EC World REIT (SGX:BWCU) is a China-based port logistics and e-commerce REIT where all of its 7 properties are located in the country – where 4 are dedicated to e-commerce logistics (Stage 1 Properties of Bei Gang Logistics, Fuzhou E-commerce, Wuhan Meiluote, and Fu Heng Warehouse), 2 are dedicated to port logistics (Chongxian Port Investment, and Chongxian Port Logistics), and 1 is dedicated to specialised logistics (Hengde Logistics).

Trading of the REIT has been suspended since 31 August 2023 as it failed to repay its offshore interest payments due. This financial strain stems from several tenants not meeting their rental obligations, leading to cash flow issues for the REIT. Consequently, distribution payouts have also been suspended.

Last evening (13 May), EC World REIT has made available its financial results for the 1st quarter of FY2024 ended 31 March, and in this post, you will find my review of its financial performance (the REIT is one of the few that have continued to report its full financial statements on a quarterly basis), portfolio occupancy, and debt profile.

Let’s begin:

Financial Performance (Q1 FY2023 vs. Q1 FY2024)

Q1 FY2023Q1 FY2024% Variance
Gross Revenue
(S$’mil)
$28.1m$25.3m-10.1%
Property Operating
Expenses (S$’mil)
$2.1m$2.0m-3.5%
Net Property
Income (S$’mil)
$26.1m$23.3m-10.6%
Distributable Income
to Unitholders (S$’mil)
$9.1m$7.3m-19.8%

My Observations: As expected, its financial performance for the 1st quarter have continued to weaken – a trend that has been going on since the 1st quarter of FY2022.

For the current quarter under review, the 10.1% and 10.6% decline in its gross revenue and net property income respectively can be attributed to the discontinuation of leases by China Tobacco at Hengde Logistics Phase 1, lower rental income from Chongxian Port Logistics, along with a weaker Chinese renminbi against the Singapore dollar. However, this was partly mitigated by organic rental escalations, higher late fee income, and lower operating expenses at the properties.

In RMB-terms, after the straight-lining of step-by- rental, security deposit accretion, and other relevant distribution adjustments, the REIT’s gross revenue and net property income were down by 6.7% and 7.3% respectively.

Calculated distribution to unitholders was down by 19.8% due to lower revenue, and higher finance cost (which was up by 5.9%).

Portfolio Occupancy Profile (Q4 FY2023 vs. Q1 FY2024)

When it comes to reviewing a REIT’s portfolio occupancy profile, my personal preference is to compare the statistics recorded for the current quarter under review (in this case it is for the 1st quarter of FY2024 ended 31 March 2024) against that recorded in the previous quarter 3 months ago (in this case it is for the 4th quarter of FY2023 ended 31 December 2023), and you can find them in the table below:

Q4 FY2023Q1 FY2024
Portfolio Occupancy
(%)
79.9%71.3%
Portfolio WALE
(years)
0.8 years1.0 years

My Observations: As far as the occupancy rates of EC World REIT’s properties are concerned, only Stage 1 Properties of Bei Gang (which is master leased from 01 November 2015 to 31 October 2024).

Hengde Logistics is another property that saw a slight improvement in its occupancy (from 31.4% in Q4 FY2023 to 33.7% in Q1 FY2024).

The remaining 5 properties saw declines in their portfolio occupancy rates.

Looking at its lease expiry (by gross rental income), 73.2% of the leases will be due for renewal in the next 3 quarters of FY2024, 21.7% of the leases will be due for renewal in FY2025, and the remaining 5.1% of the leases will be due for renewal in FY2026 or later.

Debt Profile (Q4 FY2023 vs. Q1 FY2024)

Just like how I have reviewed the REIT’s portfolio occupancy in the previous section, I will also be reviewing its debt profile by taking the statistics recorded in the current period under review, and compare them against the statistics recorded in the previous quarter (i.e., Q4 FY2023 vs. Q1 FY2024), as follows:

Q3 FY2023Q1 FY2024
Aggregate Leverage
(%)
58.3%57.2%
Average Term to
Debt Maturity (years)
0.95 years0.70 years
Average Cost
of Debt (%)
6.3%6.8%

My Observations: Aggregate leverage was slightly lowered to 57.2%. If the REIT’s repayment of S$52.4m (using cash collaterals for the SBLC [Standby Letter of Credit] – the facilities were placed with United Overseas Bank (China) Limited, and Bank of East Asia (China) Limited) on 30 April 2024 was included, its aggregate leverage would be at 55.6%. The REIT’s management is exploring more options to further reduce its aggregate leverage.

As far as principal and interest payments due on 30 April 2024 under the Offshore Facility are concerned, I understand that the REIT is unable to service the payments due to insufficient funds, and the REIT’s management is still in negotiation with the lenders of the Offshore Facility to restructure them.

Additionally, for the Onshore Facility, I note that the lenders are still in the process of obtaining internal approvals on the restructuring.

CEO Mr Goh Toh Sim’s Comments & Outlook (from the REIT’s Press Release)

“The revenue in RMB terms was 6.0% lower compared to 1QFY2023. Due to the delay in collection of related party rent receivables and the non-completion of the proposed divestment, ECW Group has insufficient funds to maintain its operations for the time being. To address the Outstanding Rental Receivables owing from the Sponsor Group, the Manager is actively demanding for repayment from the Sponsor Group for the Outstanding Rental Receivables. The manager had commenced the novation process to take over underlying leases from the master leases and other related party leases and appointed an independent consultant to evaluate and formulate a new leasing strategy for the assets being leased under master leases.


In addition, the Manager has escalated the urgency for the discharge of unauthorised mortgages imposed over Fuzhou E-Commerce and Fu Heng Warehouse through issuing more demand letters to the Sponsor and the Fuyang Finance Bureau. The Manager concurrently instituted legal actions against the Fuyang Financial Institutions and submitted lawsuits to the PRC court and the case applications are now pending acceptance by the PRC court.


The Manager has taken steps to lower the aggregate leverage ratio for the ECW Group through partial repayment of existing facilities include SBLC loans. Since 31 December 2023, the Manager has repaid approximately S$62.2 million towards SBLC loans by 30 April 2024. As a result of the partial repayments, the aggregate leverage decreased to 55.6% as at 30 April 2024. The Manager is exploring more options to further reduce ECW’s aggregate leverage.


The Lenders for the existing bank loans under the existing onshore and offshore facilities, have not indicated any intention to accelerate them while the Manager is actively working with the Lenders to explore the possibility of restructuring them. In the meantime, ECW Group continues to face challenges to maintain its operation and meet the financing obligations.”

Closing Thoughts

The troubled REIT is facing difficulties on many fronts – rental payments by tenants continued to be delayed, leading to its cash flow issues unresolved, and thereby difficulties in servicing its interest payments for its borrowings.

On top of that, as you can see from its portfolio occupancy profile – close to 95% of its rental leases will be due for renewal from now till end-2025. Considering the weak Chinese economy at this juncture, it is highly likely that, even the leases are being renewed (there’s also every chance that the tenants choose not to renew the leases, leaving the REIT with close to 0% occupancy rate), it will be at unfavourable terms – and this further impacting its financial performance in the coming years.

With the above in mind, I am still of the opinion that the REIT is at a high risk of facing liquidation, unless or otherwise there are some positive news being reported on the rental collection-front (and to my knowledge, there’s none so far), and like I have shared in my previous update (when the REIT released its 4th quarter and full year results), I am writing off my investment in it (thankfully it formed just a small 5% weightage towards my overall investment portfolio).

With that, I have come to the end of my review of EC World REIT’s latest 1st quarter results for FY2024. Do take note that all opinions shared in this post are purely for educational purposes only, and they do not represent any buy or sell calls for the REIT.

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Disclaimer: At the time of writing, I am a unitholder of EC World REIT.

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