UOB KH: PLife Reit - An oasis in sea of turbulence

UOB KayHian

27 Aug 2007

An oasis in sea of turbulence

Parkway Life REIT invests in income-producing real estate assets in the Asia Pacific region used primarily for healthcare and related purposes. They include hospitals, ambulatory surgery centres, primary clinics, medical office building, step-down care facilities, research & development facilities and pharmaceutical facilities in China, India, South East Asia and the Middle East.

The initial portfolio comprising Mount Elizabeth Hospital, Gleneagles Hospital and East Shore Hospital represents the largest portfolio of private hospitals in Singapore. Mount Elizabeth Hospital and Gleneagles Hospital, in particular, are located in the heart of prime Orchard Road shopping district.

Riding on growing demand for healthcare. Parkway Holdings will lease the three hospitals from Parkway Life REIT for an initial term of 15 years with an option to extend for another 15 years. The annual rental for each of the properties comprises a base rent (S$30m) and a variable rent (3.8% of adjusted hospital revenue). The variable rent component is linked to adjusted hospital revenue, allowing unitholders to participate in growth of the healthcare industry.

Singapore is a healthcare-hub in Asia.

Parkway Life REIT also benefits from the growth in medical tourism. International patient inflow in Singapore has increased at CAGR of 35.4% from 98,700 in 2001 to 448,800 in 2006 (source: The population in Singapore is ageing. The life expectancy for male has increase from 76 years in 2000 to 78 years in 2006. The life expectancy for female has correspondingly increased from 80 years to 81.8 years (source: Ministry of Health). The proportion of people aged 65 or older is projected to increase from 6.9% of total population in 2006 to 18.9% by 2030. Already, Parkway Holdings?s revenue per patient day has increased at CAGR of 16.2% from S$1,258 in 2004 to S$1,699 in 2006.MOH and Frost & Sullivan). Singapore aims to attract 1m foreign patient visitors by year 2012.

Acquisition growth strategy. Parkway Life REIT will source and acquire assets in the Asia Pacific region, which are distribution yield accretive and have potential for future earnings and capital growth. Parkway Life REIT will also seek to improve portfolio diversification and asset quality. It is already evaluating opportunities for acquisitions in Singapore, Malaysia, India and China. Parkway Life REIT has been granted the right of first refusal by Parkway Holdings over future sale of healthcare and related facilities located in the Asia Pacific region. Parkway Holdings operates 15 hospitals in Singapore, Brunei, India and Malaysia. It also operates an ambulatory surgical centre and clinics in China and an aesthetics clinic in Vietnam. These assets provide a pipeline of potential future acquisitions. Parkway Life REIT will also identify greenfield sites for development of hospital and healthcare-related facilities. It also seeks to acquire third party hospital and healthcare-related properties.

Parkway Life REIT offers attractive yield. Parkway Life?s yield is comparable to hospitality REITs such as CDL Hospitality Trust and Ascott REIT. Its yield is nevertheless much more attractive when compared to REITs investing in commercial, retail or industrial properties.