United Hampshire US REIT - UOB Kay Hian 2023-02-28: Strip Centres At The Forefront Of Retail Recovery

• United Hampshire US REIT provides resiliency and lucrative 2023F distribution yield of 9.6% and trades at P/NAV of 0.69x. Maintain BUY. Target price: US$0.71.
• Strip centres are leading the recovery in retail real estate and accounted for 45% of retail absorption in 2022. United Hampshire US REIT’s strip centres are benefitting with occupancy improving 0.2ppt q-o-q to 96.9% in 4Q22. Its strip centres cater to necessity spending, and United Hampshire US REIT has a long WALE of 7.5 years.

United Hampshire US REIT's 2H22 Results

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• Resiliency from focus on essential services. Committed occupancy for grocery & necessity properties edged higher by 0.2ppt q-o-q to 96.9% in 4Q22. United Hampshire US REIT executed a total of seven leases (new leases: three and renewal leases: four) covering 84,464sf of retail space in 4Q22. Essential services accounted for 64.2% of base rental income as of Dec 22. United Hampshire US REIT has long weighted average lease expiry (WALE) of 7.5 years. There is minimal leasing risk with only 2.6% expiring in 2023, down from 8.7% a year ago.
• Self-storage properties: Rents on an upward trajectory. Occupancies at self-storage properties Carteret and Millburn were 92.4% and 93.9% respectively as of Dec 22. Average net rent rate for Carteret and Millburn increased 29% and 31% y-o-y respectively to US$24.30 and US$26.60 psf in 4Q22.
• NAV per unit stable at US$0.75. Appraised portfolio valuation increased by 1.3% y-o-y, a testament of the resiliency of United Hampshire US REIT’s grocery & necessity and self-storage properties.

Prudent capital management.

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Above is the excerpt from report by UOB Kay Hian Research.
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