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Arena REIT Strong Income Gains from Acquisitions

February 21, 2019

 Arena REIT announced a net operating profit for the half-year ended 31 December 2018 of $18.3 million, up 9.3% on the prior corresponding period.

 

Financial Highlights

  • Net operating profit (distributable income) of $18.3 million, up 9.3% on the prior

  • corresponding period (pcp)

  • Earnings per security (EPS) of 6.77 cents, up 5.5% on pcp

  • Distributions per security (DPS) of 6.75 cents, up 5.5% on pcp

  • Total Assets of $763.7 million, up 5.2% on 30 June 2018

  • Net Asset Value (NAV) per security of $2.03, up 3% on 30 June 2018

Key contributors to the result were rental income growth from annual rent reviews and new rental income from acquisitions and development projects completed in FY18 and HY19. This result equated to earnings per security (EPS) of 6.77 cents, an increase of 5.5% over the prior corresponding period. Arena has paid a half-year distribution of 6.75 cents per security, up 5.5% on the prior corresponding period.

 

Statutory net profit for the half-year was $34.2 million. This was down 7.8% on the prior period, primarily due to the scale of revaluation gains ($18.6 million vs $21.3 million in prior period).

 

Arena’s total assets increased by 5.2% to $763.7 million, as a result of acquisitions, development capital expenditure and the positive revaluation of the portfolio. The revaluation uplift contributed to a $0.06 increase in Net Asset Value (NAV) per security to $2.03 at 31 December 2018.

 

Annual rent reviews have been completed over 57% of portfolio income in HY19, with an average like-for-like rent increase of 3.1% over passing rent achieved. The average increase in market rent reviews achieved in HY19 was 6.3%.


Arena’s healthcare portfolio leases with Healius (formerly Primary Health Care Limited) were extended from an average of 4 years to 14.6 years during HY19 with the expiries on the initial lease terms now staggered from FY29 to FY36. The net healthcare portfolio valuation increased from $85.4 million to $96.3 million.
WALE extended to 14.2 years


Occupancy was maintained at 100% and the portfolio’s weighted average lease expiry (WALE) was increased to 14.2 years (from 12.9 years at 30 June 2018) following the extension of leases over the healthcare portfolio and ELC acquisitions and development completions.


At 31 December 2018, Arena’s property portfolio comprised 211 ELC properties and development sites (87% of portfolio value) and seven healthcare properties (13% of portfolio value). All 218 properties were revalued during HY19, with 40 properties independently valued and the remaining 178 at directors’ valuation. A revaluation uplift of $18.6 million was recorded, equivalent to an increase of 2.7%.

 

Acquisitions and development project completions in HY19 Two operating ELC properties were acquired at a net initial yield on cost of 6.7% with a weighted average lease term of 17.8 years. Three ELC development projects were completed at a net initial yield on cost of 6.3% on new 20 year leases and two new ELC development sites were acquired.

 

Post balance date acquisition of specialist disability accommodation portfolio Arena has settled the acquisition of a $24 million portfolio of three specialist disability accommodation properties in metropolitan Adelaide as announced to ASX on 18 February 2019. The properties were acquired on an initial income yield of 6% on the purchase price, have an initial 15 year lease term and the rent will be reviewed annually by CPI+0.5%. The properties are all leased to SACARE, a leading provider of disability care and rehabilitation services in South Australia.

 

FY19 distribution guidance reaffirmed at 13.5 cents per security Following announcement of the HY19 result, Arena has today reaffirmed its FY19 DPS guidance at 13.5 cents per security . This reflects growth of 5.5% over FY18, and compound annual growth in DPS since listing in June 2013 of 8.7% per annum

 

ARF Trading Chart vs ASX200 AREITs

Blue - ARF

Purple - ASX200 AREITs

 

 

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