United Hampshire US Reit posts DPU of 1.78 US cents, meeting IPO forecast

UNITED Hampshire US Reit posted a distribution per unit (DPU) of 1.78 US cents for the period from March 12, 2020 to June 30, 2020, meeting the forecast from its initial public offering (IPO) prospectus.

This is its first results since the Asia's first grocery-anchored retail and self-storage real estate investment trust (Reit) listed on the Singapore Exchange's main board on March 12, 2020, in the thick of the Covid-19 pandemic.

Income available for distribution to unitholders was US$8.79 million for the period, up 0.2 per cent from the initial forecast.

However, gross revenue came in 3.5 per cent under expectations at US$15.31 million, largely due to lower reimbursable expense recoveries pertaining to grocery & necessity properties. In addition, there was a deceleration in leasing activities for self-storage properties at the onset of the pandemic due to shelter-in-place guidelines, and a delay in completion of Perth Amboy Self-Storage.

Net property income was also 5.5 per cent lower than forecast, coming in at US$11.31 million. This came on the back of lower gross revenue and other operating income, as well as a provision of US$300,000 for rent relief currently under negotiation, partially offset by lower repair and maintenance expenses. For certain tenants, rent relief was granted in exchange for lease extensions. Rent deferral amounting to US$400,000 was also granted. These deferred rents will be collected over the second half of FY2020 and in FY2021, said the Reit manager.

Robert Schmitt, chief executive officer of the manager, noted that all its properties remained open during the recent lockdown period, with retail tenants comprising over 90 per cent of the total base rental income open for business in June 2020.

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"Our grocery & necessity properties and self-storage properties which are in two economic cycle resilient sectors, are strategically located in high density suburban markets across the east coast of the US, and will continue to provide income stability," he said.  "In addition, with the accelerating suburb's population growth trend that started in the mid-2010s and the higher suburban median income, the attractiveness of the suburban grocery-led centres is further accentuated."

The manager also observed that in many north-eastern states where a majority of the Reit's properties are located, new Covid-19 cases are significantly down from their April peak.

While cases have more recently spiked in other states, primarily in the south and western regions of the country, the Reit's two properties in those regions are not located in areas where new cases have surged and remain open for business, the manager added.

Since the start of 2020, the manager has secured 11 new and extended retail leases representing approximately 170,000 sq ft. As at June 30, 2020, the Reit's grocery & necessity properties maintained a high occupancy rate of 95 per cent, with the majority of the tenants providing essential services in populous suburban areas where they are located.

The Reit's self-storage properties have remained open throughout Covid-19 and experienced growth in traffic and occupancy after the gradual lifting of lockdown guidelines from May 2020, said the manager.

The manager said that this pick-up in activity since mid-May is a result of the rising outflow of population from New York to the suburban areas. As at June 30, 2020, carteret self-storage and millburn self-storage achieved occupancy levels of approximately 93 per cent and 66 per cent respectively, as the properties continue to enjoy the benefits of a resilient and cycle-agnostic asset class, said the Reit manager.

The manager added that it is confident that its portfolio is well-positioned to weather the Covid-19 crisis.

Units in United Hampshire US Reit closed at 54 US cents, up one US cent or 1.89 per cent, prior to the release of the results.