Elite Commercial REIT Review @ 11 May 2023

Basic Profile & Key Statistics

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

Key Indicators

Performance Highlight

Revenue is similar YoY, however, distributable income and DPU have dropped significantly mainly due to an increase in finance costs.

Rental Reversion

Out of the 136 rent review, 7 have rent escalation of 21.07%; 116 have rent escalation of 15.28%; 11 have rent reduction and 2 are to be revised based on open market rent. The net increase for this rent review is 13.1%. 

Asset Enhancement Initiative

    

Various AEI works have been planned to optimize energy use.

Related Parties Shareholding

• REIT Sponsor's Shareholding: Below median by 20% or more
• REIT Manager's Shareholding: Below median by 20% or more
• Directors of REIT Manager's Shareholding: Above median by 20% or more

Lease Profile

• Occupancy: ± 5% from median
• WALE: Above median by 10% or more
• Highest Lease Expiry within 5 Years: Below median by 20% or more; Falls in this year
• Weighted Average Land Lease Expiry: Above median by 20% or more

Debt Profile

• Gearing Ratio: Above median by 20% or more
• Cost of Debt: Above median by 20% or more
• Fixed Rate Debt %: ± 10% from median
• Unsecured Debt %: 0%
• WADM: Below median by 20% or more
• Highest Debt Maturity within 5 Years: Above median by 20% or more; Falls in 2024
• Interest Coverage Ratio: ± 10% from median

Diversification Profile

• Top Geographical Contribution: Below median by 20% or more
• Top Property Contribution: Below median by 20% or more
• Top 5 Properties' Contribution: Below median by 20% or more
• Top Tenant Contribution: Above median by 20% or more
• Top 10 Tenants' Contribution: Above median by 20% or more

Key Financial Metrics

• Property Yield: Above median by 20% or more
• Management Fees over Operating Distributable Income: Below median by 20% or more; $10 distribution for every dollar paid 
• Operating Distributable Income on Capital: Above median by 20% or more
• Operating Distributable Income Margin: Above median by 20% or more
• Operating Distribution Proportion: Above median by 10% or more

DPU Breakdown

• TTM DPU Breakdown
• 100% from Operation
• TTM DPU = 97.8% of Distributable Income

Trends

• Flat: DPU from Operation, Occupancy, Property Yield
• Slight Downtrend: Operating Distributable Income on Capital 
• Downtrend: NAV per Unit, Interest Coverage Ratio, Operating Distributable Income Margin

Relative Valuation

• P/NAV: Below -2SD for 1y, 3y & 5y
• Dividend Yield: Above +2SD for 1y, 3y & 5y

Author's Opinion

Favorable	Less Favorable
High Directors of REIT Manager's Shareholding	Low REIT Sponsor's Shareholding
High Occupancy	Low REIT Manager's Shareholding
Long WALE	High Gearing Ratio
No Major Lease Expiry within 5 Years	High Cost of Debt
Long Weighted Average Land Lease Expiry	0% Unsecured Debt
Low Top Geographical Contribution	Short WADM
Low Top Property & Top 5 Properties' Contributions	Concentrated Debt Maturity
High Property Yield	High Top Tenant & Top 10 Tenants' Contributions
Competitive Management Fees	NAV per Unit Downtrend
High Operating Distributable Income on Capital	Interest Coverage Ratio Downtrend
High Operating Distributable Income Margin	Operating Distributable Income Margin Downtrend
High Operating Distribution Proportion

Compared to the previous quarter, the revenue remains similar, but the distributable income has decreased by approximately 8% due to the implementation of a distribution payout ratio of 90% from this year onwards. While there is no need for refinancing in 2023, the fixed-rate debt percentage is slightly lower than the median level. Following the rent review, there is an anticipated net rent increase of £4.2 million per annum. However, as management's decision to receive 100% of fees in cash beginning in 2022 and implementing a 90% distribution payout ratio starting in 2023, the DPU is not expected to return to its previous high. 

For more information, check out:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview and details of Singapore REIT

REIT Review - List of previous REIT review posts

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*Disclaimer: The information presented on this blog is for educational and informational purposes only. The materials, including research and opinions, are based solely on my findings and should not be considered professional financial advice or a definitive statement of fact. I cannot guarantee the accuracy, completeness, or reliability of the information provided. I shall not be held liable for any errors, omissions, or losses that may occur as a result of using the information presented on this blog. It should be noted that the information presented on this blog does not constitute a buy, sell, or hold recommendation for any security. It is crucial to conduct your own thorough research and due diligence before making any investment decisions.