THE lenders to EC World real estate investment trust (Reit) have given the sponsor of the Reit until Jan 31 to remove mortgages that had been illegally entered into, the Reit announced on Thursday (Jan 25).

In a letter of demand dated Jan 24, the lenders demanded that the sponsor negotiate with the government of Fuyang (a city in China’s Anhui province) to discharge the mortgages in question and avoid a similar situation in future, failing which the lenders may take legal action.

Forchn Holdings, the sponsor of EC World Reit, had mortgaged three properties, Fuzhou E-commerce, Fuheng Warehouse and Hengde Logistics, to the Fuyang government to provide rescue funds.

But the lenders have noted that Forchn’s actions were carried out illegally, and called for an investigation.

On their part, the lenders said they may file a lawsuit and commence insolvency proceedings to protect their rights. They have also called on the Reit manager to strengthen internal controls against the unauthorised usage of the Reit’s stamps and seals, and to ensure the independence of the Reit.

EC World Reit’s manager sent a letter of demand to the Reit’s sponsor on Jan 24 to convey the lenders’ demands, including that of discharging the mortgages by the set deadline; the manager also outlined potential legal action and other measures against the sponsor.

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Separately, EC World Reit’s manager has appointed two independent consultants, Savills Property Services and Cushman & Wakefield, to source for potential purchasers for the divestment of one or more of its properties.

Units of EC World Reit have been suspended since last Aug 31, upon the manager’s announcement that the Reit and its subsidiaries were unable to repay the interest expenses for its offshore facility.