EC WORLD REIT: Makes first acquisition post-IPO, in Wuhan

REITs, by their nature, are expected to make acquisitions of real estate assets in order to satisfy their goal of increasing their payouts to unitholders.

(L-R): EC World REIT Chairman Zhang Guobiao with Acting CEO Goh Toh Sim. (Mr Zhang is also chairman of the REIT's sponsor, Forchn Holdings Group).
 Photo by Leong Chan TeikEC World REIT, which listed in July 2016 with 6 properties, has just made its maiden acquisition post-IPO.

Located in the Chinese provincial capital of Wuhan (population: 10.6 million), this asset is owned by a third party, Hubei Anhai Steel-work Co., Ltd.

In other words, the vendor is not the REIT's sponsor.

And, to reiterate, the property is not in Hangzhou where the REIT's current six properties -- purchased from the sponsor, Forchn Holdings Group -- are located. 

The Wuhan asset is currently used for warehousing purposes with an ancillary dormitory use.

The property is leased to big-name logistics and e-commerce tenants including Dangdang Information Technology and Jingdong Jinde.

The acquisition raises the REIT's distribution per unit (DPU) by 0.8%, from 6.025 cents to 6.076 cents on a pro-forma basis.

The FY17 distribution yield was 7.9% based on DPU of 6.025 cents and the closing price of 76 cents as at end-2017.

The REIT's Acting CEO, Goh Toh Sim, emphasised the REIT's stable returns, as the committed occupancy of the six pre-IPO assets remains at 100%.

Following the Wuhan property acquistion, there is upside potential for the DPU -- if and when tenants are found for the 17.8% space that is still available there.