Arena REIT (ARF):  The listed childcare and medical centre owner reported their half-year 2026 results, which, as always, were consistent and steady. One of the key reasons we like ARF is the predictability of company earnings. With 100% occupancy, government support and a lease term of 18 years, there is not much scope for nasty surprises.  HNW Income has a 3.3% weight to ARF.

 Key Points:

  • Profits Up: Net profit increased by +9% to $39 million, driven primarily by a 12% increase in rents collected and completion of developments and acquisitions. ARF continues to have 100% occupancy and an average 18 years average weighted lease term, by far the best in the entire LPT sector, with less than 1% of lease expiring in this decade.
  • Dividends Up: ARF announced a distribution of 9.6 cents per security, representing an increase of 5% on last year. Unlike office or retail landlords, ARF benefits from “triple net leases,” which hold tenants responsible for the building’s insurance, taxes, utilities, and all capital expenditures.
  • Strong Balance Sheet: : ARF’s gearing ratio stands at 22%, with 93% of the debt hedged over the next three years. ARF continues to remain conservatively geared.
  • Regulatory Beneficiary: The government has introduced a 3-day guarantee from the start of 2026 that will allow all families to be eligible for at least 72 hours of subsidised early learning childcare per fortnight (3 days per week), providing 100,000 families access to childcare.
  • Outlook: ARF management reaffirmed FY26 distribution guidance of 19.25 cents per security, representing a +5% increase on FY25 distribution. (see Below)

Portfolio Strategy:  ARF is a well-managed company that owns 284 childcare and medical centres across Australia, which are exposed to tenants offering non-discretionary services such as childcare and healthcare, both of which enjoy bipartisan support.  ARF pays a solid, growing yield directly linked to inflation and is paid quarterly, providing regular cash flow to our investors. The next major set of lease expiries is in 2037 and 2038, so we have few near and medium-term concerns. ARF trades on a 5.5% yield paid quarterly.

ARF finished up +0.5% to $3.52