Arena REIT’s (ASX: ARF) stock has been up 26.4% this year to date (as at December 07, 2017), and edged a little up on December 08, 2017 with the release of a revaluation uplift and development update. The group’s portfolio revaluation for the six months ended 31 December 2017 resulted in an expected net uplift of $22.2 million in value as at 31 December 2017 (unaudited), and this is a growth of 3.4% since 30 June 2017 and equivalent to approximately $0.08 in Arena’s Net Asset Value (NAV) per security. This has come at the back of an increase in net passing rents and better valuation yields.

In the update, the group also touched upon about completing 11 Early Learning Centre (ELC) development projects for a total cost of $68 million at an average initial yield on cost of 6.8%. Further, addition of completed developments with a weighted average initial lease term of 19.7 years will result in an increase in the portfolio weighted average lease expiry (WALE) to 13.1 years from 12.8 years at 30 June 2017.

ARF seems to have found continuous support from strong investor interest in ELC assets that has also firmed the valuation yields. The ELC portfolio valuation yield of 6.5%, in context of the quality of assets and long triple net leases is seen to continually gain traction.

The group will provide more insights in its FY18 interim results scheduled for mid-February 2018 release. For FY17, the group had reported for a healthy performance with reported NPAT growth of about 33% over FY16. We maintain a “Hold” at the current price of $2.40
 

Portfolio Revaluation (Source: Company Reports)

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