EC World REIT has entered into an expropriation and compensation agreement with the Chongxian Sub-district Office of the People's Government of Linping District, Hangzhou City, People’s Republic of China (PRC) in relation to the compulsory expropriation.
As part of the terms of the expropriation agreement, the PRC authorities shall provide a compensation package to EC World REIT which amounts to RMB 108.5 million ($23.4 million), which is around 92.8% of Fu Zhuo Industrial’s valuation of RMB 117 million as at Dec 31 2020, and about 26.8% higher than the purchase consideration of Fu Zhuo Industrial at RMB 85.6 million at the IPO of EC World REIT.
In addition, the compensation package has been assessed based on a cost approach and has taken into account the compensation for the land, building structures, fixtures and fittings, facilities, removal costs, temporary relocation expenses for twelve months, business interruption losses as well as an incentive bonus for the timely execution of the expropriation agreement and vacation of land.
At the moment, there are currently two tenants at Fu Zhuo Industrial, one of them being a subsidiary of Forchn Holdings Group Co, the sponsor of EC World REIT and the other being a third-party tenant.
Under the lease agreement with the third-party tenant, as a result of the early lease termination due to expropriation, the compensation for expropriation of policy and commercial nature in relation to the building structures repaired, constructed or reconstructed by the third-party tenant shall belong to the third-party tenant. The potential amount of compensation to be paid to the third-party tenant is to be assessed based on the details of the compensation package.
