Parkway Life Reit Agrees To Buy Property In Japan

Source : The Business Times, April 17, 2008

It will acquire a distributing facility in Matsudo city for 2.59b yen

PARKWAY Life Reit will soon add an overseas property to its portfolio, following an agreement to buy a distributing facility in Japan for 2.59 billion yen (S$35 million).

The Reit's manager, Parkway Trust Management, yesterday said Parkway Life Reit has agreed to acquire a two-storey building named J-REP Matsudo II with a net lettable area of about 3,240 square metres.

The freehold property, in Chiba prefecture's Matsudo city, offers an initial net yield of 5.3 per cent. Parkway Trust said there is potential to increase the net lettable area as the current ratio of the building's floor-to-land area is only 40 per cent, while the allowable ratio is 200 per cent.

Completed in 2005, the building is currently leased by logistics firm Nippon Express Co, which has an A2 credit rating. Nippon, in turn, has a back-to-back lease with its partner Inverness Medical Japan Co. Inverness uses the property to manufacture, sell and distribute its diagnostic test kits and medical devices.

'We are very excited about Parkway Life Reit's first investment in Japan,' said Parkway Trust Management CEO Justine Wingrove. 'This is a key market for us as the demand for good quality healthcare real estate assets is expected to grow, driven by the fact that by the year 2050, it is predicted that one in three Japanese will be over 65 years of age.'

The master tenancy agreement with Nippon will expire in nine years' time. The property was valued by Colliers Halifax to be worth about 2.619 billion yen, as at last month.

Parkway Life is making the investment through its wholly owned subsidiary Matsudo Investment Pte Ltd. The seller of the property is J-REP Co, whose majority shareholder is Macquarie Goodman Asia.

The investment, to be funded through debt, will increase Parkway Life's gearing to 8 per cent, from 4 per cent. With its 'BBB+' credit rating, the Reit can have about $1.2 billion worth of additional debt capacity.

Parkway Life did not reveal how much the investment will add to its distribution per unit (DPU), only saying it is 'yield-accretive'.

Between last August, when it was listed, and end-December, Parkway Life posted a distributable income of $13.64 million, leading to a DPU of 2.27 cents.

Shares of Parkway Life ended two cents down at $1.19 yesterday.