Elite Commercial REIT has strengthened its capital structure and is expanding its investment strategy in the United Kingdom under its manager’s new CEO Joshua Liaw. He explains the approach.

For Joshua Liaw, Chief Executive Officer of Elite Commercial REIT (Elite REIT), its portfolio of 150 properties across the United Kingdom (UK) holds immense potential. “We plan to unlock the underlying value of the assets through repositioning or changing the use of some of the assets,” he says.

Most of Elite REIT’s properties are leased by the UK government’s Department for Work and Pensions (DWP), which uses them primarily as Jobcentre Plus. “If you live in the UK and lose your job and require financial assistance to tide you over and help to match yourself with new employment, or want job coaching services, you can walk into one of the Jobcentres located all around the UK and get the assistance you need.”

To ensure that the Jobcentres are easily accessible to UK residents – which, according to the DWP’s policy, needs to be within 20 minutes of bus or train travel, the properties are located within town centres and close to transportation nodes. Moreover, many of them were constructed when building designs favoured spaces filled with natural light. With these characteristics, the properties are fit-for-purpose for many uses.

“You can easily imagine that if you were to add some internal walls, piping, toilet fittings and so on, for example, that the properties could become student accommodation or residential units. So, what we’re trying to do a lot more now, beginning from last year, is to convert some of our assets into these other uses to maximise unitholder returns. We’re starting with a couple of vacant assets.”

One property in the city of Dundee in Scotland is within walking distance to two universities. “That’s a very interesting market because the city has a good tertiary education system but is under-supplied in terms of student accommodation. With the dynamics there, we have the opening to convert the asset into student accommodation.”

Elite REIT plans to tap the expertise and network of one of its sponsors, Sunway RE Capital, which has five purpose-built student accommodation assets in the United Kingdom. Elite REIT has two other sponsors: Elite Partners Holdings, the holding firm for Elite Partners Group, an alternative investment and asset manager, and Ho Lee Group, a real estate and construction conglomerate.

Building a stronger capital structure

The asset diversification plan is only the latest step in Liaw’s plan to strengthen Elite REIT. When he took over the reins in June last year, he consulted all of its major unitholders and investors. “The feedback was that our gearing ratio of more than 46 per cent was too high and there was considerable uncertainty over what our net asset value will be when we revalued our portfolio at year-end.”

He devised a strategy to address these issues. “I went to see our largest unitholders and managed to get their buy-in to back us in a proposed equity fundraising. We obtained their support to back the fundraising and the eventual transaction was 89 per cent back-stopped by substantial unitholders and all three of our sponsors, with banks underwriting the rest.”

“With the fundraising done and gearing ratio reduced, we turned our attention next to tackling the refinancing risk.” In March, Elite REIT announced that it had obtained a committed offer for debt facilities of up to £135 million from a group of financial institutions. It had also lowered its net gearing ratio to 40.9 per cent.

Liaw notes that the offer came from new lending relationships sourced via Elite REIT’s sponsors, underlining the firm’s soundness. “Securing the commitment shows the strong fundamentals and resilience of our unique portfolio of properties in providing social infrastructure assets in the UK, as well as the strength of our banking partnerships.”

With this milestone in Elite REIT’s refinancing exercise, he is turning his attention to another, equally important matter: lease negotiations. “We have a big tower of maturity coming up in 2028, mostly due at the end of the DWP leases. We have started early dialogue with the tenants, with the objectives of extending and diversifying leases ending in 2028.”

He adds that while his tenure at the helm to-date has been fast-paced and demanding, the results speak for themselves. “We have been going from one initiative to the next one with very little down moments, but that’s one of the benefits of being a smaller organisation like us. We can make decisions and move on them very quickly.”

A team that can go the distance

His decisiveness is also backed by nearly two decades of experience in real estate finance and fund management across the banking and REIT management sectors. He started his career in banking, where he held various roles in Standard Chartered Bank and Citi covering real estate funds, sovereign wealth funds, REITs and corporate developer clients in Southeast Asia.

After that, he spent almost 10 years in integrated real estate group Lendlease, rising to the position of executive general manager of finance as CFO at Lendlease REIT’s manager. He was part of the team that oversaw the Lendlease REIT’s initial public offering in 2019 and transformational acquisition of office and retail mall Jem in 2022.

At 45 years old this year, Liaw is one of the youngest chief executive officers of a REIT manager. He shares: “When I was in banking in my earlier days and looked even younger than my age at the time, quite often the chief financial officers of other companies didn’t want to talk to me because I didn’t look old enough. But I earned their trust over time.”

“When you’ve been in business long enough, you realise that people in C-suites are just that: people. They deal with the same issues and have likes and dislikes, like everyone else. We’re all human. That’s why I find it easy to talk to them and other people now, and don’t get very flustered or worried.”

He aims to bring Elite REIT to new heights by continuing to focus on opportunities in the UK. “UK is the world’s sixth-largest economy, and many high net-worth individuals have their eyes on it. They have real estate there, send their children to schools there and are comfortable with the real estate laws. It’s a big and liquid market internationally.”

After working with his team over the past year, he has full confidence in their capabilities and commitment. He says: “I’m very blessed to have the team that I have, as we push ahead. As a REIT manager, we must do the best that we can with our assets and portfolio. We have been doing this, and we will continue to deliver on this.”

About Elite Commercial REIT

Elite Commercial REIT (“Elite REIT”) is a Singapore real estate investment trust established with the investment strategy of principally investing, directly or indirectly, in commercial real-estate related assets in the United Kingdom (“UK”). Elite REIT is the first and only UK REIT listed in Pound sterling on the Singapore Exchange. Elite REIT’s portfolio (“Portfolio”) comprises predominantly freehold properties strategically located mainly in town centres, and near amenities and transportation nodes, and offers a stable government-backed income stream with almost 100% of the gross rental income derived from the UK Government, backed by AA-rated sovereign credit strength.

The company’s website is at https://www.elitecreit.com/

About kopi-C: the Company brew

kopi-C is a regular column by SGX Research in collaboration with Beansprout (https://growbeansprout.com), a MAS-licensed investment advisory platform, that features C-level executives of leading companies listed on SGX. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations. Written by Feng Zengkun.

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