EC World REIT has renewed a major lease amounting to 159,752 square metres at its Hengde Logistics property with China Tobacco Zhejiang Industrial Co Ltd.

The REIT has been engaging with the company since October 2019, said Goh Toh Sim, CEO of EC World REIT’s manager.

However, the negotiation was delayed by the COVID-19 situation.

“We are pleased to report that EC World REIT has successfully renewed the lease at competitive rates”, the REIT added, without giving further details.

With the renewal of the lease, the manager has substantially renewed the expiring leases of EC World REIT for 2020, it said.

According to CBRE’s MarketView 2Q 2020 report, due to COVID-19 and economic uncertainties, the rental rates for the logistics sector in Hangzhou showed a 0.4% decline quarter-on-quarter.

But despite this, China Tobacco has committed to a lease term of 38 months, and the new rental rates represent a 1.1% increase over the expiring rental rates.

However, the warehouse management services currently provided to China Tobacco will no longer be required for the renewal lease term due to their internal restructuring.

The termination of the services will reduce the REIT’s total revenue by about 1.1%.

Separately, EC World REIT disclosed that it has also leased 22,545 square metres of warehouse and dormitory space at Wuhan Meiluote to a “reputable e-commerce company”.

The new lease was committed at a 4.3% increase in rental rate compared to the previous tenant for a period of three years (warehouse space) and two years (dormitory space), said the REIT.

The lease will commence in end-October 2020, bringing Wuhan Meiluote’s occupancy to about 79.5%.

EC World REIT was last done on the Singapore Exchange at SGD0.69, which implies a yield of about 7.4% according to data in the Singapore REITs table.