United Hampshire US Reit lowers sale consideration for self-storage assets

UNITED Hampshire US Reit has agreed to revise the sale consideration of its 2 self-storage properties - Elizabeth and Perth Amboy - down to US$45.5 million from US$49 million previously. 

This comes after the due diligence period for the proposed divestment lapsed following a number of delays, and upon taking into account an independent valuation of US$44.4 million for the asset. 

In an update on Tuesday (Apr 19), the Reit manager said its revised consideration are 2.5 per cent above the properties’ latest valuation and 17.7 per cent above their book value of US$38.7 million. 

An escrowed top-up amount of US$4.7 million has been fully depleted. The revised consideration is 4.9 per cent above the purchase price of US$43.4 million, inclusive of this top-up. 

The Reit manager estimates net proceeds of US$44.1 million after deducting transaction-related expenses. This equates to a cumulative divestment gain over book value of the properties of about US$5.4 million, it said. 

The manager also added that it believes the proposed divestment will still enhance value for unitholders as well as strengthen the Reit’s balance sheet, while allowing it to realise capital gains from the divested properties. 

“While the initial sale consideration carried a more significant premium over book value, the revised sale consideration remains attractive, especially in light of the recent spike in market volatility due to uncertainties caused by higher interest rates, high inflation and the conflict in Ukraine since the entry into the PSA (purchase and sale agreement) on Feb 23, 2022,” said the manager. 

The divestment is expected to complete in Q2 of 2022. 

For illustrative purposes, distribution per unit (DPU) for the fiscal year ended Dec 31, 2021 would have been 5.5 US cents instead of 6.1 US cents had the divestment been completed on Jan 1, 2021. 

The decrease in pro-forma DPU comprises 0.03 US cent per unit from the net property income of the 2 self-storage properties, as well as 0.57 US cent per unit from the top-up of the properties and stipulated damages for the Perth Amboy self-storage property. 

Units of United Hampshire US Reit closed US$0.005 or 0.8 per cent higher on Monday at US$0.635.