Arena REIT wraps up $62m in childcare, disability centre deals

An early learning centre in Armadale.

The listed Arena REIT Group is growing its empire of childcare centres and disability accommodation centres, striking deals to buy $62 million worth of the properties.

The deals, which will lift the trust’s portfolio to $805 million, will see Arena acquire and develop the social infrastructure properties.

The new assets include three specialist disability accommodation properties for $24 million, three Early Learning Centre properties for $13 million, and five ELC developments worth about $25 million.

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Arena’s managing director Rob de Vos says the improvement in the operating environment for its early learning tenants is “providing new opportunities for disciplined investment” and it is in due diligence on another $30 million worth of assets.

De Vos says the equity raising provides the capacity for additional investment in “appropriate social infrastructure properties, consistent with our investment strategy”.

Arena is undertaking a fully underwritten $50 million institutional placement at an issue price of $2.67 per share via Morgan Stanley to fund the acquisitions and refresh its balance sheet.

Evans Dixon is acting as financial adviser.

Arena confirmed its fiscal distribution of 13.5c per share for this year and said its fiscal 2020 distribution guidance of 14.3 cents per share was a 5.9% lift on this year and represented a distribution yield of 5.4%.

Arena says the “strategic rationale” for the deal was in keeping with its focus on well-located assets that had strategic importance to the operations of the tenant.

Both areas are also supported by fundamental demand drivers, including population growth and increasing female workforce participation.

The latest acquisitions have a 6.5% weighted average net initial yield on total cost and an 18-year weighted average lease expiry.

Arena also likes the properties because of their secure defensive income streams, underpinned by long lease terms, triple-net lease structures and contracted rental growth.

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