Parkway Life REIT property, Mount Elizabeth Hospital, in Singapore. (Photo: REITsWeek)

Moody’s Investor Service expects Parkway Life REIT’s earnings to improve in the coming quarters, given the recent induction of five newly acquired Japanese properties into its portfolio.

The ratings agency was referring to the REIT’s acquisition of four nursing homes, and one specialised home for elderly dementia patients, which was first announced on 17 February.

“The acquisition is credit positive because it will boost the healthcare real estate investment trust’s overall portfolio quality, allow the trust to benefit from strong demand in Japan and extend its lease-expiry profile”, said Saranga Ranasinghe, Assistant Vice President and Analyst at the Corporate Finance Group of Moody’s, on 27 February.

Moody's also highlighted that the acquired properties collectively feature a net property yield of 6.9%, which is higher than Parkway Life REIT’s average net property yield of around 6.0% at the end of 2016.

“We expect demand for nursing homes in Japan to remain strong, owing to the country’s growing aging population given low fertility rates and longer life expectancy”, said Ranasinghe.

“The master-lease arrangements at the newly acquired assets have remaining lease terms of 20-30 years, which will improve [Parkway Life REIT’s] overall lease-expiry profile to 9.81 years from 8.44 years at the end of 2016”, the analyst added.

Parkway Life REIT finished the trading day unchanged from its previous close on the Singapore Exchange at SGD2.41.

Read: Parkway Life REIT acquires five properties in Japan for SGD59.5 million.

By Ridzwan Rahmat

Ridzwan has been analysing REITs and business trusts since 2008, and personally manages a portfolio comprising mainly of SGX-listed REITs. He founded REITsWeek in 2013.