I first came across Parkway Life Reit from Motley Fool Singapore subscription service. It is interesting that this healthcare Reit was not in my radar for the past decade. It could be that I was holding on to First Reit through CPF in the past decade and hence it did not occur to me to look for other healthcare Reit. And because of that, I missed its growth over the past decade! Ouch!

Why buy?
I believe it is still not too late to take a stake in this stable and probably growing Reit. A few reasons behind my optimism.

  • Population in affluent Singapore and Japan will continue to age and hence there will continue be demand for quality healthcare and nursing homes.
  • The built-in rental escalation for the three Singapore hospitals (Mount Elizabeth, Gleneagles, and Parkway East) which is based on the formula of consumer price index (CPI) + 1 allows annual growth rent.
  • Past performance indicated a strong management team which has ensure no more than 30% of its debt matures every year.
What I expect?

What do I expect for the next decade? I expect to receive consistent dividend from the Reit and based on my purchase price, it’s about 5.2% yield. Growth should be moderated since it does not have much headroom for debt (though management felt that there is ample headroom) with its gearing around 38%. I think these are two possible events in the next decade, 1) Rights issue to raise money for new acquisition; 2) occasional divestment which will result in special dividend.

When will I sell?

I do hope to keep this forever unless there’s a big deterioration in its fundamental such as a big drop in its revenue, net property income etc.

Recent results
In the results released in July, Parkway Life Reit continues to perform well. For 1H 2016, its revenue has grown 7.7% to $54.286 million and net property income grew 7.5% to $50.7 million. Its dividend per unit dropped by 8.6% to 6 cents due to lack of divestment gain. Exclude the divestment gain, current dividend represented 51% of 2015 full year dividend. From the presentation slides, management highlighted two prong approach in its Strategic Investment.

  • To continue to seek out long-term and strategic partnership with good lessee/operator where possible. 
  • To prioritise & seek out investment opportunities in countries where PLife REIT  already has investments. It might establish a country HQ for closer monitoring of its properties and portfolio.
All seems well and I will continue to hold on to my small stake.