REIT ASIAPAC
office building can be converted to residential without requiring
planning permission. In the UK, there’s a long-term structural
under-supply of housing, and that’s driving up the value of land
and buildings that can be converted into residences. We are
not saying we will start converting our properties to residential
developments, but we want to highlight is the potential of our
assets and what are the possible options to unlock some of these
potentials.
transpire over the next year; if unfortunately, the economy is
going to turn south, there will be a potential increase in DWP
commitments. Then, the usage of the buildings or footfall within
the buildings will naturally increase.
Furthermore, the leases are signed on a 10-year basis with some
of the leases giving the tenant an option to break in the fifth year.
However, the tenant is required to give us at least a year’s notice
if they do decide to exercise the break option. That should give
us sufficient time to either secure new tenants or evaluate other
options.
Our asset management strategy involves building and maintaining
a very close relationship with our tenant. Based on the current
REIT portfolio, we are one of the largest landlords to the DWP.
This gives us a lot of opportunities to plan and work with the UK
Government on their long-term requirements.
Q
Q
Will future expansion be UK-focused and follow the
government-as-tenant theme?
Shaldine: If you look at the spread of the REIT’s portfolio, it’s
mainly outside central London. Therefore, we do not foresee
any major impact on our business, it may even benefit us. For
example, our asset Peel Park in Blackpool will benefit from this
announcement. The UK Government, via the Blackpool Council,
has pumped in hundreds of millions of dollars trying to regenerate
Blackpool and to bring in more civil servants there. That’s also in
line with our discussion with DWP on trying to work on a medium-
term plan to put up more space for their departments. This goes
hand-in-hand with what the UK Government is planning.
Shaldine: One thing we have been saying to our investors is that
we want to keep the credit standing of our REIT as close to what
we have now as possible, which is essentially deriving rent from
the UK Government. It is not easy to get a tenant as good as this.
We do not expect to change or deviate from our strategy. We will
still very much be UK Government-focused, and we are open to
expanding into other government departments.
Q
Are there are any immediate acquisition opportunities
that you are looking at right now?
Q
Shaldine: There is no shortage of acquisition opportunities in the
UK real estate market. However, we would also like to emphasise
that while we want to grow the REIT, we want to do it responsibly
and acquire assets which are accretive to our unitholders.
Q
How will Prime Minister Boris Johnson’s recent
announcement about plans to move the government
out of Westminster affect your business?
How will you address concerns about the currency risk
given that the British pound has recently been under
pressure?
Joel: The base case we have presented to investors is that this
REIT has benefited from a natural currency hedge. Our assets
and liabilities are all denominated in Pounds. Similarly, we will
report our financials and declare our distributions in Pounds.
Unitholders have the right to elect their distributions to be in
Pounds. We see this REIT as pure-play with minimal FX (foreign
exchange) exposure.
While most analysts gauge Elite REIT as relatively
stable because most properties are government-
backed, some flag this as a concentration risk,
especially with uncertainties surrounding the Brexit
and other EU developments. How are you looking to
address this and what could be the potential effect of
Brexit developments to your distribution, profitability,
and vacancy rates?
Elite Commercial REIT sponsors are Elite Partners Holdings
Pte. Ltd., a Singapore-based investment holding firm for Elite
Partners Group, property and construction firm Ho Lee Group
Pte. Ltd., and Sunway RE Capital Pte. Ltd., a wholly-owned unit of
Malaysian conglomerate Sunway Berhad. Together, the sponsors
own about 20% of the REIT post-IPO. The REIT Manager, Elite
Commercial REIT Management Pte. Ltd., is 85% held by Elite
Partners Holdings, in which former Viva Industrial Trust Founder
Victor Song and Ho Lee Group have a stake. Sunway RE Capital
holds the remaining 15%.
Shaldine: Our tenant, DWP, is responsible for the welfare,
pensions, and child maintenance policy. Their operations are
counter-cyclical in nature. In addition, without Brexit, there’s
already a stable number of claimants visiting our properties to
utilise DWP services. So, depending on how Brexit is going to
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