Arena REIT reports occupancy across ECEC tenant portfolio at highest level in six years

 

Arena REIT has released a pre close trading update in which it confirmed that underlying operator occupancy across its early childhood education and care (ECEC) portfolio of around 240 centres is higher than any corresponding period over the past six years.

 

The performance metrics, which were similarly strong this time last year, are submitted by Arena’s tenant partners that include some of Australia’s largest ECEC providers and send a strong signal that demand for ECEC services across 2022 has been robust and bodes well for 2023. 

 

“Strong macroeconomic drivers continue to support the Australian Early Learning Centre (ELC) Sector,” the Trust noted in a statement, “demand for services and record female workforce participation rate have been driving increased long day care participation rates over the medium to long term.”

 

Average daily fees across Arena’s portfolio now sit at $127.31, up 5.22 per cent from March 2022, with rent reviews during the last six months resulting in an average like for like increase of 6.45 per cent, significantly higher than the 3.6 per cent reported last year. 

 

Portfolio revaluations muted as higher interest start to bite 

 

Although strong operating conditions and solid like-for-like rental growth provided positive momenum, their outperformance was not matched by revaluations which for the ELC portfolio increased by just 1.6 per cent, compared to a sizable 14.7 per cent increase last year. 

 

Passing yields increased 13 basis points to 5.03 per cent but despite significant interest rate increases in 2022 still remain below the 5.15 per cent recorded last year. 

 

A total of 51 ELC assets and one healthcare asset were independently valued as at 31 December 2022, with the remaining ELC and healthcare assets and ELC development projects subject to Directors’ valuation.

 

Two operating centres were acquired in the period and seven development sites completed. As at the end of 2022, the Trust will have fifteen development sites in its pipeline which is lower than the record high levels reported in June 2022 but still elevated relative to the past seven years. 

 

To accommodate the recent growth and fund future development and acquisition opportunities the syndicated borrowing facility was increased by $70 million to 500 million. As at 31 December 2022, undrawn debt capacity was $148 million, materially higher than the forecast cost of completion for its Greenfield portfolio which sits at $106 million. 

 

Arena confirmed it will publish its Half Year 2022 results on 9 February 2023. 

 

To review the statement in full please see here.