EC World REIT’s net property income fell 45.9 year-on-year to S$4.3 million for the quarter ended Jun 30, dragged down by tenant exits and the continued reorganisation of its sponsor, Forchn Holdings Group, which led to revenue derecognition at key assets. Gross revenue dropped 40.1 per cent to S$5.9 million over the same period.
The Singapore-listed Chinese logistics landlord does not disclose net profit; its calculated distribution to unitholders and distribution per unit were both nil as the trust continues to suspend payouts amid liquidity pressures.
Quarterly revenue in renminbi terms contracted 42.6 per cent, while finance costs in Singapore-dollar terms inched up 3.2 per cent to S$10.7 million after currency translation effects and higher all-in funding costs, which averaged 8.7 per cent versus 8.4 per cent a year earlier.
Performance was weighed by the removal of Bei Gang Stage 1 rental income after the sponsor, the master lessee, entered court-supervised restructuring; the loss of a third-party anchor tenant at Hengde Logistics Phase II; and the expiry of shortfall compensation and late-fee income previously paid by the sponsor group. Underlying tenant contributions were also lower.
The REIT’s balance sheet remains stretched. Aggregate leverage surged to 107.5 per cent from 95.1 per cent at end-December, breaching the 45 per cent statutory limit for Singapore real estate investment trusts as well as a 40 per cent covenant on its offshore loan facility. Current liabilities exceeded current assets by S$298.0 million at group level, with S$479.7 million of bank borrowings classified as repayable on demand due to multiple events of default.
To avert further stress, the manager is pursuing asset divestments and a debt restructuring. It is also addressing contingent liabilities that include RMB286 million of unauthorised mortgages and guarantees and a separate RMB3.5 billion corporate guarantee dispute involving subsidiary Hangzhou Beigang Logistics.
Chief executive and executive director Goh Toh Sim said the manager is prioritising asset sales to reduce leverage and “make its best endeavour to stabilise performance” while navigating lingering operational and financing challenges from the sponsor’s restructuring. He added that trading in EC World REIT units and cash distributions will remain suspended until liquidity improves.
Looking ahead, the manager flagged continued pressure on China’s logistics-property market stemming from tepid domestic demand, excess warehouse supply and higher financing costs. It intends to maintain a “supportive policy stance” by working with lenders and regulators to preserve asset value and restore financial flexibility.