In her Feb 10 report, she mentioned that the REIT has significantly derisked its rental exposure though lengthening its lease expiry with its key tenant, the UK Department of Work and Pensions (DWP), resulting in portfolio WALE improving sharply to 7.2 years (pro forma as at Dec 31, 2025).
“We anticipate this could kickstart a round of positive news flow, as banks are likely to be more willing to lend at tighter credit margins, while improved cashflow visibility could support valuation uplift,” adds Foo.
Despite the longer WALE, Foo noted that the latest renewals carry flat rental contributions as rent reviews only occur later, deferring organic growth into the medium term.
At the same time, there could be some risk of non-renewal for assets that have only secured short extensions of one or three years. “Nonetheless, we view the outcome as broadly favourable, given the enhanced income visibility,” says Foo.
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In the medium term, the repositioning of Elite UK REIT through the ongoing conversion of Lindsay House, Dundee into a 170-bed PBSA (estimated completion for 2027 academic year) and the completion of pre-application planning consultation at Cambria House, Cardiff could offer strategic upside.
With that, the analyst revised her FY2026 and FY2027 DPU estimates by 1% and 2% downwards respectively to factor in slightly higher than anticipated interest costs, partly offset by PBSA contribution from Lindsay House from September 2027 onwards.
FY2026 and FY2027 DPU estimates of 3.05 and 3.13 pence respectively, translate to forward yield of 8.5%.
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“We remain positive on Elite UK REIT as we believe its proactive portfolio management positions it well for continued growth. We maintain a “buy” call on Elite UK REIT with a target price of £0.40,” concludes Foo.
Meanwhile, RHB Bank Singapore’s Vijay Natarajan shared in his Feb 10 report that even as the REIT’s financials are in line, the key takeaway is the recent early renewal of a substantial portion of its UK government leases that are expiring in early 2028, lifting a key overhang.
“The outcome is better than our expectation of one-third early renewals by 2026, and lifts a key investor concern.We expect Elite UK REIT’s improved income visibility to also have a positive impact of between 3-7% on its valuation,” says Natarajan.
As part of early renewals, the analyst mentioned that Elite UK REIT will provide a one-time capital incentive of £9.5 million, with DWP to top up an additional £13 million.
At the same time, with Peel Park development plans at the final approval stage and having secured a 120MVA power supply, Natarajan predicts the site will be sold post planning approvals, potentially allowing the REIT to secure net proceeds of around £20-30 million.
For the ongoing redevelopment works at Lindsay House, Dundee, the analyst shared that Elite UK REIT targets a yield-on-cost of around 7% on its £15-17 million capex and ROI of around 20%.
As such, Natarajan trimmed his FY2026 and FY2027 DPU by 2% and introduced FY2028 projection. He is keeping a “buy” call with a slightly higher target price of £0.41.
“We have also cut our cost of equity assumptions by 20 basis points to factor in the reduced risk profile post early lease renewals,” concludes Natarajan.
As at 3.47pm, units in Elite UK REIT are trading 0.5 pence higher, or 1.41% higher at £0.36.
