ELITE Commercial Reit : MXNU -3.9% posted a 26.6 per cent fall in distribution per unit (DPU) to 0.94 pence for the first quarter of FY2023, from 1.28 pence in the previous corresponding period.

 

This was attributed mainly to higher borrowing costs, lower revenue from vacancies and an enlarged equity base, said the real estate investment trust&rsquo s (Reit) manager on Thursday (Apr 27).

 

Revenue for the quarter slipped 0.4 per cent year on year to £ 9.2 million (S$15.3 million).

 

Distributable income fell 26.1 per cent to £ 4.5 million for Q1, from £ 6.1 million.

 

The UK-focused Reit&rsquo s portfolio occupancy stood at 97.9 per cent as at Mar 31, 2023, down from full occupancy as at end-March 2022. For the portfolio&rsquo s 12 vacant and vacating assets, the manager said it is considering potential alternative uses, such as re-letting as an office space, among other strategies.

 

Its gearing ratio stood at 46.6 per cent as at Mar 31, up from 42.8 per cent as at end-March 2022.

&ldquo Prudent capital and balance sheet management will go hand-in-hand with our overall business strategy in bringing our gearing to a more comfortable level, even as we continue to have our sights on potential opportunities for growth,&rdquo said Shaldine Wang, chief executive of the Reit&rsquo s manager.

 

The manager noted that its assets remain stable in terms of income profile, as it has consistently collected rent in advance.

 

The manager expects the recent rent escalation review to help mitigate increased borrowing costs from interest rate hikes and offset the impact of reduced rent contribution from vacant and vacating assets.

 

Based on a review of 136 of the Reit&rsquo s 155 assets, 134 assets have their rent escalation pegged to the UK Consumer Price Index.

 

The recently revised rent per annum of £ 36 million, which came into effect on Apr 1 this year, represents a net annualised rent escalation of 13.1 per cent compared with the rent per annum of £ 31.8 million as at end-March 2023.

Elite Commercial REIT has renewed leases for 134 of its properties that will see its total annual rental income from these properties increase 13% from £ 31.8 million to £ 36 million following the revisions.

 

The rent review, which took effect on April 1, is pegged to the UK consumer price index. The tenant for these properties is the UK government.

 

No thanks to the war in Ukraine, which drove up energy prices, UK suffered double-digit inflation this past year. Earlier today, on April 19, UK' s CPI for March was reported as up 10.1% y-o-y. Analysts had been expecting 9.8%.

 

While the bulk of the properties enjoyed higher rates of 15.28%, 11 properties had their rates reduced by 15.28% instead.

 

As at Dec 31, 2022, the REIT has 155 properties in its portfolio, valued at £ 466.2 million.

ELITE Commercial Reit reported a 19.6 per cent drop in distribution per unit (DPU) for the half year ended December 2022 to 2.25 pence, from 2.8 pence in H2 FY2021.

 

This came as two vacant investment properties resulted in lower income and higher property operating expenses, said the manager on Tuesday (Feb 14).

 

Revenue declined 2.5 per cent to £ 18.4 million (S$29.7 million) from £ 18.8 million, while net property income fell 3.8 per cent to £ 17.6 million from £ 18.3 million previously.

 

Property operating expenses rose 47.4 per cent to £ 728,000 from just £ 494,000 the previous year, as maintenance costs of the vacant properties &ndash which were previously borne by the tenant &ndash are now being borne by the real estate investment trust (Reit).

 

Income available for distribution to unitholders for H2 FY2022 fell 18.8 per cent to £ 10.9 million from £ 13.4 million.

 

For the full year ended December 2022, Elite Commercial Reit&rsquo s DPU declined 11.4 per cent to 4.81 pence from 5.43 pence in FY2021, which included an advanced DPU of 0.9 pence paid out in April 2021. 

 

Payment is expected to be made on Mar 30 after the record date on Feb 22.

 

Revenue grew 6.7 per cent year on year to £ 37.1 million from £ 34.7 million, while net property income rose 6 per cent to £ 35.7 million from £ 33.7 million.

 

Income available for distribution to unitholders, however, fell 5.8 per cent to £ 23.1 million from £ 24.5 million previously, mainly due to increased borrowings and interest cost on borrowings as well as lower occupancy rate from vacancies at the two assets.

 

As at Dec 31, 2022, the Reit&rsquo s portfolio occupancy stood at 97.9 per cent, with a weighted average lease expiry of 4.8 years and gearing ratio of 45.8 per cent.

 

Net asset value per unit stood at 52 pence, compared with 61 pence as at end-2021.

 

The valuation of the Reit&rsquo s portfolio of 155 properties stood at £ 466.2 million as at end-2022, down 9.9 per cent from the £ 517.7 million portfolio valuation reported as at end-June 2022.

 

The manager said this decline was attributed mainly to &ldquo widely reported market factors&rdquo including the impact of rising interest rates on financing cost, which resulted in weaker demand for real estate investment and declining transaction volumes.

 

In its outlook, the Reit manager said it is cognisant of the risks of the ongoing macroeconomic uncertainty. It remains on the lookout for growth opportunities, which may be available through the Reit sponsors&rsquo right of first refusal pipeline, or from the open market.

ELITE Commercial Reit : MXNU 0%&rsquo s distribution per unit (DPU) for the first nine months of FY2022 shrank by 7.8 per cent to 3.79 pence, from 4.11 pence in the corresponding financial period a year ago.

 

This came despite a 10.3 per cent rise in the real estate investment trust&rsquo s (Reit) revenue for the period to £ 27.9 million (S$44.3 million), compared with £ 25.3 million previously. Income generated for distribution to unitholders fell 0.3 per cent to £ 18.17 million from £ 18.22 million. 

 

The 9M DPU includes an interim distribution of 2.56 pence per unit which the Reit declared on Aug 5, and paid out on Sep 22.

 

In a Q3 business update on Friday (Nov 4), the Reit&rsquo s manager said that the decline in DPU for the first nine months was due mainly to the election of the manager&rsquo s fees in cash increased borrowings for the full period, as well as interest cost on borrowings a slightly lower occupancy rate and an enlarged equity base year on year.

 

These were partially offset by the full period of rental contribution from the Reit&rsquo s maiden acquisition and tax savings from a lower headline tax rate. The Reit&rsquo s manager has also extended the maturity of a £ 94 million loan ahead of schedule &ndash which helps remove &ldquo uncertainties pertaining to upcoming debt maturities in a volatile market&rdquo , said Shaldine Wang, chief executive of the manager.

 

The loan extension has adjusted aggregate borrowing to about 4.2 per cent, with an improved weighted average debt maturity of 2.2 years and 68* per cent of interest rate exposure fixed.

 

As at Sep 30, 2022, the trust had a gearing ratio of 41.9 per cent, while net asset value per unit stood at £ 0.61. 

 

Elite Commercial Reit&rsquo s occupancy portfolio stood at 97.9 per cent as at Sep 30, with 99.9 per cent of rent for the three-month period of October to December collected in advance. The portfolio&rsquo s weighted average lease expiry is five years.

AT least half of the 42 actively traded Singapore-listed real estate investment trusts (S-Reits) are trading at or extremely close to their 52-week lows, following a massive sell-off that is shaping up to be one of the worst in the 20-year history of S-Reits.

 

Going into the long Deepavali holiday weekend, a dozen S-Reits hit their 52-week lows last Friday (Oct 21), with another nine coming within 1 per cent of their 12-month troughs.

 

All but four of the S-Reits &ndash Elite Commercial Trust : MXNU +5.15%, Dasin Retail Trust : CEDU 0%, EC World Reit : BWCU -1.05%, and BHG Retail Reit : BMGU 0% &ndash closed within 10 per cent of their 52-week lows.

 

This comes as the benchmark Straits Times Index (STI) on Oct 21 tumbled below 3,000 points for the first time since March 2021.

 

Commonly seen as a safe haven in periods of volatility and uncertainty, the S-Reits have struggled to stand up against the spectre of a potential recession and persistent aggressive interest rate hikes by various central banks to combat decades-high inflation rates.

 

Even some of the biggest S-Reits have not been spared the collapse in investor sentiment, with CapitaLand Integrated Commercial Trust : C38U +4.6% (CICT), Mapletree Pan Asia Commercial Trust : N2IU +1.94% (MPACT), Mapletree Industrial Trust : ME8U +1.41% (Mint) and Frasers Centrepoint Trust : J69U +2.55% (FCT) trading at 52-week lows.

 

The sell-off also appears to be broad based, across a variety of S-Reit sub-sectors.

 

Other S-Reits that fell to their 52-week lows include data centre-focused Digital Core Reit : DCRU -2.61% and Keppel DC Reit : AJBU +3.75%, industrial Reits Daiwa House Logistics Trust : DHLU -1.87% (DHLT) and ESR-Logos Reit : J91U +3.13%, US-focused Keppel Pacific Oak US Reit : CMOU +8.16% (Kore) and Ara US Hospitality Reit : XZL +2.86%, as well as retail-focused SPH Reit : SK6U +0.63% and the diversified OUE Commercial Reit : TS0U 0%.

 

Most of the 12 S-Reits bounced back as the market reopened on Tuesday (Oct 25). Kore led the rebound, closing 8.2 per cent higher, followed by CICT and Keppel DC Reit, which gained 4.6 per cent and 3.8 per cent, respectively.

 

OUE Commercial Reit remained at its 52-week low as it closed flat Digital Core Reit and DHLT &ndash the two newest S-Reits which made their trading debuts near the end of 2021 &ndash fell to new all-time lows as they lost 2.6 per cent and 1.9 per cent, respectively.

 

As more S-Reits fall to new lows, so too the number of market watchers that question whether it&rsquo s time to &ldquo buy the dip&rdquo .

 

It might be premature &ndash and indeed, foolish &ndash to venture that the worst is over for the wider market and that S-Reits have bottomed out. 

 

But with the results reporting season currently underway, there should be some indications on the S-Reits that are worth a closer look.

 

Beyond wider economic and sectoral trends, investors will want to study the operational performance of the individual Reits, as well as the strength of their balance sheets. 

 

A case in point is CICT, which announced its business updates for Q3 on Oct 21.

 

The Reit manager reported that gross revenue rose 13.7 per cent to S$374.1 million in Q3, while net property income (NPI) was 12.7 per cent higher at S$273.3 million.

 

Portfolio committed occupancy climbed 1.3 percentage points quarter-on-quarter to 95.1 per cent.

 

In addition, rental reversions for its retail and office portfolios were both in positive territory in the nine months ended September, at 0.6 per cent and 7.9 per cent, respectively.

 

As at end September, CICT&rsquo s aggregate leverage stood at 41.2 per cent, with an average cost of debt at 2.5 per cent and an average term to maturity of 4.1 years.

 

Some 80 per cent of its borrowings are hedged to fixed interest rates, with an interest coverage ratio of 3.9 times.

 

CICT&rsquo s Q3 results earned it an upgrade to &ldquo buy&rdquo from RHB, from &ldquo neutral&rdquo previously, as a result of emerging value amid the market sell-off.

 

&ldquo (CICT&rsquo s Q3) business update indicates that positive levers from reopening continue to outweigh cost and rising rate pressures,&rdquo RHB analyst Vijay Natarajan said in a report on Tuesday.

 

As the other Reits provide their quarterly updates in the weeks to come, a clearer picture of the bargains should emerge.

 

Rising inflation and interest rate hikes are two main issues weighing on the minds of investors today. Amid a gloomy macroeconomic outlook, however, one bright spark could offer some respite and stability.

 

Elite Commercial REIT, Singapore&rsquo s first and only UK-focused REIT, offers stable returns with rental growth pegged to inflation, backed by the AA-credit-rated UK government and a strong occupier base that has remained resilient in times of economic uncertainty.

 

Occupancy rate remains high at 98% and weighted average lease expiry (WALE) stands at 5.2 years as at June 30. The REIT, which was listed on the Singapore Exchange (SGX) on Feb 6, 2020, just at the onset of the Covid-19 pandemic, recovered ahead of the wider industry benchmarks during the unprecedented period of UK lockdowns and Singapore&rsquo s &ldquo circuit breakers&rdquo to manage the pandemic.

 

Social infrastructure

 

Elite Commercial REIT is not your typical commercial REIT. Its asset base consists of a network of 155 functional, centrally-located properties, geographically diversified across the different regions in the UK.

 

Not only are the assets strategically located in town centres, the properties are also near amenities and transportation nodes.

 

These attributes serve the REIT well as it serves the community as part of the social infrastructure through which the UK government delivers its services.

 

Currently, over 99% of its portfolio is leased to the UK government, which is credit-rated AA by S& P Global Ratings and Aa3 by Moody&rsquo s Investors Service.

 

The REIT&rsquo s assets are primarily occupied by the Department for Work and Pensions (DWP) &mdash the UK&rsquo s largest public service department that is responsible for welfare, pensions and child maintenance services.

 

Shaldine Wang, CEO of the REIT manager, says: &ldquo Although the recent pandemic sees an increased popularity for hybrid working, the REIT&rsquo s buildings are not typical commercial offices &mdash the assets are used as centres to provide social benefits and support to the local communities, such as helping the unemployed get back into the workforce. Hence, the need for such centres increases in times of economic uncertainty.&rdquo

 

While the DWP contributed about 91.5% of the REIT&rsquo s annualised gross rental income as at June 30, the overall tenant mix also includes the UK Ministry of Defence (MOD), His Majesty&rsquo s Courts and Tribunals Service, Natural Resources Wales, Home Office and the Environment Agency, among others.

 

The majority of leases are signed directly with the Secretary of State for Levelling Up, Housing and Communities (formerly known as the Secretary of State for Housing, Communities and Local Government), which is a Crown Body and which management says &ldquo provides credit stability and certainty&rdquo .

 

Rents are collected in full and on time &mdash three months in advance, says management. &ldquo For the period of three months to Sept 30 this year, 99.9% of rent was collected in advance, within seven days of the due date of end-June.&rdquo

 

Stability amid uncertainty

 

Elite Commercial REIT boasts unique attributes to serve as a hedge against market uncertainties. According to management, unitholders are largely shielded from inflationary pressures and interest rate hikes.

 

&ldquo The leases are all on a full repairing and insuring basis, where the operational expenses of the properties are borne by the tenant, hence the REIT is largely insulated from the effects of rising inflation and energy prices,&rdquo management tells The Edge Singapore.

 

As assets, liabilities and distributions are denominated in British pounds, the REIT is naturally hedged against forex fluctuations, adds management. &ldquo With about 63% of interest rate exposure fixed, Elite Commercial REIT is also largely insulated from interest rate hikes.&rdquo

 

Additionally, the REIT&rsquo s properties have inflation-linked rental escalation clauses built into a majority of the leases, presenting potential upside from April 2023. The rental uplift is pegged to the UK Consumer Price Index (CPI), subject to an annual minimum increase of 1.0% and maximum of 5.0% on an annual compounding basis from April 1, 2018, to March 31, 2023.

 

Based on the four periods of inflation rates locked in so far, rental escalation is estimated between 11.0% and 15.4%, depending on the prevailing inflation rate of the final period. Staying resilient through economic cycles and delivering sustainable returns to unitholders remain first and foremost in the minds of the REIT&rsquo s manager.

 

Maiden acquisition and tax savings

 

Shortly after its first year of listing, the manager completed its maiden acquisition, growing the number of assets by 60% and increasing market capitalisation by 39%.

 

The newly acquired portfolio of 58 properties contributed positively to its revenue, diversified its occupier mix, increased exposure to London and added a large institutional investor into its investor base.

 

Next, to make its tax structure more efficient, the manager successfully listed the REIT&rsquo s wholly owned UK subsidiary &mdash Elite UK Commercial Holdings Limited (ECHL) &mdash on The International Stock Exchange (TISE) on Aug 26 last year.

 

With the technical listing, ECHL and its subsidiaries qualified as a UK REIT group and enjoy the same tax treatment as a UK REIT group, bringing it broadly on par with its peers there, says the REIT&rsquo s manager, who added that there is no trading of units involved in a technical listing.

 

Elite Commercial REIT&rsquo s UK entities are now exempted from UK&rsquo s corporation tax &mdash currently at 19% &mdash on its property rental business income and gains. &ldquo Instead, they are required to pay 15% of withholding tax on dividend remitted back to the REIT,&rdquo says management.

 

Effectively, headline tax has been reduced from 19% to 15%. With the UK corporation tax legislated to rise to 25% from April 1, 2023, the implied tax savings is material. &ldquo Hence, the qualification of ECHL and its subsidiaries as a UK REIT group also future-proofs the REIT&rsquo s capital structure against future tax increases. With a lower headline tax rate, there&rsquo s lower tax expenses and this may translate to higher distributable income to unitholders,&rdquo says management.

 

The achievement of these two key milestones can be seen through its outperformance over eight consecutive quarters, beating IPO forecasts and projections.

 

In the recent half-year results announcement, the distributable income for 1HFY2022 ended June increased by 9.7% y-o-y to GBP12.2 million ($20 million), derived from identical 17.7% y-o-y increases in both net property income (NPI) and revenue, with the maiden acquisition and tax savings from headline tax rate as among the key performance drivers.

 

This follows a 65.2% y-o-y surge in the REIT&rsquo s distributable income for FY2021 ended December to GBP24.5 million. Unitholders of Elite Commercial REIT will be receiving distribution per unit (DPU) of 2.56 pence for 1HFY2022.

 

Through extensive negotiations, the REIT&rsquo s manager has removed lease break options from 109 of the leases of properties occupied by the DWP and MOD.

 

The other lease terms remain intact, and the leases continue to enjoy the upside from the in-built inflation-linked rental escalation expected to start on April 1, 2023.

 

Following the removal of lease break options, about 87.5% of the total REIT portfolio&rsquo s annualised gross rental income as at June 30 is secured up to March 2028.

 

The weighted average lease to break also trended closer to the portfolio WALE, enhancing lease stability and income visibility.

 

First sustainability collaboration

 

In line with the UK&rsquo s 2050 net-zero goal, management began its first public-private collaborative effort with the DWP in February to boost sustainability and energy efficiency in its occupied properties.

 

This was later expanded to include the asset occupied by the MOD. The plans include replacing variable refrigerant systems, gas- or oil-fuelled boilers and air-conditioning systems with more energy-efficient systems, along with roof works.

 

So far, management has committed some GBP14.8 million over three years towards these asset enhancement initiatives. In 2Q2022, management paid the first tranche of GBP7.3 million towards this effort.

 

Better portfolio valuation

 

Following the positive lease re-gearing exercise in 1HFY2022, management undertook a voluntary mid-year valuation of its assets.

 

The REIT&rsquo s portfolio is valued at an aggregate of GBP517.7 million as at June 30, which represents an overall fair value gain of 3.5% over the previous valuation of GBP500.1 million as at Dec 31, 2021.

 

&ldquo This is remarkable in view of the recent overall real estate market condition in the UK, which is exacerbated by the current ongoing macroeconomic challenges and geopolitical uncertainties. The upward revaluation is testament to the REIT manager&rsquo s efforts in strengthening the portfolio&rsquo s attractiveness and enhancing income visibility. Looking ahead, we will continue to focus on executing active asset management strategies to create the best value outcome for the REIT,&rdquo says the REIT&rsquo s manager.

 

Unitholders also enjoy generous yield, adds management. Elite Commercial REIT&rsquo s 1HFY2022 annualised DPU yield of 8.26%, based on the REIT&rsquo s closing price of 62.5 pence per unit as at June 30, outperforms bonds and bond-like instruments like the Singapore CPF Ordinary Account, 10-year government bonds in Singapore and the UK, as well as fixed deposit rates in Singapore dollar and British pounds.

 

As at Aug 16, units in Elite Commercial REIT traded at 60.5 pence and analysts see upside ahead.

 

CGS-CIMB Research analyst Lock Mun Yee believes units could reach 76 pence, while DBS Group Research analysts Tabitha Foo, Dale Lai and Derek Tan think the REIT could trade at 70 pence per unit.

 

Says management: &ldquo With a pipeline of quality properties from the sponsors&rsquo right of first refusal and potential third-party transactions in the open market, the REIT continues to exhibit strong growth potential. Using analytics and proactive asset management, the manager also formulates the best outcomes for the REIT&rsquo s properties to maximise value and deliver sustainable returns to unitholders.&rdquo

 

ELITE Commercial Reit&rsquo s : MXNU -0.81% distribution per unit (DPU) fell by 2.7 per cent to £ 0.0256 for its first half ended Jun 30, from £ 0.0263 in the corresponding period a year ago.

 

This was mainly due to the effect of a larger unitholder base as the real estate investment trust&rsquo s (Reit) manager opted to receive all its management fees in cash instead of units from FY2022 onwards.

 

Furthermore, last year&rsquo s DPU included an advanced distribution of £ 0.009 per unit paid on Apr 15, 2021, the manager said on Friday (Aug 5).

 

That being said, revenue and net property income (NPI) each grew 17.7 per cent year on year in the 6 months ended June, as the UK-focused Reit enjoyed the full period of revenue from new properties it acquired on Mar 9, 2021, the manager said.

 

Revenue stood at £ 18.7 million (S$31.3 million), compared with £ 15.9 million in H1 2021. The Reit recorded NPI of £ 18.1 million, compared with the £ 15.4 million posted a year ago.

 

Distributable income rose 9.7 per cent to £ 12.2 million, driven mainly by the full half-year rental contribution from the Reit&rsquo s maiden acquisition and tax savings.

 

This was offset by the rise in borrowings due to the acquisition, increased interest costs on borrowings and marginally lower occupancy, the manager said.

 

The distribution will be paid out on Sep 22, after the record date on Aug 16.

 

The Reit&rsquo s portfolio occupancy stood at 98 per cent as at end-June, with vacancies at John Street, Sunderland and Sidlaw House, Dundee. Weighted average lease expiry was at 5.2 years.

 

Following a positive re-gearing exercise in the first half, the Reit&rsquo s portfolio of 155 properties was valued at around £ 517.7 million as at Jun 30, 2022, 3.5 per cent higher than the previous £ 500.1 million valuation as at Dec 31, 2021.

 

The revaluation gain was driven by the removal of lease break options for a majority of leases in the portfolio, offset by a reduction in the values of vacant and vacating assets, the manager said.

 

Shaldine Wang, chief executive officer of the manager, said a majority of the properties have inflation-linked rental escalation clauses built into the leases, presenting potential upside when rental rates adjust next year.

 

&ldquo About 63 per cent of our borrowings are also hedged on fixed interest rates, providing some cushioning against volatile market movements,&rdquo Wang added.

 

Elite Commercial Reit&rsquo s gearing stood at 41.9 per cent as at Jun 30, 2022, and there are no refinancing requirements for FY2022, the manager noted.

ELITE Commercial Reit EliteComREIT GBP : MXNU 0% said its lease for Tomlinson House in Blackpool Norcross Lane to the United Kingdom' s Ministry of Defence will now run till March 2028, after the option for lease break in March 2023 had been removed.

 

In its regulatory filing on Thursday (Apr 14), the manager of the real estate investment trust (Reit) said the move has provided income visibility for the next 6 years from March 2022, as well as further upside from its built-in inflation-linked rental escalation from April 2023.

 

Elite Commercial Reit, under an agreement with the UK Ministry of Defence, will be investing £ 100,000 (S$177,880) towards pre-approved works relating to sustainability upgrade initiatives focused on improving the underlying energy efficiency of the building.

 

But it was notified by the Department for Work and Pensions in the UK that the tenant will exercise the lease break options for 7 out of 8 remaining properties in March 2023.

 

Altogether, break options exercised by the Department for Work and Pensions for the 8 properties, including the one earlier announced in March, represent 4.8 per cent of the FY2022 contractual rent for the Reit.

 

Elite Commercial Reit will see income from these 8 properties continue until March 2023 when their leases end, noted the Reit manager.

 

Meanwhile, it is also considering a variety of options for each of these properties, including re-letting as an office or other uses, disposal with vacant possession or following re-letting, and seeking consent for alternative uses such as conversion or redevelopment where those offer the best outcomes.

 

Also noted was that its assets leased to the Ministry of Defence and the Department for Work and Pensions have largely included rental escalation pegged to the UK Consumer Price Index, subject to an annual minimum increase of 1 per cent and maximum of 5 per cent on an annual compounding basis from Apr 1, 2018 to Mar 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.

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.

So far, the manager has received a break option notice for one out of the remaining nine assets occupied by DWP with a March 2023 lease break clause. The manager will continue to engage DWP on the remaining eight assets with a March 2023 lease break clause and will update the market in due course. The WALE of Elite Commercial REIT&rsquo s portfolio will remain stable at 6.0 years following this latest update.