Arena REIT releases robust operating update, signals revaluation gains and ups distribution

by Jason Roberts

December 04, 2020

Arena REIT, the social infrastructure real estate investment trust with a significant early childhood education and care focus, has followed up positive comments made at last month’s Annual General Meeting with an operating, revaluation and distribution update, all of which were on the strong side. 

 

Over the course of the last six months Arena has completed a total of eight development projects, acquired a further seven established centres and disposed of three regional centres which combined has seen their early learning centre (ELC) portfolio increase to 233 centres, an increase of around 5 per cent since June 2020. 

 

The net capital deployed was $75 million at an average yield on cost of 6.4 per cent. 

 

Arena’s Head of Property, Mr Stuart Andrews said “Despite the external challenges of the past six months it has been another active period for Arena and we remain on track to complete fourteen high quality ELC development projects with our tenant partners in FY21.”

 

With the completion of eight development projects in the first half of the year, the pipeline will now consist of nine further projects, of which at least six are expected to deliver in the second half of 2021. 

 

The statement did not reference whether additional development sites had been added to the pipeline. 

 

Increased rent and firming yields trigger revaluation uplifts across portfolio

 

The ELC portfolio saw an uplift to the valuation of its 233 properties of $33.2 million or 4.2 per cent to $862.3 million, and the valuation of its eleven healthcare properties rise to $140.5 million, an increase of 3.0 per cent. 

 

A total of 38 ELCs and three healthcare centres were independently valued with the balance of properties subjected to directors valuations. All revaluations remain subject to review by Arena’s auditors.

 

The main drivers of the revaluations were an increase in passing rents and falling yields with the latter falling 5 bps to 6.19 per cent in the ELC portfolio.

 

Arena’s Managing Director Mr Rob de Vos said “We continue to see strong investor interest in social infrastructure property and this has contributed to a further firming in valuation yields. Our portfolio valuation yield of 6.16 per cent continues to look relatively attractive in context of the quality of our assets and long term triple net leases.”

 

Distribution guidance for FY21 increases with 5.7% growth now expected

 

Arena now expects to pay an FY21 distribution of 14.8 cents, an increase of 5.7 per cent on last year and around a 2.0 per cent increase from its previous FY21 guidance of 14.4 to 14.6 cents per security. 

 

Notably, Arena, who deferred their March 2020 quarterly distribution due to COVID-19, have now more than compensated security holders for the disruption with a second half FY20 payment at the upper end of guidance and now boost to their FY21 guidance. 

 

Mr de Vos said “Arena remains well  positioned  to continue to  provide benefits  to  our  tenant partners  and  the  communities  that  use  our  assets,  and to  deliver an  attractive and  predictable distribution to investors with earnings growth prospects over the medium to long term.

To read Arena’s latest statement please click here.

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