EC World REIT: Full-year 2018 DPU rose 2.6% to 6.179 cents

(L-R): EC World REIT Chairman Zhang Guobiao with CEO Goh Toh Sim. (Mr Zhang is also chairman of the REIT's sponsor, Forchn Holdings Group). NextInsight file photo.EC World Asset Management, as manager of EC World Real Estate Investment Trust, announced that despite a challenging macro-economic environment, the REIT's 4Q18 distribution per unit (DPU) came in at 1.57 Singapore cents, a 4.4% increase y-o-y. Full-year DPU rose 2.6% to 6.179 Singapore cents. Based on the recent price of S$0.74, the REIT's yield is 8.35%, "one of the highest yielding investment instruments available to investors," said the Manager.

The Manager also announced that it will be seeking unitholders’ approval for the proposed entry into New Master Lease Agreements in relation to Stage 1 Properties of Bei Gang Logistics, Chongxian Port Investment and Fu Heng Warehouse.

Mr. Goh Toh Sim, Executive Director and CEO of the Manager, said, “Our portfolio continues to perform well with committed occupancy remaining high at 99.2%. Furthermore, the New Master Lease Agreements will significantly extend our lease expiries, providing income certainty and sustainability with built-in escalations.”

Resilient Portfolio Performance and Asset Management Strategies
The operating performance of ECW’s portfolio of assets remained resilient.

Net property income grew 5.6% year-on-year mainly due to contribution from Wuhan Meiluote which was acquired in April 2018 as well as organic growth from built-in rental escalation and positive rental reversion on new leases signed during the year.

The committed portfolio occupancy remains high at 99.2% while the weighted average underlying end-tenant occupancy3 was 96.9%. Weighted Average Lease to Expiry (“WALE”) as at 31 December 2018 stands at 1.9 years and 2.0 years by Net Lettable Area and Gross Revenue respectively.

Prudent and Proactive Capital Management
ECW’s aggregate leverage remains healthy at 31.5% ECW as at 31 December 2018. The blended annualized running interest rate for the financial year was 4.3%.

The Manager continues to adopt a prudent FX strategy to protect the unitholders from the fluctuations of currency movement.

Majority of projected distributions are hedged every quarter using a put spread options structure on a 6-month rolling basis. Interest exposure of our offshore SGD loans continues to be fully hedged through an interest rate swap.

Proposed Entry into New Master Lease Agreements
Key rationale for the Agreements:
• provide predictable cash flow and income viability to EC World REIT, ensuring stable and sustainable returns to Unitholders;
• the annual fixed rent will limit downside risks and provide predictability in returns while built-in escalation will provide organic growth
• significantly extend portfolio WALE from 2.0 years to 4.8 years (by gross revenue);
• demonstrates strong support from the Sponsor and alignment of interest between the Sponsor and Unitholders 

The New Master Lease Agreements will significantly extend ECW’s weighted average lease to expiry, provide income certainty and sustainability with organic growth through built-in rental escalations.

The Manager will continue to pursue attractive yield-accretive investments from the Sponsor as well as third party logistics assets, in China and in fast growing markets in Southeast Asia.

For more info, see the Powerpoint presentation materials here.

See also:EC World REIT: DBS initiates coverage with 86-c target