Healthcare S-REITs outperform broader S-REIT market
Healthcare S-REITs have been the top-performing REIT sub-sector this year, with an average total return of 6.2%, compared to the iEdge S-REIT Index's decline of 1.1%. The sub-sector also outperformed other REIT sub-sectors over the 1-year and 3-year periods, averaging 16.8% and 6.2% respectively.
The two healthcare S-REITs listed in Singapore have reported net institutional inflows amounting to S$17.6 million year-to-date. In contrast, the S-REIT sector as a whole has experienced net institutional outflows totaling S$527 million over the same period.
Here’s a look at the two healthcare S-REITs’ business updates for the first quarter of 2025.
1. $ParkwayLife Reit(C2PU.SI)$
ParkwayLife REIT (PLife REIT) is one of the largest listed healthcare REITs in Asia with a portfolio value of approximately S$2.46 billion comprising healthcare properties across Singapore, Japan and France. For the first quarter of 2025, PLife REIT posted increases in both gross revenue and net property income (NPI). Gross revenue rose by 7.3% year-on-year to S$39.0 million in 1Q25, while NPI rose 7.5% over the same period to S$36.8 million.
The strong performance was driven by contribution from one nursing home acquired in Japan in August 2024 and 11 nursing homes acquired in France in December 2024, partially offset by the depreciation of the Japanese Yen. Step-up lease agreements in Singapore properties also contributed to higher distributable income in 1Q25.
PLife REIT recorded a higher distributable income of S$25.0 million, up 9.1% year-on-year, and declared 1.3% higher in distribution per unit (DPU) at 3.84 cents for the period which will be distributed in 1H25.
As part of its portfolio optimization strategy, the REIT also announced that it was divesting its Malaysia portfolio, which makes up 0.2% of its gross revenue, at S$6.09 million which will mark its exit from Malaysia.
CGSI Research’s Lock Mun Yee notes that PLife REIT’s income profile is underpinned by a robust rental structure with in-built rent escalation features, and its Singapore portfolio contributing to 65.2% and 66.2% of its total 1Q25 revenue and NPI respectively. She also highlights that the REIT has a strong balance sheet with a gearing ratio of 36.1%, and that 90% of its interest rate exposure is hedged into fixed rates.
According to Bloomberg, PLife REIT has a 12-month consensus estimated target price of S$4.70.
2. $First Reit(AW9U.SI)$
For the first quarter of 2025 period, First REIT posted a 2.8% year-on-year decline in both rental & other income and net property & other income to S$25.4 million and S$24.6 million respectively. The decline was attributed to the depreciation of Japanese Yen and Indonesian Rupiah against the Singapore Dollar. As a result, distributable amount declined by 2.2% year-on-year and DPU dipped to 0.58 Singapore cents for the period.
In local currency terms, 1Q25 rental & other income for the REIT’s Indonesia portfolio rose by 5.5% year-on-year, while that of Japan remained unchanged.
As at 31 March 2025, First REIT’s gearing rose slightly to 40.7% and has 56.7% of the debt portfolio either on fixed rates or hedged. Lower interest rates led to a drop in cost of debt from 5.0% in 1Q24 to 4.7% in 1Q25, and the REIT has no refinancing requirements until May 2026.
On progress of its strategic review, First REIT updated that a marketing agent has been appointed to run a competitive and robust price discovery process where there was an outreach to over 60 parties to solicit interest for the Indonesia portfolio. First REIT has also approached multiple parties to explore options relating to the business as part of assessing opportunities.
Phillip Securities Research’s Darren Chan notes that First REIT is trading at attractive FY25e DPU yield of 9.2% and organic growth will come from more Indonesian hospitals achieving performance-based rent.
According to Bloomberg, First REIT has a 12-month consensus estimated target price of S$0.30.
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