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.

On 1 September 2021, PLife REIT announced the withdrawal of Moody’s issuer rating on the REIT as well as the provisional rating on its Debt Issuance Programme. PLife REIT’s issuer rating was Baa2 with stable outlook before the rating withdrawal. In accordance with the latest measures implemented by the Monetary Authority of Singapore, the single-tier leverage limit for Singapore REITs (“SREIT”) was raised from 45% to 50%1 with effect from 16 April 2020, without the requirement for a credit rating.

As at 30 September 2021, PLife REIT's gearing improved to 34.9% arising from the Singapore hospitals’ valuation uplift.

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.

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, 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 2021, there were three series of outstanding unsecured fixed rate notes amounted to JPY11.8 billion issued under the Debt Issuance Programme, which diversified PLife REIT’s funding sources.
d) Minimising near-term refinancing risk through pre-emptive terming out near-term debts. In October 2021, PLife REIT has successfully put in place a 3-year committed loan facility to term out the remaining SGD loan due in 2022. Together with a JPY loan (due 2022) that will also be termed out in 4Q 2021, there will be no long-term debt refinancing needs till June 2023.

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.

Tactical approaches in regard to the interest rate and foreign exchange risk management strategies are:

a) 100% 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. On the overall portfolio, about 70% of interest rate exposure is hedged as at 30 September 2021.

b) The JPY net income hedge was further extended till 3Q 2026, thereby enhancing the stability of distributions to Unitholders.

For more details, please refer to PLife REIT's announcements on www.sgx.com.

 

Note:

  1. On or after 1 January 2022, the aggregate leverage of the SREIT may exceed 45% limit of its deposited property (up to 50%) if the SREIT has a minimum adjusted interest coverage ratio of 2.5 times after taking into account the interest payment obligations arising from the new borrowings