Active property manager, Arena REIT (ASX: ARF) manages and develops social infrastructure property assets across Australia. Today (i.e., 21 May 2019), the company has announced that it is undertaking a fully underwritten A$50 million institutional placement at an issue price of A$2.67 per new Stapled Security to fund its recent acquisitions and maintain its balance sheet capacity for future growth opportunities.
The company has settled, exchanged contracts or entered heads of agreement during 2H FY19 to acquire and develop additional social infrastructure properties with a total investment of A$62 million.
The company’s acquisition includes three specialist disability accommodation properties for a total investment of A$24 million, three Early Learning Centre (ELC) properties for a total investment of A$13 million and five ELC developments with a total anticipated project investment of A$25 million.
These acquisitions are supported by fundamental demand drivers including population growth and increasing female workforce participation. Further, the acquisitions are well located assets with strategic importance to the operations of the tenant. All ELC acquisitions are having a strong operational track record in respective sectors.
After completing the Institutional Placement, Arena will offer its eligible securityholders an opportunity to participate in a non-underwritten SPP to raise up to A$5 million. Eligible securityholders in Australia and New Zealand will be invited to subscribe for up to A$15,000 of additional new securities per securityholder, free of transaction and brokerage costs. The Issue date of the SPP Securities will be 1 July 2019 and they will not participate in the June 2019 quarter distribution.
Indicative transaction timetable (Source: Company Reports)
The FY20 financial impact of the Acquisitions and Institutional Placement will improve the company’s Earnings Per Security and Net Asset Value per Security. Further, it is expected that the acquisitions and Institutional Placement will provide pro forma gearing at 31 December 2018 of 25%.
The company has confirmed FY19 distribution of 13.5 cents per security. Further, the company has provided FY20 distribution guidance of 14.3 cents per security (+5.9% on FY19) representing a distribution yield of 5.4% at the Institutional Placement price.
The securities of Arena REIT were placed in trading halt today at the request of ARF to to allow the institutional placement to take place in an orderly manner.
In the first half of FY19, the company reported Net operating profit of $18.3 million and Earnings per security (EPS) of 6.77 cent. The company’s statutory net profit for the half-year was $34.2 million, down by 7.8% on pcp.
In the last six months, the share price of Arena REIT increased by 23.45% as on 20 May 2019. Further, the stock has provided a year till date return of 12.50%. It is trading at a PE multiple of 12.260x. ARF’s stock last traded at $2.790 with a market capitalization of circa $760.55 million as on 20 May 2019.
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