MAINBOARD-LISTED Elite Commercial Reit has applied for its wholly-owned unit, Elite UK Commercial Holdings Limited (ECHL), to be listed on The International Stock Exchange (TISE) as a UK Reit by the third quarter.

 

Post-listing, Elite Commercial Reit will continue to hold 100 per cent of the shares in ECHL, said the manager in a regulatory filing on Friday.

 

It further said that the proposed listing puts the tax treatment of Elite Commercial Reit on par with that of other UK Reits.

 

Following the admission of ECHL on TISE - and according to the double taxation treaty between the UK and Singapore - it is expected that the principal tax rate applicable to Elite Commercial Reit will be reduced to 15 per cent from the current 19 per cent.

 

Further, any latent capital gains - and its corresponding deferred tax liabilities - of properties currently held by Elite Commercial Reit will be eliminated, said its manager.

 

While the listing of ECHL on TISE is expected to be completed by the third quarter, there is " no assurance" that it will be successfully completed, it added.

 

Prior to ECHL' s listing, the income and gains of Elite Commercial Reit' s subsidiaries in UK would continue to be subjected to the prevailing UK corporation tax.

 

Elite Commercial Reit, which debuted on the Singapore Exchange mainboard last February, is the first Reit denominated in the British pound to be listed here.

ELITE Commercial Reit on Friday posted a distribution per unit (DPU) of 1.22 pence (2.25 Singapore cents) for the first quarter ended March 31, slightly higher than the 1.2 pence it had forecast upon its initial public offering.

 

Income available for distribution to unitholders amounted to £ 4.5 million, 11.1 per cent above the £ 4 million forecast, according to the real estate investment trust (Reit)' s results released on Friday.

 

Revenue was £ 6.6 million for the quarter, up 15.1 per cent from an IPO forecast of £ 5.7 million. Revenue was boosted by £ 864,000 in contributions from a portfolio of 58 commercial properties in the United Kingdom acquired on March 9, 2021.

 

The acquisition increased the number of assets in the Reit' s portfolio to 155 properties. The Reit' s enlarged portfolio is currently fully occupied.

 

Shaldine Wang, chief executive of the manager, said Elite Commercial Reit' s long-term growth objectives are " to focus on tenant-mix diversification and a staggered lease expiry period to maintain a stable income flow" . It will also look to grow through yield-accretive asset acquisitions, Ms Wang said.

 

THE manager of Elite Commercial Reit on Monday posted a distribution per unit (DPU) of 1.23 pence (S$0.02) for its third quarter, which is 1.7 per cent higher than what it had forecast in its listing prospectus.

 

The Reit listed on the Singapore Exchange in February.

 

For the three months ended Sept 30, it generated a post-tax profit of £ 3.3 million, a 5.6 per cent drop from its forecast, on the back of a revenue of £ 5.8 million, which was a 0.5 per cent dip from its earlier expectations.

 

The manager said that the profit after tax was calculated after an additional provision of deferred tax expenses of £ 276,000, compared to the forecast, because of the recent increase of UK corporate tax rate from 17 per cent to 19 per cent in Q3 2020.

 

" This additional provision of deferred tax expenses has no impact on income available for distribution to unitholders," it said.

 

For the nine-month period, DPU was 1.3 per cent higher than forecast at 3.18 pence, while revenue and post-tax profit generally met target at £ 15.1 million and £ 7.1 million, respectively.

 

The Reit manager said that it may stand to benefit from the current pandemic situation, as its 97 assets are mostly leased to the Secretary of State for Housing, Communities and Local Government, with the Department of Work and Pensions (DWP) as the primary occupier.

 

" The DWP is a uniquely counter-cyclical occupier, as 82.5 per cent of the assets in the initial portfolio are used to provide key front-of-house services, primarily Jobcentre Plus unemployment services. Claimant counts, job centre footfall and DWP benefit spending are all correlated to unemployment.

 

" An increase in unemployment has historically been linked to an increase in the number of UK benefits claimants requiring the services provided by the UK government in the Reit' s assets. Against the current macroeconomic backdrop, our assets via DWP continue to be a crucial social infrastructure that serves the UK society," it said.

 

It added that during the previous lockdown in the United Kingdom (UK) in late March, the Reit' s JobCentre Plus locations had remained open to process and disburse benefits to claimants, even as medical assessments, interviews or other face-to-face appointments were discouraged.

 

The new restrictions had thus not resulted in a significant business disruption at the properties in the Reit' s UK portfolio.

 

The UK unemployment rate has risen to its highest level in over three years as the pandemic continues to hit jobs. The unemployment rate rose to 4.5 per cent in the three months to August, compared with 4.1 per cent in the previous three months. Meanwhile, redundancies rose to their highest level since 2009.

 

Chancellor Rishi Sunak had officially announced that another 13,500 JobCentre Plus staff would be recruited as part of an economic recovery package - 4,500 of whom were expected to have been in position by last month, and a further 9,000 by March 2021. This is on top of the 13,500 coaches already employed.

 

As of end-September, the portfolio was 100 per cent occupied, with a weighted average lease expiry of 7.5 years. The manager expects to provide a stable income to investors as over 99 per cent of its rental income is derived from triple net leases from the UK government, it said.

 

Meanwhile, the Brexit negotiations continue against the background of the economic challenges. A " no deal" outcome appears even more likely at the end of the transition period on Dec 31, it added.