SINGAPORE (Oct 28): EC World Asset Management, the manager of newly-listed EC World REIT, announced a distribution per unit (DPU) of 0.991 cents for its first reporting period from Jul 28 to Sept 30 – 2.5% under the forecast 1.016 cents due to a shortfall in finance income.

Gross revenue and net property income, however, outperformed forecasts at $16.4 million and $15 million respectively – 0.9% and 1.2% higher in comparison to the respective projections of $16.3 and $14.8 million.

(See also: <a href="http://www.theedgemarkets.com.sg/sg/article/ec-world-reit-manager-says-public-offer-%E2%80%98oversubscribed%E2%80%99" target="_blank">EC World REIT manager says public offer ‘oversubscribed’</a>)

The outperformance of gross revenue was due to an increase in rental income of RMB0.315 million ($64,000) and the remaining difference of $81,000 was due to favourable exchange rate movement, says the manager in a Thursday statement.

On the other hand, the higher than expected net property income was due to savings in property maintenance costs.

Income available for distribution which came in at $7.7 million, 2.3% below the forecast $7.9 million as disclosed in the REIT’s prospectus.

This was because finance income came in at $56,000, below the $600,000 forecast.

The manager says the shortfall in finance income was a result of its decision not to invest the security deposits of RMB301.7 million received from the master lease tenants, in view of the volatile PRC corporate bond market.

To mitigate currency and interest rate volatilities, the manager says it has hedged 50% of its secured $200 million term loan facility, as well as fully hedged its distributions for the financial period ending Dec 31 to ensure stability of its Singapore-dollar denominated distributions.

The first distribution to be paid by EC World REIT will be made on from its initial public offering (IPO) listing date to Sept 30, instead of Dec 31 this year.

Peter Lai, CEO of the manager, notes a “solid operating performance” for the REIT’s maiden reporting period, which he says bears testament to “the strong and stable recurring income generated by [EC World’s] quality assets, backed by Hangzhou’s strong economic growth and fast-growing high-tech and services industry”.

“Following the listing of EC World REIT, we considered the various options for the use of the security deposits. In light of a potentially yield-accretive acquisition opportunity in the PRC, we concluded that it may be more beneficial to unitholders for EC World REIT to set aside the security deposits to partially finance this asset from an unrelated third party vendor,” says Lai.

The manager says it will continue to seek non-first right of refusal (ROFR) third-party acquisition opportunities in China, with the objective of diversifying its property portfolio.

Units of EC World REIT closed 0.65% lower at 76 cents on Thursday.

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EC World REIT reports DPU of 0.991 cents in maiden results, 2.5% shy of forecasts

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