Keppel Pacific Oak US REIT has reported signs of demand recovery in its latest financial update, with its first half of 2025 (1H25) results slightly below expectations. Despite previous concerns about a tariff-induced decline in US office demand, the outlook is improving due to a resurgence in return-to-office trends. However, the company continues to face challenges in the financing market, with a volatile interest rate environment impacting conditions.
The REIT is maintaining a “neutral” stance, with a target price increase to USD0.22 from USD0.19, indicating a 4% downside. Analysts highlight that key catalysts for a potential rerating include interest rate cuts and increased dividend payouts. The company is on track to resume dividend distributions from the financial year 2026, with a token dividend expected in the second half of 2025 (2H25).
Vijay Natarajan, an analyst, noted, “Our earlier concerns on a tariff-induced decline in US office demand have proven unfounded with the outlook brightening amid improving return-to-office trends.” This positive shift in demand is crucial for the REIT’s future performance.
The announcement comes as the company navigates a challenging financial landscape, with interest rate fluctuations posing ongoing risks. The anticipated return to dividend payouts signals a cautious optimism for investors, with the potential for further positive developments should market conditions stabilise.
Looking ahead, Keppel Pacific Oak US REIT’s performance will be closely watched, particularly in relation to interest rate movements and their impact on the company’s financial strategy.
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