SIAS queries EC World Reit’s manager over illegal mortgages

THE Securities Investors Association (Singapore) or Sias has sent a list of questions to the manager of EC World real estate investment trust (Reit) about the illegal mortgages entered into by its sponsor, Forchn Holdings.

Three properties of EC World Reit were mortgaged illegally by its sponsor to entities linked to the Fuyang government in China in a bid to raise rescue funds. Of the three mortgages, the one for Hengde Logistics was discharged on Jan 18; the Fuzhou E-commerce Warehouse and Fu Heng Warehouse remain under mortgage.

The association is asking questions about the role of the sponsor in the day-to-day operations of the Reit, and about the non-executive director and chairman Zhang Guobiao’s level of involvement in the affairs of the Reit’s manager.

Sias is asking the board of EC World Reit on the potential impact of the illegal mortgages on the Reit’s operations and financial situation, and whether its operations have been compromised. Other questions for the board include the nominating committee’s assessment of whether the chairman has fulfilled his statutory duty of prioritising the interests of unitholders, and whether the Reit would benefit from having an independent director as chairman.

The independent directors of the Reitr’s board are also being questioned about their level of involvement in the oversight of the Reit since its trading suspension in August 2023, and their familiarity with the legal framework of the Chinese real estate and property market. Sias is also asking for their comments on the sponsor’s financial distress and the Reit’s ongoing issues.

The association would also like to confirm that the manager is in possession of the Reit’s certificates, seals and stamps, and that there are no duplicates. Sias is also asking how the manager can assure unitholders and regulators that it is discharging its duty according to regulations.

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The manager is also being asked for an update on the performance of the Reit’s assets, and whether there have been issues in collecting rent from tenants. Sias also has additional questions on the outstanding rent due from the sponsor, and the plans to resolve it.

Sias is also asking whether the board has a strategy to recapitalise the Reit and if there have been discussions about weaning it from the sponsor. More clarity is also requested about the milestones needed before a resumption-of-trading proposal can be submitted to the Singapore Exchange.