SINGAPORE (THE BUSINESS TIMES) - Singapore-listed OUE Lippo Healthcare (OUELH) has entered into sale and purchase agreements to divest two wholly-owned subsidiaries, which together hold 100 per cent interest in 12 nursing homes in Japan, for a consideration of $163.5 million.
The subsidiaries, OUELH Japan Medical Facilities and OUELH Japan Medical Assets, will be divested to Perpetual (Asia), the trustee of First Real Estate Investment Trust (Reit) for a purchase consideration of around $163.2 million and $300,000, respectively. First Reit, which holds a portfolio of healthcare properties in Singapore and Indonesia, is also listed here.
The transaction is in line with OUELH's asset-light strategy, and is expected to help sharpen its focus on quality healthcare service delivery, the group said in a bourse filing on Wednesday (Dec 8).
The total consideration comprises $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. The intercompany balances include loans and other amounts owed by the company to the subsidiaries.
OUELH chairman Lee Yi Shyan said: "With the completion of the proposed transaction, the group can redeploy its financial resources to create new capacities for growth."
The group expects the transaction will assist with First Reit's repositioning strategy for future growth across the pan-Asian market.
Upon completion of the proposed transaction, the group's holdings in First Reit will increase to 33.2 per cent from 15.3 per cent.
First Reit's exposure to markets outside Indonesia will also increase to 27.1 per cent of its asset value amounting to $335.6 million on a pro forma basis, from 3.6 per cent at $33.8 million as at June 30. Meanwhile, rental income for markets outside Indonesia is expected to grow to 22.3 per cent at $10.5 million on a pro forma basis, from 5.3 per cent at $2 million as at June 30.
As for the pro forma financial effects on OUELH, the group's net tangible assets per share post-transaction is expected to rise to 7.4 cents, from 7.3 cents as at June 30, while its earnings per share is expected to remain at 2.6 cents, as at Jan 1.
The nursing 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 at Nov 12.
OUELH Japan Medical Facilities indirectly owns the 12 nursing homes, which are leased to independent nursing home operators via OUELH Japan First Tokutei Mokuteki Kaisha.
Meanwhile, OUELH Japan Medical Assets owns OUELH Japan Management, a joint stock company established to act as the current asset manager of the Japan nursing homes.
The proposed transaction is subject to shareholders' approval at the group's upcoming extraordinary general meeting.
OUELH currently holds a 40 per cent stake in First Reit's manager and a direct 15 per cent stake in First Reit. The latter's portfolio consists of 20 properties including hospitals, nursing homes and shopping malls in Indonesia, Singapore and South Korea.
Chairman of the board of the manager of First Reit Christopher Williams said the acquisition of the 12 Japan nursing homes is yield accretive and represents an opportunity for the Reit to diversify into a new market for growth. Post-acquisition, distribution per unit is expected to increase from 1.3 cents to 1.31 cents, or by approximately 0.8 per cent.
He added that the acquisition will increase the Reit's exposure to developed markets, from 3.6 per cent of its asset value currently, to 27.1 per cent post-completion. That will also position First Reit as a "premier healthcare Reit" in Asia Pacific with $1.3 billion in total assets.
Additional reporting by The Straits Times