PARKWAY Life Real Estate Investment Trust (Parkway Life Reit) is acquiring 11 nursing homes in France for a total consideration of about 111.2 million euros (S$159.9 million).
The acquisition marks the Reit’s maiden investment in Europe, which is the third key market – besides Singapore and Malaysia, and Japan – with “strong fundamentals, growing ageing population and aged care sectors”, said the manager on Tuesday (Oct 22).
The purchase price of S$159.9 million represents an approximate 3.6 per cent discount from the properties’ independent valuation of about S$165.8 million.
The healthcare-focused Reit is buying the properties from DomusVi, a nursing home operator in France.
The properties will continue to be leased to DomusVi, under a new lease term of 12 years, after the deal goes through.
The transaction is expected to be completed by the fourth quarter of 2024, after which Parkway Life Reit’s portfolio will rise to 75 properties with a total value of about S$2.42 billion.
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The acquisition will be fully funded by a private placement to raise gross proceeds of about S$180 million, at an estimated issue price range of between S$3.80 and S$3.88 per new unit.
This price range represents a discount of between about 2.7 and 4.7 per cent to the volume-weighted average price (VWAP) of S$3.99 per unit on the preceding market day, said the manager in a separate announcement.
For illustrative purposes, the price range represents a discount of between about 1.5 and 3.5 per cent to the adjusted VWAP of S$3.94 apiece. This is based on trades done on the preceding market day, and excludes an estimated advanced distribution of S$0.05 per unit.
About 88.8 per cent, or S$159.9 million, of the proceeds will be used to finance the acquisition.
The remaining S$20.1 million, or about 11.2 per cent, will be used to cover the fees and expenses associated with the placement and purchase.
The manager will declare an advanced distribution for the period from Jul 1 to the date of the issue of the new units. The quantum of distribution is estimated to be between S$0.048 and S$0.052 per unit.
If the acquisition was completed on Jan 1, 2024, and was fully financed by the placement, pro forma distribution per unit (DPU) for the first half of 2024 would stand at S$0.0764, which is 1.4 per cent higher than its actual DPU of S$0.0754.
The Reit’s pro forma net asset value per unit for H1 2024 would be S$0.0246, representing a 4.3 per cent accretion to unitholders.
Its pro forma leverage ratio for H1 2024 would also fall roughly to 32.7 per cent, from 35.3 per cent as at Jun 30, after adjusting for the acquisition in France.
The new units are expected to be issued on or around Nov 1.
The 11 nursing homes, located across France, comprise a total of 42,630.8 square metres of net lettable floor area and 850 nursing beds.
The Reit manager is positive on the strong demand for nursing homes in France, which is facing an ageing population. It noted that the proportion of people aged 65 and above has increased from 17 per cent in 2009 to 22 per cent in 2023.
Therefore, it believes that the transaction will allow the Reit to “capture the structural tailwinds” of France’s ageing population.
It also expects the deal to provide the Reit a foothold in a “highly regulated sector with high barriers to entry”, as no new nursing home beds are expected to be authorised until 2028.
The Reit manager also highlighted that France’s strong governmental support for the nursing-home sector would reduce operational risks.
Some 32 per cent of France’s gross domestic product is allocated to social security outlay, and spending on aged care such as nursing homes accounts for 44 per cent of the country’s total expenditure, said the manager.
Yong Yean Chau, chief executive officer of the manager, said: “Through this acquisition, Parkway Life Reit will extend (its) growth into a new market with strong fundamentals – ageing population with mature health and aged care sectors.”
He added: “This will allow Parkway Life Reit to optimise its investment exposure and further diversify the geographical risks within its portfolio, thereby enhancing risk-adjusted returns for its unitholders.”
Units of Parkway Life Reit closed flat at S$3.99 on Monday. It called for a trading halt on Tuesday morning.
