Date of Report: 17 September 2024
Broker Name: Lim & Tan Securities

Strong Occupancy and Leasing Activity

United Hampshire REIT (UHREIT), a U.S.-focused REIT listed in Singapore, maintained a healthy occupancy rate of 96.3% as of the first half of 2024, up from 95.7% in March 2024. The weighted average lease expiry (WALE) remains long at 7.7 years, with 349,090 square feet of new and renewed leases signed in 1H 2024, achieving a strong tenant retention rate of 92%. Additionally, the REIT’s self-storage business maintained high occupancy rates at 94.3%.

Divestments to Strengthen Financial Flexibility

In 1H24, UHREIT completed the divestment of two properties—Freestanding Lowe’s and Freestanding Sam’s Club Properties within Hudson Valley Plaza—for a consideration of US$36.5 million. This divestment represented a 4.3% premium over the independent valuation of US$35.0 million as of June 30, 2024, and a 17.5% gain over the original purchase price of US$31.1 million.

The proceeds from the divestment are expected to reduce UHREIT’s aggregate leverage ratio from 41.7% to 39.0% and improve its adjusted interest coverage ratio from 2.9 times to 3.2 times. The net proceeds may be used to repay debt, finance capital expenditures, fund potential acquisitions, or for general corporate purposes.

New Long-Term Leases Signed

UHREIT has been actively enhancing its portfolio by signing several long-term lease agreements. Key leasing activities in 3Q24 include:

• A 10-year lease agreement with DICK’S Sporting Goods at Hudson Valley.
• A 12-year lease renewal with Lowe’s, a Fortune 500 home improvement company.
• A 10-year lease renewal with TGI Fridays at Towne Crossing.
• A 6-year lease renewal with Crunch Fitness at the Wallkill property.

Additionally, UHREIT entered into a long-term lease agreement with Trader Joe’s at Lynncroft Center, improving the committed occupancy rate at the center to 98.4% from 88.1%.

Strong Financial Position

UHREIT’s balance sheet remains robust, with no refinancing needs until November 2026 and a weighted average debt maturity of 2.8 years. The REIT has 67.8% of its debt at fixed rates, and every 50 basis points movement in SOFR is expected to impact its DPU by 0.092 US cents per annum, representing 2.2% of its trailing 12-month DPU.

Market Capitalization and Valuation

UHREIT currently has a market capitalization of US$277.1 million and trades at a price-to-book ratio of 0.6x. The REIT offers a dividend yield of 8.4%. The consensus target price for UHREIT stands at US$0.62, reflecting a potential upside of 30% from its current share price of US$0.475.

This detailed analysis is based on information from the Daily Review report by Lim & Tan Securities, dated 17 September 2024.