[SINGAPORE] The manager of Elite UK Real Estate Investment Trust (Reit) announced on Tuesday (Jun 10) that the Reit has entered into a conditional sale-and-purchase agreement to acquire three freehold government infrastructure assets in the United Kingdom for £9.2 million (S$15.9 million).
The seller is Elite Phoenix, a subsidiary of Elite UK Commercial Fund II.
The deal was struck at a 7.6 per cent discount to the average of the independent valuations of these assets.
To partly fund the acquisition, the Reit has launched a private placement to raise £4 million by issuing around 13.3 million units priced at between £0.295 and £0.305 apiece, it announced on Tuesday (Jun 10).
These three properties, all leased to the UK government, generate an annual gross income of £0.8 million and provide a gross rental income yield of 9.2 per cent, which is higher than the Reit’s existing portfolio yield of 9.0 per cent as at Mar 31.
On a pro forma basis for FY2024, the properties are expected to be 0.6 per cent distribution-per-unit accretive, and gearing would have reduced by 20 basis points to 43.2 per cent.
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These properties would have a weighted average lease expiry (WALE) of 7.4 years, significantly longer than the WALE of 3.1 years for Elite UK Reit’s current portfolio. Following completion, the overall portfolio WALE will edge up to 3.2 years.
Lease expiry concentration will also improve, with no leases maturing before 2028, and the proportion of leases expiring that year dropping by 220 basis points to 95.7 per cent.
Joshua Liaw, chief executive of the Reit’s manager, said: “This acquisition of mission-critical national infrastructure aligns with our strategy to provide investors with resilient, counter-cyclical income backed by government tenancies.
“It enhances tenant diversification and strengthens the stability of our portfolio.”
As at Mar 31, Elite UK Reit’s portfolio comprised 148 properties, with 136 of them leased to the Department for Work and Pensions, primarily for Jobcentres, which are UK government-funded offices found in most cities, set up to help people of working age find employment in the UK.
Post-acquisition, the portfolio will expand to 151 assets, lifting total valuation by 2.2 per cent to £424.8 million.
Two of the properties – Priory Court in Dover, and Customs House in Felixstowe – are tenanted to the Home Office, an existing tenant. A third property, Ty Merlin in Carmarthen, has taken on the Department for Environment, Food and Rural Affairs as a new tenant.
Trading in Elite UK Reit’s units was halted on Tuesday. The counter last closed flat at £0.335 on Monday.
