Not all REITs are equal, and I like this one a lot

Parkway Life REIT ("Plife): one of my favourite REIT. I got to know of this when I just "joined" the investment community and read it on Dividend Warrior blog. He is one of my greatest inspiration. :)

Now, let's have some fun dealing with some FAQs.

"REITs are going to suffer from the impending interest rate hike"

a) Gearing 35.2%, additional headroom of $298.8M to hit the cap.

b) Lowest all in cost of debt of 1.4% (that's insanely low). 

What PLife is doing is to have all of their loans be variable rates (thus the low cost of debt) to have the upfront interest-savings now. 

I feel this is also a wise move as the FED is unlikely to have interest rates hiked to the normal levels anytime in the short to mid-term. 

Having the loans swapped to fixed rates (at about 3%) now is not going to benefit Plife much when they're currently saving 1.6% of interests. Plife will only "lose out" if their floating rates exceeds 3% by a large margin. (because that will have to be "offset" against their current accumulated interest savings)

c) Interest rate hike have mostly been priced into REITs.

d) When will the FED finally raise interest rates? It was delayed from Q4 2014 to Q1 2015 and now Q2 2015?

Even when they do, Yellen has said that it will be done at a gradual and slow pace - I'm not going to expect interest rates rise to 3-4% in a short period of time.

"Stagnant performance"

69% of their portfolio is CPI-linked. (inflation protected)

93% of their portfolio has downside protection.

"No Margin of safety - trading 1.4x Book value"

The healthcare industry is defensive in nature and typically is trading at a premium to its book value as a result.

PLife has 67% of its revenue from Singapore and 32% from Japan

Singapore is poised to be medical hub. DBS has projected that medical tourism will grow by 8% through 2018.

Japan - the "king" of ageing population. Demands for nursing homes and hospitals will always be high in this country.

Worried about forex risk (Japan Yen)?

Japan's results are hedged for the next few years, shielding the REIT against any forex volatility.

"Low div yield (4.9%) compared to the average 6%"

Well, it is a defensive REIT in the first place, and thus its future earnings are more predictable and its DPU are more sustainable.

If you're a long term investor of Plife (which we all should be investing for long term), look at this chart below.

IF you had bought Plife in 2008 at $1.09 (with a 6% yield) and held on to it to 2014, your current yield would be 10.5% (with a capital gain of >100%)

That's the power of holding good businesses for a long term.

"Singapore Saving Bonds will put downward pressure to REITs"

In the short term, yes, the market will react to that by selling off REITs.

However, with quality-REITs like Plife, earnings will grow, NAV will grow.

DPU (hopefully) will eventually grow.

I always believe that "in the long run, the market will behave like a voting machine" and I still do.

There are some REITs capable of having capital gains, and not merely dividend yielding instruments.

"Is this the right time to buy Plife?"

There is no definite answers for these type of questions. But if you want to avoid buying Plife at a "high price", see the chart below.

Plife has been trading at a tight range for the past 12 months. Should you enter now or not? 

There's nobody who cares about your money that you do. When making such decisions, please perform your due diligence and weigh your options.