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