Elite Commercial REIT - Maybank Kim Eng 2021-10-01: Approaching The Billion-dollar AUM Mark


Elite Commercial REIT - Approaching The Billion-dollar AUM Mark

  • Elite Commercial REIT (SGX:MXNU) has been sizing up rapidly, with its AUM growing 65.2% to GBP515.3m (S$955m) after completing its maiden portfolio acquisition earlier this year. Meanwhile, its sponsor has another GBP150m portfolio in the horizon.
  • Management is now focused on addressing the size (market cap: US$400m) and liquidity (6m ADTV: GBP275k) of the REIT, as well as the 63.7% lease break potential in 2023/2028 and GBP94/125m of debt expiring in 2023/2024.
  • Elite Commercial REIT trades at an attractive yield of 8.1% (consensus FY21E) and its upcoming rental review on 1st Apr 2022 serves as a key catalyst.

Elite Commercial REIT - Relatively new REIT on SGX with one year+ track record

  • Elite Commercial REIT made its SGX debut on 06 February 2020. The REIT offered 192.5m units at GBP0.68/unit to raise GBP130.9m.
  • On 19 Oct 2020, Elite Commercial REIT announced its maiden acquisition and completed the transaction on 9 Mar 2021. The target was a GBP212.5m SPV (Gemstone II fund; owned & managed by its sponsor) comprising 58 properties spread across the UK. Thereafter, Elite Commercial REIT was successful in the application for its UK holding entity to be listed on the TISE (effective 26 Aug 2021), thus paving the way for ELITE UK to convert into a UK REIT structure.
  • Elite Commercial REIT's sponsors comprise of three companies,
    • Elite Partners Holdings,
    • Ho Lee Group and
    • Sunway RE Capital.

Soon to join the S$1b AUM club; scaling up rapidly

  • Elite Commercial REIT earlier this year (on 9th March ’21) completed its maiden acquisition of a 58-property portfolio (GBP212.5m) from its sponsor, Elite Capital Partners. The landmark acquisition brought its AUM to GBP515.3m (S$955.6m), just shy of the S$1b mark.
  • Moving forward, management has three key objectives over the next few years:
    1. Sizing up and increasing market of debt expiring in 2023/2024. The manager recently geared up to finance its maiden acquisition. Borrowing costs are currently manageable (2Q21: 1.9%) but the terms of refinancing come 2023/2024 are likely to be dependent on whether DWP exercises its break clause in Apr 2020. Management is aware of this and is working with its lenders in preparation of all scenarios.

Second highest yield in S-REIT offshore universe

Soon to qualify as UK REIT entity

  • Its recent TISE (The International Stock Exchange) listing was a necessary step for Elite Commercial REIT to qualify as a UK REIT entity. Once achieved, the REIT will be exempt from taxes on property income and latent capital gains. This could ultimately improve distributable income and DPU for unitholders.

All eyes on DWP’s upcoming rent review on 1st Apr ’22

Matthew Shim Maybank Kim Eng Research | Chua Su Tye Maybank Kim Eng | https://www.maybank-ke.com.sg/ 2021-10-01
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