United Hampshire US REIT Review @ 5 September 2023

Basic Profile & Key Statistics

• Main Sector(s): Retail
• Country(s) with Assets: United States
• No. of Properties (exclude associate/fund): 23

Key Indicators

Performance Highlight

Gross revenue and NPI increased YoY mainly due to contributions from Upland Square which was acquired in July 2022. However, due to higher interest expenses, distributable income only increases slightly. DPU on the other hand, is lower due to retention.

Divestment

On 31 Aug, UHREIT completed the divestment of Big Pine Center .

Development

Construction of the new store expansion on ST. Lucie excess land has commenced and is expected to be completed in 2024.

Related Parties Shareholding

• REIT Sponsor's Shareholding: Below median by 20% or more
• REIT Manager's Shareholding: Below median by 20% or more
• Directors of REIT Manager's Shareholding: Above median by 20% or more

Lease Profile

• Committed Occupancy: ± 5% from median
• WALE: Above median by 20% or more
• Highest Lease Expiry within 5 Years: Below median by 20% or more; Falls in 2027
• Weighted Average Land Lease Expiry: Above median by 20% or more

Debt Profile

• Gearing Ratio: ± 10% from median
• Cost of Debt: ± 10% from median
• Fixed Rate Debt %: ± 10% from median
• Unsecured Debt %: 0%
• WADM: Above median by 10% or more
• Highest Debt Maturity within 5 Years: Below median by 10% or more; Falls in 2026
• Interest Coverage Ratio: Below median by 10% or more

Diversification Profile

• Top Geographical Contribution: Below median by 20% or more
• Top Property Contribution: Below median by 20% or more
• Top 5 Properties' Contribution: Below median by 20% or more
• Top Tenant Contribution: ± 10% from median
• Top 10 Tenants' Contribution: Above median by 20% or more

Key Financial Metrics

• Property Yield: Above median by 20% or more
• Management Fees over Operating Distributable Income: Below median by 20% or more; $9.01 distribution for every dollar paid 
• Operating Distributable Income on Capital: Above median by 20% or more
• Operating Distributable Income Margin: ± 10% from median
• Operating Distribution Proportion: ± 5% from median

DPU Breakdown

• TTM DPU Breakdown:
• 89.5% from Operation
• 10.5% from Management Fees Paid in Units
• TTM DPU = 95.5% of Distributable Income

Trends

• Uptrend: DPU from Operation, Committed Occupancy
• Slight Uptrend: Operating Distributable Income on Capital
• Flat: NAV per Unit, Property Yield, Operating Distributable Income Margin
• Downtrend: Interest Coverage Ratio

Relative Valuation

• Dividend Yield: Above +1SD for 1y, 3y & 5y
• P/NAV: Average for 1y; Below -1SD for 3y & 5y

Author's Opinion

Favorable	Less Favorable
High Directors of REIT Manager's Shareholding	Low REIT Sponsor's Shareholding
High Committed Occupancy	Low REIT Manager's Shareholding
Long WALE	0% Unsecured Debt
Well Spread Lease Expiry	Low Interest Coverage Ratio
Long Weighted Average Land Lease Expiry	High Top 10 Tenants' Contribution
Long WADM	Interest Coverage Ratio Downtrend
Well Spread Debt Maturity
Low Top Geographical Contribution
Low Top Property & Top 5 Properties' Contributions
High Property Yield
Competitive Management Fees
High Operating Distributable Income on Capital
DPU from Operation Uptrend
Committed Occupancy Uptrend

Compared to the previous quarter, despite similar gross revenue and NPI, distributable income has fallen by 10% due to higher finance costs. This can be seen from the increase in the weighted average interest rate from 3.02% in 1Q23 to the current 3.57%. Nonetheless, the nearest debt maturity only happens in March 2024 and represents only 6.6% of the total debt. And with 80.9% of the debt at a fixed rate, any further increase in finance expenses should be minimal.

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*Disclaimer: The information presented on this blog is for educational and informational purposes only. The materials, including research and opinions, are based solely on my findings and should not be considered professional financial advice or a definitive statement of fact. I cannot guarantee the accuracy, completeness, or reliability of the information provided. I shall not be held liable for any errors, omissions, or losses that may occur as a result of using the information presented on this blog. It should be noted that the information presented on this blog does not constitute a buy, sell, or hold recommendation for any security. It is crucial to conduct your own thorough research and due diligence before making any investment decisions.