff. Currently, the number of high-value storefronts in that district stands at only 16, with the average price of these reaching NT$260 million. These shops are primarily located on Wuchang Street, Section 2. There are also a fair number of complete buildings in attractive locations for sale online; the most expensive of these can cost upwards of NT$580 million.

Yet given global low interest rates, as well as the fact that Taiwan has enjoyed normal economic activity compared to the rest of the world during the pandemic – even experiencing growth in 2020 – commercial real estate prices in Taipei have actually remained flat.

Based on data released by local real estate company Sinyi Global at the end of 2020, the vacancy rate in Taipei’s office space in Q3 2020 increased from 2.32% to 2.52%. Rents in all of Taipei’s commercial districts remained relatively stable, with an average rental price of NT$2,344 per ping (approx. 35.6 square feet). Rents at the World Trade Center in Xinyi District and the Songjiang Nanjing commercial district increased by 2.8% from the same period the year before, a bigger increase than in other districts.

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