Elite UK REIT (SGX: MXNU) has been included back into the FTSE Global Micro-Cap Index and FTSE Global Total Cap Index after improving its liquidity and market capitalisation.

The improvement is attributed to interest savings through capital management and interest rate optimisation

 

[SINGAPORE] The manager of   Elite UK Reit   : MXNU 0% on Tuesday (Nov 4) posted a distribution per unit (DPU) of £ 0.0233 for the nine months ended Sep 30, 2025, up 9.4 per cent from £ 0.0213 in the year-ago period.

 

This was based on a payout ratio of 95 per cent for the period, and of 90 per cent for the corresponding period in 2024. 

 

At a 100 per cent payout ratio, the DPU for the nine-month periods in 2025 and in 2024 would have been £ 0.0246 and £ 0.0236, respectively. 

 

For the period, distributable income stood at £ 14.8 million (S$25.4 million), up by 6.2 per cent on the year from £ 14 million. 

 

The higher DPU and distributable income were due to interest savings through capital management, interest rate optimisation and an increase in payout ratio to 95 per cent in H2 2025, the manager said.

 

Net property income, however, dipped marginally by 0.5 per cent year on year to £ 27.4 million from £ 27.5 million, due to expenses incurred for asset repositioning. 

 

Revenue inched up 1 per cent to £ 28.3 million from £ 28 million previously. 

 

This was driven by rental reversions for three properties: Dallas Court in Salford, Theatre Buildings in Billingham and Ladywell House in Edinburgh. Contributions from the June acquisitions of Priory Court in Dover Custom House in Felixstowe, England and Ty Merlin in Carmarthen, Wales, also contributed to the revenue. 

 

The real estate investment trust&rsquo s (Reit) occupancy improved to 98.6 per cent as at Sep 30, 2025, up 32 basis points since Q1 2025, with its weighted average lease expiry at 2.7 years. 

 

Its net asset value per unit fell to £ 0.39 as at end-September 2025, from £ 0.41 as at end-December 2024, in tandem with a decrease in its net assets to £ 237.9 million from £ 241.2 million. 

 

Total debt dropped to £ 189.9 million as at end-September, from £ 190.5 million as at end-December. All of its debt is denominated in pound sterling, which provides a natural hedge and eliminates currency mismatching in its balance sheet, the manager noted. 

 

It added that the Reit had no refinancing requirements until 2027, with built-in two-year extension options offering a runway for it to navigate future refinancing.  

 

Its net gearing ratio stood at 42.5 per cent as at Sep 30, 2025, unchanged from Dec 31, 2024, supported by interest savings from ongoing capital management efforts. 

 

As at end-September, its interest coverage ratio rose to 2.7 times, from 2.5 times as at end-December 2024. 

 

Borrowing costs came in at 4.8 per cent as at Sep 30, compared with 4.9 per cent as at Dec 31. 

Over the past two years, Elite UK REIT has strengthened its capital structure, cutting its net gearing ratio by 680 basis points to 40.7% as of June 30 &mdash its lowest since 2023.

 

In 2024, the only UK REIT listed in Singapore completed a preferential offering that raised gross proceeds of approximately GBP28 million ($48.6 million) while concurrently securing up to GBP215 million of debt from a diversified group of banking partners for refinancing.

 

Through fundraising and capital recycling from dilapidation settlements and divestments, the manager has reduced borrowings by GBP50 million since 2023.

 

This includes the divestment proceeds from Hilden House in Warrington and Crown Buildings in Caerphilly in 1HFY2025 for some GBP4 million at an average 7.9% premium above valuation.

 

&ldquo The past couple of years have focused on strengthening our capital structure and preparing for growth,&rdquo says Josh Liaw, CEO of the manager, who was appointed in June 2023. &ldquo But we can&rsquo t simply cut our way to prosperity. Our recent acquisition is our way of signalling that we&rsquo re not just about shrinking &mdash we&rsquo re ready to grow again, in a strategic, balanced and sustainable manner.&rdquo

 

In June, Elite UK REIT completed a GBP4 million equity fundraising round to partially fund a GBP9.2 million acquisition of three government-leased properties &mdash Priory Court, Custom House and Tŷ Merlin &mdash at a 7.6% discount to average valuation.

 

Priory Court and Custom House are tenanted to the Home Office, while Tŷ Merlin adds the Department for Environment, Food and Rural Affairs to Elite UK REIT&rsquo s tenant mix.

 

While the Department for Work and Pensions (DWP) remains Elite UK REIT&rsquo s biggest tenant, at 92.3% of gross rental income (GRI), the acquisition increased GRI contribution from non-DWP government occupiers by 1.5 times.

 

Elite UK REIT&rsquo s portfolio occupancy improved to 95% after the two divestments and three acquisitions. Excluding assets &ldquo undergoing repositioning&rdquo , occupancy is around 97%, says Liaw.

 

Site visit

While on a trip to London, Liaw personally visited Priory Court in Dover. &ldquo It didn&rsquo t look that big on Google Earth, but it is really huge.&rdquo

 

Priory Court consists of 12 separate buildings arranged on a site of approximately 6.3 acres. It functions as a customs and immigration facility of the UK&rsquo s Home Office for the neighbouring Port of Dover.

 

&ldquo Dover faces Calais in continental Europe. It is where the Eurostar tunnel digs into the ground and emerges in France,&rdquo says Liaw. &ldquo Dover is also traditionally the largest continental port that&rsquo s facing Europe, so they have a lot of rollon, roll-off cargo, including a very busy car-ferry service.&rdquo

 

With a net internal area of 72,052 sq ft, it is the largest of the three recent acquisitions, and it sits on 452,083 sq ft of freehold land. The current lease expires in April 2031, but it has the potential for a longer-term lease with the existing tenant, or to be re-let to other port users.

 

The Home Office shares the property with His Majesty&rsquo s Revenue and Customs (HMRC), the UK&rsquo s tax, payments and customs authority.

 

&ldquo As we learn more about these assets, we know that their ability to move, to be able to find a similar-sized property, is quite constrained,&rdquo says Liaw. &ldquo All these indicate that the tenant could extend even beyond their current expiry in 2031.&rdquo

 

The current annual rent at Priory Court is GBP325,000, and the tenant is due for an &ldquo upward-only open market rent review&rdquo in April 2026.

 

PBSA foray

Elite UK REIT is also making inroads into its expansion into living assets. About three months after submitting a planning application for Lindsay House in Dundee, Scotland, to be transformed into a 168-bed purpose-built student accommodation (PBSA), the manager received approvals from the local authority in July.

 

Dundee is experiencing a significant shortfall in PBSA supply, says Liaw. &ldquo Living is underbuilt as a sector this is probably a tailwind that will last for many years to come. There are not enough rooms for students, so they are then soaking up the usual available stock for residential use, taking that space away from families and local residents.&rdquo

 

Lindsay House is a former government workspace and is within walking distance of leading universities and transportation nodes, including Abertay University, the University of Dundee and Dundee Train Station.

 

With a combined full-time student population of approximately 16,165 at Abertay University and the University of Dundee in the 2023/2024 academic year, the market&rsquo s estimated 4,620 existing PBSA beds represent a student-to-bed ratio of around 3.5 times.

 

The proposed conversion of Lindsay House will reuse existing structures &mdash reducing project costs and also embodied carbon &mdash and is expected to welcome students from the academic year starting September 2027.

 

The estimated yield on cost is 7% and the estimated return on investment is around 18%.

 

Data centre site

In October 2024, Elite UK REIT submitted its planning application for an 80-megawatt data centre at Peel Park, Blackpool, but unlike Lindsay House&rsquo s, has not yet received planning approvals.

 

Still, this timeline &ldquo is not out of the ordinary&rdquo . Liaw adds: &ldquo The planning officer has come on site and made some comments we&rsquo ve addressed them and gone back to them. Now we are waiting eagerly for final approval, which we hope to get later this year.&rdquo

 

The site is located near a transatlantic subsea cable linking North America and Europe. With Peel Park, the manager aims for &ldquo long-term value maximisation&rdquo either through strategic divestment or partnerships with data centre operators.

 

Peel Park&rsquo s valuation rose 36% y-o-y to GBP32.8 million at end-2024. However, this was based on 60 megavolt-amperes (MVA) of power, before the site securing an additional 60 MVA of power in January. Altogether, the site now has 120 MVA of power.

 

DBS Group Research, one of seven houses covering Elite UK REIT, notes in an Aug 1 report that the new asset value could &ldquo conservatively rise&rdquo to an estimated GBP45 million to GBP50 million. &ldquo As such, the potential divestment of a stake in this property is likely to serve as a key catalyst.&rdquo

 

Mission-critical infrastructure

Although Elite UK REIT is expanding into the living sector and repositioning Peel Park, Blackpool, its portfolio still predominantly consists of government-leased properties.

 

The REIT is the largest provider of mission-critical infrastructure to several UK government departments, with the majority of its properties used as Jobcentres, which provide employment support.

 

This is set to stay, even with any potential changes in the UK government, says Liaw. &ldquo I think regardless of whichever political party comes into power in the future, social welfare and the Jobcentres seem to be a cornerstone of the UK political agenda. I don&rsquo t think it can be written off easily.&rdquo

 

The UK government is trialling the sharing of properties among different agencies. With demand for medical care outstripping supply, the UK&rsquo s National Health Service (NHS) is one potential beneficiary, says Liaw.

 

The UK&rsquo s publicly funded healthcare system may even become a tenant of Elite UK REIT in future. &ldquo They need space to expand, and I think some of these centres occupied by the DWP &mdash where they can afford to share space with another user, they can be shared with the NHS for a clinic or an assessment centre.&rdquo

 

The manager is in talks with the DWP to extend leases expiring in 2028, to lengthen the current weighted average lease expiry of 2.9 years. With the UK government as a key tenant, rental income is backed by AA-rated UK sovereign credit with zero arrears, and rent is even collected in advance.

 

Business as usual

In August, sponsor Elite Partners Holdings purchased fellow sponsor Sunway RE Capital&rsquo s 15% stake in the manager. The latter no longer holds any interest in the manager, whose sponsors are now Elite Partners Holdings and Ho Lee Group.

 

&ldquo We&rsquo re incredibly grateful for the support that Sunway has extended to Elite UK REIT as its sponsor,&rdquo says Liaw. &ldquo The REIT is in a better position than it was two years ago, and the manager&rsquo s shareholders have mutually agreed on Elite Partners&rsquo purchase of Sunway&rsquo s 15% stake.&rdquo

 

Liaw is confident in Elite UK REIT&rsquo s counter-cyclical portfolio of 100% freehold and virtual freehold assets with resilient income. &ldquo With Elite Partners and Ho Lee remaining as Sponsors since IPO in 2020, coupled with the strong banking relationships that we continue to have, we are well on track to strengthen Elite UK REIT&rsquo s portfolio and expand into the living sector.&rdquo

 

He adds: &ldquo Investors can rest assured that it&rsquo s business as usual at the manager and for the REIT.&rdquo

Net property income for the half year is down 1.3% at £ 18 million from £ 18.2 million in H1 2024

 

[SINGAPORE] The manager of Elite UK real estate investment trust (Reit), announced a 5.8 per cent year-on-year increase in distributable income to £ 9.7 million (S$16.7 million) in H1 2025, from £ 9.2 million during the same period last year.

 

Revenue for the half year was down 0.5 per cent to £ 18 million, from £ 18.1 million in H1 2024, said the manager on Thursday (Jul 31). It also noted that recognising rental income on a straight-line basis over the lease term for H1 2025 had an effect of negative £ 0.7 million.

 

Net property income for the half year dipped 1.3 per cent to £ 18 million, from £ 18.2 million in the corresponding period of the previous year. The distribution per unit for the quarter grew 10 per cent to £ 0.0154, from £ 0.014 in H1 2024.

 

The improved financial performance was driven by positive rental reversion and new rental income from the acquisition of three government-leased properties in June 2025, said the Reit manager.

 

Interest savings arising from capital management and interest rate optimisation, tax planning and tax benefits from sustainability-related capital expenditure also led to a rise in distributable income.

 

As at the end of H1 2025, net gearing ratio fell to 40.7 per cent, from 42.5 per cent as at Dec 31, 2024. Borrowing costs fell 0.1 per cent to 4.8 per cent as at Jun 30, 2025, due to the manager&rsquo s &ldquo refinancing and debt optimisation initiatives&rdquo .

 

The weighted average lease expiry for the Reit&rsquo s portfolio as at Jun 30 came in at 2.9 years. 

 

The manager has received a planning application for the Lindsay House property in Dundee, Scotland, to be converted into a 168-bed purpose-built student accommodation. The property is situated within walking distances of universities and transport nodes.

 

The manager&rsquo s chief executive officer, Joshua Liaw, said: &ldquo The first half of 2025 has begun to reflect the results of our strategic efforts.&rdquo

 

Maybank Securities analyst Li Jialin has issued an unrated report on Elite Commercial REIT on Oct 19 after her visit to the REIT&rsquo s office assets in the UK.

 

The REIT has 18 assets in London, the north western part of England and Scotland. Its assets are valued at GBP148.6 million or 32% of its total assets under management (AUM).

 

Elite Commercial REIT is the only Singapore-listed offshore REIT with pure UK exposure and adhering to the social infrastructure theme. Its total AUM stands at GBP466.2 million.

 

&ldquo Anchored by 155 office assets across the UK, Elite Commercial REIT offers exposure to mostly freehold, triple-net-leased, and government-occupied assets with a weighted average lease expiry (WALE) of 4.5 years,&rdquo says Li.

 

&ldquo The major tenant, Department for Work and Pensions (DWP), occupies 146 buildings, including its public serving Jobcentre Plus and back offices,&rdquo she adds. &ldquo Based on FactSet consensus data, Elite commercial REIT is trading at 0.48x FY2023 P/BV.&rdquo

 

In her report, Li notes that the REIT&rsquo s upward rental review will be effective from April onwards, referring to the REIT&rsquo s original lease that was inked in 2018 for its initial public offering (IPO) portfolio. The lease includes an inflation-linked rental adjustment in 2023 with an option for its tenant to break the lease, she writes.

 

In the 1QFY2023, the REIT completed a rental review and increased its the gross rental income by GBP4.2 million on a net annualized basis.

 

&ldquo In addition, break-lease options for 108 assets have lapsed since the review,&rdquo says Li. &ldquo The next round of lease renewals will be in 2028.&rdquo

 

&ldquo Overall, there is no renegotiation of leases before Elite&rsquo s re-financing exercise in FY2024. In June 2023, Elite&rsquo s gearing was lowered to 46%, after the proceeds from divesting John Street and Openshaw Jobcentre were partially deployed to repayment. Elite is in the process of divesting three other assets,&rdquo she adds.

 

The REIT is also taking steps to address the occupancy issues at its 12 vacated assets, with management indicating that they are exploring potential changes for the use of some of its assets.

 

&ldquo In the IPO prospectus, Elite Commercial REIT referred to case studies of residential developments of higher market value converted from office assets, near [its] assets,&rdquo notes Li.

 

&ldquo Elite Commercial REIT&rsquo s shares have dropped 66% since listing due to uncertainties created by the impact of Covid-19 and rising interest rates. Upside risk stems from the abatement of these factors while high-for-longer interest rates, client concentration risk, slow recovery in physical occupancy are downside risks,&rdquo she adds.