CGS International
July 23, 2025
Elite UK REIT: Scotland Site Visits Affirm Resilience, Dividend Upside, and Strategic Growth in Student Housing
Elite UK REIT’s Resilient Income Backed by UK Government Tenants
Elite UK REIT (ELITE SP) continues to demonstrate the defensive nature of its cashflows, with a unique portfolio anchored by sovereign-rated tenants in the UK. Recent ground checks across ELITE’s Scottish properties—spanning Edinburgh, Falkirk, Dundee, and Glasgow—reinforce confidence in its income stability and reveal compelling avenues for value creation through asset repurposing.
Target Price Upgraded on Robust Fundamentals
CGS International has reiterated its Add rating for Elite UK REIT, upgrading its target price to £0.38 (from £0.35), representing a 10.1% upside from the current price of £0.345. The forecast for FY25-27 dividend per unit (DPU) has been raised by 1.26% to 3.07%, now projected at 2.98–3.04 pence. This upward revision factors in the strong performance in the first half of FY25 and contributions from three new property acquisitions completed in June 2025.
Ground Checks in Scotland: Portfolio Insights and Growth Opportunities
Site visits to four ELITE properties in Scotland—Heron House, Parklands, Lindsay House, and Northgate—plus two sponsor properties (Queensway House, 150 Broomielaw), offered in-depth insight into ELITE’s tenant profile, occupancy, and value-unlocking potential.
- Scotland’s Share in Portfolio: 26 properties, 16.7% of portfolio AUM, 10.1% of total gross rental income as of 1Q25.
- Prime Locations: All assets are strategically located close to transport links and major universities, ensuring high occupancy and future repurposing potential.
Heron House, Falkirk
- Tenant: Department for Work and Pensions (DWP), operating as a Jobcentre Plus.
- Size: 25,454 sqft.
- Annual Gross Rental Income: £0.3m; Valuation: £2.4m at end FY24.
- Lease Expiry: 2028F; high physical occupancy and footfall observed.
Parklands, Falkirk
- Tenant: DWP (mainly backroom functions).
- Location: Callendar Business Park.
- Annual Gross Rental Income: £0.79m; Valuation: £6.19m in 2024.
- Occupancy: Remains high despite hybrid work arrangements.
Northgate (Glasgow Benefits Centre), Glasgow
- Size: 137,287 sqft.
- Major Tenant: DWP; Partial lease to HM Passport Office; one wing vacant.
- Annual Rental Income: £2.24m; Valuation: £22.82m at end-FY24 (c.6% of FY24 gross revenue).
- Potential: Proximity to Glasgow Caledonian University and University of Strathclyde positions the property for possible conversion to purpose-built student accommodation (PBSA) post-2028F lease expiry.
Lindsay House, Dundee: A PBSA Pivot
- Currently vacant; plans to convert to a 168-bed PBSA, with target opening in Academic Year 2027.
- 3-minute walk to Abertay University, 7-minute walk to University of Dundee.
- Student population in Dundee: 17,950 full-time students in AY2022/23, growing 3% annually; only 4,000 PBSA beds—undersupply highlighted by a 4.2x student-to-bed ratio.
- Estimated NAV uplift from redevelopment: £2.2m or 0.36 pence/unit.
Potential Sponsor Acquisitions: Diversifying Tenant Base
ELITE is eyeing further acquisitions from its sponsor, which would diversify its tenant exposure:
Queensway House, East Kilbride
- Size: 217,674 sqft, campus-style facility with gym and nursery.
- Tenant: His Majesty’s Revenue and Customs (HMRC), serving as regional admin and call centre hub for 1,760 employees.
- Lease Expiry: Weighted average 6.3 years; some space underutilised.
150 Broomielaw, Glasgow
- 96,759 sqft Grade A office on the River Clyde waterfront, within the financial district.
- Tenant: Scottish Ministers (via Scottish Enterprise).
- Lease Expiry: Weighted average 5.4 years; fully let.
Financial Performance and Upgraded Forecasts
Following the June 2025 equity fundraising and acquisitions, ELITE declared an advance DPU of 1.43 pence for 1 Jan–18 Jun 2025, implying a robust 1H25 DPU of 1.53 pence (52% of FY25 forecast). This, combined with new acquisitions, supports the upward revision of FY25-27 DPU guidance.
Key Financial Highlights
| Financial Summary (£m) |
Dec-23A |
Dec-24A |
Dec-25F |
Dec-26F |
Dec-27F |
| Gross Property Revenue |
37.64 |
36.47 |
37.95 |
38.28 |
38.51 |
| Net Property Income |
33.80 |
33.74 |
36.01 |
36.56 |
36.96 |
| Net Profit |
(29.74) |
17.89 |
17.64 |
18.28 |
18.48 |
| Distributable Profit |
16.24 |
16.82 |
17.91 |
18.30 |
18.49 |
| Core EPS (£) |
(0.059) |
0.032 |
0.030 |
0.030 |
0.030 |
| DPS (£) |
0.031 |
0.029 |
0.030 |
0.030 |
0.030 |
| Dividend Yield |
8.90% |
8.32% |
8.64% |
8.73% |
8.82% |
| Asset Leverage |
49.6% |
41.6% |
40.5% |
41.3% |
41.5% |
| BVPS (£) |
0.39 |
0.41 |
0.42 |
0.42 |
0.42 |
| P/BV (x) |
0.89 |
0.85 |
0.81 |
0.82 |
0.81 |
| Recurring ROE |
(13.1%) |
8.0% |
7.1% |
7.2% |
7.2% |
DPU Upgrades and Dividend Yield
- FY25F DPU: 2.98 pence (+1.26%)
- FY26F DPU: 3.01 pence (+2.49%)
- FY27F DPU: 3.04 pence (+3.07%)
- FY25F dividend yield: 8.6% at 95% payout ratio; total return c.19% projected.
Key Risks and Catalysts
- Risks: High tenant concentration—DWP accounts for 93.4% of gross rental income at end-FY24.
- Catalysts: NAV uplift from successful asset repurposing, higher dividend payout, and valuation gains.
Elite UK REIT Peer Comparison: How Does It Stack Up?
| Company |
Ticker |
Price (Local) |
Target Price (Local) |
Mkt Cap (US\$m) |
Asset Leverage |
P/BV |
Dividend Yield FY25F |
Dividend Yield FY26F |
Dividend Yield FY27F |
| CapitaLand Ascott Trust |
CLAS SP |
0.90 |
1.13 |
2,684 |
39.9% |
1.15 |
6.8% |
7.0% |
7.1% |
| CDL Hospitality Trust |
CDREIT SP |
0.84 |
0.87 |
830 |
41.8% |
1.48 |
6.1% |
7.2% |
7.4% |
| Far East Hospitality Trust |
FEHT SP |
0.61 |
0.74 |
955 |
31.2% |
0.92 |
6.4% |
6.4% |
6.5% |
| Frasers Hospitality Trust |
FHT SP |
0.70 |
NA |
1,048 |
35.0% |
0.64 |
4.6% |
5.0% |
5.2% |
| Elite UK REIT |
ELITE SP |
0.35 |
0.38 |
280 |
43.0% |
0.40 |
8.6% |
8.7% |
8.8% |
| Sasseur REIT |
SASSR SP |
0.67 |
0.85 |
652 |
25.9% |
0.83 |
9.3% |
9.6% |
9.9% |
ESG Initiatives and Sustainable Growth Commitment
Elite UK REIT is proactively aligning its portfolio with the UK government’s net carbon zero targets by 2050. ESG material topics include climate change, emissions, water management, tenant engagement, talent development, diversity, regulatory compliance, and anti-corruption.
- Sustainability Initiatives: £14.7m committed over three years from 2022 for energy efficiency enhancements (notably for DWP and Ministry of Defence assets).
- Green Clauses: 98.6% of gross rental income covered by green leases as of end-FY24.
- ESG Milestones: Ranked 15th in the Singapore Governance and Transparency Index 2024 (up from 40th in 2023).
- 100% of loans are sustainability-linked as of Dec 2024.
- EPC Ratings: 3.5% of portfolio rated B or higher; 23.1% rated C or higher.
Portfolio Overview and Financial Ratios
- Portfolio Occupancy: 93.5% as at end-1Q25.
- Weighted Average Lease Expiry (WALE): 3.1 years.
- Geographic Spread: 23.7% North West, 16.7% Scotland, 14.9% London, 11.1% South East UK.
- Top Tenants: DWP (93.4% of gross rental income), Ministry of Defence (2.4%), HM Courts & Tribunal Services (1.4%).
Conclusion: Elite UK REIT Primed for Value Creation and Stable Returns
Elite UK REIT’s focus on government-backed leases, strategic asset repurposing (notably into student accommodation), prudent capital management, and committed ESG initiatives position it as a compelling choice for yield-seeking investors. With a robust 8.6% FY25F dividend yield, a strong total return outlook, and ongoing NAV enhancement opportunities, ELITE stands out in the SREIT universe for its resilience, growth potential, and sustainability orientation.
Broker Recommendation and Outlook
- Rating: Add (no change)
- Target Price: £0.38
- Current Price: £0.345
- Implied Upside: 10.1%
- Dividend Yield: 8.6% (FY25F)
- Total Return: c.19%
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