The terms of these leases remain intact except for the removal of the lease break clause, and they continue to enjoy the built-in inflation-linked rental escalation to start in April 2023. The rental uplift is based on the UK Consumer Price Index, subject to an annual minimum increase of 1.0% and a maximum of 5.0% on an annual compounding basis from April 1, 2018 to March 31, 2023.
Elite Commercial REIT's manager announced on Mar 11 that it has entered into separate agreements with the UK government's Secretary of State for Levelling Up, Housing and Communities of the United Kingdom, which is its main tenant, to remove the lease break clause from eight more assets in Elite Commercial REIT's portfolio that have a lease break option in March 2023.
This brings the total to 108 out of 117 assets occupied by the Department for Work and Pensions (DWP) with a March 2023 lease break clause removed, translating to 83.2% of the portfolio by gross rental income (GRI) with a stable lease profile until March 2028 without any lease break options. The outcome further enhances the income visibility and lease stability of Elite Commercial REIT for the next six years.
