PARKWAY Life Real Estate Investment Trust (PLife Reit) has agreed to acquire 2 nursing homes in Japan for 2.88 billion yen (S$29.4 million) to deepen its expansion in the country's aged care market.
The healthcare-focused Reit is buying the properties from Japanese real estate developer Daiwa House. Together with 3 other acquisitions announced last week, this will bring its Japan portfolio to 57 properties valued at S$758.4 million.
The acquisition will be made at 11.1 per cent below valuation, and is expected to generate a net property income yield of 5.2 per cent. The transaction is expected to be completed by Q3 2022.
PLife Reit will be working with a new operator, Zen Wellness Co, which operates 11 nursing homes in the Kanto/Greater Tokyo region.
The nursing homes are freehold properties built in 2021 and located in residential areas of the Tokyo and Chiba prefectures. PLife Reit will take over the existing lease agreements, with an average long balance lease term of 29 years.
With the addition of the 2 nursing homes, the Reit's weighted average lease expiry by gross revenue will increase from 17.05 years as at end-August to 17.21 years. Coupled with the 3 other nursing homes, the Reit's leverage ratio will increase from 32.5 per cent as at end-June to 34.3 per cent.
The acquisition will be fully funded by yen-denominated debt.
"The 2 well-located properties will not only strengthen our portfolio but also initiate a new collaboration with Daiwa House, a reputable real estate developer in Japan," said Yong Yean Chau, chief executive of the Reit manager. He added that there is a strong demand for quality care homes, driven by Japan's ageing population.
The counter ended at S$4.62 on Tuesday (Sep 20), up S$0.03 or 0.65 per cent, before the announcement.