Arena REIT taps investors as $4b ploughed into listed property
The Arena REIT childcare property at 76-84 Baden Powell Drive, Tarneit, Victoria.

Arena REIT taps investors as $4b ploughed into listed property

Investors have pumped close to $4 billion into the listed property sector as companies seek to shore up balance sheets bruised by the impact of the global pandemic.

Reflecting the rush to higher-yielding vehicles as the prospect of negative interest rates loom, shopping centre giant Vicinity only took a day to raise $1.4 billion from its investor base. It will use the cash to reduce debt and boost its coffers for ongoing redevelopment.

At the other end of the scale, Arena REIT has tapped investors for $60 million through an institutional placement and share purchase plan. The listed property group says the additional funds will give it the capacity to “pursue further social infrastructure property investments”.

With a focus on early education and healthcare properties, Arena REIT has 233 assets across the country worth about $853 million. The company’s development pipeline consists of 20 projects with a total cost value of about $112 million.

Arena’s centres remained open during the coronavirus pandemic and about 23 per cent of its tenants were covered under the national cabinet’s mandatory code of conduct. The company said rent relief agreements had been reached where justified.

Arena managing director Bob de Vos said the sector received government support through the Early Childhood Education and Care Relief Package (ECECRP) and the JobKeeper package, but noted COVID-19 continued to provide an environment of “heightened economic uncertainty”.

“The ELC [early learning centre] sector is expected to benefit from thematic tailwinds such as government support and strong fundamental demand drivers as demonstrated by the record long day care and female workplace participation rates observed prior to the onset of the COVID-19 pandemic,” Mr de Vos said.

Arena has maintained its full-year distribution guidance of up to 14?? per security.

Vicinity and Arena have joined other REITs, including Lendlease, Charter Hall’s retail and social infrastructure trusts, Centuria Industrial REIT, convenience mall landlord SCA Property Group, Aspen Property and self storage landlord National Storage, in undertaking successful and swift equity raisings.

JP Morgan’s Richard Jones said other capital raisings could be in the wings in the lead up to the end of the financial year, when the impact of COVID-19 on operations will be revealed.

Mr Jones said Scentre group, the country’s largest shopping centre landlord, could be the next cab off the rank.

Scentre raised $2.3 billion in debt last month giving it breathing space and ample balance sheet liquidity. The retail owner and manager has said it has no plans to raise cash from asset sales or through investors.

But Mr Jones said Vicinity’s decision to tap the market complicates Scentre’s capital decisions.

“Assuming a 10 per cent decline in book values, we estimate Scentre would need to raise about $1.6 billion to $1.7 billion in equity to maintain its December 2019 financial year gearing at 33 per cent,” Mr Jones said.

“We assume a 30 per cent peak-to-trough correction in retail book values over the next 12 to 18 months. We assume Scentre will sell $3 billion of assets in 2021 to absorb part of the impact and this results in about 40 per cent gearing.”

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