EC World REIT is suspending its distribution for 2HFY2023 due to insufficient funds following overdue rent receivables under the relevant master leases.
The REIT has previously deferred its distribution of 2.053 cents for 1HFY2023, which was supposed to have been made on Sept 28, 2023.
During FY2023, more than 80% of the REIT’s revenue came from rental income pursuant to related party leases with its sponsor. As at Dec 31, 2023, the overdue rent receivables owing to the EC World Group by the sponsor group has exceeded RMB289.1 million ($53.7 million).
Notwithstanding the security deposit from the master lessees amounting to RMB345.1 million, the REIT manager continued to engage the sponsor group to demand for payment of outstanding rental receivables from the related party lessees although it has met with “little success” due to severe financial difficulties faced by the sponsor.
The DPU for FY2023 would have been 3.659 cents, 23.2% lower than the 4.762 cents in the previous year.
Gross revenue for the year was $107.8 million, 11.4% lower y-o-y. Net property income was down by 10.6% y-o-y to $99.2 million.
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For FY2023, calculated distribution to unitholders stood at $29.6 million, 23.2% down y-o-y on lower revenue, higher interest cost and absence of payout distribution previously retained in prior periods.
The portfolio valuation of EC World REIT as at Dec 31, 2023 has declined by 43% y-o-y to RMB4.34 billion, according to an updated independent valuation.
Overall occupancy as at end of last year dropped to 79.9%. Weighted average lease to expiry (WALE) stood at 0.8 years for both gross rental income and net lettable area.
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As of Dec 31, 2023, aggregate leverage stood at 58.3%.
In its outlook, the REIT manager says it will continue to face serious financial and cash flow stress in the short to medium term. The units trading will continue to be suspended until the financial situation has improved.
Units in EC World REIT last traded at 28 cents.
