EC World REIT posted a net property income of S$9.0 million for the quarter ended Sept 30, down 60.5 per cent year-on-year as the expiry of four master lease agreements, lower underlying rents and a weaker renminbi weighed on performance. Revenue fell 56.9 per cent to S$10.8 million.
The trust did not declare any distribution per unit, compared with 0.401 Singapore cent a year earlier, citing insufficient funds. Calculated distribution to unitholders was nil versus S$3.25 million in the prior-year period.
After rental straight-lining and other adjustments, revenue and NPI in renminbi terms declined 54.6 per cent and 58.3 per cent respectively. Overall portfolio occupancy stood at 84.3 per cent, with a weighted average lease expiry of 0.9 year by gross rental income.
Performance was further pressured by overdue rent of RMB337.8 million (S$61.2 million) owed by the sponsor group, comprising RMB247.6 million under master leases and RMB90.2 million under related-party leases. The manager is negotiating a master offset agreement to net these receivables against payables arising from the planned asset divestment.
Headwinds also came from a leverage ratio that climbed to 71.1 per cent as at Sept 30, breaching the 40 per cent covenant on the offshore loan facility. Current liabilities exceeded current assets by S$573.6 million at group level, with S$465.9 million of bank borrowings classified as repayable on demand after events of default. The blended all-in interest rate averaged 9.3 per cent during the quarter.
Strategic workstreams include the sponsor’s court-supervised reorganisation, where the REIT has lodged preliminary claims of RMB1.14 billion; ongoing discussions with lenders to restructure offshore facilities; potential asset sales; and legal action to discharge an unauthorised mortgage over the Fuzhou E-commerce property, which carries a maximum exposure of RMB268.6 million.
Executive director and chief executive officer Goh Toh Sim said the revenue decline largely mirrored the gap between expiring master leases and replacement rents. He noted that distributions have been suspended since July 2023 and are unlikely to resume in the near term. Goh added that management is prioritising negotiations under the sponsor reorganisation, resolution of the unauthorised mortgage and debt restructuring with offshore lenders, but cautioned that severe operational and financing challenges are unlikely to be resolved quickly.
Looking ahead, the manager highlighted that China’s logistics real-estate outlook remains tied to macroeconomic conditions, while the weak property sector and volatile funding markets continue to cloud asset-divestment efforts and the timing of any trading resumption for EC World REIT units.
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