Great news! United Hampshire US REIT ("UHREIT") has announced that it is disposing its Freestanding Lowe's and Freestanding Sam's club property within Hudson Valley Plaza for US$36.5Mil. The Divestment Consideration of US$36.5 million represents a premium of US$2.9 million, or 8.8%, above the book value of the Properties, and US$1.5 million, or 4.3%, above the Independent Valuation. Furthermore, the Divestment Consideration is US$5.4 million, or 17.5%, higher than the purchase price of US$31.1 million of the Properties. The estimated gain on divestment based on the book value of the Properties is approximately US$2.0 million, after taking into account the transaction-related expenses of approximately US$1.0 million.
1. Use of Divestment Proceeds
It is stated that the proceeds from the Divestment may be used to repay existing debts, finance capital expenditure, fund potential higher yielding acquisition opportunities and/or for other general corporate requirements.
Taking into account the super low market pricing (US$0.43 per unit) relative to its Net Assets Value per unit (US$0.74 per unit), the realised value of the capital appreciation is actually benefical for retail investors of UHREIT. It will also reduce the leverage ratio from 41.7% to 39% and improved its interest coverage ratio from 2.9 times to 3.2 times.
2. Pro forma Financial Effects of Divestments.
2.1 DPU effect if assume UHREIT had completed the Divestment on 1 January 2023:
2.3 Aggregate Leverage Ratio and Interest Coverage Ratio effect:
Parting Thoughts
Above is good news as many investors of UHREIT have been lobbying for a reduction in its leverage ratio which have been hovering over 40%. Good job by the management team of UHREIT. Today (14th August 2024) also happens to be the results released date (before trading commence) for UHREIT. Keeping my fingers crossed that the distribution per unit will not be reduced drastically due to the high interest rate environment.
Congratulations to the good news! Though the results is ok, I saw that dpu was down by over 20%... But with this move of divestment, I suppose it's good for the long run.
ReplyDeleteBFIRE
Hi Bro BFire, glad to see you dropping by. How have you been?
DeleteYup, just saw the results. Not too good at all....it is terrible- the financing cost ate up the profits. if compare to 1H 2023, it is a terrible 24% decline. Even relative to last year ending 31 Dec 2023, the drop is 6.1%.
I'm good, just finished tabulating my dividends for q3 this yr with St eng results released today... Glad to be on track towards my annual S$26k goal... Hopefully no black swan in the last quarter. Well, I'm not vested in UH reit but hopefully things turn more rosy after Sept with the hopeful rate cut... Hoping my mpact to improve as well, 😂
DeleteHi Bro, glad to hear that you are on track to meet your annual target. I am keeping my fingers crossed that the rate cut by the US Feds materialises as per everyone's expectation. Else it it going to get really ugly wor.
DeleteIf that ugly outcome happens, then buy more!!!! 😂
DeleteHi Blade, was waiting for UHREIT's results with anticipation as well. Good point about the divestment unlocking some value by realising some of the discounted NAV to lower gearing, but I'm wondering if it would have been better to have been done once rate cuts are official? Not too sure about the valuation methodology.
ReplyDeleteResults are actually not too bad given the market's reaction, seems like most of the negatives were priced in already, but definitely not ideal. Given that UHREIT has more % of loans at floating rates, I'm hopeful that this positions itself as a significant beneficiary in the event of a rate cut, but we'll see..
Hi Bro PL, glad to hear you are also learning more about accounting during your intern period and boosting your stock analysis skills....haha...长江后浪推前浪indeed.....Ganbatte k!
DeleteAgree with you on UHREIT with market seemingly pricing in all the negatives from the results announcement already....I was quite surprised to see its market price still holding up during trading yesterday.....thought that it would have dropped below US$0.40 per unit due to the bad news.
Thank you for the encouragement Blade! Very motivated by your kind comments :D
DeleteJust curious whether you view UHREIT as a long-term hold, or will you sell it off should it experience a sharp rebound?
Hi Bro PL, good question...haha....I plan to sell off 33% of my UHREIT holdings eventually as I am currently too heavily concentrated in it my overall gross portfolios. Past 2 years of catching the falling knife of UHREIT not exactly a good thing.
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