Interest Rate Risk ECW Group’s exposure to changes in interest rates relates primarily to interest-bearing financial liabilities. Interest rate risk is managed on an ongoing basis with the primary objective of minimizing the impact on interest expenses caused by adverse movements in interest rates. The Manager deploy relevant hedging tools to hedge ECW Group’s borrowings when required. Investment Risk The main sources of growth for ECW Group are asset enhancement initiatives (AEI), acquisition of properties, and property developments. Investment risks are managed through a rigorous investment process, including evaluating potential for growth in yield, rental sustainability, and potential for value creation. Key financial assumptions are reviewed, and sensitivity analysis is performed on key variables. Potential risks associated with proposed projects and issues that may prevent their smooth implementation or achievement of projected outcomes are identified at the evaluation stage, enabling the Manager to devise action plans to mitigate such risks early. Leasing Risk Leasing risk remains a key concern for the REIT. While the Manager has undertaken efforts to take over underlying leases and secure positive cashflow, the expiry and novation of master leases and related party leases have led to a loss of contracted cash inflow and exposed the REIT to direct tenant-level risk under challenging market conditions. In addition, the subdued demand environment, oversupply of warehouse space, and slow rental recovery continue to limit tenant replacement efforts. These factors collectively exacerbate leasing risk and may lead to further income volatility. The Manager continues to work with third-party leasing agents and consultants to formulate tailored leasing strategies, but the leasing outlook remains highly uncertain in the near term. Liquidity Risk ECW Group currently faces significant liquidity risks. Due to insufficient cash flow, the company is under pressure to meet its financial obligations and received pre-enforcement notice from the Offshore Facility Agreement regarding potential enforcement actions if certain conditions set are not met. These actions could include accelerating loans, appointing a receiver, or initiating legal proceedings. The aggregate leverage for the Group was 56.5% as of 31 December 2024, as a result of the decline in the property valuation of ECW. The increased leverage ratio breached the financial covenant under the existing offshore facility agreement, which requires ECW’s leverage ratios to be no more than 40%. Regulatory and Compliance Risk ECW Group is required to comply with applicable legislations and regulations, including the Listing Rules of the SGX-ST, the Code on Collective Investment Schemes issued by MAS, tax rulings by the Inland Revenue Authority of Singapore, sanctions-related laws or regulations, as well as laws and regulations in the countries where ECW Group’s assets are located. The Manager proactively identifies applicable laws and regulatory obligations, legal updates, and integrates compliance into day-to-day operations. ECW does not have exposure or nexus to sanctions-related risks. EC WORLD REIT 66 ENTERPRISE RISK MANAGEMENT
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