Parkway Life Reit to acquire two nursing homes in Japan for 1.8 billion yen

PARKWAY Life Real estate investment trust : C2PU 0% (PLife Reit) announced on Wednesday (Oct 18) the acquisition of two nursing homes in Osaka for a total purchase price of 1.8 billion yen (S$16.4 million).

The healthcare-focused Reit is buying the properties from K.K. FDS, a Japanese real estate developer. The purchases will take PLife Reit’s portfolio in Japan to 59 properties, valued at approximately S$710.7 million.

The acquisition is being made at about 11.9 per cent below valuation, with the transaction expected to be completed by Q4 2023.

PLife Reit will be working with a new operator, K.K. Biscuss, which runs 17 nursing and/or aged-care facilities in the Osaka and Hyogo prefectures. 

The two nursing homes, built in 2022 and 2023 and with 108 beds between them, are freehold properties in Osaka prefecture. PLife Reit will take over the existing building lease agreements, which have an average of 29 years left on their leases.

With these acquisitions, the Reit’s weighted average lease expiry by gross revenue will go up from 16.7 years to 16.8 years.

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PLife Reit’s leverage ratio will also rise from 35.3 per cent (as at Jun 30, 2023) to 35.8 per cent, which is within the regulatory gearing limit for Singapore Reits under the Code on Collective Investment Scheme, said its manager. 

The acquisition will be fully funded by yen-denominated debts. As was the case with earlier acquisitions, the Reit manager said that “the deployment of the yen-denominated funding provides a natural hedge for the foreign-exchange risks arising from yen-denominated assets and mitigates against potential currency”.

The chief executive officer of the Reit manager, Yong Yean Chau, added: “The acquisition of the two properties will further entrench our presence in Japan, and allow us to grow alongside Biscuss, a new credible operator for PLife Reit.”  

Units of PLife Reit ended at S$3.66, up S$0.01 or 0.27 per cent before the announcement.