Not long ago, the Federal Reserve decided to cut interest rates by 50 basis points, signaling an easing of global financial conditions and significantly increasing the attractiveness of Singapore Real Estate Investment Trusts (S-REITs) to retail investors.

Since the end of June 2024, the iEdge S-REIT Index has achieved a total return of 15.3% as of August 30, successfully reversing the 11.4% downward trend in the first half of 2024. In August, the REIT sector saw net institutional inflows of more than S$90 million, compared with S$15 million in July, with the recovery largely driven by market expectations for a rate cut by the Federal Reserve.

The iEdge S-REIT Index tracks S-REITs with higher liquidity and larger scale. The 31 constituent stocks in the index had a median total return of 13% from the end of June to September 9, with all constituent stocks rising.

Among them, key S-REITs worthy of attention include:

Kebao Pacific Oak US REIT (KORE, SGX: CMOU): KORE achieved a total return of 26.9% in August and has an expected future dividend yield of approximately 26.35%. As of June 30, KORE's leverage ratio was 42.7%, its portfolio occupancy rate was 90.7%, and its interest coverage ratio was 2.9 times. The trust plans to repay loans due in 2024 and 2025 early, avoid selling properties at deep discounts and continue to invest in the portfolio to maximize net property income, with the aim of resuming dividends in financial year 2026.

Preferred U.S. REIT (SGX: OXMU): Although Preferred U.S. REIT reported a 92% year-over-year drop in distributable income in the first half of 2024, its strategic moves, including securing a $550 million credit facility, have laid the foundation for future growth. The trust's leasing volume will double from the first half of 2023 to the first half of 2024, reflecting improving confidence among U.S. office tenants. As of June 30, the trust's leverage ratio was 48.9%, its interest coverage ratio was 2.8 times, and its portfolio occupancy rate was 83.9%.

Manulife US REIT (MANU, SGX: BTOU): MANU achieved a remarkable turnaround, going from a loss of $247.6 million in the first half of 2023 to net income of $15.8 million in the first half of 2024. While it is recapitalizing, MANU will continue to optimize its investment portfolio, focusing on assets, leasing and capital management, and is committed to maintaining and improving its ESG performance. In the first half of 2023, the trust's leverage ratio was 56.3% and its interest coverage ratio was 2.2 times. It is expected to suspend dividends by the end of 2025.

Capital Data Center REIT (SGX: AJBU): Capital Data Center REIT, which experienced positive rental returns of over 40% in the second quarter of 2024, signed a major contract extension. The trust recently acquired a data center in Tokyo, marking its entry into the Japanese market and further enhancing its growth potential. The REIT has benefited from rising data center rents in Singapore, which account for 53% of its portfolio valuation. As of June 30, Kaibao Data Center REIT's portfolio occupancy rate was 97.5%, the leverage ratio was 35.8%, and the interest coverage ratio was 5.1 times.

Suntec City REIT (SGX:T82U): Suntec City's first half of 2024 results were underpinned by strong operational performance at Suntec's offices, shopping malls and convention centers. The trust's strategic divestment and debt reduction focus are also positives. As of June 30, the trust's leverage ratio was 42.3%, interest cover was 1.9 times, and rental returns in other areas showed high single-digit or low double-digit growth in the first half of 2024.

As the Federal Reserve cuts interest rates, the income advantage of S-REITs has increased significantly, and the yields on traditional fixed-income investments such as bonds usually fall, making the higher returns provided by S-REITs more attractive. Investors may seek higher returns, driving demand and potentially increasing market value.

The S-REIT industry's positive momentum and favorable macroeconomic conditions have laid the foundation for continued growth. The inflow of institutional funds validates the attractiveness of the industry.

Additionally, the Federal Reserve's interest rate cuts and the potential for further interest rate reductions in the future could lower S-REITs' financing costs and improve their leverage ratios, making it easier to manage debt and invest in growth opportunities.