PLife – DBSV

Acquires another 5 nursing homes in Japan

• Acquires a further 5 nursing homes in Japan
  
• Initial net yield of 7%, similar to existing Japan assets
  
• Acquisition price of JPY4.5bn (S$59.2m) funded fully via 6-year JPY debt
  
• Maintain HOLD, TP adjusted marginally to S$2.51
  

Expanding further into Japan. PREIT announced that it has entered into 2 conditional sales and purchase agreements to acquire a further five nursing homes in Japan for a total consideration of JPY4.5bn (S$59.2m). The average net property yield is 7%, and is roughly in line with its existing Japan assets. The purchase will be fully funded by a 6-year unsecured JPY loan at a cost of c.1.75%. With this acquisition, the REIT’s gearing will increase to about 34.8%, from 32% as of 31 July 2013.

Leveraging on an ageing population. The acquisition is expected to complete by end Oct 2013. With this latest acquisition, the PREIT’s Japan portfolio stands at 32.9% of the Group’s portfolio. The rationale for investing further in Japan is consistent with its past strategy and to leverage on Japan’s ageing population.

Fresh 20-year leases. Each of the nursing homes will enter into a fresh 20-year building lease with the operator. This will raise PREIT’s weighted lease expiry further to 11.14 years, from 10.69 years (as at July 2013), thus providing long term stability to the REIT’s lease structure.