EC World Reit posts calculated Q4 DPU of S$0.0069 as distributions stay suspended

EC WORLD Real Estate Investment Trust (Reit) reported a calculated distribution per unit (DPU) of S$0.0069 for the fourth quarter ended Dec 31, 2023, though its distributions remain suspended due to “insufficient funds”.

The latest Q4 DPU figure is 9.9 per cent above the prior year’s DPU of S$0.00628, and translates to an annualised yield of 9.78 per cent based on the Reit’s last unit price of S$0.28 as at Aug 28, 2023, before the counter’s trading suspension.

Gross revenue fell 11.8 per cent to S$25.1 million from S$28.4 million in Q4 FY2022, while net property income (NPI) declined 12.7 per cent to S$22.7 million from S$26 million previously.

On Wednesday (Feb 28), the manager attributed the topline fall to a weaker yuan against the Singapore dollar along with straight-line rental adjustments, lower occupancy rates in Wuhan Meiluote, as well as the early termination of China Tobacco’s leases at Hengde Logistics Phase 1.

After factoring in retention for general working capital purposes, calculated distribution to unitholders was 10 per cent higher at S$5.6 million due to S$126.8 million in income tax credit, as opposed to income tax expenses of S$11.8 million in the same period the year before. This was mainly due to a reversal of deferred tax expenses as a result of a fair value loss on investment properties, said the manager.

For the whole of FY2023, EC World Reit’s calculated DPU was S$0.03659, down 23.2 per cent year on year from S$0.04762.

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As the Reit’s sponsor and its subsidiaries remain unable to pay their overdue rent receivables, EC World Reit once again said that it was suspending distributions for H2 due to insufficient funds like it did in the first half of the fiscal year.

The manager estimated that overdue rent receivables owed by the sponsor group exceeded 289.1 million yuan (S$53.7 million) as at end-December 2023.

“Despite the security deposit from the master lessees amounting to 345.1 million yuan, the manager continued to engage the sponsor group to demand for payment of outstanding rental receivables from the related-party lessees (including master lessees), although it has met with little success due to severe financial difficulties faced by the sponsor group.”

The Reit’s portfolio valuation as at end-2023 declined 43 per cent to 4.3 billion yuan compared to 7.6 billion yuan in the prior year. This was largely due to a deteriorating market situation in China, said the manager, amid a surge in new warehouse supply as well as a global and local economic growth slowdown.

Lower rental from novated lease agreements and vacancies at Hengde Logistics Phase 1 due to China Tobacco’s departure were also factored into the valuation assessment, among others.

Goh Toh Sim, executive director and chief executive of the manager, noted that no repayment plan has been provided by EC World Reit’s sponsor group “despite the manager’s continued efforts”.

He also recalled how past attempts over the last few years to raise cash through asset divestments were unsuccessful.

“The EC World group is faced with enormous challenges to maintain its operations and meet various financing obligations under the existing onshore and offshore facilities,” said Goh.

As current liabilities of the Reit and its subsidiaries have exceeded its current assets, the manager said that it is working with lenders to explore the possibility of restructuring existing onshore and offshore facilities.

Brokers have been appointed to divest the Reit’s assets through market sales, while KPMG was appointed financial adviser to “explore viable strategic options” for the Reit.