• The acquisition of Upland Square is in line with United Hampshire US REIT’s focus to expand its portfolio of grocery-anchored and necessity-based retail properties along the Eastern Seaboard. Upland Square’s key tenants include Ahold Delhaize, Burlington and TJ Maxx.
• The acquisition provides attractive NPI yield of 6.5% and is accretive to United Hampshire US REIT's pro forma 2021 DPU by 2.1%.
• United Hampshire US REIT provides compelling 2023 distribution yield of 10.3% and trades at a 19% discount to NAV per unit of US$0.75. Maintain BUY.

United Hampshire US REIT to Acquire Upland Square Shopping Center

• United Hampshire US REIT (SGX:ODBU) has entered into a sale and purchase agreement to acquire Upland Square Shopping Center in the County of Montgomery (third highest populous county), Pennsylvania for US$85.7m.
• United Hampshire US REIT continues to expand its presence along the Eastern Seaboard. It currently owns one grocery-anchored and necessity-based retail property in Pennsylvania, namely Penrose Plaza. The acquisition of Upland Square Shopping Center expands United Hampshire US REIT's exposure to the state of Pennsylvania from 7.3% to 17.7% of base rental income.
• The acquisition increases the size of United Hampshire US REIT's portfolio by 6%. Portfolio WALE remains stable at 7.7 years.

Stable rental income underpinned by quality tenants.

• The anchor tenant at Upland Square Shopping Center is Giant by Ahold Delhaize, a leading supermarket operator in the Mid-Atlantic region. It has three dominant national off-price retailers, namely Burlington, Ross and TJ Maxx. Other key tenants include Petco (chain of stores for pet food and supplies), Ashley Furniture (home furnishings retailer) and Ulta Beauty Supplies (chain of beauty stores carrying cosmetics, fragrances, nail, bath and body products).

United Hampshire US REIT - Earnings Forecast and Recommendation

• We raise our 2023 DPU forecast for United Hampshire US REIT by 3% due to full-year discount model (DDM) (cost of equity: 8.0%, terminal growth: 1.3%).
• Share price catalysts:
  • Stability of spending on necessity products and essential services.
  • Yield-accretive acquisitions of grocery-anchored & necessity-based retail properties.

Source: UOB Kay Hian Research - 24 Jun 2022