The US Fed has announced a rather big cut of 50 Basis Percentage points.
With that the SOFR (USA's interbank overnight rate) has decreased by 0.5% once the US Fed made the announcement
US REITs on SGX are Going Up
With the news the USA REITs listed on the SGX has gone up. This is mainly due to their debts being in USA and pegged to the SOFR. Today we have seen the 5 US REITs in the green (as of writing).
Who are the 5?
ARA Hospitality Trust, Keppel Pacific Oak, Manulife US REIT, PRIME US REIT and Unitedhampshire REIT are the well known US REITs listed on SGX. Among them most of their debts (with the exception of Manulife) interest rates are pegged to the SOFR.
A Buy Now?
This is up for debate because 4 of the 5 REITs are in distressed sectors where a large vacancy rate persists. Only UnitedHampshire US REIT is in the stripe retail mall which has a strong occupancy. It is definite as investors if we want to ride on the tailwind of the US Fed cut, Utddhampshire US REIT is the best bet because it does not have the overhang of distressed properties. In fact, from here, Utdhampshire would even benefit from lower capitlisation rates on its property which will result in increased property values and in turn lower leverage rates.
Utdhampshire US reit to me is the best bet to be on because it is well leveraged (with leverage primed to move even lower), strong occupancy rates. You can read my review of Utdhampshire US REIT here.
While Utdhampshire US REIT has risen 25% since my last post, I do feel there is more upside. It is in a much stronger property sector of USA and will be able to benefit from rate cuts directly. Hence among the 5 US REITs, Utdhampshire US REIT investors should be able to experience the full benefits of a rate cut. Dividend of 8-9% is assured too. Hence it is my top pick to benefit the rate cut. Even at 50 US Cents, it is still worth an investment and I have not sold off any of my holdings yet (my own target price is 72 US cents)
In second place, it is up for grabs, but my sense is either ARA US Hospitality Trust or PRIME US REIT.
