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Arena REIT (ASX:ARF) raises guidance on the back of rising valuations

Market News, Real Estate
ASX:ARF      MCAP $1.625B
11 August 2021 11:30 (AEDT)

Arena REIT (ARF), a childcare and health care landlord, will raise its guidance for the coming year after earnings increased due to higher property valuations, increased profit and full occupancy.

ARF reported a net operating profit of $51.9 million for FY21, up 18.5 per cent from the previous year, while statutory net profit for the year was $165.4 million, up 116 per cent from the previous year.

Growth in contracted yearly rental growth and market rent reviews, purchase of existing early learning centre (ELC) assets, and development projects completed in FY20 and FY21 are all contributors to increasing operating revenue.

The result translates to earnings per share of 15.2 cents, up 4.5 per cent from the previous year.

Arena distributed 14.8 cents per security for the whole year, up six per cent from the previous year. The company now forecasts a dividend per share of 15.8 cents per security in FY22, representing a 6.8 per cent increase over FY21.

Due to acquisitions, development capital expenditures, and a favourable revaluation of the portfolio, Arena’s total assets grew by 14 per cent to $1.15 billion.

Arena’s portfolio consists of 225 early learning centres (ELC), 12 ELC development sites and 11 healthcare properties.

The 15 per cent increase in net assets value per security to $2.56 by June 30, 2021 was mostly due to the revaluation uplift.

Commenting in respect of today’s announcement, Arena’s managing director Rob de Vos said despite a challenging external environment, the company has achieved strong results.

“Early learning and healthcare services are integral to economic recovery and improving community outcomes,” he said.

“Arena remains well positioned to navigate the ongoing and emerging challenges arising from COVID-19, including potential changes in economic conditions. We also remain well positioned to consider new opportunities that are consistent with strategy and deliver on Arena’s investment objective.”

During the year, rent reviews resulted in an average 3.3 per cent rise in like-for-like rent, with the company collecting full rent across its 100 per cent occupied portfolio.

Market rent evaluations across 25 assets from FY20 and 11 from 1H21 contributed to this outcome, which was all settled during FY21 at an average increase of 6.5 per cent.

The company weighted average lease expiry also increased to 20.1 years following the acquisition of seven ELC properties.

During FY21, six ELC properties were sold at a 16 per cent premium over book value, with the revenues going back into the development pipeline.

Arena’s gearing was 19.9 per cent 13 as of 30 June 2021, with $90 million of undrawn debt capacity as of balance date to cover the rest of the $57 million construction capital expenditure and future expansion prospects.

Arena REIT was up 0.53 per cent to $3.81 per share at 11:25 pm AEST.

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