As of the time of writing, US has reported a "cooled down" inflation standing at 3.3%. If such a figure persists, the Fed will not raise prices but instead let rates remain at 5.25-5.50% while its QT effects continue in the background
What It Means To Investors (and my portfolio)
27% of my portfolio is in US REITs so I am naturally sensitive to how SOFR moves. Given the latest set of data, high chance SOFR will remain at its 5.3% level and I expect it to remain at this level until the Nov 2024 Fed meeting. "That's my higher for longer".
With this parameter and knowledge that US Office loans would be pegged to the SOFR + 1.6% range based on KORE's annual reports. I expect my investments in both PRIME and KORE to survive the current ordeal. For KORE it has no refinancing risk as well. I would dare say that at least a dividend of 2.3 US cents per half a year (4.6 US cents full year). With such a strong balance sheet, diversified blue chip tenant base, KORE should snap back to a 9% dividend yield. It's a 51 cent dividend stock to me.
For PRIME, with the renewal of a significant chunk of its loan next year, I expect its ICR to be 2.7 times. The second thing I think is that at end 2023, PRIME would survive the revaluation. The Sodexo vacancy will push the value of One Washington down by 20%. All in all, I expect a 11% downward revaluation. Near term the REIT would go above 20 cents due to much less risk
Generally I feel the US REIT space is now a much safer space to buy and with more capital I will deploy it to Keppel Pacific Oak (KORE) and UnitedHampshire REIT due to the strength of their balance sheet and with little debt maturing. Ping An insurance is now out of the running due to the improvement in the US environment. Do caveat like a certain blogger I am talking to myself and writing out my general views. More digging and fact finding is needed by readers.