THE sponsor of EC World Real Estate Investment Trust (Reit) said that a lapse in an approval process had resulted in three properties being mortgaged without consent.

 

On Jan 2, the manager of EC World Reit said the properties &ndash Fuzhou E-Commerce, Fu Heng Warehouse and Hengde Logistics &ndash had been mortgaged between Nov 20 and 24, 2023, in favour of two Fuyang government-linked financial institutions in China, without its approval.

 

In response to a letter of demand from the manager dated Jan 4, the sponsor Forchn Holdings said on Jan 8 that it had been negotiating with the two financial institutions to obtain relief funds for itself, and that the financial institutions had required the funds to be secured by assets.

 

Forchn Holdings provided a list of assets to the financial institutions, which included the three properties. The properties thus came to be part of the various assets that the financial institutions imposed mortgages on.

 

In its Jan 8 reply, the sponsor said that its treasury department did not go through the requisite approval processes of EC World Reit to execute the mortgages. Instead, a written request was made by the department to Forchn Holdings&rsquo chief executive officer to seek approval and usage of the company and legal representative seals.

 

After this approval was granted, the mortgages were executed.

 

The manager sent another letter of demand on Jan 9 to Forchn Holdings, asking for a timeline and proposal to discharge the mortgages on the three properties, and all relevant documents pertaining to the mortgages. The sponsor has since provided certain related documents, which the manager said it is seeking legal advice on.

 

The manager said the mortgages &ldquo will cause a breach in the existing onshore facilities of EC World Reit&rdquo . It added that they would result in an event of default and trigger a cross-default under the Reit&rsquo s existing offshore facilities, giving lenders under the onshore facilities the &ldquo right to send a notice to accelerate repayment&rdquo .

 

The breach in the offshore facilities, if not remedied within 10 business days of EC World Reit being made aware of it, will also result in a default. Lenders of the offshore and onshore facilities have given the sponsor up to Jan 20 to remove the mortgages, failing which the lenders may consider taking legal action, the manager said.

 

The manager added that, since Jan 5, it has taken control of company and legal representative seals, as well as the contract and finance stamps from the property management teams in China. The legal representative seal and finance stamps are being kept in the manager&rsquo s registered office in Singapore, while the company seal and contract stamps are under the custody of the manager&rsquo s legal counsel in Shanghai, China.

 

The Reit manager said Forchn Holdings has met the financial institutions to resolve the matter, and the institutions are agreeable to remove the mortgages on the three properties. The sponsor has been asked to provide other assets to secure the loan, in exchange for the removal of the mortgages.

 

Forchn Holdings said it is seeking to review its internal processes and personnel training. The Reit manager, meanwhile, is in the process of appointing an external auditor to review the internal control and processes of EC World Reit.

 

EC World Reit&rsquo s units have been suspended from trading on the Singapore Exchange since Aug 31, 2023, after its manager disclosed that the Reit and its subsidiaries could not fully repay their offshore interest expenses due.

THREE properties owned by EC World Real Estate Investment Trust (Reit) have been mortgaged without the consent or knowledge of its manager. The loans were in connection with the Fuyang local government in China providing Forchn Holdings, the sponsor of EC World Reit, with rescue funds.

 

The manager of EC World Reit said in a bourse filing on Tuesday (Jan 2) that the properties &ndash Fuzhou E-Commerce, Fu Heng Warehouse and Hengde Logistics &ndash were mortgaged between Nov 20, 2023 and Nov 24, 2023, in favour of two Fuyang government-linked entities in China.

 

These funds &ndash approximately 268.6 million yuan (S$49.8 million) based on preliminary inquiries &ndash were provided to Forchn as arranged between the Fuyang government and the sponsor, the manager said. It added that EC World Reit was not aware of and did not consent to the arrangements.

 

Most of the mortgages are third ranking, except for those in favour of Zhejiang Fuyue Finance Lease which are fourth and fifth ranking. This means that they do not have priority over EC World Reit&rsquo s existing first and second ranking mortgages on existing facilities, and the mortgages of its existing lenders will not be affected.

 

The sponsor is in the process of sourcing for funds to repay the Fuyang government.

 

The manager has stated that the mortgages were &ldquo illegally procured by the sponsor without informing EC World Reit to guarantee loans of the sponsor group which are irrelevant to the EC World Reit group&rdquo , in a letter to the sponsor immediately after being notified of the mortgages on Dec 29 last year.

 

It also demanded in the letter that Forchn immediately procure the discharge of the mortgages by Jan 8, 2024. It also stated that it has initiated an investigation into the mortgages, and has the right to take legal action against the sponsor and relevant personnel.

 

Separately, it had demanded that Yuntong Property Management, the property manager of EC World Reit&rsquo s properties and a wholly owned subsidiary of the sponsor, hand over all the title deeds of EC World Reit&rsquo s properties to its onshore facility agent.

 

They have since been handed over, and there is no record of the mortgages on the title deeds of the properties, the manager said.

 

It is seeking legal advice to ascertain, among other things, the validity of the mortgages on the three properties how to remove the mortgages and the legal action that can be taken against its sponsor and relevant personnel.

 

This incident is the latest in a series of troubles for the Reit. In October 2023, it announced that one of its major tenants would not be renewing one of its two leases at Hengde Logistics warehouse property. It had also failed to sell two logistics assets in Zhejiang as its sponsor could not obtain sufficient financing for the proposed divestment.

 

EC World Reit&rsquo s units have been suspended from trading on the Singapore Exchange since Aug 31 last year, after its manager disclosed that the Reit and its subsidiaries could not fully repay their offshore interest expenses due.

 

PART of EC World Real Estate Investment Trust&rsquo s (EC World Reit : BWCU 0%) Hengde Logistics warehouse property in Hangzhou will remain occupied by its existing tenant, China Tobacco.

 

On Tuesday (Dec 19), the manager said China Tobacco selected the 74,057 square metres (sq m) of space in the property, through a tender process, as its warehouse for the storage of raw materials.

 

Terms of the tender entail a new lease period from Jan 1, 2024 to Dec 31, 2025.

 

China Tobacco&rsquo s earlier leasing agreement for the same space was from May 9, 2021 to Dec 31, 2023.

 

The new rental rate will be on a par with what China Tobacco is currently paying for the space.

 

In October, EC World Reit&rsquo s manager announced that China Tobacco would not be renewing its lease for a separate space in Hengde Logistics spanning 159,752 sq m &ndash marking the loss of a major lease contract for the Reit.

 

The tenant&rsquo s lease for this portion of the property also expires on Dec 31, 2023, and has been active since Oct 5, 2020.

 

At the time, the manager said it would conduct a review of the space, including exploring a new leasing strategy. 

 

Units of EC World Reit have been suspended from trading on the Singapore Exchange since Aug 31, following its manager&rsquo s disclosure that the Reit and its subsidiaries could not fully repay their offshore interest expenses due. 

EC WORLD Real Estate Investment Trust (Reit)&rsquo s distribution per unit (DPU) fell 32.8 per cent to 0.916 Singapore cent for its third quarter ended Sep 30, from 1.364 cents a year ago.

 

Gross revenue for the China-focused e-commerce logistics landlord was down 9.5 per cent to S$27 million for the quarter, from S$29.8 million a year ago. Net property income (NPI) was down 8.5 per cent to S$24.7 million, from S$27.1 million a year ago.

 

This was mainly due to a weakening of the renminbi against SGD by 8.7 per cent year on year and straight-line rental adjustment, offset by organic rental escalations and higher late fees, the Reit manager said in a bourse filing on Tuesday (Nov 7).

 

Distributable income to unitholders declined 32.9 per cent year on year to S$7.4 million, from S$11 million.

 

Besides the impact of the weakening renminbi, the Reit manager attributed the fall in distributable income to the increase in finance costs &ndash which rose 10.8 per cent in the quarter to S$11.8 million &ndash driven by higher interest rates.

 

The Reit has also retained 10 per cent of the total amount available for distribution in Q3 FY2023 for general working capital purposes, its manager said.

 

No distribution has been declared for the period Jul 1 to Sep 30, 2023.

 

The manager announced on Sep 27 that the Reit will be deferring its first-half FY2023 distribution payment to a future date when the Reit has sufficient free cash.

 

EC World Reit and its subsidiaries are owed more than 171 million yuan (S$32.3 million) in overdue receivables, and trading in the units of the Reit has been suspended since Aug 31.

 

For the nine months ended Sep 30, the Reit&rsquo s DPU was lower at 2.969 Singapore cents, from 4.134 cents a year ago, while distributable income fell 28.2 per cent to S$24 million. Gross revenue was 11.2 per cent lower at S$82.7 million, while NPI was 9.9 per cent lower at S$76.5 million.

 

Goh Toh Sim, executive director and chief executive officer of the Reit manager, said EC World Reit and its subsidiaries have faced challenges to maintain operations and meet financing obligations for the past three quarters in 2023.

 

While all efforts are being concentrated towards the collection of rental receivables in order to fulfil the Reit&rsquo s various operating and financing obligations as well as to lift its trading suspension, he pointed out other challenges resulting from high interest rates and the weak renminbi against the Singapore dollar and the US dollar.

 

These challenges &ldquo will continue to build up additional pressure for the business of EC World Reit&rdquo , Goh warned.

 

EC WORLD Real Estate Investment Trust (Reit) has failed to sell two logistics assets in Zhejiang, China, as the Reit sponsor could not obtain sufficient financing for the proposed divestment.

 

This rendered the sponsor Forchn Holdings and the purchasers unable to complete the deal by the already postponed long-stop date on Oct 31, the manager announced on Thursday (Oct 26).

 

The manager said it is looking for at least two independent consultants to evaluate the possibility of divesting one or more of the Reit&rsquo s properties to third parties via open market sale. This includes, but is not limited to, Bei Gang Logistics and Chongxian Port Logistics.

 

The troubled Reit is also seeking legal and financial advice on the possible termination of the proposed divestment and options to address &ldquo ongoing challenges&rdquo .

 

EC World Reit had on Sep 30 last year entered into an equity purchase agreement to divest all of its indirect interests in the two logistics assets in Zhejiang.

 

The long-stop date was extended to Oct 31 from the initial Jan 31 this year, after the Reit received approval from the Monetary Authority of Singapore.

 

Its units have been suspended since Aug 31, following manager&rsquo s disclosure that the Reit and its subsidiaries could not fully repay their offshore interest expenses due.

 

The challenging financial position could have been resolved, the manager said, if the sponsor group had paid the &ldquo sufficient&rdquo amount of the 145.8 million yuan (S$27.4 million) overdue rent receivables on time. This is spread across ECW Group&rsquo s four master-leased properties in China, including Fu Heng Warehouse in Hangzhou.

 

On Sep 21, the manager announced that around 11.3 million yuan had been released from its onshore interest reserve to repay the Reit&rsquo s onshore interest expenses, which were due on the day before. The manager also extended the Reit&rsquo s trading suspension to resolve financial uncertainties.

 

Among its financing woes, ECW Group faces S$443.2 million in borrowings due on Jun 30, 2024. It also has existing offshore facilities ending on Apr 30 next year, which could be further extended to 2026.

 

However, any extension of the initial termination date is subject to its completion of the proposed divestment of the two China properties, noted the manager on Sep 21.

 

Troubled Real Estate Investment Trust (Reit) EC World Reit : BWCU 0% will defer its first half FY2023 distribution to unitholders to an unspecified future date, citing &ldquo insufficient funds&rdquo .

 

The distribution was originally due on Sep 28.

 

Its manager said on Wednesday (Sep 27) that the trust&rsquo s sponsor and its subsidiaries had not been able to pay the overdue rent owed to ECW Group, which comprises EC World Reit and its subsidiaries.

 

&ldquo Additionally, as at the date of this announcement, the sponsor has been unable to provide a committed repayment plan in respect of the outstanding rent receivables which is satisfactory to the ECW Group,&rdquo it added.

 

As such, EC World Reit will defer the distribution payment to a date when the Reit has sufficient free cash for the distribution, said the manager.

 

It added that it will update unitholders when there is clarity on the deferred distribution date.

 

The China-focused Reit and its subsidiaries are owed more than 145.8 million yuan (S$27.3 million) in overdue rent by their sponsor.

 

The manager had previously flagged a &ldquo high risk&rdquo of non-collection of the rent receivables.

 

On Wednesday, it said that the ECW Group may have insufficient funds to maintain its operations as the trust&rsquo s sponsor has not paid the outstanding rent receivables.

 

In particular, the group may not be able to pay interest expenses which are due to become payable, said the manager.

 

This may give rise to an event of default under the group&rsquo s existing onshore and offshore facilities, such as EC World Reit being unable to pay its debts.

 

Such a circumstance may also be viewed by lenders as constituting a material adverse event, which in turn could result in an event of default under facilities.

 

The manager noted that this may lead relevant lenders to accelerate the facilities, or in other words, demand repayment.

 

It added that it is currently engaging the lenders and has not received any indication that they intend to accelerate the facilities.

 

The manager also said that it intends to take steps to address the situation. These include working with the sponsor group on the repayment plan for its outstanding rent and payment obligations under existing related party leases.

 

It will also appoint independent consultants to evaluate the market rental rates of assets under master leases so as to formulate a new leasing strategy for these assets.

 

The master-leased assets are Chongxian Port Investment, Fu Heng Warehouse, Beigang Logistics Stage One and Fuzhou E-commerce. All properties are in China.

 

Additionally, it intends to appoint independent consultants to evaluate the possibility of divesting ECW Group&rsquo s properties so that the group can meet its pre-payment obligations under the facilities.

 

Lastly, the manager said that it plans to appoint legal advisers who can provide advice in relation to the master leases as well as the equity purchase agreement between ECW Group and the sponsor group, in connection to the proposed divestment of properties.

 

It added that the sponsor recognised the challenges faced by EC World Reit, and that it would &ldquo continue to proactively work&rdquo with the manager to explore solutions.

 

The Reit&rsquo s units have not been traded since Aug 31, when the manager disclosed that the ECW Group could not fully repay its offshore interest expenses.

 

As at Jun 30, the Reit&rsquo s current liabilities exceeded its current assets by S$117.9 million. ECW Group&rsquo s current liabilities exceeded the group&rsquo s current assets by S$133.2 million.

 

Within its current liabilities, the ECW Group has borrowings of S$443.2 million that are due for repayment within a year from Jun 30, 2023.

 

The manager said last week that the tenure for the group&rsquo s existing offshore facilities ends on Apr 30, 2024, subject to the consent of the offshore facilities lenders and certain conditions being met.

 

THE manager of EC World Real Estate Investment Trust : BWCU 0% (EC World Reit) said on Thursday (Sep 21) that around 11.3 million yuan (S$2.1 million) has been released from its onshore interest reserve to fully repay the Reit&rsquo s onshore interest expenses due on Wednesday.

 

The Reit&rsquo s majority lenders approved the release of the interest reserves at the manager&rsquo s request, it added.

 

However, as there is no specific deadline by which the onshore interest reserves need to be topped up, there are ongoing talks between onshore lenders and EC World Reit and its subsidiaries.

 

The China-focused Reit and its subsidiaries are owed more than 145.8 million yuan in overdue rent by their sponsor Forchn Holdings Group and its subsidiaries. The manager had previously flagged a &ldquo high risk&rdquo of non-collection of the rent receivables.

 

The units in EC World REIT BWCU 0.00% will remain suspended, says the REIT manager.

 

This is after the REIT&rsquo s trustee has determined that it is in the REIT&rsquo s unitholders&rsquo best interests that the REIT&rsquo s units remain suspended.

 

In a Sept 21 announcement, the REIT manager pointed out that the REIT&rsquo s current liabilities exceeded its current assets by $117.9 million as at June 30. The REIT&rsquo s current liabilities and its subsidiaries have exceeded the group&rsquo s current assets by $133.2 million.

 

&ldquo Within its current liabilities, the EC World Group has borrowings of $443.2 million (including amounts presented within liabilities directly associated with disposal group classified as held for sale) which are due for repayment within the next 12 months from the reporting date of June 30,&rdquo reads the statement put out by the REIT on Sept 21.

 

The tenure for the REIT&rsquo s existing offshore facilities is for 11 months ending on April 30, 2024. The tenure of the facilities may be extended for another 24 months not going beyond April 30, 2026, depending on whether certain conditions have been met.

 

&ldquo At this juncture, the manager understands from the offshore lenders that their approval of the extension of the initial termination date [of April 30, 2024] would be contingent on the ECW Group&rsquo s successful completion of the proposed divestment of Stage 1 Properties of Beigang Logistics and Chongxian Port Logistics and the ECW Group making certain mandatory repayments in the amount agreed or to be agreed by all the existing lenders under the existing onshore facilities of the ECW Group and all the offshore lenders,&rdquo continues the REIT&rsquo s statement.

 

As at Sept 21, the REIT also owes its sponsor, Forchn Holdings, overdue rent that exceeds an amount of RMB145.8 million. The REIT manager says it is working with its sponsor on a repayment plan.

 

It adds that the suspension of the REIT&rsquo s units will provide it more time to work on resolving its &ldquo uncertainties&rdquo including securing the requisite funding to complete the proposed divestment among other things.