SREITs Approaching an Inflexion Point as Inflation Prints Cool

-Cooler inflation prints have raised the probability of a September rate cut

-Regional REITs have seen gains in July

-Furthermore, SREITs outperformed relative to regional REITs as it increased 5.4% m/m in July

-The gains were mostly attributable to REITs with riskier capital management due to 2 main developments during the month

      Fed Chair Powell putting September rate cuts on the table at the July FOMC meeting

      MAS proposal to raise gearing to 50% and establish a single ICR floor of 1.5x for all SREITs

-DBS’s observation of 2Q24’s earnings results as it is still ongoing

       SG business parks remains soft though SREITs business park occupancies are at >80% (higher than submarket           average of ~70%)

       Hotel RevPAR softer-than-anticipated as there was short-term supply overhang in Orchard and CBD area                     (despite     attempts to close occupancy gap), room rates fell, and guidance felt more neutral instead of positive

       Retail high single digit and office >5% rental reversion was as expected; subsectors are well supported by tight           supply

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