PLife – BT

PLife Reit buys five nursing homes to boost Japan portfolio

PARKWAY Life Real Estate Investment Trust (PLife Reit) is expanding its presence in Japan with the 3.1 billion yen (S$48.3 million) acquisition of five nursing home properties, through its wholly owned subsidiary Parkway Life Japan3 Pte Ltd.

PLife Reit is buying the five properties from Yugen Kaisha KSLC, a subsidiary of Japan- based real estate asset manager Kenedix Inc, whom the Reit had previously acquired 15 nursing home properties from in 2008 and 2009. Kenedix will be appointed asset manager of the five properties in a separate deal.

The acquisition, which will be completed by July 23, will be funded through a five-year revolving credit facility of up to 3.2 billion yen, which will increase PLife Reit’s gearing from 32.2 per cent to 34.4 per cent.

‘Firmly guided by our principal investment strategy of building a ‘healthcare eco-system’ with value-enhancing buys, this acquisition provides an expected net property yield of 8.35 per cent. It will also improve income diversification and deliver stable and sustainable distributions to our unitholders,’ said Yong Yean Chau, CEO of Parkway Trust Management Ltd. This is higher than the current property yield of 7.16 per cent for PLife Reit’s existing Japan portfolio.

As at June 30, the five properties had an average occupancy rate of 94.9 per cent. Each of the properties has a long-term lease agreement with the operators, with a weighted average lease term to expiry (by gross rental income) of 17.45 years, as at June 30. This will boost PLife Reit’s portfolio weighted average lease term to expiry from 13.42 years to 13.63 years.

Yugen Kaisha will also be providing a rental income guarantee for seven years with a cap of 5 per cent of the purchase price, offering certainty for the Reit’s future distributions, PLife Reit said.

This latest acquisition adds to the six nursing home and care facility properties in the Fukuoka and Akita prefectures which the healthcare Reit acquired recently.

‘Upon achieving a good 29 properties in our Japan portfolio today, we are ready to further generate synergies and sharpen our focus towards establishing a mark in our other core countries, which will certify a boost in geographical diversity,’ Mr Yong added.