One S$150 million financing package has been secured by Parkway Life REIT to fund its pro-rata share of the S$350 million Project Renaissance capital expenditure at Mount Elizabeth Hospital, with sponsor IHH Healthcare separately contributing S$200 million, underscoring sponsor support for the asset enhancement initiative.
Parkway Life REIT secured S$150 million financing for Project Renaissance, with sponsor IHH Healthcare contributing S$200 million in support.
This initiative sits within the renewed 20-year master lease with Parkway Hospital Singapore that was finalised in 2021.
The REIT’s S$150 million commitment will be fully financed through external borrowings, arranged via six new committed, long-term facilities comprising SGD- and JPY-denominated loans, while leaving no long-term debt refinancing needs until March 2025.
Works at Mount Elizabeth Hospital commenced on January 3, 2023, and are scheduled over a three-year construction timeline with expected completion in 2026.
Public-facing areas, including the dropoff point and lobby, are being refreshed with new infrastructure, a VIP lounge is being added at Level 1 with upgraded technology and equipment, and mechanical, electrical, and fire protection systems are being upgraded to comply with the latest building codes.
The redevelopment is also designed to expand clinical capacity, adding 56 single-bed wards to an existing base of 112, which represents a 50% increase.
The emergency department and inpatient treatment centres will be expanded to improve operational flow, major operating and day surgery theatres will be consolidated for efficiency, and the fertility centre and haematology and stem cell transplant centre will be relocated to The Heeren, while radiology, executive health screening, and outpatient rehabilitation centres remain at Paragon.
Under the renewed lease, rental growth is stipulated at approximately 40% over four years, with a fixed 3% per annum increase during the first three years, offset by a S$60.9 million rent rebate over the same period.
Upon completion, the rent step-up for Singapore hospitals is estimated at 25.3% in 2026, supporting expectations that distribution yield could rise by 0.8 percentage points to 4.9%, with uplift beginning in 2026.
For 2H23, distributable income translated into a DPU of 7.48 Singapore cents, up 2.1% year-on-year, and interest cost capitalisation on Project Renaissance loan drawdowns is stated to have no immediate distribution impact, with earnings maintained for 2024, 2025, and 2026 forecasts.
Aggregate leverage stood at 35.6% then.
About 90% of its interest rate exposure is hedged until end-1Q24.
The financing structure mirrors GuocoLand’s recent S$619.3 million green club facility for its River Valley Green development, reflecting growing institutional preference for sustainability-linked credit arrangements.
