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According to First Reit’s 2.0 Growth Strategy, rolled out in FY2021, it aims to have more than 50 per cent of assets under management (AUM) from developed markets by FY2027. The proportion of First Reit’s AUM in developed markets has grown from 3.4 per cent in Singapore in FY2021, to a combined 25.5 per cent in Singapore and Japan in FY2023. This includes three and 14 nursing homes in Singapore and Japan, respectively.
The CEO of First Reit, Victor Tan, believes that the demand for healthcare is rising. In an interview with SGX’s kopi-C column, he noted that in Asia, many developed countries have ageing populations that will need more healthcare. Japan is already a super-aged society, and Singapore’s population is ageing quickly.
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First Reit also announced its FY2023 results last week. It declared a distribution per unit (DPU) of 0.62 Singapore cent for the quarter ended Dec 31, 2023, unchanged from the DPU in the preceding three quarters. However, DPU for the full year was 6.1 per cent lower year on year due to higher financing costs, foreign exchange effects, and an increased unit base.
While there is pressure from higher interest rates, First Reit maintained a gearing of 38.7 per cent and an interest coverage ratio of 4.1 times. To further manage interest rate impact, it has increased the proportion of debt on fixed rates or hedged to 87.2 per cent from 59.6 per cent a year ago.
PLife Reit has a portfolio of 63 healthcare properties of which a majority are in Singapore (67.6 per cent by asset value) and Japan (32.3 per cent). By asset count, most of the Reit’s properties are located in Japan. Following the acquisition of two nursing homes in Osaka last year, PLife Reit’s total Japan portfolio footprint has grown to 59 properties aggregating to S$717.2 million in value.
While PLife Reit plans to strengthen its existing markets by leveraging its strong network in Japan, it also has plans to build a third market which can contribute enhanced growth to the Reit in the mid to long term.
PLife Reit announced a DPU of 14.77 Singapore cents for the full year 2023, a 2.7 per cent increase year on year. This was largely due to contributions from new acquisitions and higher rent from Singapore hospitals. PLife Reit has close to 90 per cent of its interest rate exposure hedged by end Q1FY2024. The Reit also has a healthy gearing of 35.6 per cent and high interest coverage ratio of 11.3 times. SGX RESEARCH
The writer is a research analyst at SGX. For more research and information on Singapore’s Reit sector, visit sgx.com/research-education/sectors for the monthly S-Reits & Property Trusts Chartbook.
Source: SGX Research S-Reits & Property Trusts Chartbook
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