Updated: 29 September 2021
Unitholders of Parkway Life REIT should note that the EGM will be held tomorrow to vote on the entry of the new master lease agreements as well as the renewal capital expenditure agreements.
A summary of the salient details of these two transactions can be found below.
The weekly round-up continues with interesting snippets from various companies during the week.
Parkway Life REIT (SGX: C2PU)
Parkway Life REIT is in a league of its own, being one of the only REITs that can boast an uninterrupted increase in its recurring distribution per unit (DPU) since its IPO in 2007.
This week, the healthcare REIT announced the signing of new master lease agreements for its three Singapore hospitals.
The new lease agreements will run for around 20.4 years, from 23 August 2022 till 31 December 2042.
Beyond the initial term, Parkway Life REIT has the option to renew these leases for a further 10 years till 31 December 2052.
The new leases are signed with IHH Healthcare Berhad (SGX: Q0F), an international healthcare services provider that employs 65,000 staff across 80 hospitals in 10 countries.
As part of the agreement, Parkway Life REIT will also commit a one-time capital expenditure (capex) of S$150 million to revamp all three Singapore hospitals.
The capex will commence no later than 1 January 2023 and is estimated to take place over three years.
In addition, the sponsor for the REIT has also granted a right-of-first-refusal (ROFR) for Mount Elizabeth Novena Hospital for 10 years.
This ROFR provides visibility on Parkway Life REIT’s growth pipeline as the hospital is a high-quality asset that may be injected soon.
The REIT manager has announced the projected financial effects of these transactions.
Meanwhile, DPU is projected to rise from S$0.1379 in the fiscal year 2020 to S$0.1826 by the end of the fourth year after the transaction closes.
Net asset value per unit will rise from S$1.96 as of 31 December 2020 to S$2.49 by 31 December 2024.
SPH REIT (SGX: SK6U)
From a healthcare REIT, we move on to retail.
SPH REIT had recently announced its fiscal 2021 third quarter (3Q2021) business and operational update for the period ended 31 May 2021.
Recovery was evident from the healthier numbers reported by the REIT.
Gross revenue increased by 22.2% year on year to S$209.6 million, boosted by better performance across all the REIT’s assets coupled with a decrease in rent reliefs given to tenants.
There was also an additional quarter of financial contribution from the REIT’s Westfield Marion asset in Australia that was acquired in the second quarter of fiscal 2020.
DPU increased by 11% quarter on quarter to S$0.0138 and more than doubled from the S$0.005 recorded a year ago.
SPH REIT’s portfolio remained resilient, with occupancy staying high at 98.4%.
Weighted average lease expiry by net lettable area stood at 5.4 years, providing ample time for the REIT to renew its leases with tenants.
Only 7% of leases by gross rental income are expiring by 31 August 2021, with another 22% expiring by the end of the fiscal year 2022.
The REIT also does not have any debt maturing this fiscal year, and its average cost of debt is low at 1.86%.
SPH REIT should continue to do well as the recovery takes hold and tenant sales gradually improve.
Singapore Exchange Limited (SGX: S68)
Singapore Exchange Limited, or SGX, has also been kept busy.
This week, the bourse operator launched three new freight forwarding agreements (FFA) and futures contracts for liquified natural gas (LNG) vessels.
Global LNG trade hit an all-time high of 356.1 million tonnes in 2020 amid supply chain challenges.
Asia accounts for the lion’s share (70%) of LNG imports and demand is growing faster in this region compared to the rest of the world.
SGX plans to continue building a suite of products to complement the transition to cleaner energy sources.
This launch is accompanied by SGX’s recent report on its June 2021 market statistics that saw record open interest in several foreign exchange contracts traded on the exchange.
Commodity derivatives traded volume also grew 12% year on year while secondary fund-raising hit S$7.5 billion during the month, the highest level chalked up in a year.
With the buoyant mood propping up the markets, SGX should continue to enjoy a healthy interest in its growing suite of products.
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Disclaimer: Royston Yang owns shares of Singapore Exchange Limited.