FY19 Reported, Is Arena (ASX:ARF) The Best REIT?

Companies and indices mentioned:

Arena REIT No 1 (ASX: ARF) has reported its FY19 result to investors, is it the best REIT?

Arena is a real estate investment trust (REIT) in the ASX300 that owns, manages and develops social infrastructure such as childcare centres and healthcare properties. Its property portfolio is leased to a diverse group of tenants.

Arena REIT’s FY19 Result

Arena REIT reported that its (distributable) net operating profit grew by 9% over the year to $37.7 million. However, statutory net profit fell 8% mainly because of revaluation of interest rate hedges.

Total assets increased by 14% to $825.7 million and net assets per share (NAV) increased by 7% to $2.10. Pleasingly, gearing, the level of borrowing, decreased to 22.8% from 24.7% a year ago.

During the year it 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.

Overall, 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.

FY19 And FY20 Distributions

During FY19 Arena increased its distribution by 5.5% to 13.5 cents per share and in FY20 management have guided that the distribution will grow by a further 5.9% to 14.3 cents per share reflecting its like for like rent growth, acquisitions and its development pipeline.

Is Arena A Buy?

I have been impressed by Arena REIT over the years that it has managed to steadily increase its operating earnings and distribution over the years at a steady 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.

I think there could be better options for dividends, such as the reliable shares in the free report below.

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At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.

Jaz Harrison

Jaz Harrison

Jaz is a keen investor who loves to thoroughly poke holes in an investment idea before it has a chance of making it into her portfolio. Jaz invests for the long-term and doesn't sweat the small stuff. She strongly believes that empowering people with knowledge is the best way for them to take charge of their finances, which is exactly the approach she takes with her own money and investments.