Elite Commercial Reit to invest £12.5m in AEI works; re-gears leases for UK properties

ELITE Commercial Reit M XNU has committed to investing £12.5 million (S$22.7 million) over 3 years in asset enhancement (AEI) works to improve the sustainability and energy efficiency credentials of properties in its portfolio that are currently occupied by the UK's Department for Work and Pensions (DWP).

The DWP is the UK's largest public service department responsible for welfare, pensions and child maintenance.

In an announcement on Monday (Feb 28), its manager said this marks the real estate investment trust's (Reit) first collaboration with the DWP to boost sustainability and energy efficiency of their occupied estate.

AEI works will include the repair, replacement or upgrading of existing lighting, heating and cooling systems as well as insulation and solar panels. The manager also intends to undertake other initiatives that will improve the properties' energy efficiency and result in the upgrade of the properties' Energy Performance Certificate ratings.

"Investing in retrofitting works to enhance the energy efficiency ratings of assets in the portfolio will contribute towards reducing their environmental impact," said Shaldine Wang, chief executive of the manager.

"This win-win initiative demonstrates our commitment to adapt our portfolio to address sustainability and climate change requirements, and to extend the relevance of our assets to tenants," she added.

Separately, Elite Commercial Reit and the DWP have agreed to re-gear a number of leases of DWP-occupied properties by removing lease break options.

Lease re-gearing is the practice of renegotiating lease terms between the tenant and landlord during the course of the lease.

A total of 117 of the Reit's properties are currently leased by the DWP. This contributed to about 57.3 per cent of the Reit's total portfolio by gross rental income (GRI), and previously had a lease break option in March 2023.

With the lease re-gearing agreement, these lease break options have been removed from 100 of the properties occupied by the DWP to reflect about 47 per cent of the total portfolio by GRI. This means that 78.6 per cent of the leases by total portfolio by GRI will continue straight to 2028 without any lease break options, said the manager.

It was also agreed that 11 out of the 100 properties - amounting to 5.3 per cent of the Reit's total portfolio by GRI - will have rent reductions taking effect in April 2023.

The manager said its latest lease re-gearing agreement with the DWP enhances income visibility for Elite Commercial Reit for the next 6 years, and that it will ensure sustainable distribution to the Reit's unitholders for the longer term.

Units of the Reit were trading £0.003 or 0.5 per cent higher at £0.63 as at 9.03 am on Monday, after the announcement was made.

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