Parkway Life REIT acquires nursing facility in Japan for $17.8 mil in sale and leaseback deal

By Michelle Zhu / The Edge Singapore | February 7, 2018 10:44 PM SGT
SINGAPORE (Feb 7): The manager of Parkway Life REIT (PLife REIT) is acquiring Konosu Nursing Home Kyoseien, a nursing rehabilitation facility in Japan, from operator Iryouhoujin Shadan Kouaikai for 1.5 billion yen ($17.8 million) under a sale and leaseback deal.
The yield-accretive acquisition will be made at 7.4% below its valuation of JPY1.62 billion as at end 2017, and is expected to generate a net property yield of 6.7%.
Konosu Nursing Home Kyoseien is located in Konosu City, Saitama prefecture, within the greater Tokyo region. It was secured on a fresh 20-year master lease arrangement with Iryouhoujin Shadan Kouaikai, and is approximately 100% operationally occupied.
Stock image of aged care premises
Stock image of aged care premises
The acquisition will be financed by a mixture of internal funds and Japanese yen-denominated debt, which comes as part of the REIT’s approach to provide a natural hedge for the foreign exchange risks arising from its Japanese yen-denominated assets.
The deal is slated for completion in 1Q18, and is not expected to have a significant impact on the REIT’s leverage level post-acquisition.
In a Wednesday announcement, PLife REIT’s manager says HSBC Institutional Trust Services has entered into a silent partnership agreement for the property’s acquisition its HSBC’s wholly-owned subsidiary, Parkway Life Japan2.
The deal is expected to further lengthen the REIT portfolio’s weighted average lease expiry (WALE), which currently stands at about 7.91 years and 13.17 years for the entire portfolio and the REIT’s Japan portfolio, respectively.
This will also increase PLife REIT’s nursing home tenant base to 23 from 22 previously while bringing the trust’s portfolio to 50 properties with a total value of $1.75 billion, adds the manager.
In view of Japan’s rapid ageing population and long life expectancy, PLife REIT’s manager says current statistics on private nursing-care indicate an undersupplied market where the number of nursing homes will likely to continue growing to meet the rising demand.
“With the growing ageing population and shrinking family sizes continuing to contribute to the increase in demand for aged care facilities in Japan, we are pleased to kick start 2018 with this Japan acquisition,” says Yong Yean Chau, CEO of the manager.
“As we work on strengthening PLife REIT’s portfolio attributes, this acquisition also brings about another new partnership with an established and experienced operator in Japan, signalling PLife REIT’s strategic presence in Japan,” he adds.
This story, written by Michelle Zhu for The Edge Singapore, first appeared on Feb 7.