On Feb 15, Keppel Pacific Oak US REIT’s (KORE) manager announced it plans to suspend distributions. KORE share has seen fallen 42%. Since 31 Dec 2023, its down 61%. What is the crux of this catastrophe?
The issues that dogged KORE and Manulife US problems reveals a brewing systemic issue in US, and in Europe – real estate commercial loans. According to NBER (National Bureau of Economic Research):
- 14% of all commercial real estate loans, and 44% of office loans are under water.
- Up to 385 US banks could go bankrupt from commercial real estate risks.
You can read a report here : https://www.nasdaq.com/articles/will-the-u.s.-commercial-property-meltdown-lead-to-a-banking-crisis
My thoughts:
Last year was a bull year for the US market, even though it was hit by the collapse of Silicon Valley and First Republic banks.
The S&P500 broke record 5000 recently. With the Fed possibly pivoting, lots of investors sitting on T-Bills waiting on the sidelines, and 2024 being the 4th year presidential cycle which is usually lead to an up year, it may indeed be a good year for investors. However, it may be fraught with danger. But these perils may bring opportunities to us, especially if the market falls >20%.
- I'm a remisier with Maybank Securities, and as a bonds and REITs investor myself, I guide my clients to build resilient bonds and REITs portfolios. If you like to be guided, please open a trading account to become my client; It's free!
- WealthLions is my blog where I journal my trading ideas and share my opinions about the markets. If you like to be kept posted of my new blog posts and events, please join my Telegram Channel and subscribe to my mailing list. No spam, I promise.