Healthcare REITs are one of the most resilient REIT sub-sectors.

The need for medical attention during good times or bad helps to anchor these REITs and provides them with a stable, predictable source of rental income.

The Singapore REIT (S-REIT) market contains two healthcare REITs, namely First REIT (SGX: AW9U) and Parkway Life REIT (SGX: C2PU), or PLife REIT.

We decided to compare these two REITs to determine which makes a more attractive investment candidate.

To do so, we looked at several metrics for both healthcare REITs as follows.

Portfolio composition

First, we looked at each REIT’s portfolio composition.

First REIT has 32 properties within its portfolio, while Parkway Life REIT has more than double the number of properties.

First REIT’s exposure is to three countries – Singapore, Japan, and Indonesia, while Parkway Life REIT’s exposure includes Singapore, Japan, France, and Malaysia.

Investors should note that Parkway Life REIT divested its sole Malaysian property after March 2025, thus the REIT is now left with exposure to three countries.

With Parkway Life REIT’s portfolio being double the size of First REIT, with more than twice the number of properties, the former wins on this attribute.

Winner: Parkway Life REIT

Financials and DPU

Next, we reviewed the financials for each REIT for the first quarter of 2025 (1Q 2025).

First REIT saw both gross revenue and net property income (NPI) fall year on year, mainly because of the depreciation of the Indonesian Rupiah and Japanese Yen against the Singapore Dollar.

Otherwise, the healthcare REIT enjoyed higher rental income from its Indonesian and Singaporean properties.

Because of the lower NPI and the enlarged unit base, First REIT saw distribution per unit (DPU) fall 3.3% year on year to S$0.0058.

On the other hand, Parkway Life REIT reported higher gross revenue and NPI principally because of maiden contributions from its French acquisition.

The REIT’s DPU inched up 1.3% year on year to S$0.0384.

Winner: Parkway Life REIT

Operating metrics

The next attribute looks at each REIT’s operating metrics, and this is where healthcare REITs shine.

Both REITs have very high portfolio occupancies that attest to their resilience during tough times.

However, Parkway Life REIT has a significantly higher weighted average lease expiry (WALE), which makes it the winner.

Winner: Parkway Life REIT

Debt metrics

Debt metrics come next.

First REIT’s gearing level hit 40.7% and it also has a significantly higher weighted average cost of debt at 4.7% compared with Parkway Life REIT.

To its credit, First REIT its working to reduce its cost of debt and has successfully done so as its cost of debt three months ago (i.e. 31 December 2024) was at 5%.

Parkway Life REIT also has a higher proportion of its debt on fixed rates at 90%, thus helping to mitigate increases in finance costs.

A lower gearing and higher interest coverage ratio means that the REIT has more room to take on debt for acquisitions while being able to service its interest payments.

Winner: Parkway Life REIT

Rental escalation clauses

Things get interesting when it comes to rental escalation details for each REIT.

For First REIT, Indonesia enjoys a 4.5% annual escalation or 8% of the hospital’s gross operating revenue (GOR), whichever is higher.

Parkway Life REIT’s Singapore hospitals also have a similar mechanism.

They will pay the higher of the base rent + variable rent (based on 3.8% of annual hospital revenue), or the consumer price index + 1%.

That said, Parkway Life REIT has an annual rent review coming up in 2026 which should see a sharp 24.4% year-on-year increase in rent payable, putting it ahead of First REIT’s 2% escalation.

Japan is a country where rent escalation is negotiated with the tenant, but the majority of the leases there have “up-only” rental clauses, as the country has suffered from years of deflation.

Winner: Parkway Life REIT

Distribution yield

Finally, we come to the arguably most important attribute for income investors – each REIT’s distribution yield.

There is no contest here as First REIT’s distribution yield is significantly higher than Parkway Life REIT’s.

Winner: First REIT

Get Smart: Look beyond the headline yield

Investors, however, should look beyond the yield itself and scrutinise each of the REIT’s attributes.

First REIT could be sporting a high distribution yield because of its presence in Indonesia and its higher cost of debt, which could take a toll on distributions moving forward.

First REIT also has a higher gearing level, which may constrain the REIT from undertaking more yield-accretive acquisitions.

That said, First REIT is heading in the right direction with the unveiling of its 2.0 Growth Strategy back in December 2021.

Back then, the REIT made the transformational acquisition of 12 nursing homes in Japan to diversify its portfolio and reduce reliance on Indonesia.

Parkway Life REIT has not been slacking, either.

Its low yield could be a symptom of the REIT’s solid track record of uninterrupted rising core DPU since its IPO in 2007.

The REIT also conducted its first acquisition in Europe last year with the purchase of 11 nursing homes from DomusVi, an aged care property operator.