Parkway Life REIT: Singapore Hospitals Drive 15.1% DPU Growth

Revenue declined due to weaker JPY and tenant exits 

Gross revenue came in at S$38.2 million, down 2.1% year-on-year, primarily due to JPY depreciation and lower rental income from the Japan portfolio following tenant exits at five nursing home properties.  

Japan tenant Miyako Group entered liquidation proceedings, affecting five properties in Osaka (representing ~1.6% of FY2026 gross revenue).  Parkway Life REIT has repossessed these properties and is actively pursuing re-leasing options. 

This was partly offset by higher contribution from the Singapore and France properties with step up lease agreements.

Net property income margin remains strong at 93.9% in 1Q 2026, compared with 94.5% in 1Q 2025.

Singapore portfolio drives 15% year-on-year growth in distribution per unit 

Singapore remains the dominant contributor, accounting for 67.1% of gross revenue and 68.4% of net property income, with the three private hospitals — Mount Elizabeth, Gleneagles, and Parkway East — delivering stronger income following the cessation of the three-year rent rebates and the activation of the new CPI-linked rent review formula, which pushed the minimum rent payable up by 24.3% to S$99.1 million for FY2026. 

Japan, contributing 25% of gross revenue, faced headwinds from two fronts — a weakening Japanese Yen and the loss of rental income from five nursing home properties vacated by the financially troubled Miyako Group, though Parkway Life REIT has mitigated downside risk through security deposits and hedging arrangements that convert the FX losses into distributable income. 

France, the newest addition to the portfolio acquired in December 2024, contributed 7.9% of gross revenue and 8.0% of net property income, with all 11 nursing homes achieving 100% committed occupancy under the DomusVi sale-and-leaseback arrangement, providing an early and stable income stream as Parkway Life REIT builds its European presence.

Distribution per unit (DPU) rose 15.1% year-on-year to 4.42 cents, driven by higher income from the Singapore hospitals after the cessation of a three-year rent rebate period and the new CPI-linked rent review formula kicking in from FY2026. This DPU will be paid out as part of the 1H 2026 distribution.

Healthy balance sheet and well-balanced debt maturity profile

As at 31 March 2026, total debt stood at approximately S$905.4 million, an increase of 2.5% from S$883.4 million on 31 December 2025.

In 1Q FY26, Parkway Life REIT has drawn upon, short term loans amounted to JPY3.5 billion ($28.1m) were drawn down for capital expenditure and working capital purposes.

Parkway Life REIT maintains a healthy gearing of 34.2%, an all-in debt cost of 1.66%, and interest coverage of 8.4x. 

To mitigate market volatility, approximately 96% of interest rate exposure is hedged. 

Currency risks are also prudently managed through a natural hedge strategy, where JPY-denominated acquisitions are funded using JPY loans. 

Meanwhile, EUR exposure from the France portfolio is hedged via EUR/SGD cross-currency swaps, with net income hedges in place until 1Q 2029 for JPY exposure and 1Q 2030 for EUR exposure.

Parkway Life REIT maintains a disciplined debt maturity profile, guided by its principle of ensuring that no more than 30% of total borrowings mature in any single year. This helps to reduce concentration risk and refinancing pressure.

Management has also taken proactive steps to address refinancing requirements ahead of maturity.  Parkway Life REIT does not have long-term debt refinancing needs until March 2027.

The debt maturities are well spread out across multiple years. The largest maturity tranche falls in 2027 at S$234 million, representing 26% of total debt. This is followed by S$159.7 million in 2028 (18%), S$135.6 million in 2029 (15%), and S$161.1 million in 2031 (18%).

In early 2026, Parkway Life REIT established a Sustainable Financing Framework and subsequently issued its inaugural 5-year S$70 million fixed-rate green bond at 2.103% per annum. 

In addition, it secured a maiden 10-year JPY8.8 billion (approximately S$70.9 million) social loan. These initiatives extended the weighted average debt maturity from 3.0 years to approximately 3.8 years post-refinancing.

The funding sources are diversified across SGD loans, JPY loans, SGD fixed-rate notes, JPY fixed-rate notes, as well as newly issued green and social financing instruments, with certain borrowings extending maturities to 2036.

As at 31 March 2026, gearing ratio was at 34.2%, up 0.8 percentage point from 31 December 2025.  This leaves substantial debt headroom of S$517.9 million and S$834.2 million before reaching the 45% and 50% regulatory gearing limits respectively.

Portfolio resilience supported by long term CPI-linked lease structure 

As at 31 March 2026, Parkway Life REIT's portfolio holds 74 properties with a total portfolio value of S$2.57 billion.  It is defensively positioned with long weighted average lease to expiry of 14.85 years, which provides income visibility and stability far exceeding the typical industry lease period of 3 to 5 years.

The portfolio is geographically diversified across Singapore (67.6% of gross revenue), Japan (24.7%), and France (7.7%).  Singapore comprises three private hospitals leased to Parkway Hospitals Singapore (a wholly-owned IHH subsidiary) under a 20.4-year master lease running to 2042. 

Japan holds 60 nursing homes across 17 prefectures. France holds 11 freehold nursing homes operated by DomusVi under a 12-year sale-and-leaseback arrangement, acquired in December 2024.

91.8% of gross revenue carries downside protection through lease structures that include minimum rent guarantees and upward-only rent review provisions, meaning income is shielded even in adverse operating environments. 

The portfolio serves 30 lessees, ensuring no excessive tenant concentration risk, with the largest single tenant — Parkway Hospitals Singapore — capped at 67.6% and backed by the strong credit profile of parent IHH Healthcare, one of the world's largest hospital networks. 

The Singapore portfolio is the key pillar of Parkway Life REIT’s income resilience. The Singapore hospitals are held under a renewed master lease with Parkway Hospitals Singapore for a term of 20.4 years, running from 23 August 2022 to 31 December 2042, with an option to renew for a further 10 years. 

From FY2026 onwards, the lease transitions to an Annual Rent Review Formula whereby Parkway Hospitals Singapore pays the higher of two options — either Base Rent plus Variable Rent (computed at 3.8% of Adjusted Hospital Revenue), or a CPI-linked escalation formula of {1 + (CPI + 1%)} multiplied by the preceding year's rent, with CPI floored at zero to prevent any downward adjustment. This structure provides a guaranteed income floor and upside participation if hospital performance is strong.

The impact of this formula is significant. Following three consecutive years of fixed 3% annual rent step-ups from FY2023 to FY2025, the CPI-linked escalation formula produced a sharp 24.3% jump in minimum rent for FY2026, rising from S$79.7 million in FY2025 to S$99.1 million in FY2026. Actual rent payable is expected to increase by at least this amount, with further upside potential should the hospitals' adjusted revenue exceed the minimum rent threshold. This step-change in rental income is a key driver of Parkway Life REIT’s strong DPU growth in 1Q 2026 and is expected to sustain distributable income at meaningfully higher levels going forward.

Maintain BUY and target price at S$4.60.

Parkway Life REIT is trading at S$4.06, implying FY2026E distribution yield of 4.1%.  In comparison, Stoneweg European Stapled Trust and Starhill Global REIT are trading at FY2026 distribution yield of 8.8% and 7.0%, respectively.  The comparables have master leases or exposure to CPI-linked leases.   

It is trading at FY2025 price-to-book 1.59x, above the peer average PB of 0.85x.  Parkway Life REIT is trading at a premium due to lack publicly listed healthcare REIT. 

Given the track record of Parkway Life REIT in generating growth in distribution per unit, we maintain our BUY rating with the target price at S$4.60 per unit.

Related links:

• Parkway Life REIT share price history and share price target
• Parkway Life REIT history and dividend forecasts

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