Elite Commercial REIT plans to issue up to 131.4 million new units at £0.68 per unit to Elite UK Commercial Fund II as partial consideration for the proposed £212.5 million acquisition of 58 UK commercial buildings.

The vendor is Elite Bushel Holding, a subsidiary of Elite UK Commercial Fund II.

At the issue price of £0.68 per unit, it represents a 3.8% premium over the current unit price. 

The total amount of consideration units to be issued amounts to £89.4 million and this will increase the REIT’s market capitalisation by approximately 39% and its assets under management by 67%.

The properties to be acquired are 100% occupied, with more than 99% of the rental income coming from the UK government, with tenants including the Department of Work and Pensions; the Ministry of Defence; National Records of Scotland; HM Courts and Tribunals Service; National Resources of Wales and Environmental Agency. 

Following the receipt of the consideration units, Elite UK Commercial Fund II will do a distribution in specie of such consideration Units to its investors, all of whom are unrelated third parties. 

SEE:Elite Commercial REIT posts 2H20 DPU of 2.49 pence, 2.9% higher than IPO forecast

This will result in PartnerRE, a reinsurance firm, being the largest investor of Elite UK Commercial Fund II, holding approximately 23% of the REIT’s enlarged share capital. 

Shaldine Wang, CEO of the manager is encouraged by PartnerRE’s decision to roll over its investment as a sign of commitment and support for the REIT’s maiden portfolio acquisition and overall investment strategy.

“With the completion of this transaction, there will be a substantial increase in the REIT’s size and market capitalisation. In tandem with the strengthening British pound, unitholders will also stand to reap more benefits through their investment in Elite Commercial REIT,” says Wang.

As a further sign of PartnerRE’s commitment, it will not sell 100% of their share of the consideration units for the first 6 months after receipt of the units, and at least 50% of their share of the consideration units for the next 6 months thereafter. 

In addition, the REIT’s manager has secured a one-year bridging loan of up to £10 million. The bridging loan, at a cost of 2.1%, is able to provide cost savings as compared to a vendor’s Loan 3 option that was previously announced. 

Elite Commercial REIT closed Feb 26 at £0.66.