SINGAPORE (Dec 3): Parkway Life Real Estate Investment Trust (PLife REIT) is acquiring three nursing rehabilitation facilities in Japan for a total consideration of 3.7 billion yen ($46.3 million), the manager announced Tuesday.
The trustee of PLife REIT, through its wholly-owned subsidiary Parkway Life Japan4, has entered into a Tokumei Kumiai (or silent partnership) agreement for the acquisition of the properties. This is similar to the holding structure for PLife REIT’s previous acquisitions in Japan, the manager says.
The three properties – Hodaka no Niwa, located in Takayama City, Gifu Prefecture; Orange no Sato, located in Arita-gun, Wakayama Prefecture; and Haru no Sato, located in Shunan City, Yamaguchi Prefecture – are located in residential areas of the respective prefectures.
The manager says the properties will contribute positively to its lease expiry profile and further enhance the resiliency of its portfolio.
With the new acquisition, PLife REIT will secure fresh 20-year master lease agreements for each of the properties.
The long lease arrangement serves to further improve the lease expiry profile of PLife REIT’s entire portfolio by lengthening the weighted average lease term by gross revenue to 6.69 years, from 6.29 years as at Oct 31, 2019.
The manager says the acquisition will fortify the resiliency of its portfolio and deliver immediate growth, as well as solidify the REIT’s geographical and tenant diversification within Japan.
The acquisition will be made at approximately 7% below valuation and is expected to generate a net property yield of 6.8%, delivering immediate yield growth to PLife REIT.
Expected to be completed by December 2019, the acquisition will bring PLife REIT’s portfolio to 53 properties with a total value of $1.92 billion.
PLife REIT’s tenant risk exposure will also be diversified with the addition of three new operators. Two of the operators are associated companies of K K Habitation, PLife REIT’s second largest nursing home operator in Japan.
The acquisition will be funded by a long-term Japanese yen bank facility. Post-acquisition, PLife REIT’s gearing level will increase to 38.0%, from 37.2% as at Sept 30, 2019.
“The strong ageing demographics of Japan continue to position PLife REIT favourably as we acquire aged care properties to fortify the resiliency and quality of our portfolio,” says Yong Yean Chau, executive director and chief executive officer of the manager.
“Working in collaboration with one of our key partners in Japan, K K Habitation, we have further deepen our presence in Japan, which represents one of PLife REIT’s growth engines,” he adds.
Units in Parkway Life REIT closed 4 cents lower, or down 1.2%, at $3.22 on Tuesday, before the announcement.
