Is This The ASX’s Best A-REIT?
ASX-listed Arena REIT No 1 (ASX: ARF) reported its 2019 financial year (FY19) report to investors today and I’m asking if it’s the ASX’s best REIT?
Arena is a real estate investment trust (REIT) in the ASX 300 that owns, manages and develops social infrastructure such as childcare centres and healthcare properties. Its property portfolio is leased to a mixed group of tenants.
Arena REIT reported that its (distributable) net operating profit grew by 9% over the year to $38 million. However, statutory net profit fell 8% mainly because of the revaluation of interest rate hedges.
Arena’s total assets grew by 14% to $825 million and net assets per share (NAV) increased by 7% to $2.10. Pleasingly, gearing, the level of borrowing, decreased to 23% from 25% a year ago.
During the year the REIT achieved a like for like rent increase of 3.6% because of 39 market rent reviews at an average increase of 9.4%.
Arena also reported that its healthcare portfolio leases with Healius Ltd (ASX: HLS) was extended from four years to 14.6 years. Pleasingly, Arena maintained its occupancy at 100% and the portfolio’s weighted average lease expiry (WALE) grew to 14.1 years from 12.9 years at June 2018.
During the year Arena notced up its distribution by around 5% to 13.5 cents per share and in FY20 management have guided that the distribution will grow by a further 6% to 14.3 cents per share reflecting the like-for-like rental growth, acquisitions and its development pipeline.
Is It Time To Buy The Arena REIT?
I have been impressed by the Arena REIT over the years because it has managed to steadily increase its operating earnings and distribution to investors at a high single-digit pace.
With the REIT predicting further growth of the distribution, it’s certainly a fairly attractive income option with a FY20 distribution yield of 5%. So I certainly think it’s one of the better REIT income options, but it is valued at 35% premium to its underlying June 2019 value.
Therefore, I think there could be better options for dividends, such as the ETF in the free report below.
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Legal disclaimer: Chances are, the information you read on the BESTETFS website may contain a mix of factual information and general financial advice. Any information/advice on this website is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information and NEVER INVEST IN AN ETF OR MANAGED FUND BEFORE READING THE PRODUCT DISCLOSURE STATEMENT (PDS). If you don't read the PDS you're practically flying blind with one arm tied behind your back. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).
At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.
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