EC World Real Estate Investment Trust (Reit) has responded to queries from the Singapore Exchange Securities Trading (SGX-ST) regarding procedural lapses that resulted in unauthorized mortgages taken by its sponsor, Forchn Holdings, without the Reit manager’s consent. In a bourse filing on Wednesday (Jan 24), the Reit manager explained that its property manager in China, Yuntong Property Management, deviated from internal processes by providing seals and documents to Forchn Holdings for illegal mortgage applications. The property manager, acting upon approvals from Forchn’s chief executive officer, facilitated the lending of seals, stamps, and title deeds to the sponsor’s treasury department, despite lacking proper authorization. It was noted that the sponsor’s CEO, Zhang Zhangsheng, lacked the authority to grant such approvals.
Responding to concerns raised in a Jan 17 article in The Business Times, the Reit manager clarified that it was deemed necessary for the property manager to possess relevant seals, stamps, and title deeds to fulfill its operational obligations. The title deeds, mandated to be kept in China for various regulatory and operational purposes, do not confer property rights to the possessor under Chinese law, clarified the Reit manager. The Reit manager emphasized that possession of the title deeds is essential for ad hoc inspections by stakeholders, including insurers and government authorities, as well as for litigation and financing-related registrations. Additionally, it pointed out that mortgage registration in China requires specific documentation, including mortgage agreements affixed with the mortgagor’s relevant company seal.
Regarding the mortgages over its Chinese properties – Hengde Logistics, Fuzhou E-Commerce, and Fu Heng Warehouse – the Reit manager disclosed on Jan 2 that one of the three mortgages had been discharged, with efforts underway to resolve the remaining two. Trading of EC World Reit units has been suspended since Aug 31, 2023, due to challenges in meeting offshore interest expenses by the Reit and its subsidiaries.
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