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 31 December 2023, PLife REIT's gearing was 35.6% which complied with the stipulated Aggregate Leverage limit1. The interest coverage ratio stood at 11.3 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.

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 31 December 2023, there were four series of outstanding unsecured fixed rate notes amounted to JPY17.84 billion (approximately S$165.9 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. PLife REIT has secured a total of six new facilities, comprising a mix of SGD and JPY loans, with tenor ranging between 3 to 6 years largely to: 1) finance the renewal capex works at Mount Elizabeth Hospital; 2) refinance maturing loan facilities due in 2024 & 2025; and 3) term out the short-term loan drawn down for acquisition. With that, PLife REIT has no immediate long-term debt refinancing needs until March 20253.

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.

As at 31 December 2023, the Group has extended JPY income hedges via Japanese Yen forward exchange contracts for another 2 years till 1Q 2029 and put in place several interest rate swaps (including forward-starting swaps) which will bring about 90% of interest rate exposure hedged by end 1Q 2024.

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

 

Note:

  1. 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.
  2. Applicable to Adjusted-ICR as prescribed under the MAS’ Property Funds Appendix. PLife REIT has no hybrid securities as of reporting date.
  3. Taken into consideration the two new bank facilities executed on 17 January 2024 to refinance the near-term loans upon their maturity.