USA has caught the flu, and we seem to be getting the cold. US...

USA has caught the flu, and we seem to be getting the cold. US has substantially more lenders with increased competition for loans which drives reckless lending and higher LVR. Their vacancy rates are as high as 30% for commercial real estate in some cities. Prevalence of long-term fixed rate loans somewhat insulates the sector from rising rates but not from shifting work preferences.

Older properties with less amenities will see their prices tumble while prime property will largely remain unchanged. COF has a strong portfolio with high occupancy, which reflects demand for these assets. Dilapidated and aging fringe commercial real estate will suffer, but I don't think COF will bear the brunt of it. Aus also has different economic dynamics, with more of our workforce returning to the office upon the realisation of the poor productivity that is inherent when one does work while still in bed!

COFs balance sheet may be an issue, depending on how management deals with it. I would rather see dividends used to pay down debt and increase equity rather than take on more debt to finance payouts, as was the case in the last financial year. Sale of property ($63M total) to pay down debt may delay the issue, temporarily, but will not make much of an impact overall given that $65M of new debt (after repayments) was issued last financial year.

At this point, would one be better off liquidating the entire portfolio at a 20% discount to valuation and returning all proceeds to shareholders, which at this point would be $1.70 per share after discount. The use of debt to finance operations is unsustainable.