ELITE Commercial Reit MXNU : 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.

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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 units closed flat at 66.5 pence on Thursday, before the updates were filed.