Falls in gross revenue and net property income are due to depreciation of the yen

 

PARKWAY Life Reit : C2PU 0% posted a distribution per unit (DPU) of S$0.0379 for the first quarter of 2024, up 4 per cent from S$0.0365 a year ago.

 

The healthcare real estate investment trust (Reit) pays out distributions semi-annually, and the Q1 DPU will form part of its distribution for the first half of this year.

 

Overall, gross revenue declined 2.7 per cent to S$36.3 million, from S$37.3 million in Q1 2023, its manager said in a Tuesday (Apr 30) bourse filing. Meanwhile, net property income slipped 2.8 per cent to S$34.3 million, from S$35.3 million previously.

 

The falls were mainly due to depreciation of the Japanese yen, said the manager.

 

But it added: &ldquo As the Reit has hedged the net income from Japan, the drop in revenue will be compensated by the FX (foreign exchange) gains from the settlement of the forward contracts.&rdquo

 

It also noted higher distributable income from Singapore hospitals and some Japanese nursing homes with step-up lease arrangements.

 

Finance costs increased 4.4 per cent to S$2.6 million, from S$2.5 million, on the back of capital expenditure (capex), new acquisitions in 2023, and higher interest costs from Singapore dollar and Japanese yen debts, partially offset by the depreciation of the yen.

 

Notwithstanding this, the manager said interest costs on loans drawn down to fund capex have no distribution impact, as they are not subject to deduction when computing distributable income to unitholders.

 

Its balance sheet and capital structure remain &ldquo strong&rdquo , with no long-term debt refinancing needed until March 2025.

 

As at Mar 31, 2024, all-in debt cost was &ldquo low&rdquo at 1.3 per cent, while gearing stood at 36.4 per cent with an interest cover of 11.1 times.

 

On its management of the Reit&rsquo s financial risk, the manager said that prinicpal FX risk is mitigated, as Japanese yen acquisitions are fully funded by yen loans.

 

Income FX risk is mitigated with yen net income hedges in place until Q1 2029, it said, adding that about 91 per cent of its interest rate exposure is hedged.

 

DBS Group Research cut its target price on Parkway Life Real Estate Investment Trust : C2PU -0.28% (Reit) after taking into account higher capital expenditures (capex) for asset enhancement initiatives.

 

In a report released on Thursday (Mar 7), the research team lowered its target to S$4.50 from S$4.80 and maintained its &ldquo buy&rdquo recommendation. This came after DBS raised its risk-free rate to 2.5 per cent and factored in a higher cost of debt for the Reit.

 

The new target implies a potential upside of 27.5 per cent from the counter&rsquo s last trading price of S$3.53 as at 11.46 am on Thursday. Units of Parkway Life Reit were up 0.6 per cent or S$0.02 at the time.

 

&ldquo We continue to like Parkway Life Reit for its strong earnings visibility, which is a positive attribute, especially in the current volatile and uncertain market outlook,&rdquo said analysts Rachel Tan and Derek Tan.

 

The Reit was also noted to be one of Asia-Pacific&rsquo s largest listed healthcare Reits by asset size. It is a &ldquo rare jewel&rdquo among Singapore-listed Reits, offering highly visible, stable and sustainable earnings due to its resilient industry and long leases with downside risk protection.

 

Furthermore, Parkway Life Reit owns three private hospitals in Singapore, making up most of its domestic market share.

 

The research team believes the next stage of growth for the Reit could come from its potential acquisition of Mount Elizabeth Novena Hospital, where it has the right of first refusal, or expanding into a third pillar, despite the uncertain timing.

 

The Reit&rsquo s full-year results for 2023 were in line with expectations. On Feb 1, it posted a 2.7 per cent increase in distribution per unit (DPU) to S$0.1477.

 

Gross revenue was up 13.5 per cent at S$147.5 million, while net property income (NPI) climbed 14.1 per cent to S$139.1 million.

 

For the six months ended Dec 31, 2023, the Reit recorded a 2.1 per cent rise in DPU to S$0.0748. Acquisitions helped boost H2 gross revenue by 4.7 per cent to S$73.1 million. Accordingly, NPI was up 4.8 per cent at S$69 million.

On Feb 5, Cohen & Steers Capital Management increased its substantial shareholding in (PLife Reit) to back above the 6 per cent threshold. The 2,355,900 units were acquired an average price of S$3.48 per unit. The deemed interest was previously above the 6 per cent threshold, but fell below 6 per cent, following a disposal of 3,777,771 units on Jan 3 at an average price of S$3.70. Note that Cohen & Steers Capital Management is not the registered holder of any shares of PLife Reit.

 

PLife Reit owns a diversified portfolio of 63 properties located in the Asia-Pacific region, with a total portfolio size of approximately S$2.23 billion as of Dec 31, 2023. This includes the largest portfolio of strategically located private hospitals in Singapore comprising Mount Elizabeth Hospital, Gleneagles Hospital and Parkway East Hospital.

 

On Feb 1, Parkway Trust Management reported PLife Reit achieved a net property income of S$69 million for H2 FY23 (ended Dec 31). This an increase of 4.8 per cent from H2 FY22, and for its FY23, net property income amounted to S$139.1 million, which was up 14.1 per cent from FY22. During its FY23, PLife Reit fortified its presence in Japan&rsquo s aged care market with the acquisition of two new nursing homes in Osaka Prefecture.

 

These yield-accretive acquisitions marked the initiation of a new strategic partnership with K.K. FDS, an established real estate developer in Japan. At the same time the partnership has enhanced PLife Reit&rsquo s tenant diversification with a new operator and brings the Group&rsquo s total Japan portfolio footprint to 59 properties aggregating to S$717.24 million in value.

RECENT acquisitions of nursing homes lifted Parkway Life Reit : C2PU -0.57%&rsquo s distribution per unit (DPU) by 2.1 per cent to 7.48 cents, for the six months ended Dec 31, 2023.

 

The Reit&rsquo s acquisition of five nursing homes in September 2022, and two more in Osaka, Japan in October 2023, helped boost H2 gross revenue by 4.7 per cent to S$73.1 million.

 

The Reit &ndash which has 63 healthcare properties in Singapore, Japan and Malaysia &ndash also enjoyed higher rent from its Singapore properties, under new master lease agreements that commenced in August 2022.

 

With the top line increase, Parkway Life Reit&rsquo s H2 net property income (NPI) was up 4.8 per cent to S$69 million.

 

For the full FY2023, Parkway Life Reit&rsquo s DPU was up 2.7 per cent to 14.77 cents. Gross revenue rose 13.5 per cent to S$147.5 million, while NPI climbed 14.1 per cent to S$139.1 million.

 

The Reit&rsquo s total portfolio size stood at S$2.23 billion as at end-2023, and it sees itself being &ldquo in a good position to benefit from the resilient growth of the healthcare industry in the Asia-Pacific region&rdquo .

 

On the debt front, Parkway Life Reit&rsquo s gearing stands at 35.6 per cent. It has no immediate long-term debt refinancing needs till March 2025 the Reit had acquired six committed and long-term new facilities, comprising a mix of Singapore dollar and Japanese Yen loans.

 

The loan proceeds will be used to finance renewal capex works at Mount Elizabeth Hospital, refinance loans due in 2024 and 2025, and term out the short-term loan drawn down upon for the Japan acquisitions.

THE time has come for to proceed with the much-touted acquisition of Mount Elizabeth Novena Hospital, said SAC Capital on Friday (Jan 12).

 

The hospital has established itself as a stable asset with consistent cash flow, so it has become &ldquo an ideal target for capital recycling&rdquo for its sponsor IHH Healthcare, said SAC analyst Matthias Chan.

 

&ldquo As IHH focuses on its growth strategy, to maximise balance sheet efficiency, the asset-light or capital-recycling model is likely to be brought to the fore,&rdquo he said. He added that the heartland hospital stands out in IHH&rsquo s portfolio for the way it synergises best with Parkway Life Reit&rsquo s assets.

 

In addition, Parkway Life Reit, whose major shareholder Parkway Holdings is an IHH unit, has the right of first refusal (ROFR) on the acquisition of Mount Elizabeth Novena Hospital.

 

As the estimated deal size of S$2.0 billion is comparable to Parkway Life Reit&rsquo s market capitalisation of S$2.2 billion, Chan expects the Reit to acquire a one-third stake of the hospital at a time over a five to six-year period, or at about S$650 million to S$700 million for each tranche.

 

He said the deal would still be yield-accretive if Parkway Life Reit funds the acquisition purely through new equity, and sets aside debt for other opportunities.

 

He noted that the Reit will have a debt headroom of about S$370 million upon raising its gearing to 45 per cent from 36 per cent as at the end of last September.

 

He highlighted that the current capitalisation rate of Singapore hospitals, at around 5 per cent, compares favourably with the Reit&rsquo s annualised distribution yield of 4 per cent, based on its FY2023 H1 financials.

 

Given the new annual rent-review formula based on either adjusted hospital revenue or consumer price index (CPI) &ndash to be applied from FY2026 &ndash Chan sees favourable earnings growth from the Reit&rsquo s Singapore properties.

 

Parkway Life Reit stands to benefit from an annual rental upside of more than 3 per cent, based on the CPI formula and Singapore&rsquo s average 10-year CPI of 2.5 per cent. If the hospital&rsquo s revenue formula produces higher rent, the Reit&rsquo s earnings would get an even bigger boost. &ldquo In the meantime, till FY2026, rental increase has been locked in at 2 to 3 per cent per annum,&rdquo he added.

 

Following another set of &ldquo good results&rdquo for Parkway Life REIT&rsquo s (PLife REIT) C2PU -0.26% 1HFY2023 ended June 30, analysts from CGS-CIMB have maintained their &ldquo add&rdquo call on the REIT with an unchanged target price of $4.50.

 

The REIT announced a distribution per unit (DPU) of 7.29 cents for the six-month period in line with 49.9% of analysts Lock Mun Yee and Natalie Ong&rsquo s full-year FY2023 forecast.

 

For its 1HFY2023, PLife REIT reported a 23.6% y-o-y increase in 1HFY2023 gross revenue to $74.4 million due to contributions from five Japan nursing homes acquired in September 2022 and higher rents from Singapore hospitals from the new master lease agreement. Distribution income to unitholders was also up 3.3% y-o-y to $44.1 million on the back of higher interest expenses.

 

Singapore revenue and net property income (NPI) accounted for 68.2% and 70% of the REIT&rsquo s total 1HFY2023 revenue and NPI levels, respectively, as rent from Singapore hospitals during the period increased under a new 20-year lease agreement which commenced in August last year. Singapore revenue rose 42.8% y-o-y to $50.8 million while NPI increased 44.4% y-o-y to $49 million.

 

However, the analysts note that the impact on distributable income was tempered by $13.7 million of adjustments from recognising rental income on a straight-line basis over the lease term period.

 

They add that PLife REIT has maintained a strong balance sheet to tap growth opportunities , with gearing standing at 35.3% at end-1HFY2023. &ldquo Its interest coverage ratio (ICR) of 13.8x as at end-1HFY2023 remained the highest amongst S-REITs. All-in interest cost stood at 1.19% at end-1HFY2023,&rdquo say Lock and Ong.

 

&ldquo PLife REIT&rsquo s strong balance sheet should allow it to tap inorganic growth opportunities in existing markets or to build a third key market, which we believe could enhance its long-term prospects,&rdquo they add.

 

The analysts have kept their FY2023 to FY2025 DPU estimates unchanged and maintained their dividend discount model (DDM) based target price at $4.50. &ldquo We like PLife REIT for its stability, backed by its defensive income structure with inbuilt rent escalation features,&rdquo Lock and Ong say.

 

Their re-rating catalysts include accretive acquisitions, while downside risks include deflationary periods, during which the REIT&rsquo s Singapore rent revisions could revert to 1% as its annual rent formula kicks in again, or potential cost overruns from its asset enhancement initiatives under its capex renewal exercise.

 

PARKWAY : C2PU -1.3% Life Real Estate Investment Trust : C2PU -1.3%&rsquo s (Parkway Life Reit) distribution per unit (DPU) rose by 3.3 per cent to S$0.0729 for its first half ended Jun 30, 2023, from S$0.0706 previous corresponding period.

 

On an annualised basis, H1 DPU was S$0.1458, up 3.3 per cent from S$0.1412 in the same period a year earlier, it stated in results released on Wednesday (Jul 26).

 

The rise in distributions came as gross revenue grew 23.6 per cent to S$74.4 million from S$60.2 million.

 

This was mainly due to contributions from five Japanese nursing homes acquired in September 2022, along with higher rent from the Reit&rsquo s Singapore properties, partially offset by a depreciation in the yen.

 

Net property income was 25.1 per cent higher at S$70.1 million from S$56 million in the previous corresponding period, while distributable income grew by 3.3 per cent on the year to S$44.1 million from S$42.7 million.

 

The distribution will be paid out on Aug 30, after book closure on Aug 3.

 

The manager said the Reit realised around S$3.3 million in foreign exchange gains from the settlement of Japanese yen forward contracts in H1 2023, compared with the S$1.9 million realised in H1 2022. These partially offset higher management fees.

 

Finance costs also rose on the funding of capital expenditure and 2022 acquisitions. Higher interest costs from Singapore-dollar debts, however, were partially offset by the depreciation of the Japanese yen.

 

The Reit&rsquo s aggregate leverage stood at 35.3 per cent as at Jun 30, 2023, down from 36.4 per cent in the same period last year. This implies a debt headroom of between S$404.3 million and S$673.6 million.

 

Its weighted average lease expiry by gross revenue stands at around 16.7 years.

 

Yong Yean Chau, chief executive of the manager, said the Reit&rsquo s assets are well-placed to benefit from the growth of the healthcare industry in Asia-Pacific.

 

&ldquo The healthcare industry will remain critically essential in a rapidly ageing population with greater demand for better quality healthcare and aged care services,&rdquo he noted.

SINGAPORE-LISTED real estate investment trusts (S-Reits) with healthcare assets must diversify strategies to capture new growth pillars as the healthcare sector normalises and the world returns to a post-Covid &ldquo business as usual&rdquo situation, market watchers said.

 

The last two years have been good years for healthcare-related stocks in general. In the Singapore market, Parkway Life Reit : C2PU -0.74% (PLife Reit) has significantly outperformed most of its S-Reit peers.

 

While hospitality Reits dealt with the drying up of tourist dollars, retail Reits faced down empty malls and even office Reits worried about rental renewals as employees worked from home, Parkway Life enjoyed steady income over the pandemic period.

 

PLife Reit has generated total returns of 10.2 per cent in the year to Tuesday (Mar 7).

 

In comparison, the overall Reit market here, represented by the iEdge S-Reit Index, has generated total returns of 4 per cent over the same period, while the benchmark Straits Times Index has returned 0.1 per cent.

 

The edge that PLife Reit enjoyed may, however, be coming to an end.

 

Singapore on Feb 13 reverted its disease outbreak response system condition (Dorscon) level from yellow to green, which indicates that a disease is mild and poses minimal disruption to daily life. Most countries &ndash including China, which had until recently imposed strict restrictions amid a tough zero-Covid policy &ndash have also reopened their borders.

 

While expected to be a shot in the arm for sectors such as hospitality and retail, Dorscon Green could put the brakes on the healthcare sector&rsquo s trajectory.

 

New growth pillars

To its credit, PLife Reit has been building up its portfolio to grow its income.

 

One of Asia&rsquo s largest listed Reits by asset size, it acquired five nursing homes in the Hokkaido region and the Greater Tokyo region last year for a total of 5.4 billion yen (S$55.5 million).

 

&ldquo PLife Reit&rsquo s asset recycling activities in Japan nursing homes are still ongoing,&rdquo said DBS analysts Rachel Tan and Derek Tan, noting that these activities have been &ldquo sporadic&rdquo . The Reit in early 2021 divested its non-core industrial property, P-Life Matsudo &ndash the only pharmaceutical product distributing and manufacturing facility within its Japan portfolio.

 

&ldquo With the recent acquisitions, we believe its asset recycling exercise will continue to drive growth ahead, given its successful track record,&rdquo the analysts added. &ldquo But the timing remains uncertain.&rdquo

 

They see a &ldquo potential injection&rdquo of Mount Elizabeth Novena Hospital into PLife Reit&rsquo s portfolio, which already includes three other Singapore hospitals: Mount Elizabeth Hospital, Gleneagles Hospital and Parkway East Hospital.

 

The three Singapore hospitals account for 65.3 per cent of its portfolio by asset value, with the Japan nursing homes making up 34.4 per cent. The Reit also owns some strata-titled units in a medical office building in Malaysia.

 

The Reit has right of first refusal over Mount Elizabeth Novena Hospital from its sponsor IHH Healthcare : Q0F +2.25%.

 

In addition to the ongoing recycling of its nursing homes properties in Japan and the acquisition pipeline from its sponsor, the manager of PLife Reit is looking to build a &ldquo third pillar&rdquo for the next phase of growth.

 

&ldquo The management continues to explore opportunities in developed countries with a mature healthcare market and believes that there could be potential options in Australia and Europe,&rdquo the DBS analysts said.

 

Value in Japan

Another healthcare Reit making a play for Japan is First Reit : AW9U 0%, which in September last year bought two nursing homes near the Tokyo and Nagoya city centres for a total purchase consideration of 2.6 billion yen.

 

This comes after the Reit in March 2022 marked its maiden entry into Japan with the acquisition of 12 nursing homes from its sponsor OUE Lippo Healthcare : 5WA +4% for 24.2 billion yen.

 

The manager of First Reit noted then that Japan is poised to become the first &ldquo super-aged&rdquo nation in the world, with more than a third of its population projected to be over the age of 65 by 2040.

 

First Reit, which has 72.1 per cent of its S$1.15 billion in assets under management (AUM) based in Indonesia, has not done as well as PLife Reit. It generated total returns of 2.5 per cent in the year to date &ndash lower than the S-Reit average.

 

According to SAC Capital analyst Peggy Mak, First Reit &ndash like many of its S-Reit peers &ndash has been weighed down by concerns over rising interest rates and the resultant impact on its cost of funds and asset valuations.

 

&ldquo But its risk profile has improved with the conclusion of new master leases for the Indonesian assets in late-2021 and the addition of the Japan assets in March 2022,&rdquo Mak said in a report.

 

First Reit&rsquo s 14 Japan nursing homes accounted for 25.1 per cent of its AUM as at end December. Its three nursing homes in Singapore account for the remaining 2.8 per cent.

 

The Reit manager had earlier announced that it intends to pivot into developed markets, which it targets to account for more than half of its portfolio by 2027.

 

With the easing of cross-border travel restrictions, First Reit said in its latest results announcement that it will continue to carry out what it calls its &ldquo 2.0 Growth Strategy&rdquo to explore accretive opportunities arising from the increasing healthcare demand.

 

SINGAPORE &ndash Stark warnings from the US that more interest rate rises are on the way sent Wall Street tumbling overnight and sparked declines across the region on Wednesday.

 

Investors here were no exception as they rushed for the exit, sending the Straits Times Index (STI) down 0.6 per cent, or 18.41 points, to 3,226.86 in the process.

 

Only five of the 30 component stocks closed higher, while losers trumped gainers 334 to 199 across the broader market, with 1.5 billion shares worth $1 billion transacted.

 

The US yield curve became more inverted &ndash a recession indicator &ndash after Federal Reserve chairman Jerome Powell&rsquo s hawkish testimony on Tuesday.

 

He had told the Senate Banking Committee that the US central bank is prepared to react to signs of economic strength by raising interest rates higher than previously expected and potentially returning to a quicker pace of rate increases.

 

Higher interest rates generally bode well for lenders, but the risks of a recession are also rising.

 

Singapore&rsquo s banking trio had a mixed showing: UOB was marginally up 0.1 per cent to $29.47, DBS Bank slipped 0.4 per cent to $33.71, and OCBC Bank was 1 per cent lower at $12.55.

 

Real estate investment trusts (Reits) also suffer in a high-rate environment, so it was no surprise that only two of the 40 or so Reits and property trusts listed on the Singapore Exchange &ndash EC World Reit and Far East Hospitality Trust &ndash managed to chalk up gains. Most were down and only a few were unchanged.

 

EC World Reit units rose 1.5 per cent to 34.5 cents, a day after its manager announced that the sponsor had released more funds from escrow to meet some outstanding mandatory bank repayments.

 

Ground-handler and in-flight caterer Sats slid 1.6 per cent to $2.46, approaching its 52-week low of $2.355.

 

The declines on Wednesday can be sheeted home to the bloodshed on Wall Street overnight, when the key Dow Jones Industrial Average dropped nearly 600 points, or 1.7 per cent, in the wake of Mr Powell&rsquo s remarks.

 

The S& P 500 dropped 1.5 per cent while the technology-heavy Nasdaq was off 1.2 per cent.

 

Most regional markets responded in kind, with the Hang Seng in Hong Kong down 2.35 per cent, the Kospi in Seoul falling 1.28 per cent and Australian shares dropping 0.8 per cent.

 

PARKWAY Life Real Estate Investment Trust (PLife Reit) has agreed to acquire 2 nursing homes in Japan for 2.88 billion yen (S$29.4 million) to deepen its expansion in the country&rsquo s aged care market.

 

The healthcare-focused Reit is buying the properties from Japanese real estate developer Daiwa House. Together with 3 other acquisitions announced last week, this will bring its Japan portfolio to 57 properties valued at S$758.4 million.

 

The acquisition will be made at 11.1 per cent below valuation, and is expected to generate a net property income yield of 5.2 per cent. The transaction is expected to be completed by Q3 2022.

 

PLife Reit : C2PU +0.65% will be working with a new operator, Zen Wellness Co, which operates 11 nursing homes in the Kanto/Greater Tokyo region.

 

The nursing homes are freehold properties built in 2021 and located in residential areas of the Tokyo and Chiba prefectures. PLife Reit will take over the existing lease agreements, with an average long balance lease term of 29 years.

 

With the addition of the 2 nursing homes, the Reit&rsquo s weighted average lease expiry by gross revenue will increase from 17.05 years as at end-August to 17.21 years. Coupled with the 3 other nursing homes, the Reit&rsquo s leverage ratio will increase from 32.5 per cent as at end-June to 34.3 per cent.

 

The acquisition will be fully funded by yen-denominated debt.

 

&ldquo The 2 well-located properties will not only strengthen our portfolio but also initiate a new collaboration with Daiwa House, a reputable real estate developer in Japan,&rdquo said Yong Yean Chau, chief executive of the Reit manager. He added that there is a strong demand for quality care homes, driven by Japan&rsquo s ageing population.

 

CGS-CIMB on Wednesday (Sept 14) raised its target price on healthcare-focused Parkway Life Reit : C2PU -0.84% by S$0.01 to S$5.06 after the Reit announced the acquisition of 3 nursing homes in Hokkaido on Tuesday.

 

Post-purchase, Parkway Life Reit&rsquo s Japan portfolio would be expanded to S$725.3 million, which makes up around 32 per cent of its total assets under management (AUM), noted analyst Lock Mun Yee.

 

Given that the properties still have a balance lease term of 19 years, Lock believes that this will also extend the Reit&rsquo s portfolio weighted average lease expiry from 17.01 years to 17.05 years, thus improving its income resiliency.

 

She expects the deal to be accretive to the reit&rsquo s distribution per unit (DPU) and raised her FY22 to FY24 DPU estimates by 0.3 and 0.5 per cent respectively.

 

However, with an estimated total return of less than 10 per cent in the near term, CGS-CIMB upheld its &ldquo hold&rdquo rating.

 

&ldquo With its robust balance sheet, Parkway Life Reit is well placed to continue tapping more inorganic growth opportunities, in our view. We like PReit for its stability, backed by its defensive income structure with in-built escalation features,&rdquo said Lock.

 

THE trustee of Parkway Life Reit : C2PU -0.21% (PLife Reit) has entered an agreement to acquire 3 nursing homes in Hokkaido for a sum of 2.56 billion yen (S$26.1 million), in a move to further expand the healthcare Reit&rsquo s Japan portfolio.

 

The 3 properties &ndash Blue Terrace Kagura, Blue Rise Nopporo and Blue Terrace Taisetsu &ndash are being sold by Blue Melon Capital Kabushiki Kaisha and its wholly-owned subsidiary, K2 Healthcare Sapporo Godo Kaisha. 

 

These facilities are operated by Blue Care Kabushiki Kaisha, a wholly-owned subsidiary of Living Platform, one of PLife Reit&rsquo s existing nursing home operators in Japan.

 

The acquisition will be made at 12.2 per cent below valuation and is expected to generate an average net property yield of 6.5 per cent, PLife Reit announced in a Tuesday (Sept 13) bourse filing. 

 

The deal is expected to be completed by Q3 this year and will bring the Reit&rsquo s Japan portfolio to 55 properties, totalling S$725.33 million in value. It will be fully funded by Japanese yen debts, which the Reit described as a &ldquo natural hedge&rdquo .

 

PLife Reit will take over the existing lease agreements of the properties, which have 19 years left on their leases. This will improve PLife Reit&rsquo s weighted average lease expiry, by gross revenue, from 17.01 years to 17.05 years.

 

Yong Yean Chau, chief executive of PLife Reit&rsquo s manager, said: &ldquo Against the backdrop of a Covid-19 impacted economy, Japan&rsquo s aged care market remains stable and resilient. The acquisition not only strengthens our presence in Japan, but also enhances our collaboration with our existing partner, Living Platform group.&rdquo

SINGAPORE lists 2 actively traded Healthcare related S-Reits &ndash ParkwayLife Reit : C2PU -0.2%and First Reit. : AW9U -1.69% Healthcare Reits invest in income-producing real estate primarily used for healthcare related purposes including but not limited to hospitals, medical offices, outpatient facilities and nursing facilities. As such, these Reits may be regarded as an option for investors to gain exposure to the growing and resilient healthcare sector.

 

ParkwayLife Reit is one of the largest listed healthcare Reits in Asia with a portfolio of 56 properties at S$2.29 billion in size. It has 64.6 per cent of its portfolio in hospitals and medical centres, and 35.4 per cent in nursing homes, across Singapore (64.3 per cent), Japan (35.4 per cent), and Malaysia (0.3 per cent).

 

ParkwayLife Reit reported 2.3 per cent year-on-year higher gross revenue for Q1 2022, arising from the3 properties it acquired last year and higher rent received from Singapore hospitals. The Reit noted that its distribution per unit (DPU) has grown steadily at a rate of 122.8 per cent since its listing.

 

In its Singapore portfolio (hospitals include Mouth Elizabeth Hospital, Parkway East Hospital, and Gleneagles Hospital), its master lessee Parkway Hospitals Singapore, is a wholly owned subsidiary of IHH Health which is one of the world&rsquo s largest healthcare networks with 80 hospitals in 10 countries. Its latest renewal term of 20.4 years runs from Aug 23, 2022 to Dec 31, 2042, with an option to renew for a further 10 years. It has a triple net lease arrangement which means that the Reit does not bear property taxes, property insurance, property operating expenses and is unaffected by inflated-related escalating expenses.

 

In its Japan portfolio, it owns 52 nursing home properties with a weighted average lease term to expiry of 11.79 years and a diversified tenant base across 28 nursing home operators. Based on its existing lease arrangements, about 95.2 per cent of its Japan portfolio is downside-protected.

 

First Reit has a portfolio of 31 properties comprising 16 in Indonesia, 3 in Singapore and 12 in Japan with a combined size exceeding S$1.2 billion. Its Reit manager is 60 per cent owned by OUE Limited and 40 per cent owned by OUE Lippo Healthcare (OUELH). As such, the Reit has rights-of-first refusal to a pipeline of properties from PT Lippo Karawaci Tbk and OUELH.

 

First Reit in its Q1 2022 business update reported 34.9 per cent year-on-year growth in net property and other income and 1.5 per cent growth in DPU paid (0.66 Singapore cents for Q1 2022). Following its maiden entry into Japan with the acquisition of 12 nursing homes, First Reit noted that it has successfully taken the first step of its First Reit 2.0 Growth Strategy to expand into developed markets and diversify geographical risk.

 

First Reit&rsquo s Indonesia hospital operator, PT Siloam International Hospitals Tbk reported stable quarter-on-quarter performance for Q1 2022 despite the impact of the Omicron variant. First Reit&rsquo s nursing homes in Japan and Singapore also noted high occupancy rates and the Reit remains confident of the resilient healthcare market in its operating markets.

PARKWAY Life Reit reported a 2.1 per cent increase in its distribution per unit (DPU) to a record 14.08 Singapore cents for the financial year ended Dec 31, 2021 despite a small dip in gross revenue.

 

For the fourth-quarter of FY2021, its DPU was unchanged at 3.57 Singapore cents, the manager of the real estate investment trust (Reit) said in an interim financial statement on Monday (Jan 24).

 

Distributable income to unitholders stayed at S$21.6 million in Q4 but for FY2021, it rose to S$85.2 million.

 

Yong Yean Chau, chief executive of the manager, said the uninterrupted growth in distributions to unitholders was " underpinned by greater certainty from the business continuity and sustained rental income stream accrued from the renewal of master lease agreements for our Singapore hospitals" .

 

This was despite a 0.2 per cent year-on-year dip in gross revenue to S$120.7 million in FY2021, largely attributed to the divestment of its P-Life Matsudo property in Japan and the depreciation of the Japanese yen, the manager said.

 

It added that this was partially offset by revenue contribution from the Japan property acquisitions in December 2020, 2021 and July 2021 as well as higher rent from the Singapore properties.

 

Gross revenue in Q4 however inched up 0.1 per cent due to contribution from several nursing home properties and higher rent from the Singapore properties.

 

Net proceeds from the divestment have been used to repay short term borrowings in Q2.

 

The group has current loans and borrowings of about S$94.7 million as at Dec 31. Committed long-term facility of 7.7 billion yen (S$91.6 million) has been put in place to extend the current loans and borrowings by March 2022, the reit manager said.

 

" Notwithstanding the net current liabilities position, based on the Group' s existing financial resources, the group believes that it will be able to refinance its borrowings and meet its current obligations as and when they fall due," it said.

 

For 2022, the manager noted that the global economy is still facing uncertainty, stemming from Omicron, as well as a rise in inflation that could " endanger the recovery" in emerging and developing economies.

 

" As uncertainties surrounding global economies continue to pose challenges for most businesses, Parkway Life Reit remains prudent as it proactively manages its portfolio and strategically navigates for growth opportunities," said the manager.

 

" The healthcare industry will remain critically essential in a rapidly ageing population with greater demand for better quality healthcare and aged care services. Parkway Life Reit' s assets place it in a good position to benefit from the resilient growth of the healthcare industry in the Asia-Pacific region," it added.