PLife REIT aims to maintain a strong financial position through prudent and dynamic capital and financial management, to ensure continuous access to funding at optimal cost, maintain stable distributions to Unitholders and achieve a steady Net Asset Value.
PLife REIT has an issuer rating of Baa2 issuer rating, as well as a provisional (P)Baa2 senior unsecured rating to the S$500 million multicurrency Medium Term Note Programme (the "MTN Programme") by Moody's credit rating agency, with Stable Outlook.
As at 31 December 2016, PLife REIT's gearing remains healthy at 36.3%.
PLife REIT adopts a dynamic and pro-active approach for its liability and liquidity risk management. Our key liability and funding management strategies in support of our regional growth aspirations are:
1) To achieve diversified funding sources at an optimal cost
Diversify our funding sources from a panel of high quality banks, establishing and maintaining our MTN Programme and other financing sources to attain varied liability tenure, with the end objective of maintaining the most optimal financing cost mix.
2) To enhance the defensiveness of PLife REIT's Balance Sheet strength
Dynamically manage our debt maturity profile to ensure well-spread debt maturities and at the same time, to maintain an optimal capital structure.
Tactical approaches we have adopted in view of the above strategies are:
a) Conscientious effort in lengthening and spreading out the debt maturity period;
b) Cultivating and maintaining a panel of key banks to support our long term growth;
c) Establishing alternative source of fund. In this respect, PLife REIT has established a S$500 million MTN Programme in 2008. The MTN Programme provides PLife REIT the flexibility to tap the capital market when needed. In March 2016, PLife REIT issued a JPY3.3 billion 6-year senior unsecured fixed rate notes at 0.58% per annum (the "Notes Issuance") under the MTN Programme. The proceeds from the Notes Issuance were used for pre-emptive refinancing an existing loan facility of JPY2,077 million due in 1Q 2017 and financing of property acquisition in March 2016. With that, PLife REIT has achieved diversification of funding sources and extended its debt maturity profile to 2022; and
d) Minimising near-term refinancing risk through pre-emptive terming out near-term debts for the next 4 to 6 years. In June 2016, PLife REIT secured a JPY6.5 billion term loan facility to term out the remaining loan due in 2017 and about 27% of loans due in 2018 for another 5 years. On 4 January 2017, PLife REIT has further termed out the remaining loan due in 2018 for another 5 years. With that, PLife REIT has no long-term refinancing needs till 2019.
PLife REIT adopts prudent financial risk management to manage the exposure to interest rate risk and foreign currency risk. Our policy is to hedge at least 50% (up to 100%) of all financial risks.
Interest rate risk is managed on an ongoing basis with the primary objective of limiting the extent to which net interest expenses could be affected by adverse movements in interest rates, by hedging the long term committed borrowings through the use of interest rate hedging financial instruments. For the foreign exchange ("Forex") risk management, we strive to hedge Forex risk on principal which will allow PLife REIT to maintain a stable net asset value, as the Forex fluctuation on foreign asset will offset the Forex fluctuation of the hedging instrument. We also aim to hedge the Forex risk on net overseas income which will provide PLife REIT with stability in distributable income, as PLife REIT will be shielded from exchange rate fluctuation on foreign income.
Tactical approaches with regards to the interest rate and foreign exchange risk management strategies are:
a) Substantially hedged our floating rate long term JPY acquisition financing loans for the next few years. This shields PLife REIT from unexpected increase in interest rates, thereby minimising any potential negative impact to its distributions and improving its resiliency against potential interest rate risks. As at 31 December 2016, about 99% of interest rate exposure is hedged.
b) Fully hedged our net JPY income till 1Q 2020, thereby enhancing the stability of distributions to Unitholders.
For more details, please refer to PLife REIT's announcements on www.sgx.com.