The manager of Parkway Life REIT (PLife REIT) announced that it is further expanding its portfolio in Hokkaido, Japan with an acquistion of three nursing homes (Blue Terrace Kagura, Blue Rise Nopporo and Blue Terrace Taisetsu) from Blue Melon Capital Kabushiki Kaisha and its wholly-owned subsidiary, K2 Healthcare Sapporo Godo Kaisha.
The total consideration price is JPY 2.56 billion ($26.1 million).
The properties are well located with transportation connectivity within the residential areas of Ebetsu and Asahikawa Cities in Hokkaido Prefecture. This acquisition will see PLife REIT taking over the existing lease agreements of the properties, with a balance lease term of approximately 19 years, which will further improve the REIT's weighted average lease expiry (by gross revenue) from 17.01 years to 17.05 years. This will enhance the resiliency of PLife REIT’s earnings.
The properties are operated by Blue Care Kabushiki Kaisha, a wholly-owned subsidiary of Living Platform, which is one of PLife REIT’s existing nursing home operators in Japan. The acquisition presents an opportunity for PLife REIT to strengthen its long-term working relationship with the Living Platform group
HSBC Institutional Trust Services (Singapore), as trustee of PLife REIT, has through its wholly-owned subsidiary, Parkway Life Japan4, entered into a Tokumei Kumiai agreement (or silent partnership, similar to the holding structure for PLife REIT’s previous acquisitions in Japan) for the acquisition of the three nursing home mentioned.
The acquisition will be made at approximately 12.2% below valuation and is expected to generate an average net property yield of 6.5%. The acquisition is expected to complete by 3Q2022.
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Upon completion of this deal, PLife REIT's Japan portfolio will comprise 55 properties, totalling approximately $725.33 million in value.
The acquisition will be fully funded by JPY debts. Similar to previous acquisition financing, the deployment of JPY funding provides a natural hedge for the foreign exchange risks arising from JPY denominated assets, thereby insulating PLife REIT from potential currency volatility.
Following this acquisition, the REIT's leverage ratio will increase from 32.5% (as at 30 June 2022) to approximately 33.4%.
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Yong Yean Chau, CEO of the manager says: "Against the backdrop of a Covid-19 impacted economy, Japan’s aged care market remains stable and resilient. The acquisition not only strengthens our presence in Japan but also enhances our collaboration with our existing partner, Living Platform group. This acquisition has reinforced our steadfast approach of developing sustainable long-term partnerships alongside credible operators with synergic business strategies. Notably, this yield-accretive acquisition is expected to generate positive returns for our unitholders.”
Units in PLife REIT closed at $4.75 on Sept 13.
Photo: Parkway Life REIT
