Arena REIT (ARF) H2 2024 earnings summary

Executive summary

• Net operating profit rose 5% to $62.4 million, driven by rental increases, acquisitions, and development completions, while statutory net profit fell 22.5% to $57.5 million due to lower revaluation gains.

• Earnings per security increased 3.2% to 17.65 cents, with distributions per security up 3.6% to 17.4 cents.

• Distribution guidance for FY2025 is reaffirmed at 18.25 cents per security, a 4.9% increase over FY2024.

• Portfolio occupancy remains high at 99.7% with a WALE of 18.5 years, supported by a diversified tenant base and strong demand.

• Solar energy installed on 90% of properties; certified carbon neutral for business operations and services.

Financial highlights

• Property income grew 8% year-over-year to $80.2 million; total operating income up 8% to $80.9 million.

• Net asset value per security was $3.41, stable year-over-year; portfolio valuation uplift of $4 million, a 0.25% increase from FY2023.

• Like-for-like average rent increased 4.9% year-over-year; 26 market rent reviews averaged a 7.7% increase.

• Portfolio passing yield expanded by 23 basis points to 5.39% at June 2024.

• Operating expenses increased 15% and finance costs rose 26% due to higher debt and rates.

Outlook and guidance

• FY2025 distribution per security guidance is 18.25 cents, up 4.9% from FY2024, assuming no major asset sales or capital deployment beyond announced projects.

• 95% of rent reviews for FY2025–FY2028 are CPI-linked or higher, supporting embedded income growth.

• $139 million development pipeline with $95 million capex outstanding; strong social and macroeconomic drivers for early learning and healthcare sectors.

• Forward BBSY curve assumes a 4.3% average floating rate; CPI assumption averages 3.25% for FY2025.

• Market rent growth expected to continue at a reasonable rate due to government subsidies and sector demand.