At a market cap of ~US$275 million, United Hampshire US REIT currently trades at 8.5% dividend yield. This Singapore REIT invests in stabilised grocery-anchored and necessity-based retail properties, and self-storage facilities in the US.
But the timing was brutal.
UHREIT was listed in March 2020, just as COVID-19 pandemic swept the globe.
At current shares of US$0.46, it’s trading at ~50% discount from its IPO prices.Today, shares are trading nowhere over the last two years, yet paying investors a high dividend yield.
Is UHREIT a bond-like income play? Let’s find out.
Credit: Company’s financial statements
United Hampshire US REIT – A focused, defensive portfolio
United Hampshire’s portfolio is simple and focused. It operates 19 Grocery & Necessity properties and two self-storage properties. All located in the eastern US.
The first thing that comes to mind – this Singapore REIT is concentrated. ~50.3% of United Hampshire REIT’s rental income comes from its top ten tenants.
This means United Hampshire REIT is reliant on a few key tenants. If these tenants are hit poorly, it will be a significant risk to the REIT.
But I’m not worried. These tenants are household names in the US, which sells daily necessities to the average American.
This is the first reason I believe in the defensiveness of United Hampshire REIT.
Click here to read: CapitaLand Ascendas REIT (CLAR) 5% Dividend Yield: What You Need to Know
But here’s the other thing.
I believe shares of United Hampshire are backed by stability. First, occupancy rates have been over 94% over the last five years.
Next, United Hampshire REIT has a weighted average lease expiry (WALE) of almost eight years.
In fact, less than 12% of United Hampshire’s Grocery & Necessity’s leases will expire over the next three years. What does this mean? The combination of both high occupancy rates and long WALE locks in United Hampshire REIT’s income.
Even if the economy doesn’t do well, tenants continue to pay rent, securing its dividend payout.
United Hampshire REIT’s conservative balance sheet
Let’s dive into its financial numbers:
- Weighted average debt maturity is around two years
- Aggregate leverage of ~39% (well below MAS’s 50% regulatory limit)
- Interest coverage ratio of 2.5x
- Average interest cost: 5.2%
United Hampshire REIT’s leverage is slightly higher than many Singapore REITs. However, it’s still well within MAS’s regulatory cap.
This allows management to have wiggle room to expand its property portfolio and not have to worry about debt problems.
Lastly, United Hampshire REIT pays an average 5.2% interest costs on its debt. This is relatively high. But it’s because that’s due to US interest rates peaking during the inflation cycle.
However, with President Trump putting pressure on rate cuts, the Fed expecting to cut interest rates by at least 0.5% by the end of 2025, it could lead to a drop in interest costs for the US retail reit giant.
US’s Federal Funds Rate, which is the US’s interest rate, has already been dropping. And projected to drop further…
Here’s where it gets interesting.
These interest rate cuts are perfect for United Hampshire REIT’s situation. A huge chunk of its debt is expiring in late 2026.
If management refinances ~43% of its existing debt at much lower rates, it could reflect higher distributions for investors in the future.
What few investors talk about — WFH tailwind
Here’s something few investors talk about.
United Hampshire REIT benefits from work-from-home culture. Employees who work from home can’t exactly go out and have fun at malls or bars during working hours, but it’s totally acceptable for them to run errands.
They go to the grocery store. They might hit the gym. Or get a takeaway. The additional flexibility of WFH lets them do all these.
This behavior shift increases foot traffic at necessity-based retail — United Hampshire REIT’s sweet spot.
As a result, I saw United Hampshire REIT’s property values rose higher than other property asset classes. Since 2020, strip centers and self storage properties have risen by 23% and 34% respectively.
This naturally supports higher rental reversions.
What I don’t like about United Hampshire REIT
I’ll be fair. There’s no perfect REIT.
United Hampshire REIT’s operations are solid, with high occupancy rates, steady pipeline of tenants, and it operates in a stable industry where consumers spend even during economic downturns.
The problem? I don’t see much growth opportunity for this Singapore REIT.
Unlike Keppel DC REIT, or Digital Core REIT – which rides on fast-growing industries like AI trends and data centres – United Hampshire REIT operates in mature, slow-growing sectors.
Click here to read: Keppel DC REIT vs Digital Core REIT: Which is a Better Buy for Dividends?
What’s more, groceries, gyms, necessities, and F&B are all within the most mature industries that already exist, with little opportunity to grow.
Add to that: REITs pay at least 90% of their profits as dividends, leaving little room for reinvestments.
What’s more, the long WALE of around eight years is a double edged sword, because United Hampshire won’t have any opportunity to renegotiate higher rents until contracts expire.
In other words, United Hampshire REIT is built for steady cash flow, not explosive growth.
My final thoughts
If you’re looking for solid growth in Singapore REITs, this might not be it.
So far, its high occupancy rate, stable rental income secured its high dividend yield. In my view, this stock looks more like a bond-like investment.
With a historical yield of at least 7%, the nature of the tenants’ industries, long WALE, reflects steady, predictable income for this REIT.
Today, its valuations are sitting near historical lows at 0.63x book value, way below its IPO price as well. The only thing investors have to accept is there isn’t much growth opportunity for this stock.
