Chinese S-REIT faces challenges of high short term debt levels, master lease structure, savvy investors

Goola Warden
Goola Warden12/29/2021 9:9 PM GMT+08  • 3 min read
Chinese S-REIT faces challenges of high short term debt levels, master lease structure, savvy investors
EC World REIT confirms no transaction as short debt rise and cost of capital rise
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S-REITs with Chinese assets and mainland sponsors tend to have a higher cost of capital compared to S-REITs with similar assets and local sponsors.

Take EC World REIT, intimating that a potential transaction was on the way back in May 2021. Analysts who covered the stock were positive on this transaction all the way to Nov. Some savvy investors believed that the point of announcing a potential transaction was to boost the REIT’s unit price, which the announcement did.

Unfortunately for analysts - which had more faith in a transaction than savvy investors - EC World REIT’s manager announced on Dec 28, that “The Purchasers have informed the Manager that, in view of the current market conditions and the fluctuations in exchange rate between Renminbi and Singapore dollars/US dollars, they have decided not to proceed with the Potential Transaction as the bases on which the Purchasers had approached the Manager in relation to the Potential Transaction have changed significantly.”

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