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Parkway Life Reit to acquire 3 Japanese healthcare properties for S$46.3m

PARKWAY Life Reit (PLife Reit) is acquiring three nursing rehabilitation facilities in Japan for a total sum of JPY3,700 million (approximately S$46.3 million) from KK Habitation, Fuyo Shoji Kabushiki Kaisha and Medical Corporation Shojinkai.

The acquisition will be made at approximately 7 per cent below valuation and is expected to generate a net property yield of 6.8 per cent, which is expected to deliver immediate yield growth to PLife Reit. The acquisition is expected to be completed by December 2019 and will bring PLife Reit's portfolio to 53 properties with a total value of S$1.92 billion.

The properties are located in the residential areas of three different prefectures in Japan, where PLife Reit will make its maiden foray into Gifu and Wakayama Prefectures while deepening its presence in Yamaguchi Prefecture. They are: 1) Hodaka no Niwa, located in Takayama City, Gifu Prefecture; 2) Orange no Sato, located in Arita-gun, Wakayama Prefecture; and 3) Haru no Sato, located in Shunan City, Yamaguchi Prefecture.

In addition to the geographical diversification within Japan, PLife Reit's tenant risk exposure will be further diversified with the addition of three new operators. Two of the operators are associated companies of KK Habitation, which is PLife Reit's second-largest nursing home operator in Japan.

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With the new acquisition, PLife Reit will secure fresh 20-year master lease agreements for each of the properties. The long lease arrangement will improve the lease expiry profile of PLife Reit's entire portfolio by lengthening the weighted average lease term (by gross revenue) from 6.29 years to 6.69 years.

The acquisition will be funded by a long-term JPY bank facility. PLife Reit's gearing level post-acquisition will increase from 37.2 per cent as at Sept 30 to 38 per cent.

Yong Yean Chau, executive director and CEO of the Reit manager, said: "The strong ageing demographics of Japan continue to position PLife Reit favourably as we acquire aged-care properties to fortify the resilience and quality of our portfolio. Working in collaboration with one of our key partners in Japan, KK Habitation, we have further deepened our presence in Japan, which represents one of PLife Reit's growth engines."

PLife Reit is one of Asia's largest listed healthcare Reits by asset size. It owns a portfolio of 50 properties with a total portfolio size of approximately S$1.88 billion as at Sept 30, 2019.