To The Moon

THE first seven months of 2023 saw the iEdge S-Reit Index gain 3.9% in total return terms, reversing its 11.9% decline in 2022.

On a sub-segment basis, data centre S-Reits was the best performing segment, driven by Keppel DC Reit $KEPPEL DC REIT(AJBU.SI)$ ’s 29.8% total return in the year to date as at end July. This was followed by hospitality S-Reits with 5.8% average total returns, after being the best performing sub-segment last year.

Healthcare S-Reits continued to be resilient with 5% total returns, after booking declines in 2022.

ParkwayLife Reit $PARKWAYLIFE REIT(C2PU.SI)$ (PLife Reit) reversed its 25.1% decline in 2022 with a 5% gain in the year to date as at end July. Similarly, First Reit $FIRST REAL ESTATE INV TRUST(AW9U.SI)$  booked 4.9%in gains this year, also reversing declines of 6.4% in 2022.

Together, the two healthcare S-Reits booked net institutional outflows of S$19 million but received net retail inflows of S$16 million in the first seven months of 2023.

Both healthcare S-Reits have reported financial results for the first half ended Jun 30, 2023 (H1 2023).

1. $PARKWAYLIFE REIT(C2PU.SI)$

PLife Reit declared a distribution per unit (DPU) of 7.29 Singapore cents for H1 2023, representing an increase of 3.3% year on year.

This was driven by a 23.6% year-on-year increase in H1 2023 gross revenue, due to contribution from the five Japanese nursing homes acquired in September 2022, as well as higher rent from the Singapore properties. This contributed to a 25.1% growth in H1 2023 net property income (NPI) to S$70.1 million.

As at Jun 30, 2023, PLife Reit’s portfolio by asset value is split across Singapore at 65.3%, Japan at 34.4% and Malaysia at 0.3%. It expects that the healthcare industry will remain critically essential in a rapidly ageing population with greater demand for better quality healthcare and aged care services.

Hence, as part of its growth strategy, it plans to expand into a third key market while leveraging on its first mover advantage and strong network to strengthen its position in Japan.

PLife Reit’s gearing ratio remains at 35.3%, with a weighted average debt term to maturity of 2.9 years and interest coverage ratio of 13.8 times.

2. $FIRST REAL ESTATE INV TRUST(AW9U.SI)$

First Reit’s rental and other income grew by a slight 0.4% year on year to S$54 million in H1 2023, mainly due to contributions from the 12 Japan nursing homes acquired from in March 2022 and two additional Japan nursing homes acquired in September 2022.

However, due to higher financing costs, currency translation impact, and a one-off increase in unit base, First Reit’s H1 2023 DPU of 1.24 Singapore cents was 6.1% lower year on year.

Nursing homes in Japan and Singapore now comprise more than one-quarter of First Reit’s assets under management (AUM). The Reit noted that it remains committed to growing its developed markets portfolio to more than half of its AUM by FY2027.

First Reit completed an early refinancing of a Japanese yen denominated Tokutei Mokuteki Kaisha bond in Q2 2023 and has no refinancing requirement until May 2026. Its gearing ratio remains at 38.7% and interest coverage ratio at 4.1 times as at Jun 30, 2023.

Parkwaylife REIT AUM, First REIT AUM

https://www.sgx.com/research-education/market-updates/20230814-reit-watch-healthcare-s-reits-remain-committed-expansion