Parkway Life REIT’s Annual General Meeting: 7 Things Investors Should Know

From time to time, Foolish hats turn up at annual general meetings.

My better half is a unitholder of Parkway Life REIT  (SGX: C2PU). I made the trip down to the REIT’s annual general meeting, held this morning, on her behalf. You can read more about the healthcare-based real estate investment trust’s latest annual report in here.

The following are seven things I learnt during the meeting:

  1. Yong Yean Chou, the chief executive of the REIT’s manager, gave a brief presentation covering the key events of the year. Among the highlights was the asset recycling exercise in Japan that Parkway Life REIT underwent. Yong felt that the REIT was able to swap in properties with better quality and longer leases. Better geographical diversification within Japan was also achieved as a result.
  2. Meanwhile, Yong also touched on the six-year senior unsecured fixed rate notes issued by Parkway Life REIT. The bond features a 0.58% interest rate which is the lowest ever the REIT has been able to secure. Yong said that this rate would have been unobtainable in Singapore.
  3. The stability in the REIT’s distribution is one of the management’s key focus. Yong highlighted that 93% of Parkway Life REIT’s leases (by gross revenue) comes with a protection clause. This is a major feature of protection for the REIT’s distribution, Yong said.
  4. Lim Kok Hoong, the Chairman of the board, introduced the REIT’s board members and management team during the meeting. Notably, Parkway Life REIT’s board features a good number of representatives from its sponsor. This includes Dr Tan See Leng, chief executive of IHH Healthcare Bhd (SGX: Q0F). As of 31 March 2016, IHH Healthcare owned around 36% of Parkway Life REIT.
  5. A question was raised during the meeting on the level of government subsidies for the REIT’s Japanese nursing homes. Lim felt that the nursing home market is very fragmented.  He said that players in the market are closely watching for new subsidies from the government to sustain a business. As such, he commented that the nursing home market is “protected” in that sense. Yong added that there are three levels of nursing homes. The mass market nursing homes are almost 90% subsidized. The mid-to-high tier nursing homes have around 30% in subsidies. The middle tier is where Parkway Life REIT operates. The highest tier – luxury – receives very little subsidies.
  6. One of the other protective features for Parkway Life REIT is its long master leases for its Singapore hospitals. There is a master lease of 15 plus 15 years that took effect on 23 August 2007. One unitholder asked how the rollover at the 15 year mark will affect the current lease agreement. Yong said that the master lease’s formula will not change, but the base rental is open for negotiation. He was also candid in saying that the reality is that there are no assurances. Lim added that there will not be a situation of zero risk.
  7. There is no mandate requested for Parkway Life REIT to issue new units to finance future investments. Yong confirmed that the REIT would have to hold an Extraordinary General Meeting (EGM) if it wanted to issue new units.

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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 units in Parkway Life REIT.