Parkway Life REIT (PLife REIT) has acquired two nursing homes in Osaka from K.K. FDS (FDS), for a consideration amount of JPY1,766.4 million ($16.4 million), according to a release dated Oct 18.
HSBC Institutional Trust Services (Singapore) Limited, as trustee of PLife REIT, has through its wholly-owned subsidiary, Parkway Life Japan Pte. Ltd., entered into a silent partnership, similar to the holding structure for PLife REIT’s previous acquisitions in Japan, for the acquisition of the properties.
The acquisition will be made at approximately 11.9% below valuation and is expected to complete by 4Q2023. This will bring PLife REIT’s Japan portfolio to 59 properties, worth $710.7 million in value.
The REIT says that the acquisition will be fully funded by JPY debts. Similar to previous acquisitions, the deployment of the JPY funding provides a hedge for the foreign exchange risks arising from JPY denominated assets and mitigates against potential currency volatility.
Following the acquisition, PLife REIT’s leverage ratio will increase from 35.3% (as at June 30, 2023) to approximately 35.8%. This figure is within the regulatory gearing limit for Singapore REITs under the Code on Collective Investment Schemes.
The two properties, HIBISU Shirokita Koendori and HIBISU Suita, are freehold properties constructed in 2022 and 2023 respectively, located in the residential areas of their respective cities in the Osaka Prefecture.
See also: Changes in ICR, leverage to come into effect immediately, with additional disclosures in March
PLife REIT will take over the existing lease agreements after the acquisition, with an overall average long balance lease term of approximately 29 years. This brings PLife REIT’s weighted average lease expiry (WALE), by gross revenue, from 16.7 years to 16.8 years.
The REIT says that it will be working with a new operator, K.K. BISCUSS (BISCUSS), a nursing and care service operator in the Kansai region of Japan.
Yong Yean Chau, CEO of the PLife REIT, says: “Recognising the strong demand for health and aged care facilities driven by the ageing demographics, Japan remains to be a valued core market for PLife REIT. As we continue to grow our portfolio with more quality assets, we remain cognisant of the importance of fostering long-term strategic relationships with diversified partners. The acquisition of the two new properties will further entrench our presence in Japan and allow us to grow alongside BISCUSS, a new credible operator for PLife REIT. The initiation of a new partnership with FDS will also pave the way for a future pipeline of quality assets.”
Units in PLife REIT closed 1 cent higher or 0.27% up at $3.66 on Oct 18.
