SINGAPORE - First Reit listed in 2006 as the first healthcare real estate investment trust on the Singapore Exchange after previously being under the stewardship of Indonesia-based Lippo Karawaci group.

In 2018, following a restructuring and the takeover of its sponsorship and management by Singapore-Listed OUE group and OUE Lippo Healthcare, things started to stir at the trust.

The change essentially saw Indonesia-based Lippo group' s James Riady handing over control of First Reit to his brother, Singapore-based Stephen Riady and his OUE group.

Soon after, First Reit underwent a series of major restructurings which included diversifying into developed markets like Japan, reshaping the portfolio for more efficient growth, strengthening capital structure and riding the global mega trends of ageing population and ESG (environment, social and governance) issues.

These initiatives are showing results. The company reported just over a month ago that first-half rental and other income jumped 38.2 per cent to $53.8 million in the six months to June 30 due to new income contributions from 12 newly acquired Japan-based nursing homes and restructured master leases at 14 Indonesian hospitals.

Net property and other income surged 40.2 per cent to $52.7 million amid cost rationalisation and higher rentals. As a result, distribution income rose almost 21 per cent to $25.3 million, translating into a 1.5 per cent rise in interim dividend per share to 1.32 cents.

First Reit chief executive Victor Tan said this was the result of strategic actions to restructure, reposition and recapitalise for a more sustainable growth.

" After the management of the Reit changed hands, we embarked on a strategy to address the concentration risk of too much of the portfolio in Indonesia," he said.

" Our first move was to go into Japan, where OUE Lippo Healthcare Lippo group already had a ready portfolio of some $300 million."

Growth during the first half of this year was due to the restructured master leases of its 14 Indonesian hospitals to ensure a more sustainable rental income, as well as the first full quarter contribution from its newly acquired Japan nursing homes, which were acquired in March this year.

With total debt at $462.7 million, gearing ratio stood at 35.6 per cent with interest cover at 5.6 times as at June 30.

" We have assets of some $1.2 billion and relatively low gearing, which gives us headroom to leverage up another $200 million," Mr Tan said.

He added that following the successful issuance in April this year of $100 million 3.25 per cent guaranteed bonds (the " Social Bond" ) due 2027 unconditionally and irrevocably guaranteed by Credit Guarantee and Investment Facility, a trust fund of the Asian Development Bank, First Reit also now has a new channel to raise additional loans and bonds tied to social outcomes.

Mr Tan said First Reit is now in a hunt for more earnings in accretive healthcare assets in developed markets like Australia, Britain, Europe and the United States.

" Besides nursing homes and hospitals, our mandate also allows us to buy other healthcare-related assets like pharmaceutical warehouses," he added. " We plan to have at least 50 per cent of our portfolio of assets in developed markets within the next five years."

While the company already has significant assets in Japan, Mr Tan noted that the weak yen has opened up opportunities to expand further in that market, where the ageing profile of the population is well documented.

An accountant by profession, the 25-year veteran in the healthcare Reits segment stressed that growth will be a balanced and stable one, with the intention of providing stable distributions for unit holders. At the current payout, the yield works out to between 8 and 9 per cent a unit.

" We are still one of the smallest Reits here and we want to grow as much as we can," Mr Tan said. " Our sponsors OUE and OUE Lippo Healthcare are extremely supportive of our ambitions. All we have to do is identify the right assets, especially in developed markets."

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