This article is from the Australian Property Journal archive
AFTER a boost to its early learning assets, Arena REIT (ASX:ARF), is anticipating a net revaluation uplift of around $19 million for the half year from its portfolio valuation program.
This uplift for the six month period ending 31 December 2022, reflecting a 1.3% increase from 30 June 2022 or an increase equivalent to $0.055 in net asset value (NAV) per security, for a weighted average passing yield of 5.04%.
The program included the independent valuation of 51 early learning centre (ELC) assets and one healthcare asset, with the remaining ELC and healthcare assets and ELC development projects subject to a directors’ valuation.
The ELC portfolio recorded a $21 million or 1.6% uplift from June, with a weighted average passing yield as at 31 December 2022 of 5.03%.
This increase was driven by strong macroeconomic forces supporting the Australian ELC sector, including high demand and a record high workforce participation rate for Australian women.
The sector was also supported by the successful passing of the federal government’s Cheaper Childcare Bill through the senate in late November.
Arena’s tenant partners also reported improved operations as at 30 September 2022, with average daily fees at $127.31, up 5.22% from March 2022 and a net rent to revenue ratio of 10.7%.
Currently Arena’s ELC development pipeline has a forecasted total cost of $106 million with circa $67 million of capital expenditure outstanding. And a forecasted weighted average initial yield on the total forecasted cost for the development pipeline is 5.4%.
Meanwhile the healthcare portfolio saw a $2 million or 0.9% loss over the same period, with a weighted average passing yield as at 31 December 2022 of 5.16%.
Throughout the period, rent reviews in an average like-for-like rent increase of 6.45%.
Arena also agreed to terms to increase its syndicated borrowing facility by $70 million to $500 million and extended a $150 million facility tranche from 31 March 2024 to 31 March 2028 during the six month period.
With the weighted average remaining facility term will be 4.2 years with no debt expiry before 31 March 2026.
And the weighted average cost of debt at 3.5% during HY23 compared with 2.9% as at 30 June 2022 and 80% of borrowings are hedged for a weighted average term of 4.1 years at a weighted average rate of 1.93% as at 31 December 2022.
While undrawn debt capacity is at $148 million and will be available to fund the development program, as well as other future growth opportunities.
Arena has reaffirmed its full year 2023 distribution guidance of 16.8 cents per security, for 5% growth over financial year 2022.
