Healthcare S-Reits outperforming broader S-Reit market and sub-segments so far this year

HEALTHCARE S-Reits have been the top-performing Reit sub-sector this year, offering an average total return of 6.2 per cent against a 1.1 per cent decline in the iEdge S-Reit Index. The sub-sector also outperformed other Reit sub-sectors over the one-year and three-year periods, clocking average returns of 16.8 and 6.2 per cent, respectively.

The two healthcare S-Reits listed in Singapore have reported net institutional inflows amounting to S$17.6 million in the year to date. In contrast, the S-Reit sector as a whole suffered net institutional outflows totalling S$527 million over the same period.

Here is a look at the two healthcare S-Reits’ business updates for the first quarter of 2025.

ParkwayLife Reit

ParkwayLife Reit (PLife Reit) is one of the largest listed healthcare Reits in Asia. Its portfolio value stands at about S$2.46 billion, made up of healthcare properties across Singapore, Japan and France.

In the first quarter of 2025, PLife Reit posted increases in both gross revenue and net property income (NPI). Gross revenue rose by 7.3 per cent year on year to S$39 million in Q1 2025; NPI went up 7.5 per cent over the same period, to S$36.8 million.

The strong performance was driven by contributions from a nursing home acquired in Japan last August, and 11 other homes acquired in France in December 2024. The gains were, however, partially offset by the depreciation of the Japanese yen. Step-up lease agreements in Singapore properties also contributed to the higher distributable income in Q1 2025.

The Reit’s distributable income was S$25 million, up 9.1 per cent year on year. Distribution per unit (DPU) for the period is 1.3 per cent higher at S$0.0384 for the period, and will be distributed in H1 2025.

As part of its portfolio optimisation strategy, the Reit also announced that it was divesting its Malaysia portfolio, which accounts for 0.2 per cent of its gross revenue, at S$6.09 million. With this move, the Reit marks its exit from the country.

CGSI Research’s Lock Mun Yee notes that PLife Reit’s income profile is underpinned by a robust rental structure, with built-in rent escalation features and its Singapore portfolio contributing to 65.2 and 66.2 per cent of its total Q1 2025 revenue and NPI, respectively.

She also highlights that the Reit has a strong balance sheet, with a gearing ratio of 36.1 per cent, and that 90 per cent of its interest-rate exposure is hedged into fixed rates. Bloomberg pegs PLife Reit’s 12-month consensus estimated target price at S$4.70.

First Reit

For the first quarter of 2025 period, First Reit posted a 2.8 per cent year-on-year decline in both rental and other income, and net property and other income to S$25.4 million and S$24.6 million, respectively. The decline was attributed to the depreciation of the Japanese yen and Indonesian rupiah against the Singdollar.

As a result, distributable amount declined by 2.2 per cent year on year, and DPU dipped to S$0.0058 for the period.

In local currency terms, Q1 2025 rental and other income for the Reit’s Indonesia portfolio rose by 5.5 per cent year on year, while that of Japan remained unchanged.

As at Mar 31, 2025, First Reit’s gearing rose slightly to 40.7 per cent, and has 56.7 per cent of the debt portfolio either on fixed rates or hedged. Lower interest rates led to a drop in cost of debt from 5 per cent in Q1 2024 to 4.7 per cent in Q1 2025, and the Reit has no refinancing requirements until May 2026.

Turning to its strategic review, First Reit says a marketing agent has been appointed to run a competitive and robust price-discovery process which entailed reaching out to more than 60 parties to solicit interest for the Indonesia portfolio. First Reit has also approached multiple parties to explore options relating to the business as part of assessing opportunities.

Phillip Securities Research’s Darren Chan notes that First Reit is trading at an attractive FY 2025e DPU yield of 9.2 per cent, and that organic growth will come from more Indonesian hospitals achieving performance-based rent.

Bloomberg says First Reit has a 12-month consensus estimated target price of S$0.30.

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 S-Reits & Property Trusts Chartbook.