EC World Reit (ECW) has successfully extended the maturity date of the outstanding onshore and offshore facilities to April 31, 2023, obtaining sufficient time to complete the ongoing refinancing exercise, its manager announced.
Noting the recent market trends, the manager’s executive director and CEO Goh Toh Sim stresses that the economic fundamentals of ECW remain strong and resilient.
For the repayment of at least 25% of the facilities by December 31, 2022, the manager is exploring various fund-raising options including the potential divestments of non-core assets.
Additionally, the sponsor Forchn Holdings Group Co has provided assurance through an undertaking to the onshore and offshore lenders that it will ensure that the repayment will be completed by December 31, 2022, the manager said in a statement.
For the discussion on refinancing the remaining amount of outstanding facilities post-repayment, the lenders do not expect the refinancing process to last beyond April 30, 2023. The manager is working closely with the lead lenders on the refinancing process.
Commenting on the various views on China's real estate sector outlook, Goh said the ecommerce and logistics sectors in China are resilient, unlike the residential sector which is still experiencing headwinds.
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“ECW’s assets are mature ecommerce and logistics assets which are generating stable returns for investors in terms of regular quarterly distributions since its IPO.
“The sporadic Covid-19 lockdowns in China for the past two and half years did not materially impact the financial performance of ECW, and unitholders continued to enjoy stable DPU. Even in early 2020 when the whole of China was in lockdown, ECW provided only a one-off rental rebate to its tenants, equivalent to approximately half month rental income only,” he added.
As at June 30, ECW has a portfolio occupancy of 98.6% and a weighted average lease to expiry of 2.1 years. Meanwhile, its four master lease agreements with rental escalation provides organic growth within the portfolio.
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While the master lease arrangement in general is exposed to certain concentration risks, the master leases of ECW provide consistent and stable returns to unitholders, said Goh. “Master leases normally come with longer lease terms and build-in escalations. By entering into the master lease contracts, these properties of ECW are generating stable income as compared to having multiple leases with smaller tenants at prevailing market rents.
“This is one of the benefits for any investors looking for long-term stable returns. While the concentration risks of master leases in general have been well discussed in the public domain, the master lease arrangement remains to be an effective tool to mitigate leasing risks arising from the uncertainty of the underlying tenants.”
Units in ECW closed unchanged on July 6 at 41.5 cents.
