Saizen – BT

Saizen Reit takes another hard knock

Trust has 22 of its 146 Japan properties in worst-hit Sendai

NOT all S-Reits with properties in Japan have been equally hit on the stock market. Of the Singapore-listed real estate investment trusts with such exposure, DMG Research pegged Saizen Reit as potentially the worst-off trust, since all of its 146 properties are in Japan, and 22 are in the worst-hit city of Sendai alone. Yesterday, the Saizen Reit counter took another hit, tanking 9.7 per cent to 14 cents.

In contrast, Parkway Life Reit, whose healthcare facilities are mainly in western Japan, dropped 1.2 per cent to $1.68. None of its properties were structurally affected.

Another Singapore-listed company, Uni-Asia Finance, which manages or has interests in hotel and residential properties in Japan, shed 3.8 per cent to 25 cents. Uni-Asia, an Asia-based structured finance arrangement and alternative assets direct investment firm, said none of its properties were structurally affected. All 13 of its hotels are operational.

In a late update yesterday, Saizen said: ‘In total, all 6 properties in Morioka and Koriyama, and 8 out of 22 properties in Sendai have been viewed by the property managers thus far, and preliminary reports have confirmed that these properties appear to have sustained only minor damage and are not in any imminent danger of collapse. However, the full extent of damage can only be ascertained after more detailed assessments.’

Of those 28 properties, 12 belong to YK Shintoku portfolio and do not contribute to distributions. Eleven are in Sendai and one in Morioka. Saizen’s 22 Sendai properties make up 11.2 per cent of its $581.8 million portfolio and contribute 10.6 per cent of the $56.3 million annual rental income. Koriyama’s three properties comprise 2.9 per cent of portfolio value and give 2.6 per cent rental income.

Morioka’s three properties constitue only 1.4 per cent of the Reit’s portfolio value and contribute 1.5 per cent of rental income.

For PLife Reit, it is ‘business as usual’ at its 29 nursing homes and one pharmaceutical manufacturing facility. The Reit’s closest property is in Akita, 200km away from the Sendai area.

The company does not foresee ‘any disruption to their long term business operations’. ‘Nursing homes residents usually stay for a longer term, at around three to five years on average. Hence, we do not expect any significant changes in occupancy rates. Our Japan nursing homes are on long term master leases and as such, income will not be affected by any dips in occupancy rates,’ said PLife Reit’s company spokesman.

CIMB analyst Janice Ding said in a note: ‘We are comforted that the manager is holding six to nine months of security deposits in the bank from all its Japanese master tenants.’ She added P-Life Matsudo, the Reit’s manufacturing facility, reported only minor water pipe leakage.

CIMB maintained its ‘outperform’ rating on the Reit, with a target price of $1.98.