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The results for FY 2022 includes contribution from the 12 and two Japan properties which were acquired in March and September 2022 respectively.
The healthcare sector offers immense opportunities, underpinned by factors such as the structural demographic megatrend of ageing population, and a demand for quality healthcare services in markets that lack capacity. To capture these opportunities, First REIT is diversifying into developed markets to comprise more than 50% of its portfolio by 2027 and reshaping its portfolio for capital efficient growth through the divestment of non-core, non-healthcare, or mature assets, in line with First REIT’s 2.0 Growth Strategy.
In developed markets such as Japan and Singapore, which already comprises 25.1% First REIT’s portfolio as at 31 December 2022, the percentage of population aged 65 years or older is higher than the world average. Between 2022 and 2030, this age group is expected to grow from 29.9% of the total population to 31.4% in Japan, and from 15.1% to 22.8% in Singapore1. In developing markets such as Indonesia, the average number of hospital beds of 1.0 per 1,000 people remains below the Asia Pacific average of 1.1 per 1,000 people for lower-middle and low income countries, 2.0 per 1,000 people for upper-middle income countries, and 3.4 per 1,000 people for high income countries2. With growing affluence in Indonesia, the demand for quality hospital services is expected to increase.
Nonetheless, global inflationary pressures, rising interest rates, exchange rate volatility, and geopolitical risks have resulted in a challenging real estate investment environment. To remain resilient, First REIT is strengthening its capital structure by diversifying funding sources and optimising its financial position, which is another key thrust of First REIT’s 2.0 Growth Strategy.
As at 31 December 2022, 59.8% of First REIT’s debt are on fixed rates after entering into interest rate swaps and interest rate caps amounting to S$175 million; 76.7% of First REIT’s debt are now social finance instruments and contribute to the achievement of United Nations Sustainable Development Goals (“UN SDG”)3. To manage exchange rate volatility, First REIT has hedged approximately 60% of its income denominated in the Indonesia Rupiah.
Amid the easing of cross-border travel restrictions due to a waning pandemic, First REIT will continue to seek accretive acquisitions in the burgeoning healthcare real estate market by tapping on a strong network from its sponsor group, comprising OUE Limited and OUE Lippo Healthcare Limited, in addition to evaluating opportunities from third parties. With strong sponsor support and First REIT 2.0 Growth Strategy in motion, First REIT remains committed to balancing growth and stability in its portfolio, delivering sustainable distributions to unitholders.