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Capital and Financial Management
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.
As at 30 September 2024, PLife REIT's gearing was 37.5% which complied with the stipulated Aggregate Leverage limit1. The interest coverage ratio stood at 10.2 times2.
Dynamic liability and liquidity risk management
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 Debt Issuance Programme and other financing sources to attain varied liability tenure, with the end objective of maintaining the most optimal financing cost mix.
On 23 October 2024, PLife REIT successfully carried out its maiden Equity Fund Raising by way of a Private Placement, raising approximately S$180 million to fully fund the proposed acquisition of eleven nursing homes in France, its acquisition-related and EFR-related transaction costs. Please refer to the announcement titled “Acquisition of Eleven Nursing Homes in France” dated 22 October 2024 for further details. With that, PLife REIT maintains an optimal capital structure by lowering gearing post-acquisition thereby creating ample debt headroom for future acquisitions. The Private Placement was oversubscribed and drew strong demand from new and existing institutional and accredited investors.
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 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, through its wholly-owned subsidiary, Parkway Life MTN Pte Ltd (the “MTN Issuer”), put in place a S$500 million Multicurrency Debt Issuance Programme to provide PLife REIT with the flexibility to tap various types of capital market products including issuance of perpetual securities when needed. As at 30 September 2024, there were four series of outstanding unsecured fixed rate notes amounted to JPY17.84 billion (approximately S$160.2 million) issued under the Debt Issuance Programme, which diversified PLife REIT’s funding sources.
d) Minimising near-term refinancing risk through pre-emptive terming out current debts. In 3Q 2024, PLife REIT puts in place two 7-year JPY loans to refinance the maturing loans due in 2025 and term out the short-term loan draw down for acquisition by 4Q 2024. With that, PLife REIT has no immediate long-term debt refinancing needs until September 2026.
Financial risk management
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.
In 3Q 2024, the Group has executed several interest rate swaps (including forward-starting swaps) to extend maturing hedges for another 4 to 7 years.
As at 30 September 2024, the net income from Japan via JPY forward exchange contracts till 1Q 2029 and about 87% of interest rate exposure is hedged.
For more details, please refer to PLife REIT's announcements on www.sgx.com.
Note:
- With effect from 1 January 2022, the Aggregate Leverage limit for S-REITs shall be 45% and 50% for adjusted-ICR of below 2.5x or at least 2.5x respectively.
- Applicable to Adjusted-ICR as prescribed under the MAS’ Property Funds Appendix. PLife REIT has no hybrid securities as of reporting date.
