First Reit reports 1.5% rise in DPU for H1, as Japan nursing homes boost net property income

THE manager of First Reit on Friday (Jul 29) reported a 1.5 per cent increase in its distribution per unit (DPU) for first half of 2022, boosted in part by income from newly acquired nursing homes in Japan.

DPU was 1.32 cents for the six months ended Jun 30, compared with 1.30 cents in the same period last year, the interim financial statements of the real estate investment trust (Reit) indicated.

Net property and other income in H1 jumped 40.2 per cent year on year to S$52.7 million, while its distributable amount rose 20.9 per cent year on year to S$25.3 million.

Its manager said this was due to new income contribution from the 12 nursing homes in Japan acquired on Mar 1 as well as from the restructured master-lease agreements for 14 Indonesia hospitals, the manager said.

Victor Tan, executive director and chief executive of the manager, said: “The injection of the 12 well-established nursing homes in Japan, operated by high-quality local operators, has not only delivered accretive DPU to our unit holders, but also increased the geographical and tenant diversification in our portfolio.”

He added that the Reit is in a stronger financial position following the restructuring of the master lease agreements for the bulk of its Indonesia portfolio.

Among them, 77.3 per cent of its properties have a weighted average lease expiry of more than 10 years.

Its portfolio currently consists of 3 nursing homes in Singapore, 12 in Japan, as well as 12 hospitals and 3 integrated properties in Indonesia.

The Reit had a total debt of S$462.7 million as at Jun 30, compared with S$352.4 million at the end of last year. Its gearing ratio is 35.6 per cent and its weighted average debt to maturity is 1.28 years.

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The manager said the Reit is in negotiations with lenders to refinance term loans due March 2023 for the sum of S$252.4 million, or 54.6 per cent of its total debt.

In a commentary on the competition in the industry, the manager noted that the rise in Covid-19 cases in Indonesia have led to a reinstatement of testing for some travellers from Jul 17.

Overall, it said, demand for quality hospital services would continue to be sustained by domestic demand and growing affluence in Indonesia.

In Japan, demand for nursing homes is likely to continue growing, given its ageing population, it said.

It added that First Reit targets for developed markets to comprise more than half its portfolio in 3 to 5 years, and this is being done by divesting non-core, non-healthcare or mature assets such as Siloam Hospitals Surabaya.

Units of First Reit closed flat at S$0.28 on Friday.