Blood in the water from US office Reits could draw highly speculative investors

INVESTORS buy into Singapore-listed real estate investment trusts (S-Reits) for their stable distributions. But of late, the three US office S-Reits – after completely halting all or most of their distributions – no longer fulfil the needs of those seeking yield.

Manulife US Reit (MUST) was the first to stop distributions last year, after breaching a debt covenant, when its proportion of unencumbered debt to unencumbered assets crossed 60 per cent after portfolio valuations fell.

Earlier this month, Keppel Pacific Oak US Reit (Kore) went down a similar path, pre-emptively suspending distributions from H2 2023 to H2 2025 on the back of a portfolio valuation decline and increased gearing.