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.

Bloomberg: Singapore group spins off hospitals into trust

Singapore group spins off hospitals into trust

August 11, 2007

ASIA's second-biggest publicly traded operator of hospitals, Parkway Holdings, will price shares in its real estate investment trust at $S1.28 each to raise $S369.8 million ($284.2 million) in a stock sale.

Parkway Life Real Estate Investment Trust, which will hold the company's three hospitals in Singapore, is pricing the 288.9 million shares near the top end of the $S1 to $S1.34 range announced last month. The company told the Monetary Authority of Singapore it was raising funds to invest in health-care assets in Asia.

"The Asian health-care industry is expected to grow due to factors such as strong economic growth, rising personal income, increased awareness and expectation towards health-care," the company said in the filing.

The trust will offer a yield of 4.9 per cent for 2008, and 5 per cent for 2009.

Parkway Life REIT joins 17 other real estate investment trusts in Singapore, a market valued at $18 billion. The trust will be the second REIT in Singapore that has hospitals in its portfolio, after PT Lippo Karawaci's share sale for its First REIT, which owns three Indonesian hospitals and a country club.

Parkway said it would hold at least 30.1 per cent of the trust after the REIT goes public. It said last month that it wanted to acquire hospitals and clinics in markets such as China, Vietnam and India.

The REIT's shares start trading on the Singapore exchange on August 23. Shares of Singapore-listed Parkway Holdings have risen 18 per cent this year, compared with a 12 per cent gain in the Straits Times Index.

The shares, at $S3.74, up S6c yesterday, have a gross yield of 2.4 per cent.

Bloomberg