The manager of EC World REIT has issued an update regarding the status of the mortgages imposed on its Fuzhou e-commerce, Fuheng warehouse, and Hengde logistics properties.
The REIT’s sponsor, Forchn Holdings, had been given till Jan 20 by EC World REIT to remove the illegal mortgages imposed over its properties, of which the failing to do so could result in legal action.
The REIT’s lenders sent a demand letter dated Jan 24 to EC World REIT which states, among others, the first right of mortgage over its properties. The illegal mortgages, amounting to approximately RMB269 million ($50.8 million), were created in connection with funds provided by the Fuyang government to Forchn Holdings and were undertaken without the knowledge or consent of EC World REIT. Forchn’s actions, hence, have breached the terms of the EC World facilities.
The Jan 24 letter also demanded immediate action to remove the illegal mortgages. It also asked the REIT manager to strengthen internal controls over the usage of all its stamps and seals and ensure the independence of the management and operation of the REIT and its subsidiaries.
In its Jan 25 statement, the manager says it has strengthened the internal controls over the usage of all stamps and seals, including the relevant company seals, legal representative seals, contract stamps and finance stamps from the REIT’s property management teams in China.
The legal representative seal and the finance stamps are also currently being kept in the manager’s registered office in Singapore while the relevant company seal and contract stamps are under the custody of its legal counsel in Shanghai.
See also: Changes in ICR, leverage to come into effect immediately, with additional disclosures in March
EC World REIT has also sent a demand letter on Jan 24 to Forchn Holdings demanding that the company negotiate with the Fuyang government to have the illegal mortgages discharged by Jan 31, and ensure that no similar incident shall happen again in the future.
In the event that the deadline is not met, the REIT will not rule out taking the relevant legal action, including but not limited to filing a lawsuit, seizing assets and other measures to protect their rights.
Separately, EC World REIT announced, also on Jan 25, that it has appointed independent consultants, Savills Property Services (Shanghai) Co., Ltd. and Cushman & Wakefield (HK) Ltd, to evaluate the possibility of divesting its properties including the Stage 1 Properties of Bei Gang Logistics and Chongxian Port Logistics.
Units in EC World REIT last traded at 28 cents before its trading halt.
