Strategy and Value Creation
The Manager is focused on delivering sustainable growth and returns to Unitholders over the long term.
Our Competitive Strengths
Strategically Located Assets with Strong Fundamentals
Our portfolio of 155 strategically located commercial assets is primarily leased to an AA-credit rated tenant on full repairing and insuring lease terms with superior WALE.
Primary Occupier of a Resilient Nature
The UK Government’s DWP is naturally a resilient occupier as it administers crucial welfare, pensions and child maintenance policy serving over 20 million claimants. To this end, our assets provide crucial infrastructure for DWP to serve the community.
Strong Financials with Enhanced Flexibility
Our proactive approach towards capital management ensures our resilient financial position provides us with enhanced financial flexibility to pursue attractive growth opportunities.
Proactive Manager with Proven Track Record
The collective wealth of experience and knowledge of our employees in investment and management of real estate assets, finance and investor relations is integral to the REIT’s long-term growth and value creation.
Strong Sponsors with Alignment of Interest
Our Sponsors’ interests are aligned with Unitholders through their holdings in Elite Commercial REIT. We are able to leverage our Sponsors’ real estate expertise, financial strength and potential ROFR assets.
Attractive Market with Demonstrated Resilience
The highly liquid UK real estate market continues to demonstrate long-term resilience and attract international investors based on the country’s transparent real estate framework and open approach to foreign investment.
Our Approach to Value Creation
The Manager seeks to deliver sustainable and growing returns through the following strategies:
Acquisition Growth Strategy
- Adopt a long-term investment approach to enhance future income and capital growth
- Focus on improving tenant mix and optimising lease profiles to increase stability of income
- Employ a rigorous research-driven selection process to identify value-enhancing commercial properties to generate attractive cash flows and yields
- Access to our Sponsors’ Right Of First Refusal (“ROFR”) pipeline of strategically located UK commercial assets
- Harness the extensive expertise and network of our Sponsors and our team in the UK to source for quality acquisitions from the open market
Active Asset Management Strategy
- Focus on tenant retention through proactive tenant engagement to understand their requirements and to better serve them
- Develop mutually beneficial collaborations between tenants/occupiers and landlord
- Formulating the best outcomes for properties in the portfolio to maximise value and deliver sustainable returns
- Diversify lease expiries and income profile with a focus on expanding and continuing dialogues on future lease renewals and extensions
- Identify potential property enhancements or redevelopment opportunities to enhance income streams
- Divest under-performing assets to redeploy capital and optimise the performance of our portfolio
Prudent Capital Management Strategy
- Prudent management of Aggregate Leverage and Interest Coverage Ratio coupled with diversification of funding sources to optimise financial flexibility
- Employ an appropriate mix of debt and equity to finance acquisitions and asset enhancements
- Optimise borrowing costs and employ all-in borrowing cost hedging strategies
- Continuous monitoring of exposure to risk with a view to maximise risk-adjusted returns to Unitholders
Sustainability Integration Strategy
- Work closely and collaboratively with the main occupier to realise sustainability enhancement works leading to improved energy efficiency of DWP-occupied assets
- Expand successful sustainability collaborations with more occupiers and tenants to ‘green’ the portfolio and improve energy efficiency of the assets and hence their desirability
- Incorporate sustainability considerations into overall business strategy to secure lease longevity and to ensure portfolio remains relevant amidst a changing real estate landscape
- Secure green financing for better cost efficiencies to support wider sustainability efforts
FY2022 Value Creation
Resilient Financial Performance
- Revenue of £37.1 million, compared to £34.7 million in FY 2021
- Income available for distribution to Unitholders of £23.1 million, compared to £24.5 million in FY 2021
- Total DPU of 4.81 pence compared to 5.43 pence in FY 2021
- Distribution yield of 10.2% based on the closing unit price of 47.0 pence as at 31 December 2022
Proactive Asset Management and Tenant Engagement
- Portfolio occupancy remains high at 97.9% as at 31 December 2022
- Over 99% leased to a resilient tenant base backed by AA-rated UK sovereign credit rating ensuring stable cashflow
- Consistent success in ~100% advance rental collection since listing despite lockdowns, challenging business conditions and macroeconomic volatility
- Landmark lease re-gearing optimised lease profile and enhanced income visibility, ensuring that 87.6% of portfolio by GRI1 run free of lease break options to 2028
- A total of 134 assets to benefit from built-in inflation-linked rental escalations commencing April 2023
- Lease renewal of St Katherine’s House, Northampton with a ~12% rental uplift, securing income for the next six years up to December 2028
Prudent Capital Management
- Aggregate leverage of 45.8%
- All-in borrowing cost2 of 3.1%
- 68.6% of interest rate exposure fixed
- Interest coverage ratio3 of 4.6 times
- 61% of assets are unencumbered4
- Available debt headroom of ~£40 million5
- Established a S$300.0 million Multicurrency Debt Issuance Programme
- Extended £94.0 million in borrowings by another two years with one-year embedded extension option, subject to certain financial covenants, thereby extending debt maturity profile; no material refinancing in FY 2023
- Secured inaugural green financing in the form of £15.0 million in green revolving credit facility raised under the newly established Sustainable and Sustainability-linked Finance Framework
- Recognised at the FutureCFO Excellence Awards 2022 with Excellence in Tax Management and Optimisation Award for future-proofing the REIT’s tax structure via an innovative and landmark restructuring
Sustainability and Corporate Governance
- Secured landmark sustainability collaboration with main occupier DWP and subsequently with MOD in February and April 2022 respectively – a ~£14.8 million investment over three years to improve sustainability and energy efficiency across assets occupied by the DWP and MOD, in line with the UK Government’s national climate agenda of achieving net zero carbon emissions by 2050
- Sustainability enhancement works on various DWP-occupied properties across the REIT’s portfolio have been planned to optimise energy use
- Upgrade in Energy Performance Certificate (“EPC”) rating from D to B for Bradmarsh Business Park, Rotherham, following the occupier’s upgrading of heating/HVAC system6 and installation of LED lighting
- Inclusion of specific green lease wordings7 into the recently renewed five-year lease for St Katherine’s House, Northampton
- Continue to be included in the SGX Fast Track Programme for listed issuers which recognises companies for high standards of corporate governance and good compliance track record
Investor Relations Efforts
- Active coverage by four research houses, namely CGS-CIMB, DBS Group Research, UOB Kay Hian and UBS
- Included into new indices such as the iEdge SG ESG Transparency Index and FTSE ST Small Cap Index during the FTSE ST Index Series September 2022 review
- Published inaugural Sustainability Report FY 2021
- Successfully organised a virtual Annual General Meeting on 27 April 2022
- Annual Report 2021 was recognised as the Platinum Winner, the highest honour, under the Print Media/Publications (Annual Report) category at the international 16th Hermes Creative Awards 2022
- Awarded Certificates for Excellence in Investor Relations as finalists in three nominated award categories at the prestigious IR Magazine Awards 2022 – South East Asia
- Shortlisted as a finalist in the category of Asia’s Best Sustainability Report (First Time) at the distinguished international 8th Asia Sustainability Reporting Awards 2022
- Conducted inaugural investor perceptions survey of covering and non-covering analysts to gather feedback on Elite Commercial REIT
- Organised and participated in more than 60 investor, analyst, media and financial blogger engagement sessions, including public outreach events, reaching out to over 3,900 investors, potential investors, analysts, the media, financial bloggers and members of the public
- Engagement with followers of Elite Commercial REIT’s corporate Linkedin page via regular posts on developments of the REIT
- Based on annualised gross rental income as at 31 December 2022.
- Includes amortisation of debt-related transaction costs.
- The interest coverage ratio is calculated by dividing the earnings before interest, tax, depreciation and amortisation (excluding effects of any fair value changes of derivatives and investment properties and foreign exchange translation) (“EBITDA”), by the interest expenses and borrowing related fees (excluding interest expense on lease liabilities). Interest expense on lease liabilities is excluded as it does not reflect the serviceability of loans and does not have any impact on the Group’s debt servicing ability.
- Based on valuations; unencumbered assets refer to properties without land mortgages.
- Based on aggregate leverage of 50%.
- HVAC refers to the heating, ventilation and air conditioning system responsible for heating and cooling the building.
- Refers to green lease clauses within a lease agreement which facilitates the sharing of environmental data by our occupiers.