- We had the opportunity to host Parkway Life REIT (SGX:C2PU) for a US Non-Deal Roadshow (NDR) in May 23 and also appreciate its longer term growth strategy that is currently in the works.
- In 2023, Parkway Life REIT entered the first full year of its renewed 20-year master lease with Parkway Hospital Singapore that was finalised in 2021. Concurrently, it has kickstarted extensive refurbishment to retrofit and rejuvenate Mount Elizabeth Hospital (MEH), named Project Renaissance. The estimated capex is S$350m, with S$150m to be funded by Parkway Life REIT while the sponsor is topping it up with another S$200m, showing their strong support.
A new lease of life breaths new opportunities and prospects.
- - Read this at SGinvestors.io -
- Rental growth upside of ~40% over the next four years. The renewed lease was signed for rental growth of ~40% over the next four years. During the first three years of the AEI period, rental income will increase at a fixed 3% p.a. (rental income increase is offset by rent rebate totalling S$60.9m over three years). Upon completion of the construction, expected in 2026, the estimated increase in rents could be ~25%.
- Rejuvenation of MEH could generate greater-than-expected economic benefits. One of the key highlights of Project Renaissance is the addition of 56 single beds from the current 112 single beds, a 50% increase. While the number may not look big in terms of a potential increase in in-patient load, the improvement in operational flows and functional layout may allow IHH Healthcare (SGX:Q0F) to increase its out-patient, day-patient, and medical checkup capacity within the hospital. As it is hard to quantify the economic benefit, we believe the market is yet to appreciate the potential economic benefit to IHH Healthcare as the hospital operator and sponsor, and consequently Parkway Life REIT, in terms of a potential increase in rental income in the future.
- May rollout potential asset enhancement with the success of Project Renaissance. Despite the bulk of asset enhancement currently targeted at one of the three Singapore hospitals owned by Parkway Life REIT, we do not discount that potential asset enhancement could be subsequently rolled out to the other two hospitals with the success of Project Renaissance. This implies potential upside in rental income in the longer term.
Key details of Project Renaissance:
- Read more at SGinvestors.io.
