Chinese S-REITs and trusts remain under stress

Dasin Retail Trust breaches loan-to-value ceiling and ICR floor while EC World REIT's auditor point to going concern challenges

Chinese REITs and property trusts listed in Singapore appear to be under some stress. EC World REIT’s (ECW) manager announced that its auditors had issued an emphasis of the matter in respect of material uncertainty relating to the ability of ECW to continue as a going concern.

This is because the current liabilities of EC World REIT and its subsidiaries have exceeded their current assets by $234.1 million and $131.0 million respectively. The current liabilities include bank borrowings of $139.2 million due for repayment by December 31.

”These matters indicate that a material uncertainty exists that may cast significant doubt on the ability of the Group and of ECW REIT to continue as going concerns,” the auditor says.

Elsewhere, Dasin Retail Trust Cedu announced that the decrease in fair value of its portfolio by RMB1,763 million (16%) from RMB11,291 million as at December 31, 2021 to RMB9,528 million as at December 31, 2022 is due to the general decline in market performance and rental rates, lower passing rent, lower projected short term growth rate in rent, negative reversion in rental rate from some leases contracted in 2022, and an increase in vacancy rates.

In Singapore dollars, the decrease in the valuation of the portfolio by 23% to $1,848 million was due to the weakening of the RMB against the Singapore dollar as the investment properties are denominated in RMB.

“Due to the decrease in the valuation of the investment properties and the weakening of renminbi against Singapore dollar, United States dollar and Hong Kong dollar in which the Trust’s offshore loans are denominated, there has been a breach of the gearing ratio, interest coverage ratio and loan to valuation ratio which the Trust is obliged to maintain under its Offshore Facilities as announced on April 24 2023,” Dasin Retail Trust’s manager says.

The manager is seeking a waiver from the lenders of any breach of the financial covenants and approval from the lenders to re-set the financial covenants as part of the discussions with the lenders to restructure and reschedule trusts’ debt obligations.

See Also:

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