THE manager of EC World Real Estate Investment Trust (Reit) said on Aug 28 (Monday) that the Reit and its subsidiaries are owed more than 145.8 million yuan (S$27.5 million) in overdue rent receivables by their sponsor group, Forchn Holdings Group and its subsidiaries.

 

Of the outstanding rent receivables, 107.6 million yuan represents the rent payable pursuant to master leases between the sponsor group, in the capacity as master lessee, and ECW Group comprising EC World Reit and its subsidiaries, the master lessor.

 

These 107.6 million yuan in rent receivables are spread across four master-leased properties of ECW Group in China: Chongxian Port Investment, Fu Heng Warehouse, Beigang Logistics Stage 1, and Fuzhou E-Commerce.

 

Meanwhile, the balance of 38.2 million yuan in rent receivables represents rent payable by the sponsor group pursuant to other related party leases.

 

According to the Reit manager, EC World Asset Management, the sponsor group typically maintains ageing between two months to three months, as their practice is to make rental payment quarterly in arrears. Such a practice is common for commercial, industrial and warehousing leases in China, it added.

 

The manager said it has been in regular dialogue with the sponsor group to remind the related party lessees (including master lessees) of their payment obligations under the existing lease agreements.

 

Despite its efforts, however, &ldquo there has been no repayment plan provided by the sponsor group to date&rdquo .

 

It has therefore assessed that there is a &ldquo high risk&rdquo of non-collection of the outstanding rent receivables, considering that the ageing of some of the outstanding rent receivables has exceeded three months and there has been no repayment plan provided by the sponsor group.

 

ECW Group&rsquo s free cash has also been &ldquo significantly depleted&rdquo at this juncture, the manager noted.

 

This was due to its refinancing exercise in 2019, where it repaid approximately S$131.1 million to its lenders pursuant to facility agreements entered into in 2019 and 2023. Of this amount, approximately S$56.8 million was funded by the group&rsquo s excess cash.

 

The manager flagged that ECW Group would be unable to maintain its operating and financing requirements if the sponsor group does not pay a sufficient amount of the rent receivables.

 

This is because more than 80 per cent of ECW Group&rsquo s revenue comes from rental income pursuant to related party leases with the sponsor group.

 

In view of this, there is a &ldquo high risk&rdquo that ECW Group would not be able to fully repay offshore interest expenses due on Aug 31, 2023, pursuant to its existing offshore facilities, the manager added.

 

It would need to request the facility agent under the offshore facilities to release part of the offshore interest reserve maintained by ECW Group, in order to fully repay the offshore interest expenses.

 

The board&rsquo s assessment was that in the absence of any other potential financing plan, ECW Group&rsquo s current assets &ldquo may not be adequate to meet its short-term liabilities&rdquo .

 

This assessment takes into account that as at Jun 30, the group&rsquo s current liabilities exceed its current assets by S$133.2 million. Its current liabilities contain borrowings of S$443.2 million, which are due for repayment within the next 12 months.

 

The assessment also considered that the sponsor group&rsquo s delay in paying the rent receivables owing to ECW Group &ldquo may signal financial weakness&rdquo of the sponsor group, including the purchasers under the proposed divestment of Chongxian Port Logistics and Beigang Logistics Stage 1.

 

In October 2022, EC World Reit said it would be divesting its indirect interests in Bei Gang Logistics and Chongxian Port Logistics for two billion yuan.

 

&ldquo Hence, there is a significant risk that the proposed divestment may not complete by the divestment longstop date,&rdquo the manager said.

 

It also expects the risk that the initial termination date of the offshore facilities may not be extended from the existing Apr 30, 2024, to April 30, 2026.

EC WORLD Real Estate Investment Trust&rsquo s : BWCU +1.69% (Reit) distribution per unit fell 25.9 per cent to 2.053 Singapore cents for the first half ended Jun 30, 2023, from 2.77 Singapore cents in the corresponding period last year.

 

This follows a 12 per cent drop in gross revenue to S$55.7 million in H1, from S$63.3 million a year ago. Income available for distribution also contracted by 25.9 per cent to S$16.6 million, from S$22.4 million in the year-ago period. 

 

Net property income (NPI) experienced a 10.6 per cent year-on-year decrease to S$51.8 million, from S$57.9 million the previous year. 

 

The Reit&rsquo s manager attributed the lower revenue and NPI to the weakening of the Chinese yuan, a decline in late-fee income and other operating income, as well as the cessation of income contribution from Fu Zhuo Industrial. The Hangzhou port property was seized by Chinese authorities for public use last March.

 

These declines were partially offset by organic rental escalations, added the manager. 

 

Meanwhile, finance costs rose 13.9 per cent year on year to S$22.8 million &ndash primarily due to surging interest rates and an extension fee incurred during the period, said the manager. 

 

Earnings per share stood at 1.40 Singapore cents for the half-year, reversing from a loss per share of 2.86 Singapore cents in H1 FY2022. 

 

Despite the fall in revenue, the Reit&rsquo s portfolio occupancy remained &ldquo strong&rdquo at 96.3 per cent as at Jun 30. 

 

The weighted average lease to expiry by gross rental income and net lettable area stood at 1.2 years and 1 year, respectively. 

 

The Reit&rsquo s manager highlighted that the business climate will remain challenging, with a weakening global economy, poor export demand and low consumer confidence.

 

&ldquo (EC World Reit) has to remain focused to resolve these issues while continuing to face financial stress arising from the current harsh currency and interest-rate conditions in the foreseeable future,&rdquo it said. 

 

THE manager of EC World Real Estate Investment Trust : BWCU -3.33% (EC World Reit) said it has entered into a supplementary agreement to amend the terms of the divestment of its two logistics assets in Zhejiang, China.

 

This includes a deadline extension for the divestment, as well as a revision of prepayment terms, along with the divestment properties&rsquo agreed values, it said in a bourse filing on Monday (Jul 10).

 

The supplementary agreement is subject to independent unitholders&rsquo approval at an extraordinary general meeting to be convened.

 

To recap, EC World Reit had on Sep 30, 2022, entered into an equity purchase agreement to divest all of its indirect interests in Bei Gang Logistics and Chongxian Port Logistics.

 

Under the proposed supplementary agreement, the long-stop date will be extended to Oct 31 this year from the initial Jan 31, 2023, deadline.

 

This will allow more time to complete the divestment, such that the Reit will be less likely to default on financing obligations, said its manager. It also flagged that in order to complete the divestment, the purchasers will need more time to secure sufficient financing to complete the payment of the equity consideration.

 

Previously, the Reit received a waiver from the Monetary Authority of Singapore to complete its proposed divestment by Jun 16 this year, on the condition that the deal be completed by Oct 31 after obtaining approval for the extended timeline from unitholders.

 

EC World Reit&rsquo s manager said the supplementary agreement will also provide the flexibility of a two-stage completion process, and a revision of the relevant mandatory prepayment amount.

 

The two-stage completion process will enable the purchasers to pay the first tranche of the divestment proceeds to the Reit earlier, thus increasing the likelihood that the Reit will be able to partially repay its loans ahead of time.

 

It also serves to give the purchasers more time to obtain financing for the divestment.

 

The original 2022 agreement required either a 25 per cent mandatory prepayment amount of the maximum aggregate amount of outstanding offshore and onshore loans, or an amount equal to a percentage of the maximum outstanding loans &ndash whichever is higher.

 

Terms of this amount will be revised under the supplementary agreement to comprise an amount agreed by all of the Reit&rsquo s existing lenders.

 

The supplementary agreement further takes into account agreed values for the divestment properties that are higher than those set out in a circular last year.

 

The agreed property value of Chongxian Port Logistics is now 824.4 million yuan (S$153.7 million), up from 820.1 million yuan, while that of Bei Gang Logistics is now 1.22 billion yuan, up from 1.21 billion yuan.

 

These revised values, however, do not affect the agreed divestment consideration of 1.37 billion yuan, said the manager, as the properties&rsquo updated valuations in 2023 will be slightly lower than their respective independent valuations conducted in 2022.

 

The manager of EC World REIT BWCU 0.00% has been granted a waiver by the Monetary Authority of Singapore (MAS) to divest its Chinese logistics properties, Bei Gang Logistics and Chongxian Port Logistics.

 

The waiver was sought under MAS&rsquo s code on collective investment schemes. Under paragraph 5.4(b)(ii) of Appendix 6 of the code, the REIT was supposed to complete the proposed divestment on June 16, six months after its unitholders approved the divestment.

 

The waiver came with several conditions. With the new extension, the divestment will have to be completed by Oct 31 instead. The REIT also has to seek its unitholders&rsquo approval for the extended deadline.

 

In addition, the REIT manager will have to sell the assets at an amount that is at least equivalent to the lower of two independent valuations. The updated valuations will have to be disclosed in a circular to the REIT&rsquo s unitholders in relation to the proposed extraordinary general meeting (EGM) that will be held to seek their approval to extend the long-stop date.

 

The board of the manager will also have to provide MAS with a written confirmation that it has assessed that the extended timeline and any revisions to the proposed divestment are in the best interests of the REIT and its unitholders. The assessment will have to be disclosed via SGXNET.

 

According to the board of the manager, the extended timeline came after the purchasers of the properties and the REIT&rsquo s sponsor told the manager that the former had yet to secure the requisite financing for the proposed divestment among other reasons.

 

As at June 13, a total of RMB333.02 million ($62.4 million) &ndash out of the equity consideration of RMB1.37 billion - has been prepaid to the vendor by the sponsor.

 

EC World Asset Management, the manager of EC World REIT BWCU 0.00% , says in a June 6 bourse filing that its Zhejiang Fuzhou E-Commerce Co., Ltd. (FZDS) offshore borrowings have been refinanced in full.

 

This comes a day after the REIT manager announced that it had refinanced existing onshore bank loans in full.

 

" As such, the refinancing of the existing onshore bank loans and the existing offshore bank loans have been fully completed," says the REIT' s manager on June 6.

 

On May 31, EC World REIT' s manager announced its offshore facility and onshore facility had been extended.

 

The offshore facility agreement dated May 31, with various banks, coordinated by DBS Bank and United Overseas Bank, was up to $348.9 million, comprising of a multicurrency term loan facility of up to $321.9 million, a Singapore dollar term loan facility of up to $15.5 million and a multicurrency term loan facility of up to $12.5 million.

 

The onshore facility, also coordinated by DBS Bank China and UOB China, was for up to RMB745.5 million ($141.22 million), consisting of two term loan facilities of RMB702.0 million and RMB43.5 million.

 

On May 31, EC World REIT' s manager announced its offshore facility and onshore facility have been extended.

 

The offshore facility agreement dated May 31, with various banks, coordinated by DBS Bank and United Overseas Bank. is up to $348.9 million comprising of a multicurrency term loan facility of up to $321.9 million, a Singapore dollar term loan facility of up to $15.5 million, and a multicurrency term loan facility of up to $12.5 million.

 

The onshore facility, also coordinated by DBS Bank China and UOB China, is for up to RMB745.5 million consisting of two term loan facilities of RMB702.0 million and RMB43.5 million.

 

The offshore facility is for 11 months. It can be extended to April 30, 2026 subject to certain conditions.

 

For the onshore facility, the final repayment date for the RMB702 million onshore facility is on April 30, 2026. The final repayment date for the RMB43.5 million onshore facility is on on July 25, 2029. 

 

Zhang Guobiao, chairman of Forchn Holdings Group, EC World REIT' s sponsor, has provided personal guarantees of $75.7 million, and the sponsor has agreed that certain dividends, payments and/or other distributions received by the sponsor from EC World REIT will be used for prepayment of the offshore facility.

 

The final date of the proposed divestment of Stage 1 Properties of Bei Gang Logistics and Chongxian Port Logistics has been extended to October 31 this year. If this is not completed by the due date, a prepayment of $410 million needs to be made.

 

The other financial covenants include Zhang holding 51% of the sponsor and 25% of EC World REIT.

 

EC WORLD Real Estate Investment Trust&rsquo s (EC World Reit) distribution per unit fell by 18.5 per cent to 1.127 Singapore cents for the first quarter ended Mar 31, 2023, from 1.383 Singapore cents the year before.

 

Gross revenue was down 12.5 per cent to S$28.1 million for the first quarter, from S$32.2 million in the year-ago period.

 

Net property income (NPI) dropped 12.3 per cent on the year to S$26.1 million for the quarter, from S$29.7 million previously.

 

The Reit&rsquo s manager attributed the lower revenue and NPI to the absence of rental income from Fu Zhuo Industrial, lower late fee income, straight-line rental adjustment as well as the weakening of the Chinese yuan. Fu Zhuo Industrial was seized by the Chinese authorities for public use last March.

 

Distributable income declined 9.4 per cent year on year to S$10.1 million, from S$11.2 million the year before.

 

Overall occupancy for EC World Reit&rsquo s portfolio remained at 96.8 per cent as at Mar 31, 2023. Of the Reit&rsquo s seven properties, four achieved full occupancy, while the others &ndash Hengde Logistics and Chongxian Port Logistics &ndash reported near full occupancy.

 

Weighted average lease to expiry (Wale) by gross rental income and net lettable area stood at 1.4 years and 1.2 years respectively.

 

Noting ongoing macroeconomic challenges and China&rsquo s property market crisis, the manager cautioned that EC World Reit will &ldquo continue to face financial stress in the short to medium term&rdquo due to higher finance costs, among other reasons. This is even as it expects the Reit&rsquo s rental income to remain fairly resilient.

The manager of EC World REIT BWCU 0.00% says that its lenders have extended the mandatory repayment deadline to May 31.

 

The REIT is expected to repay the outstanding amount of its existing bank loans in full by then. The extension is said to be conditional upon the refinancing exercise being successfully completed by May 31.

 

As at May 1, the REIT owes some $75.7 million, which is in line with what was disclosed in its announcement on March 17.

 

&ldquo Based on the current progress, the manager expects the refinancing exercise to be completed by May 31 with new conditions for the settlement of the mandatory repayment to be agreed to as part of the refinancing exercise,&rdquo says the manager in its May 1 statement.

 

Zhang Guobiao, the chairman of the REIT&rsquo s sponsor has also provided &ldquo personal guarantees&rdquo in respect of the full outstanding amount that the REIT owes. The personal guarantees have been entered into on April 28.

THE majority of lenders of EC World Reit : BWCU +5.08% (Real Estate Investment Trust) have agreed to extend the Reit&rsquo s deadline for its outstanding repayments to Apr 30 this year, its manager announced in a bourse filing on Friday (Mar 17).

 

The filing stated that 86 per cent of onshore lenders and 89 per cent of offshore lenders have agreed to extend the mandatory repayment deadline to the end of April, subject to the finalisation of terms and conditions under the revised repayment plan.

 

The rest of the lenders are in the process of obtaining internal approvals in relation to the extension.

 

The Reit&rsquo s manager has also been advised by loan facility agents that the remaining lenders have no internal directive to call for an event of default pending their internal approval process. 

 

It announced in October last year that it would be divesting its indirect interests in Bei Gang Logistics and Chongxian Port Logistics for a total of 2.03 billion yuan (S$395.5 million).

 

Part of the proceeds from the divestment will go towards repaying 25 per cent of the Reit&rsquo s outstanding onshore and offshore loans by Dec 31, as required by its lenders.

 

However, stringent Covid-19 controls, the Chinese National Day holiday and the Communist Party&rsquo s 20th Party Congress had caused delays in lenders&rsquo internal approval processes for the transaction financing, and the company was not able to complete the processes in time.

 

The repayment deadline had already been extended to Feb 28 this year, but the Reit announced then that it was still unable to complete the divestment process and had to seek another extension.