Elite UK Reit to buy five government-leased UK properties for £31.9 million

[SINGAPORE] The manager of Elite UK Real Estate Investment Trust (Reit) on Tuesday (Jun 16) said that it is set to buy five freehold and virtual freehold government-leased properties across the UK for £31.9 million (S$55 million).

The Reit is also embarking on a £19 million conversion of its Lindsay House property in Dundee, Scotland, into a purpose-built student accommodation facility.

The Reit manager said that it expects the transaction to be 1.3 per cent accretive to its distribution per unit (DPU), raising its pro forma DPU as at Dec 31, 2025, from £0.03011 to £0.03051.

Joshua Liaw, CEO of the manager, noted that the pairing of government-leased properties and living sector assets will enhance the resilience of distributions amid continued macroeconomic volatility.

He said that the acquisition reinforces the portfolio with essential UK infrastructure assets underpinned by long-term, government-backed revenue, and that the student accommodation conversion aligns with the Reit’s commitment to deliver sustainable yields.

The conversion of Lindsay House marks the Reit’s entry into the UK living sector. The five-storey former office building will be transformed into a 170-bed student accommodation asset with communal amenities such as a gym and study areas.

The property is located in a high-density student area near Abertay University and the University of Dundee. The works are expected to be completed before the 2027 academic year.

The acquisitions, meanwhile, will bolster the Reit’s lease maturity profile. They will extend its portfolio weighted average lease expiry from 2.4 years at the end of 2025 to 7.6 years on a pro forma basis.

With the addition of the new assets, the portfolio valuation will rise about 7 per cent to £492.1 million.

SEE ALSO

Is the UK student-housing party over? Singapore players face divergent prospects in PBSA market

Beyond survival: Elite UK Reit plots next phase of growth

Elite UK Reit posts 1.4% rise in H2 DPU to £0.0149

Financial boost anticipated

The targeted commercial assets are Queensway House in East Kilbride, Griffin House in Wigan, Penhaligon House in St Austell, Challand House in Pontefract and Bridgend Jobcentre in Wales.

Combined, the properties will contribute about £2.6 million in annual gross rental income, said the Reit’s manager.

All five of the new properties are leased entirely to the UK government under full repairing and insuring triple-net leases, providing a countercyclical revenue stream backed by sovereign credit.

This transaction diversifies the Reit’s occupier base by introducing a new key government tenant – the UK tax authority, His Majesty’s Revenue & Customs (HMRC). HMRC occupies Queensway House, which will account for roughly 3.1 per cent of the Reit’s gross rental income.

The remaining four properties are occupied by the UK Department for Work and Pensions (DWP). Consequently, the income contribution from non-DWP government occupiers will rise by 2.6 percentage points to 9.5 per cent on a pro forma basis.

Private placement and borrowings

To finance the acquisitions and conversion, the Reit’s manager said it plans to use an optimised funding mix. This includes up to £30.7 million in external bank borrowings, a private placement intended to raise £7.4 million, and £5.9 million in internal cash resources.

Of the capital raised, £1.3 million will be earmarked for partly financing the five-property portfolio acquisition. The remaining £6.1 million will be allocated to the Lindsay House conversion.

The private placement is being offered to institutional, accredited and other eligible investors within an issue price range of £0.296 to £0.30 per unit. The final price will be determined through a book-building process.

The price band represents a discount of about 11.95 to 13.12 per cent to the volume-weighted average price of £0.3407 a unit on Jun 15, the market day preceding the placement agreement.

On an adjusted basis, factoring out an advanced distribution, the discount sits between 8.06 and 9.29 per cent.

The trust will issue 25 million new units under the minimum placement price. The issuance represents a 4.1 per cent expansion of the existing unit base, bringing the total number units to about 636.5 million.

The manager expects this to enhance trading liquidity and broaden the Reit’s unitholder base.

To preserve equity fairness for existing investors before the new units dilute the pool, the manager intends to declare an advanced distribution of about £0.0144 per unit.

The Reit also plans to raise about £8.9 million by issuing consideration units to Elite UK Commercial Fund III, a vehicle managed by a subsidiary of the Reit’s sponsor, Elite Partners.

Units of the Reit ended Monday flat at £0.34.