UOB Kay Hian
Date of Report: Friday, 19 September 2025

Elite UK REIT: Building a Second Growth Pillar with Strategic PBSA and Government Asset Expansion

Elite UK REIT: Strategic Expansion into Student Housing and Social Infrastructure

Elite UK REIT (ELITE SP), a pioneering UK-focused Singapore-listed REIT, is embarking on a new chapter by diversifying its portfolio with purpose-built student accommodation (PBSA) and high-yield government-leased assets. This bold move is designed to drive sustainable distribution growth, enhance counter-cyclical resilience, and unlock new value for unitholders.

First Foray into Purpose-Built Student Accommodation (PBSA)

Lindsay House Redevelopment in Dundee
ELITE has secured planning approval to convert Lindsay House in Dundee, Scotland into a 168-bed PBSA facility.
This marks ELITE’s inaugural venture into the UK student housing sector, positioning the REIT to tap into a market with persistent supply shortages—Dundee’s student-to-bed ratio stands at 3.5x.
The project is managed by Mys Asset Management and is expected to complete ahead of the September 2027 academic year.
Located within walking distance of Abertay University and University of Dundee, the facility is projected to deliver a gross development value of £24 million.
Estimated ROI is an attractive 18%, with a yield on cost exceeding 7%.
By repurposing an existing building, ELITE reduces overall project costs and accelerates time-to-market.
PBSA Portfolio Roadmap
ELITE plans to redevelop Cambria House in Cardiff, Wales, into a 300-bed PBSA near Cardiff University.
Management is evaluating other assets in the portfolio for potential PBSA conversion, signaling a scalable growth strategy in student accommodation.

Monetisation Opportunities: Peel Park Data Centre Project

ELITE has submitted a planning application for an 80MW data centre at Peel Park, Blackpool.
This site is strategically situated near transatlantic subsea cables, offering robust connectivity between the UK, North America, and Europe.
The development presents opportunities for joint ventures with leading data centre operators.
Management is open to divesting the site post-approval, with a potential special dividend for unitholders upon successful sale.

Accretive Government Asset Acquisition and Portfolio Strengthening

On 20 June 2025, ELITE completed the £9.2 million acquisition of three government-leased properties: Priory Court (Dover), Customs House (Felixstowe), and Ty Merlin (Carmarthen).
These properties are leased to the Home Office and DEFRA, featuring a long weighted average lease expiry (WALE) of 7.4 years and a gross rental yield of 9.2%—higher than the existing portfolio yield.
Acquisition priced at a 7.6% discount to independent valuations and expected to be DPU accretive by 0.6%.
The new government-backed, triple-net leases enhance income stability and reinforce ELITE’s defensive profile.

Future-Proofing Social Infrastructure: Lease Extensions and Interest Rate Protection

ELITE is actively negotiating with the Department for Work and Pensions (DWP) to extend leases expiring in 2028, aiming to increase the current WALE of 2.9 years.
Longer lease terms would improve income visibility, reduce lease rollover risk, and further enhance counter-cyclical resilience.
Aggregate leverage declined to 40.7% as of June 2025, while borrowing costs dipped to 4.8%.
Prepaid rents have been used to reduce floating rate loan exposure.
All loans are sustainability-linked, with interest margin reductions tied to energy efficiency achievements.
With 91% of debt fixed or hedged, ELITE is well protected against interest rate volatility.
No refinancing is required until 2029, with a two-year extension option built into debt facilities and all borrowings denominated in GBP for a natural currency hedge.

Changes in Sponsorship and Shareholding Structure

Sunway RE Capital has sold its 15% stake in the REIT Manager to Elite Partners Holdings.
The REIT Manager is now owned by Elite Partners (83%) and Jin Leng Investments (17%).
Sunway RE Capital remains the second-largest shareholder at 11.6%, but is no longer a sponsor.
Elite Partners and Ho Lee Group continue as key sponsors.

Key Financial Metrics and Performance Highlights

Dividend and Income Resilience

ELITE delivered a 10% year-on-year increase in DPU for 1H25, reaching 1.54 pence, underpinned by a higher payout ratio (95% vs. 90% in 1H24) and dilapidation income of £1.6 million.
Achieved positive rental reversions: 30% for Dallas Court (Salford) and 24% for Ladywell House (Edinburgh) medical centre tenant during 1Q25.
Over 99% of rental income is backed by the UK government, reinforcing income stability.
The UK Spring Budget’s 30% uplift in DWP’s capital allocation signals strong ongoing support for social infrastructure upgrades.

Shareholder Structure and Stock Performance

Share price as of the report date: £0.35.
Target price: £0.39, representing an upside potential of 11.4%.
Market cap: £211.1 million (US$155 million).
52-week range: £0.265 – £0.36.
Year-to-date price gain: 18.6%.

Valuation and Recommendation

ELITE is positioned as a recession-resistant, counter-cyclical yield play with strong government support.
The report maintains a BUY recommendation with a target price of £0.39, based on a discounted dividend model (COE: 9.0%, terminal growth: 1.5%).

Key Risks and Share Price Catalysts

ELITE’s resilient model allows it to weather uncertainties from geopolitical tensions such as trade conflicts and the Russia-Ukraine war.
Catalysts include accretive acquisitions of government offices and PBSA facilities across the UK.

Geographic and Tenant Diversification

ELITE’s property portfolio is well diversified across the UK, with key concentrations in the North West (22.6%), Scotland (16.5%), London (14.7%), and the South East (11.9%).
89.6% of rental income is derived from the DWP, with other government agencies including the Ministry of Defence, HM Revenue & Customs, National Records of Scotland, and HM Courts & Tribunals Service contributing to the tenant mix.

Debt Maturity Profile and Balance Sheet Strength

No refinancing required until 2029, with a substantial two-year extension option across debt facilities.
All debt is in GBP, providing a natural currency hedge.
Aggregate leverage and robust interest cover support financial flexibility.

Conclusion

Elite UK REIT continues to deliver on its growth and income promises by diversifying into PBSA and expanding its high-yield government portfolio. With an attractive yield, strong government-backed income, prudent financial management, and clear growth catalysts, ELITE stands out as a compelling counter-cyclical investment in the UK’s real estate sector. Investors looking for resilient yield and potential upside in a volatile macro environment should keep a close watch on ELITE’s evolving story.