Parkway Life REIT Eyes Third Pillar Amidst Healthcare Boom
OREANDA-NEWS. September 30, 2015. It was actually a chain of coincidences that led Loo Hock Leong to assume the role of Chief Financial Officer at Parkway Trust Management, Manager of Parkway Life REIT, Asia’s largest healthcare real estate investment trust.
How the Electrical Engineering Honours graduate from the National University of Singapore took on a treasury advisory job with DBS Bank, and rose through the ranks to become PLife REIT’s CFO, was very much incidental, Loo said.
“I call myself the accidental CFO,” the affable 45-year-old said with a laugh.
“I was not trained in finance, business or accounting – I was an electrical engineer, and became an accidental banker in DBS after attending a campus career fair in my final year,” he said.
“I am a people person, and I enjoy meeting people. Spending all my time dealing with electrical components like resistors and capacitors, being a lab rat, was just not my cup of tea.”
Loo spent 13 years with DBS, advising clients on interest rate and foreign exchange risk management solutions relating to capital structuring, as well as mergers and acquisitions. Along the way, he obtained a Masters of Applied Finance from Macquarie University.
That experience landed him the job as head of corporate finance at PLife REIT in 2008, and he was promoted to CFO about a year later. Since then, he has also secured a professional qualification from the Institute of Singapore Chartered Accountants and the title of Chartered Accountant of Singapore.
Loo attributes the drive to upgrade himself to his parents, who exemplified the values of perseverance and hard work.
“My parents were very good role models. My dad was a very astute businessman who worked hard to support the family, while my stay-at-home mum ran the household, ensuring that my five brothers and I were getting the best possible education and care.”
Going back to school as a mid-career professional also gave Loo an opportunity to study with his four sons, including a pair of twins, aged 10, 14 and 15 years.
“They take out their books, I take out my books, and we study together,” Loo said with a grin. “Of course, I would always outlast them in terms of concentration!”
Apart from tutoring his children in science subjects, including chemistry, Loo makes it a point to impart what he calls “life skills” – abilities they cannot pick up from school that will help guide them on the road to adulthood.
His parenting responsibilities extend to the use of mobile devices at home, and includes controlling his children’s access to the Internet when it’s homework or study time.
“There are occasions when my children express frustration after my wife confiscates their mobiles, since they tend to get carried away with messaging or surfing excessively on their smartphones. In such situations, I will step in to explain the rationale and our expectations of them upfront. At the same time, I try to teach them how to solve such squabbles amicably.”
Loo views parenthood as a “work in progress” – one that should be treasured as children will remain young only for a time.
“We must cherish their growing-up years, and at every stage of their growth, there are lessons to learn and challenges to overcome,” said Loo, who goes swimming, cycling, hiking and fishing with his sons.
“When they are young, it’s all about basic needs. When they embark on the journey into adolescence, we need to appeal to their logic and emotions, counselling them, nudging them in the right direction, helping them develop good judgment.”
Such family ties have helped to shape Loo’s management philosophy.
“It’s all about teamwork, cultivating that ‘kampung’ spirit, and helping my staff grow together with the company,” he said.
“Coming from a family of six boys, we really needed to work as a team when it came to household chores, as we had no maids then. To get things done, like cleaning the toilets, washing dishes and doing the laundry, we had to band together. We learned to give and take, and negotiate a lot,” he smiled.
“No doubt we had plenty of squabbles, like who got to sit in the front seat of the family car, but we never bore grudges, and the tantrums blew over very quickly.”
The camaraderie among the six siblings, aged 39 to 50 years, still runs strong. Every weekend, the extended family gathers to cook up a storm for their parents. Local favourites, including laksa, curry fish head, chicken rice and nasi lemak (fragrant rice cooked in coconut milk and pandan leaf), dominate the menu.
‘Most Kiasu’ REIT
Apart from fostering a spirit of collaboration at work, Loo aims to maintain a culture of financial prudence at PLife REIT.
“We are very defensive in nature, and we are probably the most ‘kiasu’ REIT among all the Singapore REITs,” Loo said, referring to the popular Singlish term that means ‘afraid of losing out’ in vernacular Chinese.
With Japan accounting for 37% of its revenues, and more than S\\$500 million in Japanese assets, PLife REIT has adopted “a natural hedge” by borrowing in yen for its acquisitions.
“As our assets denominated in yen depreciated in value in line with the currency, our liabilities also declined. Therefore, we were able to mitigate the principal FX risk. If we had not adopted this natural hedge, we would be dead by now,” Loo noted.
The tenure of PLife REIT’s hedges is as long as five years. “That’s one of the longest among the S-REITs. The others typically hedge about six months to one year.”
The REIT also uses interest rate hedges for 80% of its outstanding debt, he said. “This is to ensure we are insulated against any pending rate hikes.”
And conservatism rules when it comes to managing PLife REIT’s gearing and capital structure.
“We aim to have no more than 30 per cent of our debt maturing in any single year, to ensure our debt profile is very well spread out, otherwise stakeholders would be extremely nervous in a particular year with large capital outflows,” he said.
“We do our refinancing a year ahead of the maturity date, so we have room to manoeuvre – more time to conduct beauty parades to drive down credit spreads, more time to negotiate for better terms.”
Needless to say, the state of the capital markets sometimes gives Loo restless nights.
“With the recent yuan devaluation and threat of currency war, we may see capital outflows and indiscriminate selling in the region by funds. This is of concern to us, as the well-being of a REIT depends on the efficient and healthy functioning of the capital markets,” he added.
The REIT’s defensive nature is also enhanced by its long-dated lease agreements and its focus on the healthcare industry.
PLife REIT’s weighted average lease expiry (WALE) is over nine years, longer than typical retail or industrial leases. “This helps to mitigate any loss of income due to tenant turnover,” Loo said.
WALE is a key metric used by investors to measure a REIT’s risk of going vacant. When a property is left vacant for long, income and distribution to unit holders will be affected.
“Coupled with ageing populations and rising per capita incomes in the region, particularly in Japan, demand will continue to expand. Medical technology will improve, but patients will live longer and need a place to be treated or live in,” he added.
The next step for PLife REIT is to find its third pillar of growth.
“Singapore is our anchor, accounting for about 63 per cent of our revenues. The next is Japan, and the third leg, which will make our entire portfolio more stable, could either come from Malaysia or Australia.”
“We are building up pipelines within these two markets. Our acquisitions are not an end in itself, but a means to an end, to ensure that our DPU is stable and sustainable over time,” Loo said, referring to the REIT’s distribution per unit.
“We would rather pass on deals than dilute the DPU and reduce the defensive nature of our portfolio.”
|Year Ended 31 Dec (S\\$ '000)||FY 2014||FY 2013||FY 2012||FY 2011|
|Net property income||93,775||87,599||87,608||80,308|
|Distribution per unit (DPU) (cts)||11.52||10.75||10.31||9.60|
Source : Company Data
Quarter ended June 30 (S\\$ '000)
|2Q FY2015||2Q FY2014||% change|
|Net property income||23,987||23,641||1.5|
|Distribution per unit (DPU) (cts)||3.35||2.9||15.60|
Source : Company Data
Parkway Life REIT
Parkway Life REIT invests primarily in income-producing real estate properties and related assets in the Asia Pacific region. Their properties are mostly used for healthcare or healthcare-related purposes, including hospitals and nursing homes. As of 30 June 2015, Parkway Life REIT’s portfolio consists of 47 properties totaling about S\\$1.6 billion as at 30 June 2015. Parkway Life REIT was founded in 2007 and is based in Singapore.
For the quarter ended 30 June 2015 financial results, click here.
The company website is: http://www.plifereit.com/