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3 Quick Lessons From Singapore’s Most “Kiasu” REIT

Parkway Life REIT (SGX: C2PU), a real estate investment trust with a focus on healthcare-related assets, was recently featured in an interview series by bourse operator Singapore Exchange.

In the interview, Loo Hock Leong, the Chief Financial Officer of Parkway Life REIT’s manager, shared his thoughts on how the REIT was managed. Amusingly, Loo referred to Parkway Life REIT as the most “kiasu” among all REITs in Singapore. (“Kiasu” is a colloquial term commonly used in Singapore that can be literally translated as “afraid to lose.”)

Loo’s thoughts may be worth listening too, as Parkway Life REIT has been a strong long-term outperformer in Singapore’s stock market.

From the start of 2010 up till its close yesterday, the REIT has racked up capital returns of around 83%. In contrast, the SPDR STI ETF  (SGX: ES3), a proxy for the market barometer the Straits Times Index (SGX: ^STI), has declined by 4% over the same period.  On top of its capital gains, Parkway Life REIT has also paid out S$0.58 per unit in total distributions since the start of 2010, thus bringing its total returns to nearly 130%.

Here are some of Loo’s thoughts on managing Parkway Life REIT:

1. Mitigating currency risk

Parkway Life REIT adopts natural hedging when it acquires foreign properties. For instance, its purchases of properties in Japan were funded by borrowings in the Japanese yen. This helps to avoid losses in the future that may come about because of possible large currency movements.

Beyond that, the REIT also makes long-term hedges (five years or more) against currency swings.

2 Spreading out debt

Loo mentioned in the interview that Parkway Life REIT aims to have less than 30% of its overall debt mature in any single year.

By spreading out its debt-maturity over many years, Parkway Life REIT is thus given time to adjust to any unfavorable changes which may appear in the credit environment. Notably, this approach of having a staggered debt-maturity is something similar to the stance taken by the manager of Capitaland Mall Trust (SGX: C38U), one of Singapore’s largest REITs.

3. An eye for disciplined growth

In the interview, Loo also hinted that the next leg of growth for Parkway Life REIT could come from Malaysia or Australia. While there is interest in growth, Loo also said that Parkway Life REIT would rather pass on deals than dilute its distributions. Such discipline may make a difference to the returns that the REIT’s unitholders can enjoy over the long-term.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong owns shares in Parkway Life REIT.