I thought that United Hampshire US REIT ("UHREIT) released another poignant set of of 2nd half and also full year 2024 results amidst the inflation nightmare as well as the higher interest rate environment driving up financing cost. I am heavily vested in UHREIT, hence keeping a close eye on it. Despite grave disappointment over the past 3 years where we saw the market price of UHREIT as well as its distributable income dropping non-stop, there is still some consolation in that its latest balance sheet has strengthen with aggregate leverage ratio declining to 38.9%. This is certinaly remarkable given that it used to be towering near the 42%+ range. Let me just do a quick recap of the financial summary from FY2022 to FY2024 below.
1. 2023 vs 2022- Spike in Finance Cost Dragging Down Overall Results in 2023
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| 2023 vs 2022 |
Finance cost was a major killer in FY2023 which increased by a whopping +32.2% from US$12.2 Mil in 2022 to US$16.1 Mil in 2023.
2. 2024 vs 2023- Spike in Finance Cost Gradually Stabilising and Hidden Unknown Downside Impact.
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| 2024 vs 2023 |
For FY2024, finance costs of UHREIT continue to increase by +17% from US$16.1 Mil to US$18.9 Mil thus exerting downward pressure on Net Income before tax, fair value & gain on divestment of investment properties. If the 2 US rate cuts that was widely anticpated in FY2025 materialise, then rental escalation will finally be able to catch up to the higher interest rate environment.
Nevertheless, there is one hidden downside from the back to office mandate from Donald Trump for government employees as well as US Corporate Bosses. On slide 8 of the power point deck, UHREIT management team has always been asserting that "On the other hand, the Strip Center sector has benefitted from the remote work arrangements trend as the additional flexibility has increased demand for the goods and services offered in Strip Centers, ranging from grocery shopping to dining. Strip Center sector values have increased 22% since June 2020". So, does this mean valuation will head south soon given the back to office drive in US?
3. Distribution by UHREIT and Key Dates
Parting Thoughts
Well, 2025 may turn out to be the much anticapted "breakthrough" year for UHREIT to deliver better results and meaningful higher DPU to long suffering unit-holders. Let's keep our fingers crossed that UHREIT will roar back to life in this new year of 2025!
But I will think that UH REIT is the strongest US REIT now?
ReplyDeleteHi Bro BF, yes you are right. UHREIT definitely in a much better state than the other office SREIT due to its focus on strip centres and mainly grocery focus theme. Nevertheless, the numbers are still a bit ugly.
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