UOB Kay Hian
14 August 2025

United Hampshire US REIT: Riding the Wave of Necessity Retail with Attractive Yields and Sustainable Growth

Strong Performance and Upward Momentum Continue in 1H25

United Hampshire US REIT (UHU) has once again demonstrated its resilience and growth potential, posting a second consecutive quarter of distribution per unit (DPU) uptrend. For the first half of 2025, UHU generated a 4% year-on-year increase in DPU, underpinned by organic growth from new leases and rental escalations, as well as a notable 10.6% year-on-year drop in finance costs. This robust performance highlights UHU’s ability to create sustainable value for its investors through strategic asset management, selective acquisitions, and disciplined financial stewardship.

Company Overview: Focused on Grocery-Anchored and Necessity-Based Real Estate

United Hampshire US REIT specializes in income-generating real estate assets in the US, primarily targeting properties anchored by grocery stores and necessity-based retailers, as well as self-storage facilities. The REIT’s portfolio is diversified across several high-population and affluent states, ensuring stability and resilience against economic cycles.

• Share Price: US\$0.445
• Target Price: US\$0.70 (Upside: +57.3%, Previous Target: US\$0.64)
• Market Cap: US\$286.4 million
• Shares Issued: 590.6 million
• Sector: Real Estate
• 52-week High/Low: US\$0.50 / US\$0.425

Key Shareholders

• U.S. RE Fund II Offshore Feeder 1: 7.6%
• The Hampshire Generational Fund LLC: 7.6%
• Golden Sun (China): 5.6%

1H25 Financial Highlights: Resilience through Asset Recycling and Organic Growth

• Gross revenue and NPI declined due to the absence of contributions from three divested properties, including Freestanding Lowe’s, Sam’s Club, and Albany Supermarket.
• On a same-store basis, revenue and NPI grew 2.6% and 2.4% year-on-year, respectively, reflecting organic growth from higher rents and rental escalations.

Operational Excellence: High Occupancy and Tenant Quality

• Executed 15 leases totaling over 82,395 square feet, including a 10-year pre-leased 5,000sf store to Florida Blue.
• Positive rental reversions in the low single digits.
• Grocery & Necessity portfolio maintained a 97.2% occupancy rate and a weighted average lease expiry (WALE) of 7.6 years (top 10 tenants: 9.8 years).
• High tenant retention rate of 90%.
• Tenants providing essential services accounted for 58% of base rental income.

Financial Strength: Lower Interest Costs and Solid Capital Structure

• Aggregate leverage stable at 38.9% as of June 2025.
• No refinancing needs until November 2026.
• 78.5% of loans are fixed or hedged; interest coverage ratio at 2.6x.
• Average cost of debt eased 8bp quarter-on-quarter to 5.13% in 2Q25, due to recent interest rate swaps at lower rates.
• Management expects further cost of debt reduction as US rate cuts are anticipated in 2H25.

Key Financial Forecasts (2023-2027)

Strategic Growth Drivers: Accretive Acquisitions and Asset Enhancement

• UHU remains focused on asset recycling, accretive acquisitions, and asset enhancement initiatives (AEI) to drive sustainable growth.
• Completed the acquisition of Dover Marketplace, a grocery-anchored property in Dover, Pennsylvania, for US\$16.4 million (4.8% below independent valuation) on 1 August 2025.
• Dover Marketplace is anchored by GIANT, enjoys a 96.1% occupancy rate, and has a long WALE of 9.7 years. The property’s NPI yield is 7.25% and is expected to enhance DPU by 2.0% on a pro forma basis for 2024.
• The acquisition was fully funded by proceeds from the divestment of Albany Supermarket, exemplifying effective asset recycling.
• At St. Lucie West, UHU is developing a 5,000sf store pre-leased to Florida Blue on a 10-year lease. Estimated capex is US\$2 million with a projected ROI of 10%. Completion is expected in 4Q26.

The Role of Strip Centers in Omnichannel Retailing

Strip centers have emerged as critical hubs for omnichannel retail, supporting both in-store and online sales through services like curbside pick-up and returns processing. UHU’s largest tenant, BJ’s Wholesale Club, fulfills 90% of its online orders through physical stores, while Dick’s Sporting Goods, Walmart, and Home Depot also leverage their physical footprints to fulfill a significant majority of online orders.

Attractive Valuation and Yield Spread

• UHU trades at a highly attractive 2026 distribution yield of 10.2%, significantly above peers like Kimco Realty (4.7%) and Regency Centers (3.9%).
• This yield represents a spread of 5.9% above the 10-year US government bond yield of 4.3%.
• The stock trades at a price-to-NAV of 0.65x, reinforcing its relative undervaluation.
• The target price of US\$0.70 is based on the dividend discount model, with a cost of equity of 8.5% (previously 9.0%) and a terminal growth rate of 1.5%.

Portfolio and Tenant Diversification: Geographical and Revenue Strength

Portfolio Valuation by State:

• New York: 22.5%
• New Jersey: 19.1%
• Pennsylvania: 19.6%
• Florida: 13.4%
• Maryland: 10.6%
• Massachusetts: 7.1%
• North Carolina: 4.2%
• Virginia: 3.5%

Top 10 Tenants (by % of Base Rental Income):

• BJ’s Wholesale Club: 11.0%
• ShopRite: 8.5%
• Ahold Delhaize: 6.7%
• LA Fitness: 5.6%
• Home Depot: 4.1%
• Food Bazaar: 3.1%
• Walmart: 2.9%
• Publix Super Markets: 2.9%
• Price Chopper Supermarkets: 2.9%
• Dick’s Sporting Goods: 2.4%

Lease and Debt Expiry Profiles

Lease Expiry (% of Base Rental Income):

• 2H25: 0.7%
• 2026: 3.4%
• 2027: 5.9%
• 2028: 9.6%
• 2029 & Beyond: 80.4%

Debt Maturity Profile:

• 2025: US\$0.4m (Fixed Rate Mortgages)
• 2026: US\$42m (Fixed Rate Mortgages), US\$0.8m (Term Loans)
• 2027: US\$38m (Fixed Rate Mortgages)

Key Operating Metrics (2Q24 – 2Q25)

Investment Thesis: Yield, Stability, and Growth

UHU stands out for its compelling yield, prudent capital management, and focus on necessity-based retailing which remains resilient in varying economic cycles. The REIT’s clear strategy of asset recycling, selective acquisitions, and AEI ensures long-term income growth and portfolio enhancement. With a yield significantly above peers and a disciplined approach to leverage and acquisitions, UHU provides a strong value proposition for yield-focused investors seeking exposure to the US retail real estate sector.

Recommendation: Buy for Attractive Yield and Sustainable Growth

• Maintain BUY rating with a target price of US\$0.70.
• Attractive dividend yield of 10.2% for 2026, with continued DPU growth momentum and upside from acquisitions and AEI.
• Resilient portfolio underpinned by high-quality tenants, long WALE, and defensive asset class focused on essential goods and services.

Share Price Catalysts

• Resilience of consumer spending on necessity products and essential services.
• Yield-accretive acquisitions of grocery and necessity retail properties.

United Hampshire US REIT remains a highly attractive investment for those seeking stable, high-yield exposure to the US necessity retail sector, with additional growth levers from asset recycling and enhancement.