Thursday, June 10, 2010

Parkway Life REIT

Parkway Life REIT announced the acquisition of 6 new nursing home and care facility properties in Japan for 3.9b yen (S$60.5m) from Kabushiki Kaisha Sawayaka Club and Kabushiki Kaisha Bonheure. According to mgtm, this acquisition is yield-accretive with an 8.08% net property yield vs the current property yield of 6.97% of PREIT's existing Japan portfolio. Each of these properties will have a fresh 20-year master lease/operating lease agreement with Sawayaka.

Parkway Life REIT may gain on acquisition of 6 nursing homes & elderly care facilities in Japan for 3.9bn yen ($60.5m). Assets offer 8.08% net property yield vs current 6.97% yield for PLife’s existing Japan portfolio. On pro forma basis, deal would boost DPU to 8.06¢ from 7.74¢. Purchase cost is below the combined market valuation of 4.04bn yen with PLife funding purchase via 5-year 4.2bn yen term loan at cheap 2.0% interest.

All 6 properties come with average occupancy of 93.9% and rental guarantees on 20-year master lease agreement with existing owner Sawayaka, largest private nursing home operator in Kyushu Island, ensuring long-term income stability. DPU yield expected to rise to 6.3% and gearing to 32.2% vs 28.5% as at Mar 09, giving room for further acquisitions. Stock sitting at $1.33 support with resistance at $1.40 52-week high.

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