EC World Reit loses appeal over unauthorised mortgage of key Hangzhou property; manager to seek re-trial

The manager says the legal defeat will not require further adjustments to financial statements

The manager of EC World Real Estate Investment Trust (Reit) on Wednesday (Feb 4) said that the group’s appeal to invalidate an unauthorised mortgage was dismissed by the Hangzhou Intermediate People’s Court.

The legal proceedings involve an outstanding mortgage over Fuzhou E-Commerce, one of the three properties owned by EC World Reit that were mortgaged without its consent or knowledge between Nov 20 and 24, 2023.

The group previously applied to the People’s Court of Fuyang District to have these mortgage contracts declared invalid or revoked, but the applications were dismissed in April 2025.

The Reit manager subsequently appealed to the Hangzhou Intermediate Court, which issued its judgment on Jan 29 this year, upholding the lower court’s decision to dismiss the appeal.

Legal saga

This latest setback continues a saga that began in early 2024 for the embattled Reit, the units of which have been suspended from trading since August 2023.

The unauthorised mortgages – which were also created for two other EC World Reit properties, Fuheng Warehouse and Hengde Logistics – were in favour of two entities linked to the Fuyang government in China, based on a bourse filing dated Sep 1, 2024.

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While the unauthorised mortgages related to Fuheng Warehouse and Hengde Logistics have been discharged, the one over Fuzhou E-Commerce remains outstanding.

Further legal action planned

Despite the dismissal, the manager stated it intends to apply to higher-level courts for a re-trial of both the April 2025 and January 2026 judgments, based on recommendations from its China legal counsel.

However, the manager cautioned that such an application is not considered a formal appeal of the January 2026 decision.

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In a separate development, two lawsuits initiated by Fuyang Futoufa – one of the government-linked creditors – against three of the Reit’s subsidiaries were heard in the Hangzhou Intermediate Court on Jan 28.

One lawsuit was lodged against Fuzhou E-Commerce and Hengde Logistics in relation to guarantees signed on Sep 26, 2023, for a loan of up to 140 million yuan (S$25.7 million). The loan was granted by Fuyang Futoufa to Forchn, the Reit’s sponsor.

The other lawsuit is against all three of the properties, in relation to guarantees they signed on Nov 20, 2023, for a loan of up to 120 million yuan granted by Fuyang Futoufa to the sponsor.

These cases are currently pending further court processes, the manager said.

Financial impact

The manager noted that the legal defeat will not require further adjustments to its financial statements.

A contingent liability of 268.6 million yuan related to these proceedings had already been recognised in previously announced financial results.

As at last November, when its third-quarter update was released, the Reit continued to struggle with liquidity, reporting that current liabilities exceeded current assets by S$116.8 million.

The manager indicated that it was “highly likely” no distribution will be declared for the 2025 financial year due to its inability to fulfil liabilities as they fall due.

The board of directors on Wednesday stated it will continue to update unitholders on material developments.

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