ECEC landlord Arena REIT confirms very strong trading across tenant portfolio

Arena REIT, a leading freehold owner in the early childhood education and care (ECEC) sector, has confirmed very strong trading across its tenant portfolio whilst valuations remain more or less static. 

The early learning centre portfolio revaluation program saw 45 centres independently valued as at 30 June 2023, with the balance of centres subject to a Director’s valuation with the portfolio valuation uplift of just $1.5 million, equating to a 0.1 per cent increase above that recorded on 31 December 2022. 

Notably, the weighted average passing yield is now moving more firmly back above 5.00 per cent with a 10 basis points rise to 5.13 per cent recorded for the period. 

Arena’s healthcare portfolio saw a small negative revaluation adjustment with passing yields moving up 19 basis points to 5.37 per cent. 

Portfolio growth evident in last six months as tenant report strong trading

Over the course of the last twelve months Arena has continued to grow its portfolio having added two centres via acquisition and ten via development projects taking the total ownership to around 272 centre across its network. 

Arena’s partners reported solid underlying business performances as at 31 March 2023: 

• Average daily fee of $129.46, +7.0% from March 2023
• Like-for-like occupancy is above the same period last year
• Like-for-like occupancy higher than any corresponding period in last ten years
• Net rent to revenue ratio of 10.7%

The reference to occupancy being higher than any period in the last ten years is a step up from comments made in its 2022 pre close trading statement when it noted that “occupancy levels in March were higher than any corresponding period over the last five years.”

Arena’s largest tenant partners are Goodstart (24 per cent of portfolio), Green Leaves (18 per cent), Edge Early Learning (10 per cent).

Rent reviews during FY23 resulted in an average annual like-for-like rent increase of 6.8% substantially higher than prior periods but notably the FY23 guidance was 0.1 per cent lower than reported at the Trust’s 2023 half year results suggesting increase momentum is stabilising. 

Arena will release its full year results on 10 August 2023.