Elite Commercial REIT has reported a distribution per unit (DPU) of 2.82 pence (4.715 cents) for the 9MFY2023 ended Sept 30, 25.6% lower y-o-y, and based on a payout ratio of 100%. At a payout ratio of 90%, the REIT’s DPU stood at 2.53 pence.
9MFY2023 distributable income also fell by 25.1% y-o-y to GBP13.6 million despite the higher revenue and net property income (NPI) due to higher financing costs.
9MFY2023 revenue rose by 2.0% y-o-y to GBP28.5 million while NPI for the period stood at GBP32.5 million, 20.4% higher y-o-y. The higher revenue and NPI were attributed to the 13.1% inflation-linked rent escalation starting from April 1, the conclusion of dilapidation settlements for nine assets, as well as lower debt levels following the repayment of the REIT’s existing loans. Under its dilapidation settlement lease terms, the REIT manager will negotiate with outgoing tenants for the work required and costs associated with reinstatement of the condition of the property.
The higher revenue and NPI were, however, partly offset by the absence of rental income from vacated assets and increased borrowing costs from the rise in the Sterling Overnight Index Average (SONIA) rates.
As at Sept 30, the REIT’s net asset value (NAV) remained stable at 51 pence. Its portfolio occupancy stood at 92.1%. Its weighted average lease expiry (WALE) stood at 4.3 years.
As at Oct 25, the REIT saw the completion of five divestments for a sale consideration of GBP3.4 million, 12.2% above valuation. The five properties are Openshaw Jobcentre, Manchester; Cardwell Place, Blackburn; Leeds Road, Bradford; John Street, Sunderland; and Crown House, Burton on Trent.
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A large portion of the recycled gross proceeds went to repaying the REIT’s loans. On a pro forma basis, the REIT’s gearing ratio fell by around 60 basis points to 45.4% as at Oct 25. The manager says it aims to reduce its gearing further through strategic capital recycling as well as asset management strategies to increase the value of the REIT’s assets.
“Elite REIT continues to deliver stable operating performance, notwithstanding the challenging macro environment. We are especially pleased to be able to divest five of Elite REIT’s vacant assets at a considerable premium to valuation, and are making good headway on unlocking value for our unitholders for the remaining vacant assets through a mix of asset management strategies including re-letting, change of use and disposal,” says Joshua Liaw, CEO of the manager.
“Our active capital recycling strategy and prudent capital management have also improved Elite REIT’s financial flexibility. Given the challenging operating environment, it is imperative for us to focus on enhancing portfolio resiliency and strengthening our balance sheet,” he adds. “As part of the critical public infrastructure that enables the Department for Work and Pensions (DWP) to provide welfare services to the local communities and support the UK government’s social agenda, our assets are in a unique position of stability. With a resilient tenant base and features to help hedge against inflationary pressures such as our triple-net leases, we remain focused on maximising returns and deliver sustainable value for our unitholders.”
Looking ahead, the REIT expects to continue providing a stable income to its unitholders as it continues to collect close to 100% of its rent a quarter in advance.
As at 10.01am, units in Elite Commercial REIT are trading 0.5 pence higher or 2.17% up at 23.5 pence.
