Singapore Press Holdings has scrapped its acquisition of a portfolio of senior living facilities in Canada, as the potential impact of COVID-19 on property values triggers second thoughts on valuations.
The SGX-listed media and property conglomerate announced to the stock exchange that it had abandoned the purchase of the six freehold properties “in the light of global market instabilities caused by the COVID-19 pandemic”.
SPH said in its disclosure that it had agreed with the seller – Seattle investment manager Columbia Pacific Advisors – to terminate the agreement as “a matter of prudence”.
The cancellation of the C$232.9 ($162 million) acquisition comes as COVID-19 sweeps across North America, infecting over 43,000 in the US and Canada so far, with occupants leaving senior living facilities after they have been identified as high risk locations.
Senior Living Deal Suffers Early Death
SPH, which operates the Orange Valley nursing home in Singapore and has acquired overseas portfolios of student housing, has backed out of the deal with Columbia Pacific Advisors less than a month after signing a sale and purchase agreement.
The conglomerate said on announcing the deal last month that the purchase of the 717-suite portfolio – which comprises five independent living properties in Ontario and one assisted living premises in Saskatchewan – would mark its entry into the North American market, where there has been rising demand for senior housing facilities.
The acquisition had been expected to be completed in May, subject to carrying out due diligence to “confirm the deal valuation taking into account asset valuation,” SPH indicated in its announcement of the original agreement.
A total of C$3.8 million had been placed into escrow under an income support programme when the acquisition was agreed. SPH had not replied to an enquiry regarding the settlement of this amount following the cancellation of the deal at the time of publication.
Pressing Ahead with Japan Acquisition
Despite backing out of the Canadian deal, SPH announced separately that it had partially completed the acquisition of a 365-bed aged care portfolio in Japan, after agreeing to acquire the five properties for a combined JPY 5.26 billion ($48 million) in February.
The company said it had completed the purchase of three of the properties – one each in Hokkaido, Nara and Tokyo – while the acquisition of a pair of Hokkaido assets is expected to be completed next month, subject to due diligence.
The five properties, which are on leases averaging 23.4 years, will continue to be managed by the current operators, SPH said.
Pulling Back on Aged Care
SPH had intended to expand its holdings in the aged care market, which the conglomerate had characterised last month as a “defensive sector” that offered cash-yield assets with stable, recurring income.
“Population ageing is set to be one of the most significant social transformations of the 21st century,” SPH’s deputy chief executive, Anthony Tan, said when announcing the acquisition of the Canadian portfolio last month.
“In developed economies like Canada, Japan and Singapore, the growth prospects for services targeted at older persons like independent living facilities and healthcare are good.” In the near term, the outlook for senior living facilities may have been dented after 35 residents of a Seattle senior care facility died of the novel coronavirus in recent weeks, and many other facilities have gone into lockdown to reduce the risk of infection.
With the Canada deal now off the table, the conglomerate has reduced its risk to a sector that has suddenly become less stable as a result of the coronavirus pandemic.
Causing Market Jitters
The conglomerate’s change of heart follows decisions made by other players in Asia Pacific to reduce exposure to market uncertainty caused by the virus outbreak.
It was reported two days ago that ARA Asset Management had walked away from a deal to acquire a 50 percent stake in a £900 million ($1 billion) London mixed-use development.
The Singapore private equity shop is said to have been intending to acquire the half-stake in the Nova development from Canada Pension Plan Investment Board, according to sources cited by Bloomberg.
Financial conglomerate Goldin Financial Holdings announced last week that it had received a conditional offer for a land parcel on Hong Kong’s former airport that it had paid HK$8.9 billion ($1.2 billion) to acquire in November 2018.