SINGAPORE (Mar 13): With the US Federal Funds Rate rushing towards zero, and 10- year US treasury bonds at their lowest yields ever, the S-REITs with pure US assets should have held up better. But no. Instead, a looming re­cession on the horizon spooked investors, who sold down the US REITs.

Since interest rates are falling, there is like­ly to be no impact from a potential expansion in capitalisation rates. The only problem is the outlook for rents. If the outlook deteriorates, that could hit the capital values of the prop­erties in these US REITs.

It was no surprise that the top losers this year are hospitality trusts with US assets, fol­lowed by hospitality trusts with Singapore as­sets. Occupancy rates for some of the hotels in Singapore are report­edly down to 40%. On the other hand, both Far East Hospitality Trust and CDL Hospi­tality Trusts have min­imum rent guarantees and master leases from their sponsors which provides a floor.

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