CHINA-focused property trust Dasin Retail Trust : CEDU -2.4%&rsquo s move to restructure its loan maturities has hit a speed bump after talks for a potential memorandum of understanding (MOU) with a &ldquo reputable Chinese entity&rdquo fell through, the trustee-manager said on Thursday (Jul 6).

 

This comes after a representative of the trust&rsquo s major unitholder said transactions proposed by the MOU were &ldquo illegal under Chinese law&rdquo at a Jun 28 meeting.

 

The &ldquo reputable Chinese entity&rdquo also expressed dissatisfaction at recent actions taken by Zhang Zhencheng, a substantial unitholder of Dasin Retail Trust, as it viewed the actions as detrimental to the MOU.

 

The entity therefore said it would not be proceeding further with the MOU and will cease negotiations on it.

 

Zhang is currently suing Tan Huay Lim, the trustee-manager&rsquo s lead independent director, on allegations that Tan&rsquo s conduct has been &ldquo oppressive&rdquo and &ldquo in disregard&rdquo to Zhang&rsquo s interests.

 

Some of Dasin Retail Trust&rsquo s existing lenders have &ldquo expressed great displeasure&rdquo regarding the litigation and are requesting that it be discontinued, as they believe it has a &ldquo destabilising effect&rdquo on the trustee-manager&rsquo s efforts at restructuring.

 

A debt-restructuring term sheet sought by the trust&rsquo s lenders, which was a condition precedent for the MOU, also emerged as a point of contention in negotiations over the past weeks.

 

Lenders said the trustee-manager&rsquo s chief executive, Wang Qiu, had yet to provide the board with a finalised version of the term sheet, despite having actively participated in debating it.

 

This came as a &ldquo shock&rdquo to some lenders who believed the finalised term sheet, dated May 22 this year, was already ratified by the board &ndash and put the document through their respective internal channels for approval.

 

Based on letters received by Dasin Retail Trust&rsquo s board, the matter has fuelled concerns among the lenders on whether Wang had been &ldquo acting in the interests of all stakeholders including the lenders, and if conflicts of interest are being managed appropriately&rdquo .

 

They have since requested the board to review the conduct of Wang.

 

Lenders also expressed &ldquo disappointment&rdquo at the Jun 28 meeting outcome and said they would wait for a formal response from the board before embarking on any further discussions on the trust&rsquo s debt restructuring exercise.

 

Meanwhile, Dasin Retail Trust&rsquo s board said it will continue to explore available options related to its restructuring exercise with these lenders.

 

Dasin Retail Trust&rsquo s portfolio includes retail malls in China, such as Ocean Metro Mall in Zhongshan.

 

In its previous statement on May 4, the trustee-manager of Dasin Retail Trust said that the winding-up petition is not likely to affect the trust negatively.

The winding-up petition against Sino-Ocean Capital has been postponed to Aug 16 from June 7, says Dasin Retail Trust CEDU -2.36% in a June 5 statement. Sino-Ocean Capital is the sole shareholder of New Harvest, which holds 70% of the shares in Dasin Retail Trust&rsquo s trustee-manager.

 

In its previous statement on May 4, the trustee-manager of Dasin Retail Trust said that the winding-up petition is not likely to affect the trust negatively.

 

Further to its statement, the trust added that New Harvest will be disputing the termination of the shareholders&rsquo agreement by Zhang Zhengcheng.

 

Zhang, a director of the trustee-manager and a unitholder of the trust, sought to terminate the shareholders&rsquo agreement entered into on July 23, 2021, on May 2.

 

The shareholders&rsquo agreement was entered into between Zhang, New Harvest, Shun Fung Investment Limited and the trustee-manager at the time. Zhang&rsquo s termination is based on the event of the winding-up petition filed against Sino Ocean Capital, which is a default event under the shareholders&rsquo agreement.

 

&ldquo In this regard, the board understands it is New Harvest&rsquo s position that the winding up petition filed against Sino Ocean Capital, without any application for the appointment of any administrator to Sino Ocean Capital, is not an event of default under the shareholders&rsquo agreement,&rdquo says Dasin Retail Trust in its June 5 statement.

 

As such, the shareholders&rsquo agreement remains valid and &ldquo in full force and effect&rdquo .

 

&ldquo New Harvest has put Zhang Zhencheng on notice that his purported notice of termination was invalid and New Harvest requires him to withdraw the termination notice, and that any further act(s) based on Zhang Zhencheng&rsquo s termination of the shareholders&rsquo agreement, whether by him or otherwise, are similarly invalid and of no legal effect,&rdquo adds the trust.

 

DASIN Retail Trust&rsquo s (DRT) substantial unitholder Zhang Zhencheng is suing the trustee-manager&rsquo s lead independent director Tan Huay Lim on allegations that Tan&rsquo s conduct has been &ldquo oppressive&rdquo and &ldquo in disregard&rdquo to Zhang&rsquo s interests.

 

Under an original claim filed in the Singapore High Court last Thursday (May 25), Zhang, who is also a non-executive director and shareholder of Dasin Retail Trust Management (DRT&rsquo s trustee-manager) is seeking, among others, Tan&rsquo s removal from the board of the trust&rsquo s manager. This was indicated by an announcement by the manager to the Singapore Exchange (SGX) over the weekend.

 

The trustee-manager said that it was served the originating claim last Friday (May 26), and that it intends to contest the claim. Tan has informed the board that he intends to do the same.

 

Zhang is also seeking an order to restrain Tan from further involvement in DRT&rsquo s crucial refinancing exercise and discussions relating to a memorandum of understanding (MOU) with a &ldquo reputable Chinese entity&rdquo , indicated the statement to the stock exchange.

 

In a separate statement issued to the press, Zhang said that the MOU with a &ldquo foreign seller&rdquo &ndash a deal that he alleged is being &ldquo pushed for&rdquo by Tan &ndash is &ldquo adverse&rdquo to the trustee-manager, its shareholders and the trust&rsquo s unitholders.

 

He is also seeking for the trustee-manager to terminate FTI Consulting&rsquo s services in conducting an independent business review, and that FTI too be restrained from further involvement in the refinancing of the loan facilities.

 

Alternatively, Zhang is seeking an order to restrain Tan from meeting with SGX unilaterally on the MOU and the refinancing exercise. He also wants to restrain Tan from taking any steps to prevent the management of the trust from participating in the refinancing of the facilities and the MOU.

 

Zhang is also seeking damages, interest, costs and other relief as the court deems fit.

 

&ldquo The majority of the board (Tan and Zhang abstaining) is of the view that the issuance of the Originating Claim against Tan does not warrant the trustee-manager requiring Tan to step down,&rdquo said the trustee-manager&rsquo s chairman and non-executive director Dr Kong Weipeng on behalf of the board in the announcement to the SGX.

 

The majority of the board views the dispute as &ldquo sub-judice&rdquo and under determination by the court. As such, the trustee-manager should not pre-empt the court&rsquo s decision, said Dr Kong, adding that Tan is considered by the board as an &ldquo invaluable member&rdquo owing to his skill set, knowledge and experience in auditing companies.

 

Tan was a partner at KPMG Singapore for 23 years before retiring in 2015, and has 30 years of audit experience as indicated by his bio on DRT&rsquo s website.

CHINA-FOCUSED real estate investment trust Dasin Retail Trust&rsquo s : CEDU -3.7% trustee-manager announced on Monday (Jan 9) that it has appointed FTI Consulting (Singapore) to conduct an independent business review of the trust and its subsidiaries.

 

It said that the purpose of the review is to assess and validate the financial position of the group.

 

&ldquo These findings will be used as a basis to progress loan extension discussions with the various lenders of the offshore facility 1, onshore facility 1, offshore facility 2, offshore facility 3 as announced on Jan 2, 2023,&rdquo the trustee-manager said.

 

On Jan 2, the trustee-manager announced that it was still in discussions with lenders to extend the loan maturity date to Apr 30, 2023, from Dec 31, 2022.

 

At the time, it said that while the discussions were drawn out, they were still progressing.

SINGAPORE-LISTED real estate investment trusts (S-Reits) have mostly reported topline growth for the third quarter. But higher interest rates and currency headwinds have taken a chunk out of distributable income to unitholders.

 

Of the 34 S-Reits that reported gross revenue figures for the quarter, 28 saw an improvement &ndash mostly on the back of a global lifting of pandemic-related curbs. Among the 33 that reported net property income (NPI) data, 26 did better year on year.

 

The S-Reits that posted topline declines were those whose assets are mostly overseas.

 

For example, China-focused e-commerce logistics player EC World Reit : BWCU +1.08% reported a 5.5 per cent decline in gross revenue and 5.4 per cent drop in NPI for Q3.

 

S-Reits with malls in China also reported a drop in their topline figures.

 

Dasin Retail Trust : CEDU 0%&rsquo s revenue and NPI fell 7.8 per cent and 8.3 per cent, respectively, for the nine months to September, while Sasseur Reit : CRPU -1.3% reported a 2.1 per cent dip in income for the third quarter.

 

Both retail Reits pointed the finger at the temporary closure of malls and resultant reduced shopper traffic, due to sporadic Covid-19 outbreaks in parts of China.

 

At the other end of the world, the US office Reits also reported drops in NPI.

 

Prime US Reit : OXMU -0.99% posted a 6.1 per cent decline in NPI in Q3, largely due to occupancy declines, while Keppel Pacific Oak US Reit : CMOU 0%&rsquo s Q3 NPI was down 1.9 per cent.

 

Revenues and NPIs could improve in the coming quarters, as the leasing outlook was stronger across the board. Nearly all the S-Reits reported positive rental reversions for the period.

 

Against this seemingly positive backdrop, however, more than a third of the S-Reits saw a decline in distributable income to unitholders. This was largely due to higher financing costs, amid a surge in interest rates, as well as the relative strength of the Singapore dollar (SGD) against a number of foreign currencies.

 

For example, Suntec Reit : T82U 0% reported a 5.8 per cent decline in distributable income and 6.6 per cent drop in distribution per unit (DPU) for Q3. This was despite a 15.7 per cent and 12.1 per cent increase in gross revenue and NPI, respectively.

 

The Reit manager said its stronger operational performance was weighed down by interest rate and exchange rate pressures, as the Australian dollar and British pound weakened against the SGD. About a third of Suntec Reit&rsquo s portfolio is located outside Singapore, with 20 per cent in Australia and 13 per cent in the United Kingdom.

 

Frasers Logistics & Commercial Trust : BUOU 0% (FLCT), which has over half of its portfolio based in Australia and another 38.7 per cent in the UK and Europe, is also grappling with currency volatility.

 

FLCT&rsquo s revenue and adjusted NPI fell 9.7 per cent and 10.6 per cent, respectively, in the H2 ended September, mainly due to the sale of Cross Street Exchange in March and weaker exchange rates over the period. Distributable income was flat for the second half, but DPU fell 2.8 per cent.

 

The Reit manager said higher inflation and tightening monetary policies are expected to persist over the near-term and will pose challenges, noting that both the USD and SGD have appreciated against its key operating currencies.

 

On the retail front, Frasers Centrepoint Trust : J69U +0.5% (FCT) saw gross revenue and NPI rise 7.9 per cent and 6 per cent, respectively, for the H2 ended September. But distributable income fell 2.8 per cent.

 

Both income available for distribution to unitholders and DPU were flattish in H2, helped by the release of distributable income retained in the first half.

 

The Reit manager said the muted DPU growth and reduced overall distribution income for H2 were &ldquo largely&rdquo due to rising interest rates.

 

It added that FCT&rsquo s average all-in cost of debt, which rose 10 basis points to 2.5 per cent as at end-September, is expected to rise further to &ldquo above 3 per cent&rdquo in FY2023.

CHINA-FOCUSED real estate investment trust Dasin Retail Trust on Monday (Nov 14) reported a 7.8 per cent drop in revenue to S$70.7 million for the nine months ended September (9M2022), from S$76.7 million the year before.

 

Net property income for 9M2022 slipped 8.3 per cent to S$55.2 million, from S$60.3 million in the corresponding period last year.

 

The trustee-manager said the declines were due to the temporary closure of some malls and trade sectors by the government due to Covid-19-related restrictions.

 

Rental rebates to tenants in 9M2022 were about three times higher than the previous year, the truste-manager said.

 

It added that strict travel restrictions and social distancing measures also caused &ldquo stifling spending in China&rsquo s consumer market and weak consumer sentiments&rdquo , resulting in lower revenue contribution from all its properties. 

 

&ldquo We believe that the performance of the malls will improve with the easing of movement restrictions but it would be challenging as it may still take some time for the consumer sentiment to reach full recovery,&rdquo said Wang Qiu, CEO of the trustee-manager of Dasin Retail Trust.

 

The trustee-manager said it has been working closely with its lenders for the refinancing exercise and exploring potential proposals, including the disposal of certain assets, partnership with strategic investors, and alternative fundraising activities.

 

It added that it has commenced discussions with more than one leading Chinese enterprise for potential strategic investments.

 

Dasin Retail Trust has some S$756.4 million of facilities due by the end of this year.

 

Its gearing ratio stood at 40.4 per cent as at end-September.

 

&ldquo While placing our great priority working towards the completion of the refinancing exercises, we continue with our efforts in optimising tenant mix and introducing trending brands to enhance customers&rsquo shopping experience,&rdquo Wang said.

The manager of Dasin Retail announced, on Sept 19, that it has sought to extend its facility agreement up to Dec 31.

 

All financing parties, except one, have granted their approval of the extension. The last extension is pending from a lender, which lent some 17% of the loan.

 

&ldquo The lender has informed the facility agent for the financing parties under the facility agreement that the approval process is in progress and the outcome is expected by end of September,&rdquo reads the statement put out by the REIT manager.

 

The facility agreement was entered into on Sept 18, 2019, where the manager had entered into a three-year Hong Kong dollar (HKD) and Singapore dollar (SGD)-denominated syndicated term loan facility of up to the equivalent of approximately $106.61 million in total. The term loan facility was obtained from the Bank of China Limited, Singapore Branch, Industrial and Commercial Bank of China Limited, Singapore Branch, Industrial and Commercial Bank of China (Macau) Limited and Tai Fung Bank Limited to finance the acquisition of Doumen Metro Mall.

 

The facility agreement was scheduled to mature on Sept 19.

 

In addition, the manager says it has commenced discussions with &ldquo more than one leading Chinese enterprise for potential strategic investment with the objective of leveraging their resources to conclude the trust&rsquo s refinancing effort&rdquo .

 

This comes after its statement on June 20, where it sought an extension of six months from June 19 to Dec 31 from the lenders of its onshore and offshore syndicated term loan facilities.