Yearly Financial Highlights
FINANCIAL STATEMENTS FOR THE FULL YEAR ENDED 31 DECEMBER 2024
Financials Archive
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Balance Sheet
| Group 31/12/24 S$'000 |
Group 31/12/23 S$'000 |
||
| Current assets | |||
| Trade and other receivables | 8,632 | 6,316 | |
| Financial derivatives | 32,724 | 1,341 | |
| Cash and cash equivalents | 29,471 | 28,499 | |
| Advance payment | - | 27,740 | |
| 70,827 | 63,896 | ||
| Non-current assets | |||
| Investment properties | 2,464,764 | 2,230,981 | |
| Interests in subsidiaries | - | - | |
| Trade and other receivables | - | - | |
| Financial derivatives | 15,556 | 39,257 | |
| 2,480,320 | 2,270,238 | ||
| Total assets | 2,551,147 | 2,334,134 | |
| Current liabilities | |||
| Financial derivatives | - | 1,820 | |
| Trade and other payables | 40,356 | 30,723 | |
| Current portion of security deposits | 472 | 440 | |
| Lease liabilities | 15 | 15 | |
| Loans and borrowings | 17,797 | 53,544 | |
| 58,640 | 86,542 | ||
| Non-current liabilities | |||
| Financial derivatives | 677 | 3,572 | |
| Non-current portion of security deposits | 16,058 | 16,889 | |
| Lease liabilities | 2,054 | 2,069 | |
| Loans and borrowings | 866,243 | 772,843 | |
| Deferred income | 1,279 | 1,506 | |
| Deferred tax liabilities | 36,244 | 36,156 | |
| 922,555 | 833,035 | ||
| Total liabilities | 981,195 | 919,577 | |
| Net assets | 1,569,952 | 1,414,557 | |
| Represented by: | |||
| Unitholders' funds | 1,569,952 | 1,414,557 | |
| Units in issue (‘000) | 652,371 | 605,002 | |
| Net asset value per unit ($) | 2.41 | 2.34 |
Review of Performance
Summary of Parkway Life REIT's Results for the full year ended 31 December 2024
| Note | 2024 S$'000 |
2023 S$'000 |
Change S$'000 |
Change % |
|
| Gross Revenue | 145,268 | 147,467 | (2,199) | (1.5) | |
| Net Property Income |
136,597 | 139,084 | (2,487) | (1.8) | |
| Distributable Income to Unitholders | (a) | 91,419 | 89,341 | 2,078 | 2.3 |
| Distribution per unit based on Distributable Income to Unitholders (cents) | (b) | 14.92 | 14.77 | 0.15 | 1.0 |
| Distribution yield (%), based on - Closing market price of $3.75 as at 31 December 2024 |
3.98 | 3.94 | 1.0 |
Note:
- Net of amount retained for capital expenditure on existing properties amounting to $3.0 million each year.
- In computing the Distribution per Unit ("DPU"), the number of units in issue as at the end of each period is used.
Consolidated Statements of Total Return
2H 2024 Vs 2H 2023
Gross revenue for 2H 2024 had decreased by 0.3% year-on-year to $72.8 million. The decrease was due to depreciation of Japanese Yen. This was partially offset by contribution from two nursing homes acquired in October 2023, one nursing home acquired in August 2024 and eleven nursing homes acquired in December 2024. Correspondingly net property income had decreased by 1.1% to $68.2 million for 2H 2024. The 2H 2024 net property income included $0.5 million allowance of doubtful debts due to default on rental receivables by an operator of the nursing home properties in Japan.
The management fees for 2H 2024 of $7.4 million was 2.4% higher than 2H 2023 largely attributed to the higher management fee from enlarged deposited property value from the acquisitions in 2023 and 2024 and valuation gain on the Singapore portfolio. This increase was partially offset by the depreciation of Japanese Yen. Higher trust expenses were registered for 2H 2024 due to higher professional fees incurred during the period.
Of the net foreign exchange movement, the Group had registered a realised foreign exchange gain amounting to about $5.0 million and $4.5 million from the settlement of Japanese Yen forward contracts in 2H 2024 and 2H 2023 respectively.
Finance costs had increased mainly due to funding of capital expenditure and new acquisitions in 2023 and 2024 and higher interest costs from Singapore dollar and Japanese Yen debts partially offset by depreciation of JPY. Notwithstanding, interest cost on loans drawn down to fund capital expenditure has no distribution impact as they are not subject to deduction when computing distributable income to Unitholders. Interest income mainly arose from the fixed deposit placement. In October 2024, the Group launched an equity fund raising exercise to fund its investment in France and the proceeds were placed in short term fixed deposit prior to the completion of the acquisition.
The Group has step-up lease arrangements for certain of its properties which include the new 20.4- year master lease agreements for its three Singapore hospitals, the 20-year lease agreements for the three Japan nursing home properties and the 12-year lease agreements for the eleven France nursing home properties. As part of revenue recognition, the step-up lease arrangements were accounted on a straight line basis over the lease term (i.e. effective rent) since August 2022 and September 2021, respectively. This had led to corresponding increase in the gross revenue and investment properties in the initial years of lease. As property valuation is based on discounted cash flow method which deviates from effective rent accounting treatment, the Group had removed the impact of effective rent from investment properties accordingly. This resulted in adjustments in the net change in fair value of investment properties (See Note 3 to the Financial Statements). These properties with step-up lease arrangements contributed to the higher distributable income in 2H 2024 as compared to 2H 2023.
Pursuant to the equity fund raising exercise, 47,369,000 units were issued on 1 November 2024. With the enlarged unit base, DPU for 2H 2024 of 7.38 cents has decreased by 1.3% or 0.10 cents as compared with 2H 2023's DPU of 7.48 cents.
2024 Vs 2023
Gross revenue for 2024 had decreased by 1.5% year-on-year to $145.3 million. The decrease was largely due to depreciation of Japanese Yen, partially offset by contribution from two nursing homes acquired in October 2023, one nursing home acquired in August 2024 and eleven nursing homes acquired in December 2024. Correspondingly, the net property income had decreased by 1.8% to $136.6 million for 2024.
The management fees for 2024 of $14.5 million remained consistent as compared to 2023 as the decrease from the depreciation of Japanese Yen was compensated by the increase from the enlarged deposited property value from acquisitions in 2023 and 2024 and valuation gain on the Singapore portfolio. Higher trust expenses were registered for 2024 due to higher professional fees incurred during the year.
Of the net foreign exchange movement, the Group had registered a realised foreign exchange gain amounting to about $9.7 million and $7.8 million from the settlement of Japanese Yen forward contracts in 2024 and 2023 respectively.
Finance costs had increased mainly due to funding of capital expenditure and new acquisitions in 2023 and 2024 and higher interest costs from Singapore dollar and Japanese Yen debts partially offset by depreciation of JPY.
At the reporting date, the Group has outstanding forward exchange contracts with aggregate notional amounts of approximately $96.2 million. The change in fair value of $3.4 million gain was charged to the statement of total return.
Valuations were performed by independent professional valuers for all investment properties as at 31 December 2024. During the year, the Group has recognised a net change in fair value of investment properties of $18.0 million loss in the Statement of Total Return, which includes fair value gain of $6.0 million offset by impact from straight-line rental adjustments and amortisation of right-of-use assets amounting to $24.0 million. The valuation gain was largely contributed by the projected rent increase for the Singapore hospitals and partly offset by the capex expended on Mount Elizabeth Hospital (Project Renaissance) and capitalised costs of the France acquisition. Any fair value adjustments (surplus / deficit) in respect of the revaluation would not be taxable / deductible on the basis that the fair value changes are unrealised and the properties are held for long-term purposes. As such, these fair value adjustments (surplus / deficit) would be adjusted out when determining the distributable income to the Unitholders.
Overall, DPU for 2024 of 14.92 cents has outperformed by 1.0% or 0.15 cents as compared with 2023's DPU of 14.77 cents.
Consolidated Statements of Financial Position
The advance payment arose from a one-time payment of approximately $46.2 million to the contractor in December 2022 in relation to the Renewal Capex Works and synchronised regular capex for Mount Elizabeth Hospital ("MEH"). With the progression of the capital expenditure works in MEH, the advance payment had been fully utilised and capitalised in investment properties in 2024.
Higher trade and other receivables as of 31 December 2024 was mainly due to higher variable rent receivables from the Singapore properties under the step-up rent arrangement of the new 20.4 years master lease agreements and the GST receivables. Included in the non-current trade and other receivables of the Trust are loans to subsidiaries in relation to the France acquisition.
The increase in investment properties was largely due to the acquisition of one nursing home in Japan in August 2024 and eleven nursing homes in France in December 2024, capital expenditure of existing assets and valuation gain on the property portfolio. This was partially offset by the depreciation of the Japanese Yen. Excluding the impact from straight-line rental adjustments and amortisation of right-of-use assets amounting to $24.0 million, a fair value gain of $6.0 million was recognised in the Statement of Total Return, representing a gain of 0.2% in the total portfolio value. The valuation gain was largely contributed by the projected rent increase for the Singapore hospitals and partly offset by the capex expended on Mount Elizabeth Hospital (Project Renaissance) and capitalised costs of the France acquisition.
Higher trade and other payables in 2024 was mainly due to the capital expenditure for MEH and acquisition fees and acquisition-related cost for the France investment.
The overall increase in loans and borrowings was mainly due to net drawdown of loans for the Japan acquisition, capital expenditure and working capital purposes. In 2024, the Group has drawn down JPY long-term facilities to replace an existing $50.0m loan for currency re-alignment between asset and liability to fine-tune the Group's natural hedge, as well as to term out maturing term loans totalling JPY16,398 million (approximately $141.8 million). In 2H 2024, the Group has drawn down short-term loan of JPY2,700 million (approximately $23.4 million) to fund the Japan acquisition in August 2024. As at 31 December 2024, the Group has termed out the short-term loan drawn down for acquisition.
The Aggregate Leverage of the Group as at 31 December 2024 was 34.8% (31 December 2023: 35.6%) of the Group's Deposited Property. This complied with the stipulated Aggregate Leverage limit. The interest coverage ratio (ICR) stood at 9.8 times at of 31 December 2024.
Consolidated Statement of Cash Flows
Net cash from operating activities in 2024 are mainly contributed by rental income from the properties net of property and other operating expenses.
Net cash outflow on purchase of investment properties (including acquisition-related costs) was as follows:
The acquisition-related costs paid in 2024 were in relation to the nursing home properties acquired in October 2023, August 2024 and December 2024.
Net cash used in investing activities as of 2024 included payment of capital expenditure on existing properties and the Renewal Capex Works for MEH.
Net cash generated from financing activities in 2024 was mainly due to proceeds from the equity fund raising exercise to fund the France acquisition and drawdown of loan facilities to finance the Japan acquisition, capital expenditure and working capital. This was offset by the payment of distributions to Unitholders.
Status on the use of proceeds raised from any offerings pursuant to Chapter 8 and whether the use of proceeds is in accordance with the stated use
The gross proceeds of approximately $180.0 million received from the issuance of units pursuant to the Private Placement has been progressively utilised to fund the acquisition of eleven nursing homes in France and the professional fees and expenses incurred in connection with the Private Placement and acquisition, in accordance with the stated use.
Commentary
Amid the persistent macroeconomic uncertainties and challenges, Parkway Life REIT remains prudent in proactively managing its portfolio while seeking growth opportunities strategically. In August 2024, the REIT completed the acquisition of one nursing home in Osaka Prefecture for a total consideration price of JPY2,446.2 million (approximately $22.1 million)1 . With an expanded investment mandate, the REIT marked its maiden entry into the European continent through the acquisition of 11 nursing homes in France for a total consideration price of EUR111.2 million (approximately $157.1 million)2. Both acquisitions are yield-accretive with favourable lease terms which further enhanced our portfolio resiliency and income diversification. The healthcare and aged care industries remain resilient, with demographic trends that support long-term growth. Parkway Life REIT's portfolio, composed of high-quality assets, is well-aligned with the growing demand for healthcare services. With 67.2% of rental income tied to CPI-based revisions, the Group is well-hedged against inflation, ensuring a stable and defensive revenue stream even amid economic challenges.
To enhance Parkway Life REIT's long-term sustainability and resiliency, the REIT has successfully conducted its first follow-on equity fund raising since IPO to fund its France acquisition. With that, the REIT maintains a healthy gearing post-acquisition ratio of 34.8% and interest cover of 9.8 times as of 31 December 2024, To date, with about 87% of its borrowings on fixed rates, the Group has significantly mitigated exposure to rate fluctuations, providing predictability for debt servicing. Additionally, it manages foreign currency risks through Japanese Yen forward contracts, protecting its income from the Japan portfolio.
The healthcare industry will remain critically essential in a rapidly aging population underpinning greater demand for better quality healthcare and aged care services. Parkway Life REIT's portfolio of assets places it in a good position to benefit from this continuous growth of the healthcare Industry. Going forward, Parkway Life REIT will continue to focus on driving resilient returns backed by solid financial management to create greater value for its unitholders.
1 At an exchange rate of S$1.00 = JPY110.62
2 At an exchange rate of S$1.00 : €0.71