Arena REIT reported an 8.3% increase in net operating profit to A$79.1 million for the year ended June 30, 2026, as the childcare-focused property trust posted strong portfolio growth despite rising finance costs.
The trust raised its full-year distribution by 5.5% to 19.25 cents per security, while operating earnings per security climbed 5.7% to 19.60 cents. Statutory net profit surged 62% to A$131.8 million, reflecting higher asset valuations and lower tax expenses. Total assets expanded 8% to A$2.016 billion, with net asset value per security up 4% to A$3.60. Property income rose 10.3% to A$101.6 million, though finance costs increased 16.9% to A$15.7 million and operating expenses grew 21.6% to A$7.5 million.
Arena’s gearing ratio edged up 170 basis points year-over-year to 24.5%, still well below its 50% covenant limit. The trust maintained 100% occupancy across 307 properties, with a weighted average lease expiry of 17.5 years. Portfolio composition remained heavily weighted toward early learning centers at 91%, with healthcare properties making up the remainder. No single tenant accounts for more than 23% of income.
Financial performance was underpinned by A$161 million deployed into acquisitions and developments, including 11 new early learning centers at a weighted average net initial yield of 6.0%. The trust also divested 11 assets for A$53.5 million, realizing an 8% premium to book value with a weighted average passing yield of 5.3%. Market rent reviews completed in FY2026 delivered an average increase of 7.6%, compared with 4.0% like-for-like growth. Rent reviews tied to CPI, higher-of CPI/fixed amounts, or market terms cover 95% of contracts due through FY2030.
The trust’s exposure to Edge Early Learning, which represents 14% of annual rental income, has become a focal point after the operator requested rental relief in late July and failed to pay August rent. Arena issued default notices on August 4 and took control of two newly developed centers, signing 20-year leases with a leading operator at equivalent rents. Two South Australian centers face regulatory suspensions, and Edge voluntarily suspended two additional sites. Guidance assumes no income from Edge from August 1, 2026, onward, offset in part by approximately A$4 million in liquid security.
Arena’s Edge portfolio, valued at A$219 million as of June 30, 2026, underwent an independent revaluation that reduced its value by A$24.4 million, or 10%, from initial estimates. The portfolio includes 31 modern properties, with 22 stabilized, seven in ramp-up, and two completed but not yet operational. Eighty percent of the portfolio is located in metropolitan areas, with an average center age of 6.7 years.
The trust extended its debt facility to A$700 million in February, with a weighted average term of 4.0 years and 100% hedge cover at a weighted average rate of 2.82%. The all-in weighted average cost of debt stood at 4.2%, up 10 basis points year-over-year. Undrawn debt capacity totaled A$189 million, sufficient to fund A$121 million in outstanding development commitments. Arena’s development pipeline includes 29 projects across six states, with a forecast total cost of A$228 million.
Looking ahead, Arena guided FY2027 distributions to be no less than 18.0 cents per security, a potential decline from FY2026’s 19.25 cents. The trust’s shares were trading at A$2.49, up 2.89% on the day and roughly 39% below their 52-week high of A$4.10.
