Elite Commercial REIT MXNU has posted distribution per unit (DPU) of 1.94 pence (3.3 cents) for 1HFY2023 ended June, up 6.4% q-o-q but down 24.2% y-o-y.
At 90% payout ratio, however, unitholders will receive 1.74 pence. In an Aug 7 statement, the REIT’s manager says the retention of 10% of distributable income will help strengthen Elite Commercial REIT’s financial position and help de-risk the REIT.
The record date is Aug 16 and payment is expected to be made on Sept 21.
During 1HFY2023, the REIT’s revenue grew 3.4% y-o-y to GBP19.1 million, lifted by net annualised inflation-linked rent escalation of 13.1% for 136 assets and partially offset by the vacancy of eight assets, effective April 1.
Distributable income during 2QFY2023 ended June grew 5.9% q-o-q to GBP4.8 million, driven by lower debt levels, but offset by increased borrowing costs from higher interest rates.
Distributable income during 1HFY2023 fell 23.7% y-o-y to GBP9.34 million.
See also: Elite Commercial REIT reports 26.6% drop in 1QFY2023 DPU of 0.94 pence
As at June 30, Elite Commercial REIT’s portfolio occupancy rate was 92.1%, down from 97.9% at the previous quarter.
The portfolio’s weighted average lease expiry (WALE) stood at 4.5 years as at June 30, unchanged from the previous quarter.
Meanwhile, gearing improved to 46.0%, down 60 basis points compared to March 31, with no refinancing requirement until November 2024.
See also: Elite Commercial REIT enjoys 13% rental hike from bulk of portfolio following regular review
The manager says it aims to reduce gearing further through strategic capital recycling as well as asset management strategies to increase the value of the REIT’s assets.
Net asset value (NAV) per unit remains stable at 51 pence as at June 30. The manager expects borrowing costs to remain elevated in the next 12 months as the Bank of England tackles persistent inflation; about 62% of the interest exposure is fixed.
Divestments
The REIT has entered into a sale and purchase agreement for the sale of two of its properties — Openshaw Jobcentre in Manchester and John Street in Sunderland — for an aggregate sale consideration of GBP1.1 million.
In addition, the divestments of three other vacant assets are in advanced stages and the aggregate divestments are estimated to be above book value, says the REIT’s manager.
The sale consideration represents an approximately 14.4% premium to the properties’ valuation as at July 31.
The manager says a portion of recycled gross proceeds went towards the repayment of loans, which resulted in savings in borrowing costs, as well as the lowering of holding costs of the vacant properties.
See also: Elite Commercial REIT's portfolio gains value through positive lease management outcomes
In addition to the divestments, the manager has finalised dilapidation settlements for four assets following collaborative negotiations with the REIT’s primary occupier.
Dilapidation settlement is a unique term in Elite Commercial REIT’s lease agreements, in which the manager will negotiate with tenants on a sum to be paid in full for the final release of reinstatement liabilities.
Joshua Liaw, chief executive officer of the manager since June, says: “Amid the current macroeconomic and market uncertainties, Elite Commercial REIT has demonstrated resilience in maintaining portfolio stability while providing stable income to unitholders. The recent rent escalation review contributed positively to the overall financial performance of the REIT. “
Liaw adds: “The realisation of divestment proceeds at a premium to valuations clearly reflects the intrinsic value of the underlying portfolio of assets that we manage. In addition, the successful dilapidation settlement negotiations add on to the proven track record of our team’s investment and asset management efforts and capabilities in delivering a positive outcome for each asset via proactive tenant engagement strategies.”
As at 9.34am, units in Elite Commercial REIT are trading 1.5 pence higher, or 5.26% up, at 30 pence. The unit price has fallen 37.5% year to date.
