Over the past 13 years, the public tender for the Taipei Twin Towers project failed five times for lack of interest. Last December, Nan Hai Development and Malton Berhad’s City One team emerged as the preferred bidder from the sixth tender procedure.

The two skyscrapers will have more than 10,000 pings (about 33,000 square meters) of floor space, or roughly half the surface area of the Xinyi District. Once completed, the Twin Towers, which will sit right on top of the terminus of the MRT line to Taoyuan International Airport, are expected to become a major transport hub with massive crowd flows.

Source: Nan Hai Development

However, the ambitious project remains shrouded in uncertainty. Under the tender terms, Nan Hai is required to establish a project management company in Taiwan and sign a contract with the Taipei City Government.

Since Nan Hai Corporation Limited, the parent company of Nan Hai Development, is suspected of being partly held by Chinese investors, the Investment Commission under the Ministry of Economic Affairs has asked the company to submit additional information by May 13 to disclose its ultimate beneficial owners and to explain whether it has received capital from Chinese investors.

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Nan Hai Corporation Chairman Yu Pun-hoi, also known as P.H. Yu, grants interviews in a private room at a restaurant on the sixth floor of Humble House Hotel in Taipei. As the reporter arrives, the 61-year-old Yu is sitting on an armchair, visibly relaxed and far from showing any exhaustion even though he has just finished another interview. When asked about the schedule for contract signing, Yu notes that “The end of March is the date the government told us, but we do not have a timetable for the contract signing.”

Yu Pun-hoi (Photo by Kuo-Tai Liu/CW)

Expanding from Media and Software to Cinemas and Real Estate

Although Yu was born and raised in Hong Kong, he speaks very authentic Mandarin Chinese without any Cantonese accent because his parents had immigrated from China’s Shandong Province. Yu was already 21 years old when he first set foot into China.

“You are looking for me, aren’t you,” Yu greets the reporter jovially, starting the conversation. Yu, who is about 180 cm tall, does not come across as the typical haughty, arrogant big boss, although his business empire and influence are much greater than for the average entrepreneur.

According to its latest annual report 2018, Nan Hai Corp.’s subsidiaries include Dadi Media, which again consists of four wholly owned subsidiaries, including Guangdong Dadi Cinema Construction Limited (Dadi Cinema) with nearly 500 cinemas in China that reach an audience of 100 million people per year. The corporation’s portfolio also includes two companies that provide enterprise cloud services to corporate customers in China, including more than 20 of the world’s top 500 enterprises.

Nan Hai Development, which belongs to the Twin Towers bidding consortium, has subsidiaries in China that are involved in large property development projects in Shenzhen and Guangzhou.

Nan Hai Corp. owns nearly 500 movie theaters in China. (Source: Dadi Cinema)

Yu is also the founder of Hong Kong online news outlet HK 01 and owner of another news media outlet, DuoWei News, which has offices in Beijing, Hong Kong and Taipei.

In contrast to other tycoons who have bought up media outlets, Yu actually worked in the media industry in his early career. He switched careers in his thirties, making himself a name with high-profile buyouts. His first deal was the acquisition of the Hilton Hotels in the Philippines the year when he turned 30. At age 33, he bought Hong Kong newspaper Ming Pao from its founder Louis Cha.

In Taiwan, Yu is most known for his venture into television broadcasting, pouring massive funds into the founding in late 1993 of Chinese Television Network (CTN) which included the Chong-Tian News and Dadi Entertainment channels. He was forced to sell the network to a Taiwanese investor in 1997 after it accumulated losses of US$100 million.

Making a Bid After Ten Visits

Yu emerged as the preferred bidder for the Twin Towers project because he made a more generous offer than the competition.

Andy Huang, head of consultancy and research at the Taipei branch of global real estate consulting firm RePro Knight Frank, which helped Nan Hai with the tender, explains that, based on examples of other local government-led urban renewal projects, landowners typically get a share of more than 70 percent in jointly developed property. Therefore, an offer that fulfilled the city government’s minimum share requirement of 50 percent was not likely to win.

While Nan Hai offered a 66 percent landowners’ share for the building on plot D1, which is mainly state-owned, the competing Taiwanese consortium grouping contract computer maker Clevo Co. and property affiliate Hongwell Group did not improve their offer over the minimum requirement. Consequently, the Hong Kong-led consortium won the final round of the tender procedure.

As for the background of his investment, Yu reveals that he checked out many real estate development projects in Taiwan in the past but always found that they were not big enough. When Malton Berhad subsequently introduced him to the West District Gateway Project in Taipei, Yu put together a research team with employees from Hong Kong, Taiwan and Shenzhen. When the tender for the Twin Towers, which form the core of the Gateway Project, was launched, and JLL Taiwan, the real estate consulting firm in charge of the tender process, heard that Nan Hai was interested, they invited the company to tender.

While many doubt that it will be possible to recoup the investment, Yu has confidence in his own team.

Huang notes that, due to regulations, the two skyscrapers can have only 40 percent of commercial space. The Nan Hai team will therefore include 40 percent of retail space in its design, going for the maximum in one go. “Such a large retail space, these are dimensions ordinary operators cannot imagine,” says Huang, indicating that Nan Hai is quite optimistic about its ability to run the place itself.

Much of Yu’s confidence can be attributed to his plan to introduce new retail models. The complex will be equipped with various types of sensors and cloud services that gather crowd flow data as well as personal data such as gender and age. Armed with such big data, Nan Hai will be able to improve operating efficiency.

Why is Yu so positive about Taiwan? Yu says he decided to go for the Twin Towers project after touring the Taipei Main Station shopping district eight to ten times to study the feasibility of the project as well as its future development potential and current value. “If you roam the area eight to ten times, if you walk around while focusing your attention, you will obtain the same answer,” remarks Yu.

Cozy Ties with Power and Money in China

To be able to sign a contract with the Taipei City Government, Nan Hai Development needs to establish a company in Taiwan specifically for this project. Since parent company Nan Hai Corp. is partly held by a state-owned Chinese bank, there is concern that this would provide a back door for Chinese capital to get involved in a large infrastructure project in Taiwan. According to the company’s annual report 2018, Chinese state-owned investment firm Central Huijin Investment Co. Ltd. holds a 10.29 percent stake in Nan Hai Corp. via China Construction Bank Corporation (CCB) which it controls.

The controversy revolves around the question whether the bank could enforce a debt-for-equity swap, thus gaining a stake in the project.

Nan Hai Development declares that a debt-for-equity swap is only possible when convertible bonds have been issued or if new shares are issued with the approval of the board of directors or the annual shareholder meeting to give lenders the right to convert a loan amount into equity shares. Presently, Nan Hai has not issued any convertible bonds, nor has it any plans to issue shares for debt-for-equity swaps.

Experts in Taiwan are divided over whether CCB as a lender could gain a stake in the Twin Towers project. The Department of Rapid Transit Systems (DORTS) of the Taipei City Government, which in in charge of the tendering process, denies this could happen.

DORTS Chief Secretary Wang Wei notes that the department already knew in the first stage of the tender, when tenderer qualifications are reviewed, that Nan Hai Development had used a 10.29 percent stake as collateral for a CCB loan. In the opinion of JLL Taiwan, bonds are usually sold and not converted to equity. In commerce, so-called debt-for-equity swaps are not that likely, and since the stake in question is only 10.29 percent, this would not suffice to gain control over the company, says Wang.

Based on current regulations in Taiwan, a company is determined to be backed by Chinese capital if Chinese shareholdings in a company exceeds 30 percent or if he exerts de facto control over the company. Confronted with the suspicions that his company is Chinese-funded, Yu says the decision whether a company is defined a Chinese-funded should be made based on facts. However, when the Investment Commission reviews applications from foreign or overseas Chinese investors, the decision whether to regard it as Chinese-funded also pertains to national security considerations.

Another reason why the Twin Towers project tender has drawn controversy is the fact that Yu has very good personal connections with China’s political and business elites. Wang Jingjing, daughter of Wang Jun, the former chairman of the state-owned investment corporation CITIC Group, is an example. Wang Jingjing once served as director on the board of Sino-I Technology Limited, which is a listed subsidiary of Nan Hai Corp. Yu does not deny this fact but simply returns the question: “Why not say that I have a very good relationship with Wang Jingjing so her father will help me?”

Regarding his interpersonal network in China, Yu avoids a direct answer, simply stating that he has a very good relationship with many people in China. “China has 1.4 billion people so if I have a good relationship with 1 million of them, that’s pretty good, right?

When reviewing investor information, the Taipei City Government examined Nan Hai Development and Malton Berhad. But in mid-April, the Investment Commission sent a letter demanding that Nan Hai Development disclose its ultimate beneficial owners and sources of funding before May 13. It also demanded that the information provided by Nan Hai Development be assessed by an independent third-party expert.

When contacted by phone about the current status of the investor review, the Investment Commission said that further explanations will only be offered after the May 13 deadline for submission of the assessment report has passed.

While Yu claims he knows Taiwan well, he does not seem to be aware of the widespread concern among the locals over growing Chinese influence through investments. When asked to comment about Taiwanese misgivings about Chinese-backed investors, Yu retorts: “Who in Taiwanese society has ever been concerned about how the Taipei Main Station is being built,” dismissing this as a minority opinion. “If only five or six people get together, does this represent the people? Aren’t you are going too far fooling around with democracy?”

Still Seeking Media Influence

While running a commercially successful property and entertainment business empire, Yu has always kept a foot in the news media industry.

Although the news business has been ailing for years, Yu bought DuoWei News, a Chinese-language news website founded by a Chinese dissident in New York, in 2009. He founded Chinese-language online news portal HK01 in Hong Kong in 2015. Yu says the news outlets are his hobby and not a business. DuoWei News is said to not be profitable yet.

Yu says he is developing DuoWei News with a long-term strategy and is not keen on recouping his investment quickly. “I keep saying we’ll stand our ground for one year, three years, five years, fifteen years, to let them shape a new standpoint,” Yu explains.

Yu says DuoWei News provides a window into China from a global perspective. This “China” includes Taiwan. When asked why DuoWei News established an office in Taiwan, Yu responds instantly, saying: “Because Taiwan is a part of China.”

While Yu claims DuoWei News is reporting the truth, his definition of “truth” does not necessarily match with what Taiwanese mainstream opinion considers the real story. A source familiar with how the news portal is run told this reporter that the truth DuoWei News is supposed to spread in Taiwan is “that cross-strait unification is inevitable” and that “the United States could abandon Taiwan anytime.”

However, with such views, the portal is quite an outlier in the local media landscape, unable to resonate with mainstream opinion and values.

This is reflected in the portal’s market performance. The lion’s share of the portal’s traffic comes from North America, whereas readership in Taiwan is low. A former employee of DuoWei News in Taiwan says the site does not have many readers in China, and the number of people browsing it in Taiwan is also limited. “I still wonder how Mr. Yu is going to generate influence,” the former employee points out.

There have been rumors that after buying DuoWei News, Yu moved the portal’s headquarters from New York to Beijing. In the interview, Yu denied that the portal had moved, saying that the outlet had employees in Beijing but had not relocated to Beijing. “Chinese law simply does not allow you to move headquarters there.”

But a former DuoWei News employee told this reporter that while the news portal’s location is still registered in the United States, most of its staff is based in Beijing. “The Beijing office must have 200 to 300 people.”

Back to the Twin Towers project, should the Investment Commission decide to turn down Nan Hai Development’s investment application, then the consortium ranked as second preferred bidder will come in, or the entire tender procedure will be repeated.

However, should Nan Hai Development contest the result of the Investment Commission’s review, the project will see further delays.

Yu is clearly prepared to fight a drawn-out campaign. “I am not in a hurry, because this is just one of many projects.” This battle-hardened tycoon is not going to retreat easily. Now all eyes are on the Investment Commission. No matter how it decides, the decision will have a major impact on the fate of Taipei’s West District Gateway project.

Translated by Susanne Ganz
Edited by Sharon Tseng