Three US Office REITs listed on SGX have disclosed their financial results and outlined forthcoming initiatives. It is going to be a busy period for the REIT managers managing the US portfolio.
| Our Comments |
|
Who will survive this storm? MUST serves as the initial warning sign, offering KORE and PRIME US REIT a glimpse into potential future challenges, prompting them to prepare or take preventive measures in advance. Currently, MUST is implementing a capitalization plan with assistance from its Sponsor and strong investor support. Now, both KORE and PRIME US REIT cannot ignore the impact of higher discount rates and terminal capitalization rates. Despite KORE's CEO reassuring investors of avoiding a situation like MUST's, the reality has proven otherwise. With KORE's buffer appearing small in the latest results, the effectiveness of halting distributions to shore up capital remains uncertain. It is hoped that KORE learns from MUST's example and devises a Plan B in case they face similar challenges. One area where KORE can exert control is by preventing another PR disaster, which has previously inflicted significant drag to its share price due to uncertainty. Taking a slightly different approach, PRIME US REIT has opted to continue dividend payments despite facing challenges in its balance sheet, retaining 90% of its distribution to shore up capital. The looming ~89% debt maturity remains a major concern, with further details needed to address this issue raised last year. The management has only indicated a focus on extending the $600 million BofA facility due in July 2024, underscoring the need for an update on progress from the manager asap as it is just a few months away. In conclusion, investors should brace themselves for potentially more challenges amid the volatile US office market, where higher discount rates and terminal capitalization rates are impacting theoretical property valuations, despite consistent revenue from tenants. Strong sponsor support and transparent management are crucial during such turbulent times for navigating through these challenges effectively together with the investors. What can REITsavvy readers do? Diversification is essential for every investment portfolio. Utilise the three concepts of diversification: 1) Diversify Allocation 2) Diversify Country 3) Diversify Sector Invest wisely, REITsavvy Readers! |
| Exclusive REITsavvy Newsletter |