Chinese mall landlord Dasin Retail Trust has tapped a financial advisor to conduct an independent business review as the SGX-listed real estate investment trust asks lenders for an additional extension on repayment of debt worth as much as $564 million.
The trustee manager of the REIT, which controls a RMB 11 billion ($1.62 billion) portfolio of mainland malls, appointed business advisory firm FTI Consulting (Singapore) to “assess and validate the financial position” of Dasin Retail Trust and its subsidiaries, according to a regulatory filing on Monday.
The findings of the business review may determine the REIT’s fate after it failed to make good on earlier debt extensions which obligated it to repay S$670.8 million in offshore debt and RMB 400 million (now $59 million) in onshore loans by 31 December. Hui Shi Yeo, senior research analyst at wealth management platform iFAST Singapore, said the SGX-listed REIT has now entered into a “technical default” and may struggle to raise enough cash to repay debts without a lifeline from its sponsor.
“The outcome of the review could be anyone’s guess as an independent business review typically considers a myriad of areas,” Yeo said in response to Mingtiandi’s queries on Tuesday. “Unless the sponsor steps in to provide financial support, I think it will be difficult for DRT to raise enough capital to repay the loan.”
Sponsored by developer Zhongshan Dasin Real Estate, which is based in the city of Zhongshan in Guangdong province, the REIT has secured a series of loan extensions on its onshore and offshore debts since 2021, sending its stock price into a freefall.
Shares of Dasin Retail Trust have more than halved in value from their S$0.77 price at the beginning of 2021 to just S$0.37 at the end of 2022. It fell further by 7 percent to end at S$0.26 apiece on Tuesday from its opening price of S$0.28 per share on Monday.
“If the results from the IBR are encouraging, the loan maturity date is likely to be extended. On the other hand, if worries are flagged up, the trust could avoid fire sales by going through a restructuring,” Yeo said, noting that the sponsor has not shown any indications of injecting fresh capital to save the debt-laden REIT.
In September of last year, Dasin had won a three-month extension on a portion of its debt six months after its manager revealed in March a non-binding memorandum of understanding to sell its top most valuable malls – Xiaolan Metro and Shiqi Metro – which were worth a combine RMB 4.7 billion – to Wuhu Yuanche Bisheng Investment Center. The supposed purchaser was a buyout fund co-managed by one of its substantial unitholders, Beijing-based private equity firm Sino-Ocean Capital Holding.
Since that time the manager, which controls seven malls spanning a total of 385,867 square metres, has provided no updates regarding the potential transaction, with creditors having acquiesced to further extensions of repayment deadlines.
Listed property trusts usually take on independent financial reviews when their shares trade at a steep discount compared to their book value for a certain period, or if the trust is “facing financing pressures in order to unlock and maximize stakeholder values,” said Vijay Natarajan, a real estate and REIT analyst for Singapore at RHB Banking Group, when asked to comment on Tuesday.
“Possible results of these reviews include sale of an individual asset or even entire portfolio,” Natarajan told Mingtiandi. “Another possibility is the emergence of a white knight in order to inject equity and reduce debt.”
Dasin Retail Trust is launching its business review shortly after reporting a 7.8 percent year on year dip in revenues in the nine months ending September 2022, when it took in a top-line amount of just S$71 million compared to the S$77 million it generated in the same nine-month period the year prior.
Its market cap of S$209.2 million represents less than 10 percent of the value of its RMB 11 billion (S$2.2 billion) portfolio at the time of writing.
The REIT is currently seeking to reschedule repayment of three sets of loans to 30 April 2023 after failing to make good on an earlier extension which had come due on 31 December, according to a disclosure last week.
These debts include S$430 million in offshore facilities and RMB 400 million in local debt that Dasin Retail Trust borrowed in 2017 to finance its acquisition of its initial four malls in Zhongshan.
It is also struggling to repay S$134.2 million borrowed offshore in 2020 to finance the acquisition of another two Guangdong malls – one each in Foshan and Zhongshan. That debt was originally set to mature on 15 July 2022 before Dasin’s creditors were squeezed to provide several payment extensions, with the latest maturity date falling on 31 December 2022.
The trust is also overdue to repay S$106.61 million in offshore facilities borrowed to finance its 2019 acquisition of a mall in the Zhuhai area with that debt having been initially scheduled to mature in September of last year before the deadline was extended to the last day of 2022.