United Hampshire US REIT: A Defensive Play in Uncertain Times KGI Securities (Singapore) Pte. Ltd. | March 6, 2025
Navigating the Shifting Economic Landscape The U.S. economy has shown mixed signals in early 2024, with inflation gradually cooling but core PCE remaining above target. Consumer spending has declined, and economic uncertainty is growing, with slowing GDP, rising jobless claims, and declining consumer sentiment. Geopolitical risks, such as the Trump administration’s tariffs, have also emerged, potentially impacting consumer and business confidence. 2
Favorable Interest Rate Environment However, the Federal Reserve has already implemented 100 basis points of rate cuts since September 2024, which benefits United Hampshire US REIT (UHU REIT) by reducing borrowing costs. With no loan maturities until November 2026 and 73.6% of its total loans either fixed-rate or hedged, UHU REIT is well-insulated against interest rate volatility, allowing it to focus on growth initiatives. While the Fed remains cautious, any signs of economic slowdown or weakening could prompt further action, positioning UHU REIT for sustained growth and value creation. 2
Resilient Grocery-Anchored Retail Portfolio UHU REIT’s portfolio consists of 20 predominantly freehold grocery-anchored retail properties and two self-storage assets, primarily located on the U.S. East Coast. These properties have a high tenant retention rate of 92%, and the REIT secured 35 new and renewal leases totalling 786,359 sq ft in 2024, further solidifying cash flow stability. UHU REIT’s self-storage assets in the New York metropolitan area remain well-occupied at 93.2% and 92.9%, benefiting from the sector’s undersupply. 3
Strategic Divestments and Capital Recycling The REIT’s ability to execute strategic divestments at a premium, such as the 17.5% premium sale of Lowe’s and Sam’s Club properties, demonstrates disciplined capital recycling to optimize portfolio value and financial flexibility. 4
Valuation and Recommendation KGI Securities maintains an OUTPERFORM rating for UHU REIT, valuing it at US$0.60 using the Dividend Discount Model (DDM). This valuation is based on a 9.4% cost of equity and a 2.0% terminal growth rate, reflecting UHU REIT’s stable income profile and long-term growth potential. The REIT’s proactive management, long WALE, and high tenant retention rate further strengthen its investment appeal. 4 – 5