OUE Lippo Healthcare sells 12 nursing homes in Japan to First Reit for $ 163.5 million

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SINGAPORE (THE BUSINESS TIMES) – OUE Lippo Healthcare (OUELH), listed in Singapore, has entered into sale and purchase agreements to divest two wholly owned subsidiaries, which together own 100% of the interests of 12 nursing homes in Japan, for an amount of $ 163.5 million.

The subsidiaries, OUELH Japan Medical Facilities and OUELH Japan Medical Assets, will be sold to Perpetual (Asia), the trustee of First Real Estate Investment Trust (Reit) for a purchase price of approximately $ 163.2 million and $ 300,000. $, respectively. First Reit, which owns a portfolio of healthcare properties in Singapore and Indonesia, is also listed here.

The transaction is part of OUELH’s asset relief strategy and should help refocus its focus on delivering quality healthcare services, the group said in a stock exchange filing Wednesday (December 8th).

Total consideration includes $ 131.5 million in new First Reit units, issued at 30.5 cents per unit, $ 15.8 million in cash and $ 16.2 million in intercompany balances, which will be assumed by First Reit. Intercompany balances include loans and other amounts owed by the Company to subsidiaries.

OUELH President Lee Yi Shyan said: “With the completion of the proposed transaction, the group can redeploy its financial resources to create new growth capacities.”

The group expects the transaction to contribute to First Reit’s repositioning strategy for future growth in the Pan-Asian market.

Following the proposed transaction, the group’s stake in First Reit will increase from 15.3% to 33.2%.

First Reit’s exposure to markets outside of Indonesia will also increase to 27.1% of its asset value of $ 335.6 million on a pro forma basis, from 3.6% at 33. $ 8 million as of June 30. Meanwhile, rental income in markets outside Indonesia is forecast to reach 22.3% to $ 10.5 million on a pro forma basis, up from 5.3% to $ 2 million as of June 30.

As for the pro forma financial effects on OUELH, the group’s net tangible assets per share after transaction are expected to amount to 7.4 cents, compared to 7.3 cents at June 30, while its earnings per share should remain at 2.6. cents, as of January 1.

The retirement homes, located in Hokkaido, Kyoto, Nagano and Nara, have a total capacity of 1,451 units. According to independent valuation reports, the properties have a market value of 24.2 billion yen (S $ 291 million) as of November 12.

OUELH Japan Medical Facilities indirectly owns the 12 nursing homes, which are leased to independent nursing home operators through OUELH Japan First Tokutei Mokuteki Kaisha.

Meanwhile, OUELH Japan Medical Assets owns OUELH Japan Management, a joint stock company formed to act as the current asset manager of Japanese nursing homes.

The proposed transaction is submitted for the approval of the shareholders at the next extraordinary general meeting of the group.

OUELH currently owns a 40 percent interest in the manager of First Reit and a working 15 percent interest in First Reit. The latter’s portfolio consists of 20 properties including hospitals, nursing homes and shopping centers in Indonesia, Singapore and South Korea.

First Reit chief executive board chairman Christopher Williams said the acquisition of the 12 Japanese nursing homes is yield-generating and an opportunity for Reit to diversify into a new growth market. After the acquisition, the distribution per unit is expected to increase from 1.3 cents to 1.31 cents, or approximately 0.8 percent.

He added that the acquisition will increase the REIT’s exposure to developed markets from 3.6 percent of its current asset value to 27.1 percent after completion. It will also position First Reit as a “premier healthcare trust company” in Asia-Pacific with total assets of $ 1.3 billion.

Additional reporting by The Straits Times


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