China tycoon sells S$14m of ESR-Reit and IReit units in a fortnight

Singapore

CHINESE tycoon Tong Jinquan has sold nearly S$14 million worth of units in Singapore-focused industrial landlord ESR-Reit and European commercial Reit IReit Global over the past two weeks, amid a broad Reit sector sell-off.

Disclosures filed with the Singapore Exchange show him paring his stake in ESR-Reit from 30.74 per cent two weeks ago to 29.73 per cent as at March 20. In all, he has sold 35.6 million units for about S$10 million, in five transactions and at lower prices each time.

From March 13 to March 23, he also offloaded 8.2 million units in IReit Global for S$4 million. This effectively pared his stake from 34.4 per cent to 32.89 per cent. While the units could fetch 68 cents per unit on March 13, by March 23 their value had slid to 42 cents.

The trades in units of IReit Global were done through Goodness Investment, which is owned by The Longemont (HongKong) Management. Longemont is in turn owned by Shanghai Changfeng Real Estate Development Co, which is 51.3 per cent owned by Shanghai Summit. Mr Tong owns the remaining 48.7 per cent. He also wholly owns property developer Shanghai Summit.

His unit sales may have been prompted by margin calls by his private bank - that is, the drop in value of the respective Reit units had caused his margin account to fall below the broker's required amount, thus requiring him to either deposit additional money or securities, or sell some of the assets held in the account.

Units of ESR-Reit have fallen more than 40 per cent since the beginning of March. On Thursday, they ended 1.5 cent or 4.6 per cent lower at 31 cents.

Management of ESR-Reit held an investors' call earlier this week to respond to questions about how its tenants were being affected by Covid-19 and to give updates on the Reit. Management said it had already done an early refinancing of borrowings due in FY20 and so will not have any refinancing risk for the rest of this year.

It also said that there have been no major rent arrears. About 2 per cent of tenants are late on their rental payments on average, which is in line with the usual situation. Based on its worst-case scenario sensitivity analysis, earnings will drop around S$40 million if all expiring leases this year are not renewed and there are no new leases signed. Yet, this still represents an implied 12 per cent dividend yield.

As for units of IReit Global, they are about 37 per cent below where they were at the beginning of March. On Thursday, they added half a cent or 1 per cent to 49.5 cents each.

According to Bloomberg data, Mr Tong also owns 5.77 per cent of Lippo Malls Indonesia Retail Trust, 6.55 per cent of Sabana Reit, and 4.18 per cent of Soilbuild Business Space Reit. There have no disclosures of any recent unit sales by Mr Tong in these Reits.