Should You Invest In United Hampshire US REIT [Fundamental Analysis]

In this article, we'll be conducting a fundamental analysis of United Hampshire US REIT and its suitability to achieve the following investment objective: To deliver a stable dividend yield of 5% to 6% per year while having high capital preservation ability.

Information Is Accurate Up To March 2024

Business Description

US Hampshire US REIT is a retail REIT that was listed in 2020 and owns 20 retail properties and 2 self-storage space across United States.  

What I Like About United Hampshire:

• Operations since listing (2020) have been stable and dividend yield is very attractive given how beaten down the counter is.
  

• Though unproven, the management's recent capital recycling effort has been rather successful (Figure 11)
  

• Properties are leased to tenants who are largely grocery and necessity service providers which will provide higher stability in rental income as compared to other retail tenants that provide discretionary products and services. (Figure 13)
  

What I Do Not Like About United Hampshire:

• Balance sheet health has deteriorated largely as a result of higher interest rates and borrowing costs.
  

• Properties are mostly quite aged (completed from 1970 to 1990s) which may require more asset enhancement initiatives to ensure that the property remains attractive to shoppers and competitive as compared to similar properties that are “newer”.
  

• The counter is very illiquid
  

Updates From Recent Performance (FY 2023)

General Comments:

• Anchor tenants’ sales remain healthy. Gross revenue and net property income rose by around 7% which was supported by new lease and rental escalation from existing lease.
  

• Managers have decided to receive 100% of the 2H 2023 base fee in cash instead of units resulting in further deterioration in DPU, on top of lower operating performance as a result of higher borrowing costs. 

Positive Headwinds:

• No refinancing requirement until November 2026 of which interest rates would have normalised at a level that is much lower than the current cost of borrowing. As such, the base case operating performance should only improve moving forward.

Negative Headwinds:

• -

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Daniel is a Licensed Independent Financial Consultant with MAS and a Certified Financial Planner (CFP®).

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Disclaimer:

This article is meant to be the opinion of the author

This article is for information purposes only

This article should not be seen as financial advice

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