One of Taiwan's biggest construction companies, Fubon Construction, will launch the country's first REIT this month. In a slightly surprising move, Fubon Securities is arranging the NT$6 billion (US$180 million) deal by itself, without the aid of an appointed foreign structural advisor, although an international law firm - Baker & McKenzie - is providing legal expertise.

Learning from experience in Korea, international banks were well aware their participation in the domestic market was never going to be long-term. Once Taiwanese banks acquired the necessary skills to execute transactions - having worked alongside foreign advisors on the first batch of deals - it was assumed they would start arranging without external help.

However, the foreign banks would have hoped for a longer honeymoon period than the 18 months since the first deal was completed. In April, Chinatrust Commercial Bank became the first to decide to go it alone on its NT$5 billion MBS deal, having previously appointed Lehman Brothers as structuring agent. That transaction has still not seen the light of day, despite the issuer originally targeting a May completion date.

Nevertheless, Fubon is pressing ahead alone with its transaction, despite its first-of-a-kind status. According to the latest reports from Taipei, approval is expected imminently from both the Bureau of Monetary Affairs and the Securities and Futures Commission.

The REIT packages together three Taipei-based buildings, two of which are office blocks - the Fubon Life Insurance Building and Aegon Building - and a high-rise block of apartments leased to government employees under a long-term contract.

Fubon Construction wants to take the building off-balance sheet and use proceeds from the REIT to develop and manage new buildings.

If successful, the deal will follow hot on the heals of the NT$2.1 billion real estate asset trust (REAT) from Chia Hsin International, set for launch as ASR went to press. Societe Generale and Industrial Bank of Taiwan are arranging the transaction, which involves the sale of the property conglomerate's stake in the IBM Building, located in central Taipei.

That deal will be the first REAT launched under Taiwan's Real Estate Securitization Law. The law was passed in July 2003 and allows for REIT structures, based on the U.S. mutual fund model, and REATs, which replicate Japanese special-purpose trusts.

Despite a quiet week in Japan, Fuyo General Lease, one of the country's biggest leasing companies with 833.6 billion (US$7.7 billion) in assets, kept the market ticking over with a Y20.2 billion transaction. Mizuho Securities arranged the deal, backed by a Y25 billion pool of equipment leases.

The issue is split into five tranches, each of which is rated Aaa' by Moody's Investors Service. Legal maturity for the deal, launched through the Magnum Pleco Trust Funding vehicle, is 5.5 years.

Equipment lease securitization is enjoying something of a bumper year in Japan, especially since regulators allowed maintenance contracts to be included in deals. Other recent issuers have included Hitachi Capital Corp. and Juhachi General Leasing, both of which tapped the market in early June.

Copyright 2004 Thomson Media Inc. All Rights Reserved.

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