ASX-listed Arena REIT Group has announced the acquisition of a portfolio of nine Early Learning Centre properties under development for a total cost of $65 million.
The nine properties are located in catchments with growing 0-4 year old populations and are situated across Queensland, New South Wales, Victoria, Tasmania and South Australia.
The acquisition will be partially funded by a fully underwritten institutional placement of $55 million.
The properties are expected to be completed on a progressive basis over the next 12 months and are being acquired on a fund-through basis, with Arena earning a net yield on total cost of 6.25%.
At settlement, Arena will pay an initial $27.6 million, followed by further payments as projects progress to completion.
The new portfolio has been independently valued (on completion) at $66.8 million, reflecting a weighted average passing yield of 6.0%. The property purchase price represents a 5.2% discount to independent valuation (on completion), improving Arena’s WALE to 13.5 years, further diversifies the tenant mix and enhances the rent review profile.
Commenting on the acquisition, Arena’s Managing Director, Bryce Mitchelson said, “The acquisition improves the quality of Arena’s portfolio, is accretive to earnings and is at a discount to independent valuation. The fund through acquisition structure also provides an attractive return profile from commencement, and the fixed development cost reduces Arena’s risk profile through the development process.”
On completion, each property will be leased to Green Leaves Early Learning Centres, an existing tenant in the Arena portfolio. Each lease is for a 20-year initial term, has a triple net structure, and includes annual rent reviews at a minimum of 3% per annum, with a market rent review at each 10-year anniversary.
Arena’s Head of Property, Mr Rob de Vos added, “We are very pleased to be expanding our relationship with Green Leaves and at the same time enhancing the quality of our ELC portfolio. The properties are well located in catchments with favourable demographic profiles and forecast population growth, and have been designed to maximise tenant operational efficiency.”
Melbourne-based Arena REIT is an internally managed Australian Real Estate Investment Trust. Arena REIT's investment strategy is to invest in sectors such as childcare, healthcare, education and government tenanted facilities leased on a long-term basis with the objective to generate an attractive and predictable distribution to investors with earnings growth prospects over the medium to long term.
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