Key Highlights

  • Net operating profit rose 8% to $79.1 million, while statutory net profit increased 62% to $132 million.
  • Operating EPS increased 5.7% to 19.60 cents, and FY2026 distributions rose 5.5% to 19.25 cents per security.
  • Net asset value increased 4% to $3.60 per security, while gearing increased from 22.8% to 24.5%.
  • FY2027 distribution guidance is not less than 18.0 cents per security, reflecting uncertainty around rental income from the Edge Early Learning portfolio.

Arena REIT (ASX:ARF) shares were trading at $2.49 on 21 August 2026 at 10:23am GMT, up 2.89%, or $0.070, as the property group reported higher Earnings and distributions for FY2026. Net operating profit increased 8% to $79.1 million, while statutory net profit rose 62% to $132 million. The result was supported by rental growth, acquisitions and development completions, although uncertainty surrounding Edge Early Learning has introduced a material consideration for FY2027.

Earnings Growth Supported by Rental Income

Arena's FY2026 net operating profit increased to $79.1 million from the previous year's result. Operating earnings per security rose 5.7% to 19.60 cents. Distribution per security also increased, reaching 19.25 cents for FY2026, up 5.5% from FY2025.

The earnings improvement was driven by contracted annual and market rent reviews, alongside contributions from acquisitions and development projects completed during FY2025 and FY2026. Arena ended the financial year with total Assets of approximately $2 billion.

Statutory net profit rose 62% to $132 million. Net asset value per security increased 4% to $3.60 as the property portfolio recorded a positive net Revaluation movement of 2.7%.

Portfolio Remains Fully Occupied

Arena's portfolio consisted of 307 properties at 30 June 2026, with a weighted average Lease expiry of 17.5 years and 100% occupancy. Average like-for-like rent growth was 4.0%, including 36 market rent reviews that delivered an average increase of 7.6%.

The portfolio's weighted average passing Yield increased to 5.56%, from 5.47% a year earlier. The early learning portfolio accounted for $1.67 billion of property value, while the healthcare portfolio was valued at $171.6 million.

The portfolio recorded a $47.4 million annual net revaluation uplift. However, the valuation picture was affected by the Edge portfolio, where an independent revaluation resulted in a $24.4 million, or 10%, reduction in value following rent-relief discussions and default notices.

Edge Early Learning Creates FY2027 Uncertainty

Edge Early Learning leases 31 Arena properties, representing 14% of Arena's annual rental income. Rent had been paid through 31 July 2026, but Arena said Edge did not pay its August rent. Default notices were subsequently issued to Edge and its lender.

Arena has taken control of two newly developed centres leased to Edge that were completed but had not yet opened. The company has term sheets for new 20-year leases with another national operator for both centres at equivalent rents during the initial lease period.

Arena continues to work through potential outcomes for the remainder of the Edge portfolio. It also retains security and cross-default protections under pooled bank guarantee arrangements.

For FY2027, Arena has assumed no income from the Edge portfolio from 1 August 2026, apart from the application of approximately $4 million in liquid security toward outstanding rent. This assumption contributes to the company's distribution guidance of not less than 18.0 cents per security.

Capital Position and Development Pipeline

Arena finished FY2026 with borrowings of $511 million and gearing of 24.5%, compared with 22.8% a year earlier. The increase in gearing therefore contrasts with the growth in net assets.

The company's borrowing Facility was increased to $700 million in February 2026, with an average remaining facility term of four years. The weighted average cost of Debt was 4.2%, while hedge coverage stood at 100% at year-end.

Arena had $121 million of committed Capital expenditure across its development pipeline, fully funded within its existing borrowing facility. The broader early learning development pipeline comprises 29 projects with forecast total costs of $228 million and a weighted average net initial yield of 6.0%.

Early Learning Market Conditions

The early learning sector experienced softer Demand during FY2026. The number of children enrolled in long day care was 1.5% lower over the 12 months to 31 March 2026, while 210 centres exited the market during FY2026, above the preceding five-year average of 120 closures per year.

Arena's stabilised portfolio reported average centre occupancy of 76.7%. Average daily fees were $164.13, while the net rent-to-gross-revenue ratio was 10.0% and EBITDAR-to-rent coverage was 3.05 times.

These metrics indicate that centre-level operating conditions remain an important Factor as operators adjust to changing demand, cost pressures and increased regulatory requirements.

Conclusion

Arena REIT's FY2026 results show continued growth in operating earnings, distributions and net assets, supported by rental reviews, development completions and portfolio activity. At the same time, gearing increased to 24.5%, while the Edge Early Learning situation has introduced uncertainty around rental income and distributions in FY2027. The company's decision to guide to at least 18.0 cents per security assumes no Edge rental income from August onward, making the eventual resolution of the tenant issue an important factor in the group's near-term financial performance.