EC World Reit cuts Q4 DPU, sees muted demand in Wuhan

Singapore

DESPITE higher revenue and net property income (NPI), EC World Real Estate Investment Trust (EC World Reit) posted a 3.8 per cent drop in distribution per unit (DPU) to 1.51 Singapore cents for the fourth quarter, from 1.57 cents a year earlier.

The manager of the logistics real estate investment trust (Reit), which has eight properties in China, said in a filing that it retained 5 per cent of capital distribution to unitholders for general working capital purposes and "unforeseen contingencies".

The cut in DPU also comes as the coronavirus continues its spread globally. However, given that EC World Reit caters largely to the e-commerce and specialised logistics sector, it is less exposed to Covid-19's impact compared to businesses with operations that rely largely on human traffic, said Goh Toh Sim, chief executive officer of the manager.

The Reit's portfolio comprises seven assets in Hangzhou and one in Wuhan, the epicentre of the virus outbreak. Consequently, the manager expects muted demand for space at the Wuhan e-commerce logistics asset, which accounts for 1.6 per cent of the portfolio net property income (NPI). Meanwhile, a tenant has also notified the manager that it will not renew its lease for 24,929 square metres of space at the Wuhan property in the second quarter of 2020.

"While long-term fundamentals for the logistics sector in China remain attractive, short-term volatility and disruption is to be expected given the severity of control measures implemented in China," the manager said.

For the three months ended Dec 31, gross revenue grew 10.2 per cent to S$25.9 million, from S$23.5 million a year ago.

NPI rose 17.4 per cent on the year to S$24.5 million from S$20.8 million previously.

The growth in revenue and NPI was due to the embedded rental escalations as well as contribution from Fuzhou E-Commerce, a yield-accretive e-commerce logistics asset which was acquired in August 2019.

Total amount available for distribution inched up by 2.4 per cent to S$12.7 million. The DPU for Q4 will be paid out on March 27, after books closure on March 16.

The manager said it reported a set of operationally resilient results for the latest quarter despite the "challenging macro climate".

For the full year, DPU fell 2.1 per cent to 6.047 Singapore cents from 6.179 cents for 2018.

Total amount available for distribution for the year was down by 0.3 per cent at S$48.9 million. Gross revenue was 3 per cent higher at S$99.1 million, while NPI grew 2.7 per cent to S$89.7 million.

Units of EC World Reit closed at 70.5 Singapore cents on Friday, down two cents or 2.8 per cent.