Elite Commercial REIT MXNU has reported a distribution per unit (DPU) of 2.25 pence (4.02 cents) for the 2HFY2022 ended Dec 31, 2022, 19.6% lower than the DPU of 2.80 pence in the same period the year before.
DPU for the FY2022 fell by 11.4% to 4.81 pence, down from FY2021’s 5.43 pence.
During the 2HFY2022, revenue fell by 2.5% y-o-y to GBP18.4 million as a result of two vacant properties during the period.
2HFY2022 net property income (NPI) fell by 3.82% y-o-y to GBP17.6 million on the back of the lower revenue and higher property operating expenses. The higher property operating expenses grew due to maintenance costs of the vacant properties which was previously borne by the tenant and are now borne by the REIT.
Distributable income fell by 18.8% y-o-y to GBP10.9 million.
Gross revenue for the FY2022 increased by 6.7% y-o-y to GBP37.1 million.
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Net property income (NPI) also increased by 6.0% y-o-y to GBP35.7 million.
Distributable income for the year fell by 5.8% y-o-y to GBP23.1 million mainly due to increased borrowings and interest cost on borrowings, lower occupancy rate from two asset vacancies and the REIT manager choosing to receive its fees in cash this time. This is partly offset by the full period of rental contribution from the REIT’s maiden acquisition.
As at Dec 31, 2022, the REIT’s investment properties fell by 8.2% y-o-y to GBP460.0 million due to the lower market valuation on investment properties, aligned with the worsened general economic environment in the UK.
The lower valuation comes despite a valuation gain during the REIT’s mid-year valuation, which was mainly contributed by the removal of lease break options from 109 properties announced during the financial period, where the underlying leases run till March 2028.
The REIT’s net asset value (NAV) per unit came at 52 pence as at Dec 31, 2022, down from the 61 pence in the year before. Its gearing ratio stood at 45.8%.
As at Dec 31, 2022, the REIT’s portfolio occupancy stood at 97.9% with a weighted average lease expiry (WALE) of 4.8 years.
Cash and cash equivalents stood at GBP5.4 million.
Shaldine Wang, CEO of the manager, called the REIT’s performance “resilient” thanks to the manager’s focus on active tenant engagement and collaboration, particularly with its primary occupier, the UK’s Department for Work and Pensions (DWP).
“We have also achieved greater income visibility through the removal of lease break clauses for the majority of our assets leased to the DWP, signed lease renewal, as well as built-in inflation-linked rental escalations to take effect in April 2023,” she says.
Looking ahead, Wang adds that the REIT is “well-positioned to weather the ongoing uncertainties and deliver stable unitholder value, and strive to pursue growth potential through exploring acquisitions, proactive asset management and expanding sustainability collaborations to ‘green’ the portfolio and improve energy efficiency of the assets.”
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In the next 12 months, the REIT says it expects to see 10 assets vacating, following which, it expects its vacancy holding costs to increase while it "actively markets these assets to potential occupiers.
“After taking into account the rental escalation of these 134 assets, coupled with rental reduction of 11 assets following the uplift and the impact of portfolio vacancies, the revenue and net property income for the business are expected to be stable,” says the REIT manager.
The DPU is expected to be paid on March 30.
Units in Elite Commercial REIT closed 0.5 pence lower or 0.94% down at 52.5 pence on Feb 13.
