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Parkway Life Reit buys nursing home in Japan for 1.5b yen

PARKWAY Life Reit on Wednesday announced the acquisition of a nursing rehabilitation facility, Konosu Nursing Home Kyoseien, under a sale-and-leaseback agreement with nursing home operator Iryouhoujin Shadan Kouaikai for 1.5 billion yen (S$17.8 million).

The acquisition of the 120-room property in Saitama prefecture will be made at 7.4 per cent below the valuation of 1.62 billion yen as at end-Dec 2017 by KK Halifax Associates.

It is expected to generate a net property yield of 6.7 per cent. This beats its current yield of about 4.5 per cent, and is thus expected to deliver "immediate yield growth" to the trust, it said.

The acquisition is expected to be completed in the first quarter of 2018 and will bring the Reit's portfolio to 50 properties worth S$1.75 billion.

The property is also secured on a fresh 20-year master lease arrangement with the vendor at an annual gross rental of about 112 million yen.

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The property will also have a backup operator agreement with the lessee, Iryouhoujin Shadan Kouseikai, whose role is to ensure that the business of the rehabilitation facility runs smoothly in the event of any cancellation or termination of the current lease.

The property is located in the residential neighbourhood of Konosu City, and is accessible by train and is about a 90-minute drive from the central business district of Tokyo. As at end-December, the property has a stable operational occupancy of about 100 per cent.

The acquisition will be financed by internal funds and JPY-denominated debt. There is therefore no significant impact on the Reit's leverage level post-acquisition. Its JPY-denominated debt also provides a natural hedge for the foreign exchange risks arising from its JPY-denominated assets, and ensures certainty of distribution to unitholders.

Units of the trust rose two Singapore cents to end at S$2.79 on the stock market.

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