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Monday, May 23, 2022

Elite Commercial REIT Review @ 23 May 2022

Basic Profile & Key Statistics
  • Main Sector(s): Office
  • Country(s) with Assets: England, Scotland & Wales
  • No. of Properties (exclude development/associate/fund): 155

Performance Highlight

Revenue and distributable income have significantly improved yoy due to the contribution from properties acquired in February 2021. DPU has improved yoy as well for the same reason despite an enlarged unitholder base.

Lease Event
In February, Elite announced the removal of the lease break option for 109 properties that are occupied by the Department for Works and Pensions (“DWP”) and the Ministry of Defence. Therefore, these leases would continue until March 2028. 

8 properties have exercised the lease break option, in which the leases would end in March 2023. These properties contribute 4.8% of income.

Related Parties Shareholding

  • REIT sponsor's shareholding: Below median for more than 20%
  • REIT manager's shareholding: Above median for more than 20%
  • Directors of REIT manager's shareholding: Above median for more than 20%

Lease Profile

  • Occupancy: 100% occupancy
  • WALE: Above median for more than 20%
  • Highest lease expiry within 5 years: Below median for more than 20%; Falls in 2023
  • Weighted average land lease expiry: Majorities are freehold properties with some longer than 99 years remaining land tenure

Debt Profile

  • Gearing ratio: Above median for more than 10%
  • Cost of debt: ± 10% from median
  • Fixed rate debt %: Below median for more than 10%
  • Unsecured debt %: 0% unsecured debt
  • WADM: Below median for more than 20%
  • Highest debt maturity within 5 years: Above median for more than 20%; Falls in 2024
  • Interest coverage ratio: Above median for more than 20%

Diversification Profile

  • Top geographical contribution: Below median for more than 20%
  • Top property contribution: Below median for more than 20%
  • Top 5 properties' contribution: Below median for more than 20%
  • Top tenant contribution: Above median for more than 20%
  • Top 10 tenants' contribution: Above median for more than 20%

Key Financial Metrics

  • Property yield: Above median for more than 20%
  • Management fees over distribution: Below median for more than 20%; $10 distribution for every dollar paid 
  • Distribution on capital: Above median for more than 20%
  • Distribution margin: Above median for more than 20%

Trends

  • Uptrend: DPU
  • Flat: NAV per Unit, Distribution Margin
  • Slight Downtrend: Property Yield, Distribution on Capital
  • Downtrend: Interest Coverage Ratio

Relative Valuation

  • P/NAV: Average for 1y & 3y
  • Dividend Yield: Above +1SD for 1y & 3y

Author's Opinion

 Favorable Less Favorable
High REIT Manager's ShareholdingLow REIT Sponsor's Shareholding
High Directors of REIT Manager's ShareholdingHigh Gearing Ratio
100% OccupancyLow Fixed Rate Debt %
Long WALE0% Unsecured Debt
No Major Lease Expiry within 5 YearsShort WADM
Almost 100% Freehold PropertiesConcentrated Debt Maturity
High Interest Coverage RatioHigh Top Tenant & Top 10 Tenants Contributions
Low Top Geographical ContributionInterest Coverage Ratio Downtrend
Low Top Property & Top 5 Properties Contributions 
High Property Yield 
Competitive Management Fees 
High Distribution on Capital 
High Distribution Margin 
DPU Uptrend

Elite performance has dropped as compared to the previous few quarters since the acquisition of the 58 properties in March 2021. The manager has presented the potential upside for the upcoming rent review in April 2023, in which the income could increase between 1.5% to 5.5%, assuming vacated properties remain vacant. Below is the detailed table:


You could also refer below for more information:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview and Detail of Singapore REIT

REIT Analysis - List of previous REIT analysis posts


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*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee accuracy, completeness, and reliability. It should not be taken as financial advice or a statement of fact. I shall not be held liable for errors, omissions and loss or damage due to the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.

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