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Monday, June 13, 2022

United Hampshire US REIT Review @ 13 June 2022

Basic Profile & Key Statistics
  • Main Sector(s): Retail & Logistics (Self-Storage)
  • Country(s) with Assets: United States
  • No. of Properties (exclude development/associate/fund): 24

Performance Highlight

Gross revenue, NPI and distributable income increased yoy mainly due to contributions from Colonial Square and Penrose Plaza which were acquired in November 2021, through private placement.

Tenant Sales
Tenant sales for anchor tenants in 2021 have improved as compared to 2020.

Acquisition

On 9 Jun, UHREIT announced the proposed acquisition of Upland Square Shopping Center in Pottstown, Pennsylvania. The acquisition would be funded with a combination of proceeds from the divestment of Elizabeth and Perth Amboy self-storage properties and debt. This acquisition (coupled with divestment) is expected to be DPU accretive. The gearing is expected to increase to 42.7% after the divestment and acquisition.

Divestment
The sales consideration is revised downward from $49 mil to $45.5 mil on 19 April. The divestment is expected to be completed by 2Q 2022.

Asset Enhancement Initiative
Related to ESG, UHREIT has proceeded with the installation of EV charging station, LED lighting as well as solar panels for its properties.

Sensitivity to Interest Rate
For every 0.5% increase in LIBOR/SOFR, the impact would be 0.051 cents, around 0.8% of FY21 DPU.

Related Parties Shareholding

  • REIT sponsor's shareholding: Below median for more than 20%
  • REIT manager's shareholding: Below median for more than 20%
  • Directors of REIT manager's shareholding: Above median for more than 20%

Lease Profile

  • Occupancy: ± 5% from median
  • WALE: Above median for more than 20%
  • Highest lease expiry within 5 years: Below median for more than 20%; Falls in 2024
  • Weighted average land lease expiry: Above median for more than 20%

Debt Profile

  • Gearing ratio: ± 10% from median
  • Cost of debt: Above median for more than 20%
  • Fixed rate debt %: ± 10% from median
  • Unsecured debt %: 0%
  • WADM: Below median for more than 10%
  • Highest debt maturity within 5 years: Above median for more than 20%; Falls in 2024
  • Interest coverage ratio: Above median for more than 20%

Diversification Profile

  • Top geographical contribution: Below median for more than 20%
  • Top property contribution: Below median for more than 20%
  • Top 5 properties' contribution: Below median for more than 20%
  • Top tenant contribution: ± 10% from median
  • Top 10 tenants' contribution: Above median for more than 20%

Key Financial Metrics

  • Property yield: Above median for more than 20%
  • Management fees over distribution: Below median for more than 20%; $9.90 distribution for every dollar paid 
  • Distribution on capital: Above median for more than 20%
  • Distribution margin: ± 10% from median

Trends

  • Flat: DPU, NAV per Unit, Interest Coverage Ratio, Property Yield, Distribution on Capital, Distribution Margin

Relative Valuation

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

Author's Opinion

 Favorable Less Favorable
Diversified SectorLow REIT Sponsor's Shareholding
High Directors of REIT Manager's ShareholdingLow REIT Manager's Shareholding
Long WALEHigh Cost of Debt
Well Spread Lease Expiry0% Unsecured Debt
Long Weighted Average Land Lease ExpiryShort WADM
High Interest Coverage RatioConcentrated Debt Maturity
Low Top Geographical ContributionHigh Top 10 Tenants Contribution
Low Top Property & Top 5 Properties Contributions 
High Property Yield 
Competitive Management Fees 
High Distribution on Capital

The income has improved as compared to the previous quarter, however, with the distributable income at $ 8.1 mil for 1Q, the DPU is lower due to an enlarged unitholder base. With the proposed acquisition in plan, UHREIT income should not be affected by the divestment of Elizabeth and Perth Amboy self-storage properties, assuming the acquisition follow closely after the divestment.


You could also refer below for more information:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview and Detail of Singapore REIT

REIT Analysis - List of previous REIT analysis posts


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*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee accuracy, completeness, and reliability. It should not be taken as financial advice or a statement of fact. I shall not be held liable for errors, omissions and loss or damage due to the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.

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