First REIT Divests Indonesian Assets for S$471.5mn, Target Price Reduced to S$0.25 with ACCUMULATE Rating April 24, 2026

Strategic Divestment to Enhance Portfolio Quality

First REIT has announced a comprehensive divestment strategy for its Indonesian healthcare assets, proposing to sell eight hospitals and three non-hospital properties for S$471.5mn. The purchaser, PT Siloam International Hospitals Tbk, will acquire these assets in the first tranche of what represents a strategic pivot towards developed markets.

Company Overview

First REIT operates as a healthcare-focused real estate investment trust with assets spanning Singapore, Japan, and Indonesia. The REIT specialises in healthcare properties including hospitals and medical facilities across the Asia-Pacific region.

Two-Tranche Divestment Structure

The proposed transaction follows a carefully structured two-phase approach. The initial tranche involves eleven Indonesian assets valued at S$471.5mn, comprising eight hospitals for IDR5.1tn (S$389.2mn) and three non-hospital assets for IDR1.1tn (S$82.4mn). This pricing represents a 2.1% premium over the average of two recent independent valuations.

Additionally, First REIT has secured a put option for the remaining six Indonesian hospitals, valued at S$294.8mn, exercisable until 31 October 2026. This structure provides flexibility whilst ensuring complete exit from the Indonesian market if desired.

Financial Impact and Capital Allocation

The divestment will generate significant financial benefits for unitholders. The S$9.7mn premium over appraised value will be distributed as special dividends over two quarters following completion. The manager has waived its S$2.4mn divestment fee to align with unitholder interests.

Net proceeds of S$464.2mn will primarily reduce debt, with S$362.7mn (78%) allocated to debt repayment. This will dramatically improve the REIT’s leverage profile, reducing aggregate leverage from 42.1% to 16.7%. The remaining debt will largely comprise lower-cost JPY-denominated borrowings.

Strategic Outlook and Research Recommendation

The divestment addresses rental arrears issues whilst enabling capital recycling from non-core assets. First REIT plans to focus on assets in Singapore and Japan whilst pursuing expansion opportunities in developed markets, which offer lower equity risk premiums, reduced debt costs, and more stable currencies.

Phillip Securities Research maintains an ACCUMULATE recommendation with a revised target price of S$0.25, down from S$0.29. The valuation methodology has shifted to 1x FY25 P/NAV from the dividend discount model, reflecting uncertainty over future portfolio composition pending the strategic review.

Frequently Asked Questions

Q: What assets is First REIT proposing to divest?
A: First REIT is proposing to divest eight hospitals and three non-hospital assets in Indonesia for S$471.5mn, with an additional put option for six remaining hospitals at S$294.8mn.

Q: Who is purchasing the Indonesian assets?
A: PT Siloam International Hospitals Tbk (Siloam) is the purchaser of the eight hospitals in the first tranche.

Q: When will the divestment be completed?
A: The divestments are subject to unitholders’ approval at an Extraordinary General Meeting scheduled for June 2026, with targeted completion in August 2026.

Q: How will the proceeds be used?
A: Net proceeds of S$464.2mn will primarily reduce debt (S$362.7mn or 78%), with S$9.7mn distributed as special dividends and the remainder allocated to capital expenditure and working capital.

Q: What is Phillip Securities Research’s recommendation and target price?
A: Phillip Securities Research maintains ACCUMULATE with a lower target price of S$0.25, reduced from the previous S$0.29.

Q: How will the divestment impact leverage?
A: Aggregate leverage would decline significantly to 16.7% from the current 42.1%, assuming completion on 31 December 2025.

Q: What is First REIT’s strategic direction following the divestment?
A: First REIT plans to focus on Singapore and Japan assets whilst transitioning toward developed markets, which offer lower equity risk premiums, lower debt costs, and more stable currencies.

Q: Will unitholders receive any special distributions?
A: Yes, the S$9.7mn premium over appraised value will be distributed as special dividends over two quarters following completion of the divestment.

This article has been auto-generated using AI tools. It is based on a report by a Phillip Securities Research analyst.

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About the author

Darren Chan

Darren has over seven years of experience across both the buy-side and sell-side. During his tenure as a fund manager, he managed multiple funds and mandates, including dividend income, growth, customised, Singapore-focused, and regionally focused strategies. He holds a First-Class Honours degree in Banking and Finance from the University of London.

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