An interesting buy part 1 - Elite Commercial REIT
I got to admit that Elite is abit of a weird purchase for me. The number 1 no no for me for buying reit is high leverage and Elite is 1 of the highest leveraged reit on the SGX. It's currently at 42.8%.
Another thing that i looked out for is the P/NAV ratio. I prefer reit that is trading at a discount to the NAV, but not at a HUGE discount which most likely mean the reit has some serious red flag that investors really dont like. Currently Elite is trading at a premium to the NAV.
There is essentially only 1 client for the reit, which is the UK govt. Talk about not putting all your eggs in 1 basket!
Elite is also relatively small in terms of market cap of around 300m GBP. A snapshot of the financials can be seen below. Credits to Reitoracle
In the end, i still bought it because of the following reasons.
1. Lease stability & income visibility - If the main client closes shop, it's also most likely the end of the world, no other shares will be valuable at that time. The lease break option for majority of the assets have been removed as well and will also benefit from built in inflation linked rental escalation from april 2023. This will be very useful now.
2. Relatively high yield of more than 7% but of coz forex will need to play to my advantage which is currently not the case since a year back.
3. I also need to diversify my portfolio a little into Europe instead of focusing on Singapore/China/US. I used to own cromwell reit, but i sold it off after some capital appreciation.
Anyone bought elite as well? Care to share the reason why? And would you be holding it for long?