PLife – BT

Parkway Reit buys Japan nursing homes

PARKWAY Life Real Estate Investment Trust (P-Reit) said yesterday that it has agreed to buy seven nursing homes in Japan for a total of 7.85 billion yen (S$105.7 million).

The current turmoil in the financial markets has opened up opportunities, said P-Reit manager Parkway Trust Management (PTM). ‘P-Reit is taking advantage of current soft market conditions, to negotiate the purchase of a very high-quality nursing home portfolio on very favourable terms,’ said PTM chief executive Justine Wingrove. ‘There are few markets in Asia where an investor can enjoy a 400 basis point spread between the net initial yield and cost of debt.’

The acquisition of the nursing homes is yield accretive to unit-holders, P-Reit said. The net initial yield of the portfolio is 6.9 per cent, with individual yields ranging from 6.7 per cent to 7.2 per cent. P-Reit said that the acquisition will be funded by debt, which will increase its gearing from 10.3 per cent to 19.7 per cent. The trust said that it is drawing down committed debt facilities that are already in place.

Japan has the world’s fastest-growing population of elderly people. According to Japanese government statistics, 39.6 per cent of the country’s population will be over 65 by the year 2050, compared with just 21.5 per cent last year.

The aged-care industry is expected to grow as a result. P-Reit cited Japanese government forecasts that in 2015 and 2025, nursing care insurance payments are estimated to cost 12 trillion yen and more than 20 trillion yen respectively.

‘We have observed the exponential growth of the nursing care market in Japan and will continue to pro-actively seek similar yield-accretive acquisitions to diversify our asset portfolio and grow our income stream,’ said Ms Wingrove.

The seven nursing homes are located across Japan, including Tokyo, Chiba, Saitama, Kanagawa and Hyogo. All of them are managed by established operators in Japan.

P-Reit bought the homes through its wholly owned subsidiary Parkway Life Japan3 from a wholly owned subsidiary of Japanese property investment company Kenedix.

P-Reit, with a portfolio of $902 million at June 30, is the largest healthcare Reit in Singapore by asset size. It was set up to invest mainly in income-producing real estate and real estate-related assets in the Asia-Pacific region that are used primarily for healthcare purposes.