Singapore’s Parkway Life REIT Adding Osaka Nursing Home to Japan Portfolio

Healthcare-focused Parkway Life REIT is adding to its Japan portfolio with the acquisition of an Osaka nursing home from developer FDS for JPY 2.4 billion ($16 million).

The purchase of the 138-bed Hibisu Higashi Sumiyoshi marks Singapore-listed PLife REIT’s second transaction with Osaka-based FDS and care provider Biscuss, the trust’s manager said Tuesday in a release. The REIT previously acquired two Biscuss-operated nursing homes in the city from FDS for a total of JPY 1.8 billion in a deal announced last October.

The latest buy will be made at 9.1 percent below valuation and bring the REIT’s Japan portfolio to 60 properties totalling S$676.8 million ($505.8 million) in value, according to the manager. The trust also owns the Mount Elizabeth, Gleneagles and Parkway East private hospitals in Singapore.

“Japan remains a crucial core market for PLife REIT as we drive our next phase of growth,” said CEO Yong Yean Chau. “This second collaboration with FDS and Biscuss strengthens our existing working relations and also signifies PLife REIT as a preferred partner of FDS and Biscuss. This will allow us to secure a pipeline of quality and new assets in Japan amid increasing competition in the sector.”

Master Lease Takeover

Completed in June, Hibisu Higashi Sumiyoshi is a freehold property in a residential area of Sumiyoshi ward in the southernmost part of Osaka. The terms of the deal will see PLife REIT take over the existing master lease agreement for the facility from FDS.

With a lease term of about 30 years, PLife REIT’s weighted average lease expiry (by gross revenue) will improve from 16.05 years to 16.17 years, further enhancing the resiliency of the trust’s earnings, the manager said.

The acquisition, which is expected to be completed this quarter, will be fully funded by yen-denominated debt as a “natural hedge”, increasing the REIT’s leverage ratio from 35.3 percent to 35.9 percent.

PLife REIT’s other Japan assets include a pair of nursing homes in Greater Tokyo purchased from development giant Daiwa House Industry for JPY 2.9 billion in 2022 and a trio of facilities in Hokkaido acquired for JPY 2.6 billion the same year.

Distributable Income Up

PLife REIT posted a 3.5 percent year-on-year rise in distribution per unit to 7.54 Singapore cents on higher distributable income from its city-state hospitals and some Japan nursing homes, the manager said last week.

The trust’s net property income fell 2.5 percent year-on-year to S$68.4 million, chiefly due to yen depreciation, according to the manager.

“We continue to maintain a robust balance sheet and capital structure to grow PLife REIT’s portfolio of assets to ensure that the group continues to benefit from the resilient growth of the healthcare industry in and beyond Singapore,” Yong said.

The trust’s largest unitholder is Kuala Lumpur-based IHH Healthcare, whose key investors include Malaysian sovereign wealth fund Khazanah and Japan’s Mitsui & Co.