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Arena (ASX:ARF) share price charges higher after upgrading distribution guidance

dividend chart increasing

The Arena REIT (ASX: ARF) share price was a strong performer on Thursday.

The property company’s shares rose a solid 2% to finish the day at $2.87.

Why did the Arena share price push higher?

Investors were buying the company’s shares today after the release of a positive update.

According to the release, Arena is expecting the completion of eight existing Early Learning Centre (ELC) development projects in the first half of FY 2021. These will be at a total cost of $41 million with an average initial yield on all costs of 6.7%. They will also have a weighted average initial lease term of 20 years.

In addition to this, the company has completed the acquisition of seven established ELCs for a total cost of $40.3 million at a net initial yield on all costs of 6.1%. These are all leased to existing Arena tenant partners with a weighted average initial lease term of 27.3 years.

It doesn’t stop there. Arena has also completed the disposal of three ELCs for $7.2 million. This represents a 16.1% premium to prevailing book value.

What else did Arena announce?

Arena is expecting a net revaluation uplift of $37.3 million in its portfolio value at 31 December 2020.

This reflects growth of 4% since 30 June 2020 and is the equivalent to an increase of approximately $0.11 in Arena’s Net Asset Value per security.

Another positive is an increase in the portfolio weighted average lease expiry to 14.7 years. This compares to 14.0 years at 30 June 2020.

But perhaps best of all, management revealed that 100% of rent due to the end of November 2020 has been collected. This will ease any concerns that the pandemic was going to have a lasting impact on rental collections.

Distribution upgrade.

In light of this positive performance, management has upgraded its FY 2021 distribution guidance.

It now expects to reward shareholders with a 14.81 cents per security distribution, which will be an increase of 5.7% on FY 2020.

Based on the current Arena share price, this equates to a generous 5.15% dividend yield.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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