Shares of Singapore US office REITs have been slaughtered over the last couple of years.
In fact, many of them saw shares plummeted, dividends cut, suspended and thirsty for refinancing.
However, with the Fed cutting interest rates, Singapore REITs are making a big comeback.
A couple of days ago, one of my readers asked whether I should look at US office REITs. Over the last couple of years, I’ve personally stayed away from US office REITs because of higher interest rates.
Today, Prime US REIT is trading at a big discount. Will it ever go back to a 15% dividend yield? Let’s jump in.
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Background: What is Prime US Office REIT
At a US$261 million market cap, Prime US Office REIT is a “pure-play” US office REIT. It was listed in 2019, making it one of the largest IPOs that year.
Today, Prime US Office REIT owns 13 Class A freehold office assets across 12 major US office markets. And no single market contributes more than 12% of its total rental income.
Bright spot: A turnaround bargain?
During its latest 1H2025 financial results, Prime US REIT’s net property income grew by 1.1% to US$35.8 million, as compared to US$35.4 million a quarter ago.
Distributable income grew by 12.3% to US$16.7 million, up from US$14.8 million a quarter ago.
Earlier in June 2025, Prime US Office REIT signed a new 11-year lease of at least 120,000 square feet at the rebranded Waterfront At Washingtonian in Suburban Maryland, Washington DC.
Here’s the thing, this marks a huge commitment since completing this upgrade to the property.
What’s more, its new anchor lease and earlier new leases have pushed this asset to more than 85% occupancy rate – up from 33% before its building renovations.
Plus, this deal follows a new 43,000-square-foot lease signed in the middle of June at another asset in the portfolio, Village Center Station I, with a leading global engineering and consultancy firm who is also a new tenant at WAW. Not too bad.
Here’s the other thing: Management has pointed out the US office market overall inventories fell by another 700,000 square feet.
More than that, overall vacancies in the sector have also been dropping since the interest rates hike back in 2022.
What I’m concerned – higher delinquency rates
I’ve got to admit: there are signs of improving market outlook. But if we focus on the debt market, the longer term outlook seems to have higher rates to continue to put upward pressure on delinquency rates for commercial real estate – especially offices.
This tells me two things.
First, despite lower vacancies, US office landlords like Prime US REIT could struggle trying to increase rental income in the long-term.
Why?
Work from home is a structural shift for the US market. This impacts even high-quality office assets.
Now, before COVID-19 pandemic blew up, you could make good money by borrowing cheap dollars, and investing in these US offices with reliable, blue-chip tenants.
The problem today with these properties is many tenants have reshuffled their physical workspace priorities and offices also struggle to adjust their rents.
And unlike Singapore where CBD offices have a far higher average occupancy rate, the typical average occupancy is ~80% in the office.
A lower average occupancy means it’s more sensitive to interest rate changes.
Even with interest rates falling, existing high borrowing costs could continue to drag down distributions per unit (DPU) for Singapore REITs that own US offices.
During its latest 1H2025, Prime US REIT’s DPU fell by another 33%. Not a good sign. Considering that many Singapore REITs have already hit peak borrowing costs. That’s the bad news.
So… should I buy this stock?
The good news is Prime US REIT is the surviving “pure-play” US office Singapore REIT to have continued paying dividends year after year – despite aggressively cutting dividends over the last few years.
Put it this way, Prime US REIT shares have rock bottomed, interest rate cycles have peaked and this Singapore REIT is currently paying a 2% dividend yield. Looks good.
If Prime US REIT plays its cards right in a lower interest rate environment, I won’t be surprised if it could pay half of what it normally paid before – that’s a US$0.03 per unit dividend. Of course, that’s a big IF.
My final thoughts
At current prices, Prime US REIT is an intelligent speculation. While in the short-term, vacancy rates across US offices are improving, the longer term outlook shows pressure on delinquency rates coming from these office landlords.
This means, these office landlords have pressure to repay their debt, or try to control their borrowing costs.
Shares are trading in the bargain bin, dividends have been severely cut and no one exactly likes US offices these days.
However, at current prices this also means Prime US REIT is trading in the bargain bin, dividends severely cut and is now an extremely unpopular company that looks like roadkill.
The good news is Prime US REIT is a survivor that continues to pay dividends. With all the bad news priced into US offices, any positive surprise could send shares soaring.
More importantly, if you believe in a US office recovery, I won’t be surprised if it could pay half of what it normally paid before. That’s a 15% dividend yield.
Sometimes, investing can be simple.
Willie Keng, CFA
Founder, Dividend Titan
