Healthcare REITs all going regional for growth
OCBC notes that recent forays to Asian countries like Japan, Malaysia and South Korea are proving to be lucrative.
Among Singapore REITs, Parkway Life REIT and First REIT in particular have shown that expanding their presence in the region can diversify revenues amid a growing market for healthcare services.
Here's more from OCBC:
Improved performance driven by organic and inorganic growth. First REIT (FREIT) and Parkway Life REIT (PLREIT) both exhibited similar growth characteristics during the recently concluded 4QCY11 results period. Their improved financial performance was underpinned by organic and inorganic growth as a result of contributions from recent acquisitions. Due to the triple net lease structure inherent in most of the master leases of Healthcare REITs, FREIT and PLREIT were able to command high net property income margins of 98.9% and 91.5%, respectively as at FY11.
Expanding their regional footprint. PLREIT recently stepped up its acquisition drive, purchasing three nursing homes in Japan (JPY3.0b, or ~S$50m); and marked its maiden foray into Malaysia with the acquisition of strata titled units (RM16.0m, or ~S$6.45m) within Gleneagles Medical Centre, Kuala Lumpur. FREIT’s last acquisition came in Aug last year, with the purchase of Sarang Hospital in South Korea. This too represented a venture into a new geographical market. These events suggest that both Healthcare REITs are seeking to expand their footprint in the regional healthcare scene, which is a sound move, in our opinion. This would raise their profiles and diversify their operations. Moreover, healthcare fundamentals in the region remain resilient, bolstered by rising income levels, growing demand for quality healthcare services and changing demographics towards a greying population.