Healthcare-focused Parkway Life REIT (PLife REIT) is set to acquire a nursing home in the Greater Tokyo Region in Japan at a purchase price of JPY 3.2 billion ($39.2 million).
The acquisition will be made at around 7.0% below an independent valuation of JPY 3.44 billion and is expected to generate a net property yield of 5.9%. The yield was computed by dividing the contractual net property income by the purchase price of the property.
With this, PLife REIT will secure a fresh 20-year lease agreement, thereby lengthening its weighted average lease expiry (WALE) by gross revenue from 17.42 years, to 17.47 years.
The acquisition will be funded with JPY debts. This provides a natural hedge for the foreign exchange risks arising from JPY denominated assets.
Following the acquisition, PLife REIT’s gearing level will increase from 34.9% to 36.0% - within the regulatory gearing limit for REITs in Singapore.
Constructed in 2017, the 150-bed property is located in the residential area of Kisarazu City and has close proximity to Tokyo.
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It is operated by Fuyo Shoji Kabushiki Kaisha – a wholly-owned subsidiary of the Habitation Group, or the largest nursing home operator in PLife REIT’s portfolio in Japan.
Established in 1982, Habitation Group operates 36 healthcare and aged care facilities, including hospitals, clinics, nursing rehabilitation facilities and care homes in Japan.
The acquisition will be done through a Tokumei Kumiai, or a silent partnership, involving Parkway Life Japan, the wholly-owned subsidiary of HSBC Institutional Trust Services (Singapore). The latter is the trustee of PLife REIT.
See also: CICT's manager proposes to acquire ION Orchard at $1.85 billion, subject to EGM
The REIT manager added that the transaction is not expected to have any material impact on the REIT's consolidated net tangible assets or DPUs for the period to Dec 31.
The deal - which is expected to be completed by the end of the year - would then bring the value of PLife's Japanese portfolio of 52 properties to around $804 million.
Says Yong Yean Chau, CEO of the manager, “the acquisition delivers immediate yield growth and enhances the resiliency of our portfolio with a long stable lease”.
“As we continue to grow our footprint in Japan, which is our valued core market, we recognise the importance of developing sustainable long-term partnership with credible operators with synergic business strategies,” he quips.
Units in PLife REIT closed up 3 cents or 0.60% at $5.07.
Cover image: file photo
