Singapore REITs Buy 7 Japanese Senior Living Assets for $56M

Asia’s elderly are getting more of the respect and attention they deserve this month, particularly from the managers of a pair of Singapore real estate investment trusts.

The manager of Parkway Life Real Estate Investment Trust said on Tuesday that it is in the process of acquiring a pair of nursing homes in the Greater Tokyo Area from Japanese developer Daiwa House Industry for JPY 2.88 billion ($20 million), amid growing demand from the country’s rapidly ageing population.

That announcement was followed just one day later by the manager of First REIT informing the Singapore exchange that it has agreed to buy a pair of nursing homes – one each in Aichi and Kanagawa prefectures – for a total of JPY 2.58 billion.

The set of deals follows just days after Parkway Life had notified the SGX of its purchase of three nursing homes in Hokkaido for JPY 2.56 billion, making for a September harvest of seven senior care assets worth a combined JPY 8.02 billion ($56.2 million) by the two Singapore REITs.

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In its announcement on Wednesday, First REIT said it is paying JPY 1.45 billion for the Komaki Property Medical Rehabilitation Home Bon Séjour Komaki in Aichi Prefecture, near Nagoya, and another JPY 1.13 billion for the Loyal Residence Ayase in Kanagawa Prefecture, near Tokyo.

First REIT, which specialises in healthcare facilities around Asia, is making its second acquisition of Japanese nursing homes this year, and is acquiring the two properties at a combined net property yield of 5.20 percent, according to its filing with the SGX.

“Japan is one of the key growth markets for First REIT,” said Victor Tan, executive director and chief executive officer of First REIT’s manager. “Our timely penetration and expansion into Kanagawa and Aichi prefectures, after establishing a strong foothold from our maiden acquisition of 12 nursing homes across Japan early this year, will position First REIT for long term growth with stability.”

Parkway REIT’s most recent acquisition sees the trust acquiring a pair of properties from Japanese developer Daiwa House, including an assisted living facility in Tokyo’s Edogawa Ward  and another in Chiba City, east of the capital, with a combined 166 beds.

The acquisition brings Parkway REIT’s Japan portfolio to 57 properties valued at S$758.4 million.

Daiwa House, one of the largest home builders in Japan, is exiting the year-old properties at an 11.1 percent discount compared to their JPY 3.240 billion appraised value as of 31 July, with the two assets estimated to generate a combined JPY 93 million in gross rental income each year.

Fortifying Presence

Slated to be completed in the third quarter, Parkway REIT’s acquisition is expected to generate a net property income yield of 5.2 percent and increase the weighted average lease expiry of the trust’s portfolio to 17.21 years from 17.05 years, previously.

Both facilities, will be managed by local asset manager Black Hills, and are fully occupied by Tokyo-based operator Zen Wellness Co for an average 29-year lease term.

Parkway Life agreed to pay JPY 1.7 billion for the Assisted Living Edogawa property in Tokyo, or about JPY19.77 million per bed. For the Chiba facility, the trust is spending JPY 1.18 billion or JPY 14.75 million for each bed in the 80-unit property.

“Since 2008, we have been capitalising on our first-mover advantage to expand our presence in Japan’s aged care market,” said Yong Yean Chau, chief executive officer of the REIT’s manager. “Recognising the strong demand for quality care homes driven by the aging population, PLife REIT seeks to fortify our Japan portfolio with more quality assets.”

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The set of Singapore REIT investments are aligned with growing interest in Japan’s senior living sector, with Nuveen Real Estate – part of US investment institution TIAA also betting on the market this year.

In July Nuveen Real Estate reached a $100 million first closing of its Japan Alternatives Living strategy thanks to support from Dutch fund manager Bouwinvest and TIAA.

A joint report by Nuveen Real Estate and Strategic Insight released in May shows that the current supply of senior homes in Japan remains limited with the bulk still provided by the government. With the population of Asia’s second-largest economy ageing rapidly, Nuveen’s analysts see the trend providing investors with an opportunity where where master leases range from 10 to 30 years and occupancy rates remain high at around 90 percent.

By 2040, Nuveen notes that citizens aged 75 years or more are projected to account for 20 percent of Japan’s total population –  up from 15 percent in 2020.

“Japan’s greying population has presented private institutional investors with a unique window to participate in the “residentialisation” of the senior housing sector, through partnerships with reputable operators,”  Abigail Dean, Nuveen’s global head of strategic insights.