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5 Things To Know About United Hampshire US REIT (SGX: OBDU), Asia’s First US Grocery-Anchored Shopping Centre REIT

UHREIT’s portfolio valuation increased 4.7% y-o-y.


Listed on the SGX on 12 March 2020, United Hampshire US REIT (SGX: OBDU) is Asia’s first US grocery-anchored shopping centre and self-storage REIT. Today, UHREIT owns a portfolio of 22 high-quality properties, valued at US$763.4 million, located along the east coast of the US.

20 of these properties are what the REIT terms “grocery-anchored and necessity-based retail properties”, while the remaining 2 are modern climate-controlled self-storage properties. Given its defensive nature, UHREIT’s grocery and necessity-related properties achieved an occupancy rate of 97.4%.

98% of UHREIT’s properties, which span 3.8 million sq ft of net lettable area, are freehold. In FY2023, UHREIT delivered a distribution of US4.79 cents – which translates into a distribution yield of over 11% based on the unit price of US$0.42 as at 3 May 2024.

Here are 5 things to know about United Hampshire US REIT, to better understand the US REIT market.

Read Also: Complete Guide To Start Your REITs Investing Journey In Singapore

United Hampshire US REIT has maintained a high tenant retention rate of 92.0% since IPO in 2020 – how does it plan on retaining this?

One reason behind our high occupancy and tenant retention rate is the desirable locations of our properties and focus of our tenants in serving the essential needs of U.S. consumers. These are the key considerations and attributes we look out for when we acquired our existing properties.

Another factor behind our high tenant retention is proactive property management and tenant communication, addressing the tenants’ evolving requirements within the property and doing our best to meet these needs. For example, we have been responsive in addressing tenant requests as their omni-channel strategies have evolved. This includes creating designated parking spaces for curbside pick-up.

What are some highlights from United Hampshire US REIT’s recent financial performance?

We delivered a commendable set of results in FY2023, well supported by our high-quality portfolio. Our properties cater to consumers’ day-to-day needs and are generally resilient and cycle-agnostic.

In addition, we have benefitted from the trend towards work-from-home (WFH). Our Grocery & Necessity Properties are located in the suburbs near where people live and now work, allowing them to visit throughout the week and not just on weekends.

As at 31 Dec 2023, our Grocery & Necessity Properties’ occupancy has risen to 97.4% and has a long weighted average lease expiry (WALE) of 7.1 years. We have minimal leasing risk with only 2.2% of leases expiring in 2024 and a 92.0% tenant retention rate since our initial public offering (IPO). For our Self-storage Properties, occupancy is over 91% and average net rental rates remained high.

Our FY2023 gross revenue and net property income (NPI) increased strongly, by 7.1% and 7.6% year-on-year (y-o-y) respectively. This growth was due to the new leases we signed, rental escalations from existing leases, contribution from Upland Square acquired in July 2022, and our latest new development for Academy Sports at Port St. Lucie which opened in November 2023.

Given the strong performance at our properties, UHREIT’s portfolio valuation increased 4.7% y-o-y on a like-for-like basis to US$763.4 million as of 31 Dec 2023. Whilst the capitalisation and discount rates used by the independent valuer were higher on average due to rising interest rates, UHREIT’s stronger operating performance resulted in the higher portfolio valuation.

United Hampshire US REIT Financial Highlights

United Hampshire US REIT’s FY2023 Financial Highlights

Read Also: 5 Factors Singapore Investors Should Consider When Investing In US Properties

What is the biggest challenge for United Hampshire US REIT in the next 1-3 years, that shareholders should be most concerned about?

The retail landscape has been evolving over the last few years, particularly due to the pandemic and the trend towards work-from-home. Our properties have performed very well as retailers have been innovative in adapting to changing retail trends, for example increasing their omnichannel offerings.

We’ve also seen that the brick-and-mortar store remains highly relevant. Retail stores are playing a key role in the distribution of goods ordered online, helping to speed up deliveries and save on transportation costs. Strip centers, in particular offer easy street access (unlike malls), can accommodate drive-thrus, are located close to the end-consumer, and have a large enough footprint to store inventory.

Our challenge in the coming years is to work closely with our tenants to ensure the continued desirability of the strip centre retail stores. We will do this by addressing tenants’ evolving needs and enhancing the use of their space in our properties. Examples of new uses could include:  Drive-thru lanes enabling consumers to pick-up goods without leaving their cars and “pick-up” only restaurants which could enable greater volume of sales. Tenants are also reconfiguring stores to enable designated areas for returning goods as well as larger back room areas to manage in-store fulfilment from online orders.

What impact would a change in interest rate have on the Group’s businesses, and how is it managing this risk?

Since our listing, we have been pro-actively managing our interest rate risk. In December 2022, we early refinanced our term loans which were maturing in 2023 and 2024. More recently we refinanced our Arundel Plaza loan with another fixed rate loan. This means we have no refinancing requirements until November 2026.

Furthermore, as at 31 December 2023, 78.8% of our total loans are either fixed rate loans or floating rate loans that have been hedged using interest rate swaps.

In December, the US Federal Reserve indicated the possibility of interest rate cuts in 2024. Falling interest rates are generally beneficial for REITs. When interest rates fall, the cost of servicing debt decreases. This can lead to lower interest expenses for the REIT, contributing to higher distributable income for unitholders. Lower interest rates may also stimulate demand for real estate investments as borrowing becomes more affordable.

If interest rates fall, we believe this will present us with many more attractive, value-enhancing acquisition opportunities and we will focus on executing such opportunities to grow the DPU and scale of the REIT.

United Hampshire US REIT Debt Profile

Adjusted Debt Maturity Profile as at 31 Dec 2023

Why should investors take a closer look at United Hampshire US REIT?

United Hampshire US REIT provides investors with several compelling investment merits:

#1 Stable Cashflows

Grocery & Necessity and Self-Storage properties are generally considered cycle- agnostic and not as vulnerable to cyclical shifts in the economy. Our high occupancy and long WALE of 7.1 years3 further boost the stability of UHREIT’s cashflow. Moreover, our Grocery & Necessity properties largely have triple net leases with built-in rental escalations.

#2 High Quality Assets

Our properties are located in the affluent and populous U.S. Eastern seaboard with higher spending power and lower supply growth. The majority of our tenants are also considered essential businesses.

#3 Yield & Growth

UHREIT provides exposure to the strong and growing U.S. Consumer sector. We offer investors a dividend yield of 10.2% based on the unit price of US$0.47 as at 29 Feb 2024.

#4 E-Commerce Resistant

Tenants for Grocery & Necessity properties have been successful in adopting an omnichannel strategy. Moreover, UHREIT properties also contain many service-sector tenants with limited online alternatives making them highly e-commerce resistant.

Editor’s Note: Some answers for this article were extracted from the SGX 10 in 10 series published on 5 March 2024 and have been republished with permission. You can read more on United Hampshire US REIT (SGX: OBDU) on the SGX website.

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