On Sep 23, First Reit Management independent director Martin Lechner sold 2,796,900 units of First Reit : AW9U +1.82% at an average price of S$0.275 a unit. This halved his direct interest in First Reit from 0.28 per cent to 0.14 per cent. Lechner was first appointed to the board of First Reit Management in January 2018. 

 

Lechner had previously acquired five million units in a married deal on Feb 25, 2021, at S$0.20 a unit, and 796,900 units at S$0.21 a unit on Sep 18, 2023. The units acquired in February 2021 paid S$0.0893 per unit in distributions, while the 796,900 units acquired in September 2023 paid S$0.0244 per unit in distributions.

 

Since 2021, the manager has maintained that First Reit has grown in stability, expanded its tenant mix and increased its geographical presence with restructured master lease agreements for its Indonesian hospital.

 

As at Dec 31, 2023, the portfolio of First Reit included 32 properties across Asia, valued at S$1.14 billion, with assets in Indonesia, Singapore and Japan operated by Siloam International Hospitals and other established third-party operators.

 

For its H1 FY2024 (ended Jun 30), First Reit reported that rental and other income decreased by 3.7 per cent from the year-ago period to S$52 million. However, in local currency terms, it increased by 4.4 per cent for properties in Indonesia and 2 per cent for nursing homes in Singapore, while remaining stable for nursing homes in Japan.

 

Property operating expenses rose by S$100,000 to S$1.7 million, resulting in a 4.1 per cent year-on-year (yoy) decline in net property and other income to S$50.3 million. Finance costs increased slightly by S$100,000 to S$11.3 million due to interest rates and currency risk management, leading to a 2.1 per cent yoy decrease in the distributable amount to S$25 million.

 

First Reit also maintains a healthy financial position with a gearing ratio of 39.5 per cent. The interest coverage ratio stands at four times, or 3.7 times when including distributions to perpetual securities holders. Additionally, 86.6 per cent of its debt is either on fixed rates or hedged, with an all-in cost of debt at 5 per cent.

 

The manager maintains that the overall ageing population in Asia is driving long-term demand for elderly-friendly infrastructure and quality healthcare services, positioning First Reit&rsquo s healthcare portfolio to benefit from this trend. First Reit aims to have developed markets comprise more than 50 per cent of its portfolio by FY2027, supported by its sponsors, OUE : LJ3 +1.87% and OUE Healthcare : 5WA 0%.

The manager attributes the drop in the distributable amount to the depreciation of the yen and rupiah against the Singapore dollar

 

FIRST Real Estate Investment Trust (First Reit) on Friday (Jul 26) posted a distribution per unit (DPU) of S$0.012 for the first half ended Jun 30, 2024, down 3.2 per cent from the same period a year before.

 

The manager attributed the drop in the distributable amount to the depreciation of the yen and rupiah against the Singapore dollar.

 

First Reit&rsquo s : AW9U 0% rental and other income fell 3.7 per cent on the year to S$52 million from S$54 million. On a local currency basis, however, rental and other income rose 4.4 per cent year on year for Indonesia properties, 2 per cent on year for the Reit&rsquo s nursing homes in Singapore income from nursing homes in Japan &ldquo remained stable&rdquo .

 

After property expenses rose slightly to S$1.7 million, net property and other income declined 4.1 per cent to S$50.3 million from S$52.4 million.

 

Finance costs also rose by S$100,000 to S$11.3 million on interest rate risk and currency risk management.

 

The Reit&rsquo s distributable amount stood at S$25 million for the half-year period, compared with S$25.5 million in the same period the previous year. It will be paid on Sep 25, after books close on Aug 6.

 

First Reit&rsquo s aggregate leverage stood at 39.5 per cent as at Jun 30. Its interest coverage ratio was four times, but 3.7 times after including distribution to perpetual securities holders.

 

Its weighted average lease expiry was at 11 years on a gross floor area basis as at end-June.

PhillipCapital analyst Darren Chan has initiated coverage on First REIT with a &ldquo buy&rdquo call and target price of 30 cents. 

 

Chan&rsquo s dividend discount model (DDM) derived target is based on a cost of equity (COE) of 10.5% and a terminal growth rate of 2%. 

 

In his report dated July 5, the analyst forecasted a distribution per unit (DPU) of 2.36 cents and 2.51 cents for FY2024 and FY2025, reflecting a forward yield of 9.6% and 10.3% respectively. 

 

The REIT is Singapore&rsquo s first healthcare REIT focused on investing in income-producing real estate assets primarily used for healthcare-related purposes. Its portfolio currently consists of 32 properties, including 15 in Indonesia, 14 in Japan and three in Singapore, which reflects 74.5%, 22.7% and 2.8% of the REIT&rsquo s assets under management (AUM) respectively. 

 

In Chan&rsquo s note dated July 5, the analyst notes several key positives including First REIT&rsquo s new master lease agreement (MLA) and long portfolio weighted average lease expiry (WALE) of 11.3 years which ensures long-term cash visibility. 

 

&ldquo The new MLA includes a minimum annual rental escalation of 4.5% or a performance-based rent of 8% of the hospital&rsquo s gross operating revenue (GOR) from the preceding financial year, denominated in Indonesian rupiah, for the Indonesian hospitals,&rdquo says the analyst. 

 

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Currently, three out of the 14 hospitals are paying performance-based rent, with more starting to contribute as the hospitals&rsquo operational performance improves.

 

Additionally, with the introduction of PT Siloam International Hospitals Tbk and subsidiaries (Siloam) - one of the REIT&rsquo s largest tenants - to the new MLAs, the exposure to PT Lippo Karawaci Tbk and subsidiaries (LPKR) is set to decrease from around 88% before the restructuring to 18.7%. 

 

LPKR, another of the REIT&rsquo s largest tenants has been experiencing &ldquo tight&rdquo cash flow since FY2019, adds Chan. 

 

The analyst also notes First REIT&rsquo s plans to divest some of its non-core and mature assets to fund its expansion plans.

 

For now, the REIT has identified Imperial Aryaduta Hotel and Country Club (IAHCC) as a non-core asset and is being marketed for divestment. 

 

Chan adds that management is currently exploring divesting into some of the older nursing homes in Japan in an attempt to recycle the proceeds to buy newer, better nursing homes within the country. 

 

Following the REIT&rsquo s expansion into Japan in FY2022, the analyst notes its plans to further diversify into developed markets, with a target AUM of over 50% in developed markets by FY2027. 

 

Japan and Australia have been identified as potential developed markets for further acquisitions. 

 

&ldquo This will help reduce exposure to Indonesia and the depreciating Indonesian rupiah against the strong Singapore dollar,&rdquo adds Chan. 

It implies an upside of 16.7 per cent from its current share price

 

MAYBANK Securities initiated coverage on First Real Estate Investment Trust (First Reit) with a &ldquo buy&rdquo call, as the research house is positive on the trust&rsquo s diversified portfolio.

 

The research house issued First Reit a target price of S$0.28, which implies an upside of 16.7 per cent from its current share price.

 

On Wednesday (Jun 26), analyst Li Jialin said First Reit&rsquo s top line has improved back to levels near pre-restructuring, while its valuation is still attractive at a 20 per cent discount to book despite moderate risks.

 

Looking ahead, Li projects a dividend yield of 10 per cent for the current financial year. 

 

Noting that First Reit has expanded its portfolio and geographic exposure, Li said she is positive on the trust&rsquo s diversified income coming from the nursing homes in Japan that support the ageing population.

 

&ldquo As First Reit&rsquo s nursing homes are in prefectural capitals, they do not face direct competition from the large Japan Reit counterparts in metropolitan areas,&rdquo she said.

 

While both hospitals and nursing homes provide stable recurring income streams to tenants and operators, the latter offers a &ldquo slightly different proposition&rdquo with a longer length of stay for patients, Li said.

 

&ldquo We like the rebalanced allocation in asset classes, growing assets under management in developed markets, and an enlarged tenant pool to reduce concentration risk,&rdquo she said.

 

The analyst also highlighted that the trust&rsquo s hospitals in Indonesia are seeing more affluent patients who prefer private hospitals due to Covid-19 travel restrictions and medical tourism.

 

Given revenue gains in First Reit&rsquo s Indonesia private hospital chain since FY2022, Li said the trust can drive its organic growth if more hospitals&rsquo top line &ldquo surpass their benchmark&rdquo and switch to performance-based rent.

 

She also projects favourable growth prospects for the Reit in view of its potential capital recycling of its assets in Indonesia in the long term.

 

The analyst also noted that a bulk of the Reit&rsquo s leases will expire in 2035 and 2043. She added that it is unlikely for healthcare providers to relocate as their equipment is already built in and &ldquo considerable capital expenditure&rdquo has been spent on the buildings.

Distributable income is also down 2.2% at S$12.4 million

 

FIRST Reit&rsquo s distribution per unit (DPU) fell by 3.2 per cent to S$0.006 for the first quarter ended Mar 31, as compared to S$0.0062 in the corresponding year-ago period.

 

Rental and other income declined 2.7 per cent on the year to S$26.1 million for the quarter, while net property and other income decreased 2.1 per cent to S$25.3 million.

 

&ldquo The financial results in Q1 2024 were impacted by a stronger Singapore dollar against the Indonesia rupiah and the Japanese yen,&rdquo said the healthcare real estate investment trust&rsquo s (Reit) manager in a business update on Wednesday (Apr 24).

 

It added that the currency depreciation was, however, offset by higher rental income in local currency terms from assets in Indonesia and Singapore, as well as stable rental income in local currency terms from Japan assets.

 

Distributable income was also down 2.2 per cent to S$12.4 million, from S$12.7 million, as a result of both a stronger Singapore dollar and a higher finance cost.

 

Cost of debt for the quarter rose to 5 per cent from 4.7 per cent a year ago, led by rising interest rates, said the manager.

 

As at Mar 31, 87.1 per cent of First Reit&rsquo s debt was on fixed rates or hedged. Its gearing ratio remained flat at 38.8 per cent with an interest coverage ratio of 4 per cent. The manager highlighted that the Reit also has no refinancing requirements until May 2026.

 

Net asset value per unit as at Mar 31 stood at S$0.2948, down from S$0.3018 as at the end of 2023 due to currency translation.

 

The manager also updated that the rental outstanding as at the end of Q1 from a tenant PT Metropolis Propertindo Utama (MPU) amounted to about S$5.2 million, while the security deposit received from MPU amounted to approximately S$2.3 million. It is also engaging closely with MPU on repayments.

 

&ldquo Aged care markets in much of Asia-Pacific are at a nascent stage of development, as the responsibility of elderly care potentially shifts from families to institutions amidst declining birth rates,&rdquo said the manager, adding that First Reit is well-positioned to ride the tailwinds in the healthcare sector.

 

The distribution will be paid out on Jun 21, after books closure on May 8.

FIRST REIT MANAGEMENT LIMITED
 

 

FIRST Real Estate Investment Trust : AW9U 0% (First Reit) posted a 6.1 per cent drop in distribution per unit (DPU) for the third quarter to S$0.0062, from S$0.0066 in the same period last year.

 

This brought DPU for the nine months ended Sep 30 to S$0.0186, down 6.1 per cent year on year from S$0.0198, the manager said in a business update on Wednesday (Nov 1).

 

The drop in DPU comes as rental and other income for the nine-month period inched up slightly by 0.6 per cent to S$81.4 million from S$80.9 million in the year-ago period.

 

Net property and other income, however, stayed flat at S$79.1 million, mainly due to a rise in property expenses from portfolio growth.

 

Excluding FRS 116 adjustments, rental and other income rose 3 per cent on the year to S$69.6 million from S$67.6 million. Net property and other income, meanwhile, would be up 2.4 per cent to S$67.4 million from S$65.8 million in the same period last year.

 

The manager noted healthy underlying growth from the Reit&rsquo s Indonesia and Japan properites. Rental and other income from its hospitals in Indonesia climbed 8.8 per cent on the year to 515.3 billion rupiah (S$44.1 million) during the nine-month period.

Meanwhile, rental and other income from its Japanese nursing homes jumped 41.9 per cent year on year to 1.1 billion yen (S$9.1 million), following a full period of contributions from the 12 nursing homes acquired in March 2022 and two acquired in September 2022. 

 

The Reit&rsquo s distributable amount slipped 1.2 per cent year on year to S$38.4 million from S$38.8 million, following higher finance costs and the depreciation of foreign currencies against the Singapore dollar.

 

The distribution for Q3 will be paid on Dec 22, after books closure on Nov 9.

 

As at Sep 30, the Reit&rsquo s gearing stood at 39 per cent as at Sep 30, 2023, up slightly from 38.5 per cent as at Dec 31, 2022. Around 85.9 per cent of its debt is on fixed rates or hedged.

 

There are no refinancing requirements until May 2026, the manager noted.