The positives
+ Strong lease regearing outcome. Elite renewed 70% of DWP portfolio representing
£24.3mn in rent, higher than the previously guided 33% of leases by 1Q26. WALE has
increased from 2.4 years to 7.2 years, as the leases have primarily been regeared to 7 and 10
year tenors. We view the removal of the break clause with limited concession provisions to
the tenant positively. DWP will have the option to renew the lease agreements for a further
five years for new leases expiring from 2035, and for a further three years for new leases
expiring before 2035. CPI-linked rent reviews will be conducted in 2033 for leases expiring in
2035 and 2038, with a compounded annual rent increase of between 1% and 5%.
Negotiations are ongoing for the remaining 2028 leases with DWP, and we expect total
regearing to cover at least 75% of 2028 lease expiries.
+ Disciplined capital management with refinancing optionality. Cost of debt fell 20 bps YoY
to 4.7% with c. 85% debt on fixed rates. Elite has £189.6mn in bank facilities (£160.8mn term
loans, £28.8mn revolving credit drawn), all maturing in October 2027. We expect partial
refinancing ahead of maturity to extend the debt profile and capitalise on declining rates,
with £21.2mn in undrawn revolver capacity providing near-term flexibility. The 7.4% increase
in financing costs to £14.1mn in FY25 was primarily driven by debt-funded acquisitions in 2025
for Custom House, Priory Court and Tŷ Merlin (c. £5mn of debt used), while gearing improved
1.8% YoY to 40.7% as asset values grew faster than debt.
+ Valuation uplift for medium and large-sized properties offset the decline in smaller assets.
Latest portfolio valuation uplift amounted to c. 2% YoY to £424.6mn. As seen from Figure 1,
large (above £5mn in value) and medium (between £1.5mn – £5mn in value) sized assets represented 88% of the total portfolio at £376mn. Smaller assets (smaller than £1.5mn in value) accounted for 12% of the total valuation, amounting to £49mn.
72% of the large assets (21 assets, 44% of portfolio value) appreciated in value, with 43%
delivering double-digit valuation gains (Figure 2). Although 59% of small assets declined in
value, they represented only 12% of the total portfolio, thereby limiting their overall impact
on valuation. We expect a further uplift in valuation as the year-end valuation predated the
lease regearing completion and did not fully capture the actual renewal rates. With the
remaining 2028 DWP leases still in negotiation, total renewal rates will likely exceed 75%.
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Hashim graduated from the National University of Singapore with a degree in Business Administration.
