The manager of Parkway Life REIT has announced the acquisition of two new nursing homes in the Greater Tokyo region for a total consideration of 2.88 billion yen ($29.4 million).
The freehold properties are newly built in 2021. They are said to be well-located in the residential areas of Tokyo and Chiba Prefectures with good connectivity and close proximity to the Tokyo Centre. The agreement will see the REIT taking over the existing lease agreements of the properties, with an average long balance lease term of approximately 29 years.
In its release, the REIT says its trustee, HSBC Institutional Trust Services (Singapore), had, through its wholly-owned subsidiary, Parkway Life Japan4 Pte. Ltd., entered into a tokumei kumiai agreement for the acquisition of the properties from Tokyo Stock Exchange-listed Daiwa House Industry Co., Ltd.
A tokumei kumiai agreement is a silent partnership, this is similar to the holding structure for Parkway Life REIT’s previous acquisitions in Japan.
According to the REIT manager, the acquisition will be made at approximately 11.1% below valuation and is expected to generate a net property income yield of 5.2%. It will also enhance the REIT’s earnings resilience and contribute positively to its weighted average lease expiry (WALE) by gross revenue to 17.21 years from 17.05 years.
The acquisition will bring the REIT’s Japan portfolio to 57 properties worth a total of $758.4 million in value. It is slated to be completed by the 3QFY2022.
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“Since 2008, we have been capitalising on our first-mover advantage to expand our presence in Japan’s aged care market. Recognising the strong demand for quality care homes driven by the aging population, Parkway Life REIT seeks to fortify our Japan portfolio with more quality assets,” says Yong Yean Chau, CEO of the manager.
“The two well-located properties will not only strengthen our portfolio but also initiate a new collaboration with Daiwa House, a reputable real estate developer in Japan. The acquisition will mark the first step for Parkway Life REIT to work with Daiwa House and pave the way for future pipelines of quality assets,” he adds.
“Daiwa House is delighted to work with Parkway Life REIT on the transaction of the two nursing homes. Recognising Parkway Life REIT’s significant and growing presence in Japan, we look forward to embark on future collaborative opportunities with the REIT again,” says Takahiro Imai, manager of the general construction business division (medical and nursing facilities strategy department) of Daiwa House.
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Further to its statement, the REIT manager announced that it will also be working with a new operator, Zen Wellness Co., Ltd. for its properties in Japan.
Zen Wellness is an established regional operator in Japan with proven operating track record in the aged care business. Founded in 2013, Zen Wellness currently operates 11 nursing homes in the Kanto/Greater Tokyo region.
The partnership stemmed from the acquisition, which helped initiate a long-term strategic alliance with a new reputable operator for further tenant diversification in Japan.
The acquisition will be fully funded by Japanese yen (JPY) debts, which provides a “natural hedge” for the foreign exchange risks arising from JPY-denominated assets.
Following the acquisition and the previous acquisition of the three other nursing homes in Japan, the REIT’s leverage ratio will increase to 34.3% from the 32.5% as at June 30.
Units in Parkway Life REIT closed 3 cents higher or 0.65% up at $4.62 on Sept 20.
