ASK Alvin Cheng to define his manage-

ment philosophy, and he will tell you it’s

all about being entrusted to add value.

The deputy chief executive officer of

the manager of SGX-listed EC World Reit

places a premium on the values of humil-

ity, gratitude and positiveness. “The more

responsibility you take on, the more

humble you need to become,” said

Mr Cheng, who has more than three dec-

ades of experience in corporate finance

and Reit management. “Every success you

achieve should be seen as a gift to be treas-

ured, not to boast about or flaunt, but as

an opportunity to build your career.”

Mr Cheng, who graduated with a Bach-

elor of Science with Honours degree in

Naval Architecture & Shipbuilding from

University of Newcastle-Upon-Tyne, went

on to do a double Masters degree in Ocean

Systems Management and Ocean Engineer-

ing from the Massachusetts Institute of

Technology (MIT). He describes his time in

the prestigious American university as an

“eye-opener”. “Being in MIT taught me how

little I actually know, and how much there

is to be learnt, and there are many others

who will be intellectually superior,”

Mr Cheng recalled. “MIT was where I learnt

the word ‘humble’.”

And during your career journey, if you

reach a point where you think you’re invin-

cible, that will mark the beginning of your

downfall, he noted.

Good leadership also means having a

heart for your stakeholders, Mr Cheng

pointed out. “You need to listen to people

around you, be able to feel for your em-

ployees, board of directors, unitholders

and regulators, all of whom have different

needs. Each action and decision taken

should create positive values for key stake-

holders.”

When obstacles loom, a sanguine atti-

tude goes a long way. “When you’re stuck

in a difficult situation, you need to be the

most optimistic person in the room, so as

to keep the momentum going. After all, it

is during our darkest moments that we

must focus to see the light,” he quipped, re-

ferring to a maxim from Buddha.

In the same vein, the word “impossible”

should not be in your vocabulary. “There’s

no such thing as an impossible situation in

life. It’s a matter of how much pain or sacri-

fice you are willing to make – there’s al-

ways a price to be paid.”

Mr Cheng, 56, was appointed deputy

CEO of EC World Real Estate Investment

Trust in January 2017. Prior to this, he

held senior management positions in APL

Logistics, then-Pacific Shipping Trust, and

SGX-listed Lippo Malls Indonesia Retail

Trust. His earlier career in the financial sec-

tor included senior regional roles in

then-Chemical Bank, Rabobank and GE

Capital.

EC World Reit, managed by EC World As-

set Management Pte Ltd, was the first

Chinese specialised logistics and e-com-

merce logistics trust to list on SGX last

July. It aims to invest directly or indirectly

in a diversified portfolio of income-produ-

cing real estate used primarily for e-com-

merce, supply-chain management and lo-

gistics purposes, as well as real-estate-re-

lated assets, with an initial geographical fo-

cus on China.

The trust offers exposure to the special-

ised logistics and e-commerce sectors in

Hangzhou, through a portfolio of six as-

sets located in one of the largest e-com-

merce clusters in the Yangtze River Delta.

As at Dec 31, 2016, the portfolio – compris-

ing two e-commerce logistics properties,

one specialised logistics asset and three

port logistics assets – had an aggregate net

lettable area of 698,478 square metres,

and a total appraised value of about 6.4 bil-

lion yuan (S$1.3 billion).

The manager – EC World Management –

is an indirect wholly owned subsidiary of

Forchn Holdings Group Co Ltd, the Reit’s

sponsor. Established in 1992 and

headquartered in Shanghai, Forchn is a di-

versified enterprise group specialising in

the real estate, industrial, e-commerce, lo-

gistics and finance sectors. Forchn owns

41.6 per cent of EC World Reit, while the

other IPO (initial public offering) corner-

stone investors are China Cinda Asset Man-

agement, Fosun International Holdings

and BOCOM International Global Invest-

ment.

For the three months ended Dec 31,

2016, EC World Reit reported a stellar oper-

ating performance that exceeded forecasts

in its IPO prospectus. Gross revenue of

S$24.7 million for the quarter was 7.5 per

cent above its earlier projection, while net

property income of S$21.8 million ex-

ceeded its forecast by 4.1 per cent. Its dis-

tribution per unit (DPU) of 1.463 Singapore

cents also topped its previous estimate by

2 per cent. For the year ending Dec 31,

2017, the trust has forecast gross revenue

of S$90.5 million, net property income of

S$82.0 million and DPU of 5.94 Singapore

cents.

EC World Reit has a market capitalisa-

tion of nearly S$590 million. Its shares,

trading 6.8 per cent below their IPO price

of 81 Singapore cents, have a price-to-

book ratio of 0.8. In the year to date, the

stock has distributed a dividend of 2.454

Singapore cents per unit, which translates

into an annualised yield of 7.5 per cent.

Looking ahead, Mr Cheng expects

China’s e-commerce industry to continue

expanding at a rapid clip, underpinned by

widespread Internet penetration and in-

creased consumption from a rising,

tech-savvy middle class.

According to data from Analysys, the

size of China's retail e-commerce market is

estimated to expand to 9.4 trillion yuan in

2020, from 5.1 trillion yuan in 2016, re-

flecting a compounded annual growth rate

of 16.5 per cent. This year, China’s online

retail sales are projected to reach US$972

billion, triple the US$315 billion forecast

for the US. Mr Cheng noted that physical in-

frastructure – such as the specialised ware-

house assets in EC World Reit’s portfolio,

on-the-ground delivery networks and cus-

tomer collection points – all play a crucial

role in connecting the industry’s ecosys-

tem and ensuring its smooth operation.

High-quality warehouse space is

needed for the fulfullment and customisa-

tion of each order, as well as timely deliv-

ery of goods at the lowest rates. “Many of

these warehouse and distribution services

require complex systems – they’re like the

brains of an operation, so specially con-

figured real estate is necessary to house

these operations,” he said.

EC World REIT, with a portfolio that

caters to high-growth e-commerce transac-

tions, has the ability to meet these special-

ised needs, he added.

Another competitive advantage stems

from its exposure to Hangzhou, the logist-

ics hub of Zhejiang province and the

Yangtze River Delta. Throughput of ports

in the city is expected to surge 59.1 per

cent to 175 million tonnes in 2035 from

110 million tonnes in 2016, data from

Hangzhou’s government showed.

Planned construction of a second chan-

nel within five years, connecting the water-

way systems in northern China to Hang-

zhou, will provide a further boost, accord-

ing to the Hangzhou Transport Bureau.

The Reit’s main growth thrust lies in its

e-commerce warehouses, such as Bei Gang

and Fu Heng, which partner RuiYiCang,

the sponsor’s e-commerce logistics and

supply-chain management service plat-

form. Additional drivers of growth include

acquisitions, as well as asset enhancement

initiatives, he noted.

EC World Reit is well-positioned to

leverage its sponsor’s business networks

and relationships in China to acquire

e-commerce properties that are yield-ac-

cretive. The sponsor has granted the trust

a right of first refusal (ROFR), which could

also usher in suitable opportunities.

Asset enhancement options include

converting traditional warehouses to

e-commerce logistics centres, or retrofit-

ting and refurbishing existing facilities to

achieve higher efficiency. These measures

are expected to boost rental revenues and

maintain high occupancy rates, Mr Cheng

said.

The Reit is also eyeing opportunities to

diversify outside China, particularly in the

high-growth Asean markets of Indonesia,

Malaysia, Thailand, the Philippines and

Singapore.”These markets in aggregate

have a huge population, and are rapidly ex-

panding in the e-commerce sector, particu-

larly Indonesia, where demand growth is

very significant,” he added.

Meanwhile, the key hurdle the trust

faces is not acquisitions or available fund-

ing in the market, but in the investor mind-

set, Mr Cheng said. "The biggest challenge

we face is the ability to change perception

of the Reit as a traditional warehousing

play, and investors’ willingness to under-

stand our unique operating model as part

of the e-commerce ecosystem.”

Essentially, EC World Reit is misplaced,

he noted. “We’re classified as an Industrial

Reit – while that’s not entirely wrong,

there’s no other category at the moment

that precisely defines what we do.”

But changing mindsets is a gradual pro-

cess, Mr Cheng admitted. “At the moment,

70 per cent of our portfolio comprises

more traditional and specialised logistics

assets, which are port and tobacco storage

facilities. The rationale for this composi-

tion is that we wanted to be more conser-

vative when we listed, as these traditional

assets generate more stable returns,” he

said. “But as the e-commerce logistics sec-

tor expands, our portfolio composition

will be very different, as we will grow to-

gether with the sector.”

It’s crucial to constantly reinvent your-

self, he said. Be creatively disruptive, and

continually challenge yourself to explore

beyond existing boundaries. “From time to

time, we need to break out of the mould, to

ensure we remain relevant in a fast-chan-

ging world,” said Mr Cheng, who enjoys

mentoring graduating students from his

alma mater.

“You might not like being disruptive,

but your competitors will continuously

create disruptions. Either you’re there, or

you’re left behind.”

This report is an excerpt from Singapore Exchange’s Kopi-C: the Company Brew, a regular column featuring C-level executives of SGX-listed companies. Previous editions can be found on SGX’s My Gateway website www.sgx.com/mygateway

EC World Reit riding e-commerce boom

“You need to listen to people around you, be able to feel for your employees, board of directors, unitholders and regulators, all of whom have different needs.”Alvin Cheng, deputy CEO of EC World

Management, which manages

SGX-listed EC World Reit

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Reit’s raison d’etre is to add value, says its deputy chief

1 7THE BUSINESS TIMES / WEEKEND / APRIL 15-16, 2017

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