Is there anything the manager can do about these high yields? “One of the problems is that the educational process for Asian investors to differentiate our suburban open-air necessity shopping from malls is longer. Everyone wants to lump them together. There are a lot of fundamental differences between malls and openair shopping centres. Strip centres are necessity-oriented, much localised in the community where housing is. They are easier and more convenient to get to; they are not destination locations like malls. They are selling day-today goods and services for consumer needs, be they food and hardware, medical products, services, hair salons, things that the consumer needs day to day and not discretionary,” Schmitt explains. “Trading at 9.5% to 10% yield feels like a misalignment in the risk of the profile we’re offering versus the yield,” Schmitt says.
Despite a portfolio of mainly freehold assets comprising 20 grocery and necessity shopping properties, and soonto-be two self-storage facilities, United Hampshire US REIT (UH REIT) continues to trade at a DPU yield of 9.8% based on its DPU of 6.1 US cents for FY2021 ended Dec 31, 2021, and at 0.83x its net asset value.
“The high trading yield is not justified. We have a very resilient sector, with long-term weighted average lease expiries of around eight years and necessity-based shopping,” says Robert Schmitt, CEO of UH REIT’s manager.
