Parkway Life Reit

Parkway Life Reit: Parkway Pantai’s $2b Mount Elizabeth Novena hospital is expected to be launched in early July. The 333-bed facility, which received TOP recently, is a 14-storey complex with 37 deluxe wards, 8 VIP rooms, 3 suites and 13 operating theatres. 180 beds will be ready for use from July, with the balance coming on-stream in 2H13. More than 80% of the 254 medical suites are available for sale with at least 170 already sold at between $3588 – 5088 psf. Parkway Pantai acquired the land for the hospital, with a permissible GFA of 778.8k sf, in Feb ‘08 at a record price of $1.25b or $1600psf ppr. StanChart says, an asset divestment could be a natural step, post-IPO, and PLIFE REIT could potentially acquire the asset upon its completion in July. PLIFE is currently leveraged at 35.3% debt-to-assets. An acquisition of this quantum (Stanchart estimates at $1.0b ex the strata titled portions compared to PLIFE’s current asset base of $1.4b), would likely require a combination of debt and equity financing. PLIFE could also issue perpetual securities to partially fund the acquisition. The acquisition could still be accretive if acquired at a 6% cap rate and funded using equity costing 5.5% and debt costing 2.5%. PLIFE offers 5.5% FY12e yield. The Street has 6 Buy and 2 Hold ratings, with TP btwn $1.95 – 2.07.