EC World Reit’s Q4 net property income more than halves to S$11.2 million
Due to insufficient funds, the Reit will continue to suspend distributions until sufficient free cash is available
EC World Real Estate Investment Trust’s (Reit) net property income for the fourth quarter of financial year 2024 more than halved to S$11.2 million, from S$22.7 million in the same period last year.
Revenue was down 36.6 per cent to S$15.9 million, from S$25.1 million, announced Reit manager EC World Asset Management in financial results published on Monday (Feb 24) .
No distribution has been declared for the period from July 2024 to December 2024, due to events of default continuing under the offshore facility agreement and the Reit having insufficient funds to make the distribution.
The Reit will continue to suspend distributions until sufficient free cash is available.
The calculated distribution to unitholders of S$15.8 million for FY2024 was 46.7 per cent lower compared to the year-ago period, mainly attributed to lower revenue, higher operating expenses and interest cost.
The calculated distribution per unit for the whole year dropped 46.7 per cent to S$0.01951, from S$0.03659.
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For FY2024, revenue slid 14.4 per cent to S$92.2 million from S$107.8 million, while net property income slipped 18.1 per cent to S$81.2 million from S$99.2 million.
Lower revenue, bad debt provision and higher business tax (a result of accrual of late payment penalty) resulted in the decline in net property income for the full year.
The Reit reported a lower operating performance due to the expiry of master lease agreements, as well as the effect of the novation of underlying leases from master leases and related party leases for Chongxian Port Investment, Chongxian Port Logistics, Fu Heng Warehouse and Fuzhou E-commerce during the financial year, and the impact of discontinuation of China Tobacco leases in Hengde Logistics Phase 1.
The accrued overdue rent receivables owed to the Reit group by the sponsor group exceeded 629.9 million yuan (S$117.4 million). Of this, 547.4 million yuan was the rent payable under the master leases, while the balance 82.5 million yuan was the rent payable under other related party leases.
EC World Reit’s management has been in negotiations with its sponsor for a master offset agreement, to settle the Reit’s receivables from the sponsor group against payables to the sponsor group. This includes the cash security deposit amount paid by the master lessees, and part of advance payments received from the purchasers of the proposed divestment.
The Reit manager said there was no impairment allowance being made for now.
Finance costs of S$49 million were S$2.4 million or 5.2 per cent higher year on year (yoy), mainly due to the higher interest rate for offshore facilities and additional finance cost incurred from the settlement of a short-term advance from an onshore issuer.
The blended all-in running interest rate for Q4 and FY20204 was 9.1 per cent and 8.2 per cent per annum, respectively, up from 6.7 per cent and 6.3 per cent in the previous corresponding period.
Due to changing global economic conditions, the Reit manager expects the blended interest rates for its offshore facilities to continue to fluctuate.
Meanwhile, the manager is exploring the divestment of the group’s properties to pare down existing facilities with cash proceeds, for possible refinancing or restructuring.
At the date of the announcement, the group had not received any notice of enforcement action.
Its overall occupancy improved to 86.3 per cent as at end-December, from 84.1 per cent as at Q3.
Weighted average lease to expiry stood at 1.2 years for gross rental income and 1.6 years for net lettable area.
The year-end fair value of investment properties was 3.8 billion yuan, down 11.7 per cent yoy from 4.3 billion yuan.
The drop in valuation was primarily due to intensified rental competition in 2024 resulting from oversupply in the logistics markets in Hangzhou and Wuhan, increased vacancy rates and lower rental transactions, and the adoption of lower market rental rates in its cash flow projection following the expiry of various master lease agreements, noted the manager.
The current liabilities of the group, including bank borrowings of S$474.8 million, exceeded its current assets by S$113.5 million. Its aggregate leverage stood at 56.5 per cent as at end-December 2024.
The Reit’s capital position has exceeded the gearing limit imposed by the Monetary Authority of Singapore.
The manager said EC World Reit will continue to face significant financial and cash flow challenges in the short to medium term. It added that the trading of its units will remain suspended until the financial situation improves.
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