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24
EC World Real Estate Investment Trust ANNUAL REPORT 2016
Management
REVIEW
Supply of inland ports in Hangzhou is limited and shrinking
while Hangzhou’s economy is growing at a rate of 9.5%.
2
Therefore the macro economic environment is providing
tailwinds that support the business of the tenants of the three
port-related assets, namely Chongxian Port Investment,
Fuzhuo Industrial and Chongxian Port Logistics.
According to China’s National Bureau of Statistics, online
retail sales in China grew 26.2% in 2016, more than double
the growth rate of overall retail sales in the country. Fu
Heng Warehouse is specifically designed to cater to the
ecommerce operations of “Ruyicang”
. Ruyicang
is the e-commerce logistics operator of the Sponsor,
and has strong business connections with Alibaba and
other key ecommerce platform operators in China such
as
JD.comand
VIP.com. Furthermore, the burgeoning
e-commerce system nurtured at Bei Gang Logistics is
driving up the underlying tenancy rate, which was 85% as
at 31 December 2016. The two e-commerce assets are
riding on the e-commerce tide in China and e-commerce
in Hangzhou grew by 44.4% in 2016
3
.
Hengde Logistics is currently tenanted for the storage of
tobacco. The value of products stored in this warehouse by
China Tobacco Zhejiang Industrial Co., Ltd, is estimated to
be worth RMB10 billion. With its temperature and humidity
control systems, as well as pest management system,
2 Hangzhou statistics, released on 24 January 2017:
http://www.hzstats.gov.cn3 Hangzhou statistics, released on 6 February 2017:
http://www.hzstats.gov.cnStage 1 Properties of Bei Gang Logistics
Packaging facilities at Fuheng Warehouse
Hengde Logistics is specially customised to cater to the
special requirements of tobacco storage and this reflects its
competitive advantage compared to ordinary warehouses.
Active lease management
The Manager works closely with the Property Manager
to optimise the occupancy rates of the properties.
Existing and prospective tenants are engaged well
in advance of lease expiries to mitigate risk of non-
renewals and vacancies. As at 31 December 2016,
the portfolio WALE was 3.9 years and 4.0 years by
committed net lettable area and gross rental income
respectively. WALE of new leases, which were at
Chongxian Port Logistics, entered into after IPO, was
4.2 years. Income from these new leases contributed to
0.1% of the portfolio’s gross rental income during the
period 28 July 2016 to 31 December 2016. Unitholders
can enjoy stability brought about by the long leases,
with no significant leases expiring in the next 3 years.
As at 31 December 2016, five out of the six properties
in the portfolio are on long leases, expiring in 3.8 years
and beyond. At Chongxian Port Logistics, there are 30
tenants with lease tenures ranging from 1 to 10 years
with a WALE of 3.3 years. In the fourth quarter of 2016,
rental of 22% of the space at this asset was renewed at
a 6.4% reversion rate.
Operation Review