Parkway Life REIT - Steady growth in distribution per unit

Research

REITs

By Gerald Wong, CFA • 07 Aug 2025

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Parkway Life REIT’s distribution per unit (DPU) grew by 1.5% year-on-year to 7.65 cents in 1H 2025.

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Higher DPU

Parkway Life REIT’s distribution per unit (DPU) grew by 1.5% year-on-year to 7.65 cents in 1H 2025, driven by contribution from nursing home properties acquired in 2024.

Gross revenue grew by 8.1% year-on-year to S$78.3 million, driven by the contributions from the new acquisitions but partly offset by weakness in the Japanese Yen.

The properties in France contributed to the first 6-month results with S$5.8 million in gross revenue.

In Singapore, the properties with fixed 3% annual rental step-ups lease arrangements led to higher rental income. Distributable income (DI) increased 9.5% year-on-year to S$49.9 million.

Parkway Life REIT 1H25 results summary — *Source: Company data*

Tax exemption for investments in France

Parkway Life REIT has received approval from Inland Revenue Authority of Singapore (IRAS) to apply tax exemption on income received from the France portfolio.

Specifically, dividend income and interest income received from 7 of the 11 properties in France will be tax exempted.

Full year tax savings are estimated at S$1.26 million or 0.19 cents, equivalent to 1.3% of FY2024 DI.

If tax exemption for the remaining 4 properties are approved, an additional tax saving of approximately S$0.4 million per year is expected.

Stable and high-quality portfolio

Parkway Life REIT continues to maintain a portfolio of defensive long term lease structure with downside protection.

Weighted average lease expiry (WALE) remained steady, at 14.91 years, compared with 15.17 years as at 31 March 2025.

As of 30 June 2025, the portfolio size was S$2.46 billion and 90.5% of the revenue with downside protection.

Higher finance costs

Due to the debt drawdown to fund the nursing home in Japan and the higher interest costs on the Japanese Yen debt, finance costs increased by 24.4% year-on-year to S$6.78 million.

Gearing ratio improved to 35.4% as at 30 June 2025, from 36.1% as at 31 March 2025.

Debt profile was stable, with 97% of the interest rate exposure hedged as at 30 June 2025, compared with 90.0% as at 31 March 2025.

Weighted average debt term to maturity of 3.0 years, compared with 3.3 years as at 31 March 2025.

Parkway Life REIT does not have debt refinancing needs till September 2026.

Parkway Life REIT 1Q25 balance sheet summary — *Source: Company data*

Active management

Singapore remains a core market and Project Renaissance is 85% completed.

The notable Asset Enhancement Initiative (AEI) to rejuvenate Mount Elizabeth Orchard Hospital is on track to complete by end-2025 and within the S$350 million budget.

For the Japan portfolio, management is exploring opportunities to recycle the assets as revenue are unlikely to grow in the medium term. In Europe, the focus is on integrating the assets in France.

Currently, Parkway Life REIT has debt headroom of S$455.0 million before reaching the 45% gearing level, providing ample flexibility to pursue inorganic growth opportunities.

Maintain BUY

We continue to like Parkway Life REIT for Its exposure to the growing healthcare sector, with a track record of generating consistent DPU growth since its IPO in 2007.

Based on 1H 2025 DPU of 7.65 cents, Parkway Life REIT offers an annualised distribution yield of 3.7%. It currently trades at a price-to-book valuation of 1.68x.

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