One year ago, I remember myself quoting that REITs will be making a comeback.
One year later, I think a lot has happened for me to backtrack on that quote. Yes, we are still in the process of embracing lower rates as 2025 unfolds, but those who follow the Federal Reserve like a hawk will know that it’s a hawkish stance rather than a dovish stance.
Naturally, as interest rates slowly come down, albeit at a slower pace, a strong case can be made for REITs trading below their COVID lows to eventually rebound upwards to their fair valuations.
Here are 8 REITs trading below their COVID lows EVEN after dividends. Can they recover?
1. Keppel Pacific Oak US REIT (SGX: CMOU)
Keppel Pacific Oak US REIT (KORE) was one of the US commercial REITs in the limelight during the US REIT blowup fiasco.
Although it did not really breach any financial covenant, its unit price tanked when the REIT announced it would be suspending divided payouts on 15th Feb 2024.
With one year left in its 2 year dividend suspension plans, KORE posted an 8.8 per cent fall in distributable income to US$23.8 million for H2 ended Dec 31. The REIT is still facing challenges in growing its top line, while distributable income continues to be affected by higher borrowing costs.
During COVID, KORE traded at US$0.28 per share. Five years post the COVID selloffs, the REIT is still languishing at a price of US$0.245 per unit.
2. Manulife US Real Estate Investment Trust (SGX: BTOU)
No other REIT took the interest rate harder than Manulife US REIT – not to mention its poor PR efforts that failed to stem the sell-off.
For those who are new or who may have forgotten what transpired 2 years ago, MUST breached its financial covenant and needed to deleverage. It turned out to be a vicious cycle – the REIT was forced to sell its properties at depressed valuations to pare down debt and leverage – at a time where US office occupancy was low during the height of the work from home culture in the US.
Distributions remain suspended until the end of 2025. For long term investors, it has been a tough and painful 2 years – without dividends and even holding on to large unrealised capital losses.
Current unit price is at its all time low – trading lower than its COVID-19 lows.
3. First Real Estate Investment Trust (SGX: AW9U)
The best performing REIT, hands down, is Parkway Life REIT (SGX: C2PU). But due to its premium valuation, many investors shied away from it.
Instead, many found a substitute in First REIT, seeing it as a more affordable alternative at a better valuation. And early investors rode onto the growth of the REIT, as it rallied up to a high of S$1.23 per unit.
First REIT’s debacle started way before the COVID-19 selloffs. The initial cracks appeared in 2018-2019, amid rumours of its sponsor, Lippo Karawaci (LK), defaulting on rentals and fears of a rights issue. Then COVID-19 triggered unfavourable lease restructuring due to revenue declines in Indonesia. Hospital occupancy and elective surgeries plummeted, crushing cash flow.
The final blow was the dilutive financing that destroyed unit holders value, a necessary move for the sake of keeping the REIT alive. All the mishaps one after another, saw First REIT’s price anchored well below S$0.30 per unit.
4. Prime US REIT (SGX: OXMU)
Prime US REIT (SGX: OXMU), listed on the Mainboard of the Singapore Exchange in July 2019, invests in office properties across key US office markets.
The REIT offers investors exposure to 13 Class A freehold office properties located in 12 key U.S. office markets. These markets include Atlanta, Dallas, Denver, Sacramento, Salt Lake City, San Antonio, San Diego, San Francisco Bay Area (Oakland), St Louis, Suburban Maryland (Washington DC), Suburban Virginia (Washington DC), and Philadelphia.
However, the REIT’s unit price has experienced a significant decline, dropping from a peak of US$0.975 in February 2020 to under US$0.20, representing a 77.5% drop. This is mostly attributable to rising interest rates impacting REIT distribution payouts in recent years. In 2023, the distribution per unit (DPU) plummeted by 58.6% year-on-year to US$0.0271, due to the retention of 90% of its distributable income to fund capital expenditures, reduce borrowings, and strengthen cash reserves.
Portfolio valuation also fell by US$134.3 million, due to an average 54bps expansion in cap rates across the portfolio. Although considerably in better shape that its other peers, investor sentiment in US office S-REITs remains weak, as reflected in share price declines between 50% and 80% from their peak within a year.
5. Ireit Global (SGX: UD1U)
IREIT Global (SGX: UD1U), listed on the Singapore Exchange on August 13, 2014, is a REIT focused on investing in income-producing real estate in Europe. The REIT’s portfolio includes office, retail, and industrial properties.
Currently, IREIT Global’s portfolio consists of five freehold office properties in Germany, four in Spain, and 44 retail properties in France, with a total lettable area of approximately 384,000 sqm.
IREIT’s prices rebounded from the COVID selloffs, rallying close to its pre-pandemic heights. But a series of declining earnings have saw prices heading back down, and even pummelling below its COVID lows. However, there are green shoots of recovery. The European-focused REIT provided better results for 1H 2024 as gross revenue rebounded 28.8% YoY to €36.6 million.
Distribution per unit (DPU) inched up 3.2% year on year to €0.0096, but REIT unit prices are still around historical lows, due to lacklustre EU macro-economic concerns.
6. Elite UK REIT (SGX: MXNU)
Elite UK REIT (SGX: MXNU) is a Singapore-listed real estate investment trust focused on commercial properties and social infrastructure assets in the UK. Formerly known as Elite Commercial REIT, it rebranded in May 2024 to reflect its expanded mandate, which includes Purpose-Built Student Accommodation (PBSA) and rental housing alongside core assets like government-leased offices and healthcare facilities.
Elite UK REIT’s weaknesses started circa 2022-2023, amid global monetary tightening. Rising UK interest rates increased borrowing costs, with Elite’s average debt cost climbing to 4.6% by 2022. Concurrently, the British Pound depreciated 7.3%
In H2 2023, vacancies at two properties and a lower distribution payout ratio (90% vs. 100% previously) led to a 40.9% YoY DPU decline.
By February 2025, shares traded at ~£0.30 per unit, down ~37% from 2022 highs. While DPU showed modest growth (3.9% YoY in 9M24) due to tax savings and lower financing costs, the REIT’s price-to-NAV ratio of 0.77x and high dividend yield of 9.3% signalled persistent undervaluation.
7. Lippo Malls Indonesia Retail Trust (SGX: D5IU)
Lippo Malls Indonesia Retail Trust (LMIRT) (SGX: D5IU) owns 29 quality assets that are strategically located in large population catchment areas in Greater Jakarta, Bandung, Yogyakarta, Medan, Palembang, Bali and Sulawesi, catering mainly to the everyday needs of middle to upper-middle income domestic consumers in Indonesia.
The REIT’s downfall is similar to some of the above mentioned REITs – biting off more than it can chew. The REIT took on too much financing to grow its portfolio aggressively, while maintaining above 100% distributions versus earnings.
With interest payments eating up a huge portion of its earnings and rather solid investment portfolio, concerns are raising on the upcoming debt repayments and financing.
8. EC World Real Estate Investment Trust (SGX: BWCU)
EC World REIT is a REIT that promised to ride on the Chinese e-commerce tailwinds and provide steady income for investors. But as of today, the REIT remains suspended.
The initial downfall started in 2022, when its heavy reliance on its sponsor started to show weakness. As debt was piling up, the REIT had plans to divest some properties to pare down debt, but this was delayed due to sponsor Forchn Holdings inability to secure financing.
Worsening financials, coupled by tenant defaults, left EC World REIT reeling. The crisis deepened in 2024, when the REIT’s leverage surged to 58.3% after a 43% portfolio valuation decline, driven by oversupply in China’s logistics sector and weak demand. Forchn further destabilised the REIT by mortgaging three properties without consent, triggering legal battles in Chinese courts.
Investors should expect the worst for EC World REIT, with no end in sight on when the REIT will resume trading.
Verdict: Can these 8 REITs recover?
I will be frank – some of these REITs have no way back. While deep-value investors might see an opportunity to go contrarian, and there are some good candidates as well, we are entering a highly inflationary, tariff-driven and trade war prone Trump 2.0 term.
We already have the memo from the Feds. Rate cuts will happen slower than what we thought it should be 1 year ago. That means even the greatest REITs will be bearing the full brunt of an effectively higher weighted average interest rates, as most were betting on a swift drop in interest rates.
So, with even your CapitaLand and Mapletree REITs reeling, don’t you think it is better to bet on the bluechips?
Food for thought!
P.S. if you’re interested in REITs and want to build a dividend portfolio, join Chris at his next live webinar to learn from someone who has retired doing just that.