EC World REIT has proposed a divestment of its interests in Bei Gang Logistics and Chongxian Port Logistics (CXPL) to pare down its debt.
The properties will be divested to wholly-owned subsidiaries of the REIT’s sponsor.
The assets will be divested for RMB1.2 billion (SGD242 million) and RMB820 million respectively, each representing a premium of 2.9% above their valuations.
“Rising inflation and the ongoing war in Ukraine have continued to exert pressure on the Chinese economy despite a gradual resumption of domestic economic activities”, said the REIT in its statement to explain the divestment rationale.
“To remain sustainable in this challenging environment, the manager has adopted an approach of exploring and reviewing strategic options such as asset divestments to stay agile, anticipating emerging risks and responding to suitable opportunities for the benefit of unitholders”, it added.
“With economic conditions in China continuing to exert considerable pressure on tenancies and anticipated outlays in required major structural repairs, our assessment is that the Beigang and CXPL properties have reached the stage of the business cycle where it is timely for us to unlock their values”, added Goh Toh Sim, Executive Director and CEO of the REIT’s manger.
“The property values are higher than the acquisition prices at [the REIT’s]initial public offering and divesting them now will enable us to enhance our liquidity, reduce our gearing, and give us the opportunity to offer cash distributions to our unitholders”, he remarked.
The majority of the divestment proceeds towards paring down at least 25% of the aggregate principal amount of the outstanding existing onshore and offshore loans that are due by 31 December 2022.
After the repayment, about RMB450 will be given out to unitholders as a special distribution.
The divestments will require the approval from unitholders, which will be sought an an extraordinary general meeting that will be announced in due course.