2 ways to ride on India market: replicate Reit or pump in properties
EVEN as Fortis Healthcare and Parkway Holdings are pondering over the possible synergies that the healthcare partners can leverage on from their new relationship, one analyst has suggested that they look into real estate too.
Simranjit Singh, director of healthcare practice at Frost & Sullivan Asia Pacific, said that with the India property market heating up, Fortis could leverage on Parkway Life Reit (of which Parkway is a substantial unit-holder) by ‘offloading its Indian properties’ to the Reit or ‘by replicating a similar healthcare Reit model in India’.
‘In fact, many analysts speculate that there will be about three to four large-sized initial public offerings of Reits this year,’ said Mr Singh. ‘This is likely to come from India, where business parks are maturing and attracting stable, healthy income streams for property owners. It will also be hard to rule out the possibility for hospitals to join the fray.’
However, analysts that BT spoke to expressed a mixed response to that suggestion.
‘Although India is one of the markets that have huge untapped potential, an acquisition of an Indian asset in the near term is unlikely,’ said Kim Eng Research investment analyst Anni Kum. ‘Japan and Australia currently present better opportunities due to the still attractive asset yields and stable income structure that potential targets offer. I do not think India is a market that PLife Reit is seriously looking at at this moment. But the Reit may still consider opportunistic buys at compelling prices.’
Broadly agreeing, DMG Securities’ Terence Wong said that Malaysia would be more attractive to PLife Reit. ‘They’ve always mentioned that they will focus on four markets – Singapore, Japan, Malaysia, as well as Australia. So after Japan, probably it’ll be Malaysia.’
PLife Reit owns the Gleneagles, Mt Elizabeth and Parkway East hospitals in Singapore as well as 18 properties in Japan.
Another analyst from a research house based here noted that the defensive nature of a Reit model requires that the properties that PLife Reit acquires be able to generate a stable income stream. While India is a possibility, an injection of assets is unlikely in the near term, he said.
‘The management of PLife Reit is very focused on where they want to invest in,’ said the analyst. ‘Those countries that they are looking into are usually more mature in terms of regulations, like Singapore, Japan as well as Australia. Offhand, I would think India, in terms of regulations, is still behind these three countries.’
When asked what he thinks of the real estate suggestion, Parkway Trust Management CEO Yong Yean Chau said he is positive about the growing regional healthcare market but each acquisition ‘will have to be yield-accretive’.
‘As always, we remain open to opportunities for strategic partnerships with high-quality operators at the right time to enhance our business and portfolio,’ said Mr Yong, whose company manages PLife Reit.
Interestingly, Fortis Healthcare is listed as a competitor in PLife Reit’s IPO prospectus. The Indian hospital chain owner, which bought a stake in Parkway last month for close to $1 billion, operates a network of 46 hospitals, with another eight still under construction. Fortis Healthcare now owns 25 per cent of Parkway, which in turn holds a 36 per cent interest in PLife Reit.
In a statement yesterday, Frost & Sullivan’s Mr Singh also said that Fortis could tap on Parkway’s expertise in providing primary healthcare for the expatriate segment as India is also seeing a growth in its expatriate community. There are also growth opportunities for Parkway’s laboratory business and that of Super Religare Laboratories, which is owned by Fortis.
‘In fact, this could be a business unit that could be further developed and listed as a separate entity,’ said Mr Singh.
Source: Business Times, 8 Apr 2010
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