Is Arena (ASX: ARF) the best REIT on the ASX? It has a good claim, but today it has announced a capital raising.
What is Arena REIT?
Arena REIT is a property group that owns, manages and develops social infrastructure business across Australia. The main two areas that it’s concentrating on is early learning and healthcare buildings.
The capital raising
Arena REIT is going to do a fully underwritten $50 million capital raising at an issue price of $2.28 per share unit. After that it will do a non-underwritten security purchase plan (SPP) to raise up to $10 million. The issue price is a 5% discount to the last closing price of $2.40.
What will this do for Arena REIT?
The proceeds will be used to invest in further property investments. It will be focusing on opportunities that have relatively long term leases, are strategically important to the tenant, are high credit quality or government tenants with leases where tenants are responsible for substantially all the statutory and operating expenses.
After the raising it will reduce Arena REIT’s gearing to 17.6%, using the 31 December 2019 numbers.
Arena REIT update
The property business said it expects FY20 average like for like rent increases of 3.4% which includes FY19 market reviews, but excludes rent relief programs.
Independent preliminary draft valuations of all of Arena’s portfolio at 1 June 2020 show an overall increase of portfolio value for FY20 of around $15 million, which equates to around 5 cents per security.
The the moment the development pipeline of 20 projects has a total cost of around $112 million, with $67 million outstanding.
Approximately 90% of rental payments have been pay for March to May 2020. Rent relief provided has been deferred. The government has been helping the childcare sector with various initiatives.
The FY20 distribution is expected to be 13.9 cents to 14 cents per security, growth of 3% to 3.9%. That’s a yield of around 5.8%. Not bad at all in this very low interest environment.
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Disclosure: At the time of writing, Jaz doesn’t own shares in any of the businesses mentioned.
