A strong rebound in ELC attendances post the easing of COVID-19 restrictions will see Arena REIT recovery some of its lost ground in 2020 with occupancies of its ELC tenant partners trending around the same level as this time last year.
With improved occupancy and the forecast completion of 8 development projects, Arena REIT has issued an upgrade to its FY21 distribution guidance to 14.8 cents per security (representing growth of 5.7% over FY20) and an increase over the previous FY21 guidance of 14.4 to 14.6 cents per security.
Mr de Vos said “Arena remains well positioned to continue to provide benefits to our tenant partners and the communities that use our assets – and to deliver an attractive and predictable distribution to investors with earnings growth prospects over the medium to long term.”
Arena’s Head of Property, Mr Stuart Andrews said “Despite the external challenges of the past six months it has been another active period for Arena and we remain on track to complete 14 high quality ELC development projects with our tenant partners in FY21.”
Arena has acquired seven established ELCs operated by existing tenant partners each with new triple net leases with a weighted average initial lease term of 27.3 years. The total portfolio cost is $40.3 million representing an average yield on all costs of 6.1%.
Arena has also disposed of three ELCs in regional Queensland for $7.1m, a 16.1% premium to book value. The acquisitions and development completions, net of the disposed properties, account for a net capital deployment anticipated to be approximately $75 million at an average yield on all costs of 6.4%.
So far in FY21, a total of eight existing ELC development projects have reached practical completion, for a total cost of $41 million, at an average initial yield on all costs of 6.7% and with a weighted average initial lease term of 20 years.
A total of 38 ELCs and three healthcare properties have been independently valued as at 31 December 2020, with Directors’ valuations undertaken for the balance of the portfolio. The expected uplift in portfolio value of $37m reflects both an increase in net passing rents and a firming in passing yields. The average yield for the ELC portfolio was 6.19% and the average yield for the healthcare assets was 5.98%.
Commenting on the valuations, Arena’s Managing Director Mr Rob de Vos said “We continue to see strong investor interest in social infrastructure property and this has contributed to a further firming in valuation yields. Our portfolio valuation yield of 6.16% continues to look relatively attractive in context of the quality of our assets and long term triple net leases.”