“About 70% of leases have been secured, extending WALE to 6.9 years and significantly de-risking the previously concentrated 2028 expiry profile. With retention rates guided at 85–95%, occupancy risk remains manageable,” she adds.
Liu also sees Elite UK REIT having a “strong track record” of divestments above book value is currently progressing on the divestment of Peel Park, of which its valuation stood at GBP44 million, amounting to 10% of Elite UK REIT’s asset under management (AUM).
“With planning approval secured for alternative use as a data centre, the asset has seen significant value uplift of 82% since Dec 2023, and management is targeting a disposal at least at book value,” Liu says.
She believes that this divestment will allow the REIT to monetise a mature asset and redeploy proceeds into more accretive opportunities such as redevelopment of PBSA.
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As such, Liu has given a “buy” recommendation and target price of GBP0.44 for the REIT, given that it offers an attractive yield of 9% at the current share price level, supported by an increased payout ratio of around 95% and a stable funding profile.
“Cost of debt remains at 4.7%, with over 90% of borrowings on fixed rates. This is complemented by an undemanding valuation at 0.86 times price to book ratio which we deem as attractive,” concludes Liu.
As at 10.10am, Units in Elite UKREIT were trading 0.5 pence lower, or 1.47% down at GBP0.335.
