Business / Corporate

SMBC angles for housing units for seniors before health care REIT IPO

Bloomberg

Sumitomo Mitsui Banking Corp. is seeking to buy about ¥10 billion in senior housing properties before taking its health-care real estate investment trust public.

Sumitomo Mitsui is in talks with operators of homes for the elderly after it established a company in October that will purchase the properties, said Nobuaki Oishi, senior vice president of financial solutions at the bank.

The bank declined to name the parties involved, saying the talks are private. Sumitomo Mitsui, along with other investors, plans to list the REIT by March 2015 with ¥20 billion in assets, Oishi said.

Demand for senior housing is rising thanks to the aging of the population. The proportion of Japanese older than 65 is projected to rise to 31 percent by 2025 from an estimated 26 percent this year and as many as 1.8 million housing units for the elderly will be needed by 2020, according to a report by the land ministry.

“We have considered ways to approach an aging population,” Oishi said in an interview in Tokyo. “And we came to the conclusion that a REIT is the answer.”

As part of Prime Minister Shinzo Abe’s plan to revive the economy, the administration has said it will introduce a guideline in the fiscal year ending in March 2015 for REITs to acquire and manage homes for seniors.

In China, only 9.6 percent of the population is over 65, while in the U.S. the proportion is 14 percent, according to the U.S. Census Bureau.

Other investors in Sumitomo Mitsui’s REIT include NEC Capital Solutions Ltd., a unit of NEC Corp., and Ship Healthcare Holdings Inc., an Osaka-based medical equipment provider, the bank said in a release in October.

The market value of 12 listed health care REITs in the U.S. totaled $81.2 billion as of March 2013, while similar REITs in Canada were valued at $2.6 billion, according to a report by Sumitomo Mitsui Trust Research Institute.

In Japan, a total of ¥36.6 billion worth of heath care properties are owned by J-REITs and Singapore-based Parkway Life Real Estate Investment Trust, a government report showed.

Sumitomo Mitsui isn’t alone in trying to capture rising demand for elderly care. A unit of Daiwa Securities Group Inc. said in December it will set up a health care REIT by the middle of this year, while Shinsei Bank Ltd., the bank partly owned by real estate speculator J.C. Flowers, has also said it is preparing a listing this year.

The majority of operators that run senior homes have not been able to expand because of lack of funding, Oishi said. By listing a REIT, Sumitomo Mitsui will be able to help provide financing needed to acquire properties, Oishi said.

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