Its portfolio’s weighted average lease to expiry is expected to improve from 2.4 years to 7.2 years
[SINGAPORE] Elite UK Real Estate Investment Trust (Reit) has inked new lease agreements with the UK government for properties occupied by the Department for Work and Pensions (DWP), the Reit manager announced on Thursday (Feb 5).
The deal covers an aggregate annual rent of £24.3 million (S$42.1 million).
“This entry into new lease agreements represents a significant milestone in the manager’s strategy to proactively diversify lease expiry profile and extend leases ahead of expiries,” said Joshua Liaw, chief executive officer of the manager.
These agreements, done two years before current leases expire, materially transforms the Reit’s maturity profile.
The manager reported that lease expiries in 2028 have been materially derisked, dropping from 95.7 per cent of gross rental income to 32 per cent.
Consequently, the portfolio’s weighted average lease to expiry is expected to improve from 2.4 years to 7.2 years on a pro forma basis as at 31 Dec 2025.
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Enhanced lease terms
The new leases are scheduled to commence in 2028 following the expiry of existing terms.
Under the new structure, lease expiries are distributed across 10, seven, three and one-year tenures.
A notable change from previous agreements is the removal of lease breaks.
Leases longer than five years from Apr 1, 2028, include an in-built rent review on Apr 1, 2033. This review is subject to an annually compounded rent reversion linked to the consumer price index, with increases of between 1 and 5 per cent.
Additionally, DWP retains options to renew the agreements for further periods of three to five years, depending on the initial lease length.
Capital investment and growth initiatives
As part of the agreement, Elite UK Reit will provide a one-time capital incentive of £9.5 million between 2026 and 2028 to support DWP-led asset enhancement initiatives, the manager announced.
Beyond these renewals, the manager said that it was pursuing several other value-creation initiatives.
These include the redevelopment of Lindsay House in Dundee into a 170-bed student accommodation and a potential data centre development at Peel Park in Blackpool.
The manager stated that as the new lease agreements were entered into in 2026, they will not have a material impact on FY2025.
Units of Elite UK Reit ended at £0.355 on Wednesday, £0.005 or 1.4 per cent lower. It requested for a trading halt on Thursday morning before market open, and lifted the halt after market close.
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