Parkway Life REIT (PLife REIT) has agreed to acquire a nursing home property in the Osaka Prefecture, HIBISU Higashi Sumiyoshi, for JPY2.45 billion ($20.7 million).
PLife REIT’s trustee, through its wholly-owned subsidiary Parkway Life Japan2 Pte. Ltd., entered into a Tokumei Kumiai agreement with Godo Kaisha SAMURAI 20 (TK operator) in relation to the acquisition of the home. The TK operator entered into a conditional purchase and sale agreement (SPA) with K.K. FDS for the purchase of the property. A Tokumei Kumiai agreement is also known as a silent partnership agreement. The agreement is similar to the holding structure for the REIT’s previous acquisitions in Japan.
The acquisition will be made at around 9.1% below valuation and is expected to be completed by the third quarter in 2024. Upon its completion, PLife REIT will have 60 properties in Japan totalling $676.8 million.
The Osaka nursing home was newly built in June this year and has 138 beds. The freehold property is located in the residential area in Osaka City and is Building-Housing Energy-efficiency Labelling System (BELS) certified.
The acquisition will see PLife REIT taking over the existing master lease agreement from K.K. FDS. The property’s lease term of 30 years brings the REIT’s weighted average lease expiry (WALE) by gross revenue to 16.17 years, from 16.05 years as at June 30.
The property was developed by FDS, an established real estate developer in the Kansai region of Japan. The REIT had already transacted with FDS in 2023, making this acquisition the second collaboration between both parties.
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PLife REIT will also continue to leverage the strategic memorandum of understanding (MOU) it signed with FDS in 2023 to gain access to future pipelines of high-quality assets in Japan.
Through the same acquisition, PLife REIT will also be propelling its partnership with an existing tenant – K.K. BISCUSS, a reputable nursing and care service provider that currently operates 22 nursing and, or aged care facilities in Osaka, Hyogo and Kumamoto Prefectures. Of these 22 facilities, two of them are nursing homes owned by the REIT.
“Japan remains a crucial core market for PLife REIT as we drive our next phase of growth. This second collaboration with FDS and BISCUSS strengthens our existing working relations and also signifies PLife REIT as a preferred partner of FDS and BISCUSS. This will allow us to secure a pipeline of quality and new assets in Japan amid increasing competition in the sector,” says Yong Yean Chau, CEO of the manager.
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The acquisition will be fully funded by Japanese yen (JPY)-denominated debt. Following the acquisition, PLife REIT’s leverage ratio will increase to 35.9% from 35.3% as at June 30.
Units in PLife REIT closed 1 cent higher or 0.28% up at $3.63 on July 30.
