Arena REIT seeks A$55m of new capital to fund expansion

Arena REIT, the owner, manager and developer of social infrastructure property assets across Australia, and a significant investor in early education centres, has today announced its intention to raise A$55 million to help fund the acquisition of 11 new centres.

The acquisition portfolio consists of three specialist disability accommodation properties located in metropolitan Adelaide which were announced to the market in February 2019, three operating early learning centre properties located in metropolitan Brisbane, and five early learning centre development sites.

The sites are being purchased for a total of A$62 million, with the healthcare centres yielding 6.0 per cent, the early learning centres yielding 6.8 per cent and the development sites expected to yield 6.7 per cent.

The acquisitions will increase the total number of properties owned by the Group to 229, of which 219 will be early learning centres and 10 will be healthcare related properties.

Green Leaves Early Learning percentage of Arena income rises to 16%

Post the new acquisitions Green Leaves Early Learning has seen its share of Arena REIT’s rent roll increase from 14 per cent to 16 per cent, suggesting that a portion of the early learning centres acquired by Arena are being operated by the company.

Other large tenants such as Goodstart Early Learning, G8 Education, Affinity Education Group and Oxanda Education will see their contribution to Arena’s income fall.

With respect to sector diversification, early learning centres will represent a smaller portion of the total portfolio at 85 per cent, a reduction of 2 per cent. Healthcare related assets make up the balance of the portfolio.

Geographically, Arena will continue to have most of its centres in Queensland, 32 per cent, although its South Australian exposure will now increase to 7 per cent of total assets from 3 per cent previously.

New acquisitions will replenish development pipeline

As well as providing the company with the opportunity to diversify its asset mix, the purchase of 5 new early learning centre development sites will see Arena’s development pipeline restocked.

This comes in the wake of reporting its half year results in February in which the company disclosed its early learning centre development pipeline had fallen to just four centres with a value of $21 million, a cycle low for the business.

The acquisition of the five new development sites will see the pipeline return to levels more consistent with those seen in 2016.

A$50m to be raised from institutional investors, A$5m from smaller shareholders

The company is undertaking a fully underwritten A$50 million institutional placement at an issue price of A$2.57 per share. This represents a 4.3 per cent discount to the last closing price recorded yesterday, 20 May 2019, of $2.79.

The company has also committed to offering shareholders an opportunity to participate in a share purchase plan (SPP) that will enable any eligible shareholders to purchase up to A$15,000 of new shares free of transaction and brokerage costs.

A total of A$5 million is hoped to be raised via the SPP.

For more information on the acquisitions and capital raise please click here.