It acquires 6 new properties for 3.9b yen
PARKWAY Life Reit (PLife Reit) has strengthened its foothold in Japan.
The healthcare trust, whose $1.15 billion portfolio includes private hospitals in Singapore, announced yesterday the acquisition of six new nursing home and care facility properties in Japan for 3.9 billion yen (S$60.5 million).
The two companies that sold these properties are Kabushiki Kaisha Sawayaka Club and Kabushiki Kaisha Bonheure.
They are subsidiaries of Kabushiki Kaisha Uchiyama Holdings, a Japan-based company in the nursing homes, family karaoke and F&B businesses.
Black Hills Investment, a private real estate asset management firm, will be appointed as the asset manager of the properties.
'With an 8.08 per cent net property yield, this acquisition is yield-accretive to our unitholders,' said Yong Yean Chau, chief executive officer of the Reit's manager Parkway Trust Management Ltd.
The expected net property yield from these properties compares favourably to the current property yield of 6.97 per cent for PLife Reit's existing Japan portfolio.
The six new properties are valued at 4.04 billion yen, using the discounted cashflow method. The purchase price is 2.8 per cent below the valuation.
Each of these properties will have a fresh 20-year master lease/operating lease agreement with Sawayaka, currently the largest private nursing home operator in Kyushu Island.
PLife Reit said the long lease term will improve the total portfolio weighted average lease term to expiry (by gross revenue), which stands at 13.2 years as at March 31, thus boosting the resilience of its portfolio.
To mitigate the risk of any potential rental defaults, Uchiyama and Bonheure will provide rental income guarantees for the properties for the entire lease period.
Uchiyama and its subsidiaries have also entered into a memorandum of understanding to give a right of first refusal to PLife Reit over future sales of nursing homes owned by them.
PLife Reit noted that this arrangement will enhance its growth potential in Japan. It is now adopting a clustering acquisition and partnership approach to achieve critical mass and reap economies of scale in its core markets, starting from Japan.
Mr Yong said the Reit manager will also continue to explore future acquisition or collaboration opportunities with Uchiyama, such as having them as backup operators or replacement operators for the other nursing homes in PLife Reit's portfolio.
The acquisition is expected to be fully funded via a five-year unsecured term loan facility of 4.2 billion yen from CIMB Bank Berhad, one of the Reit's key partner banks.
This loan is at an all-in funding cost of about 2 per cent per annum, better than the recent similar financing PLife Reit obtained in November 2009 at 3.22 per cent per annum.
With this funding, PLife Reit's gearing will rise to 32.2 per cent from 28.5 per cent as at March 31.
Source: Business Times, 10 Jun 2010