The Arena REIT (ASX: ARF) is trading 0.26% lower at $3.87 at the time of writing in early Friday morning trade. For the year, the share price is 4.68% lower.
The ASX REIT enjoyed a 4.02% jump in its share price at the close of the ASX on Thursday. This followed the release of its robust FY25 earnings result.
Arena announced a 17% increase in its net operating profit. It also revealed a 42% increase in its statutory net profit and a 15% rise in total assets.
Arena REIT's net operating profit reached $73 million for the full year ended 30 June 2025. This result equated to earnings per share (EPS) of 18.55 cents, an increase of 5.1% on the prior period. Arena has paid a dividend per share of 18.25 cents for the full year, an increase of 4.9% year-on-year.
According to the announcement, key contributors to the result were income growth from contracted annual and market rent reviews, acquisitions, and development projects completed in FY 2024 and FY 2025.
Here's the latest stance that Macquarie Group Ltd (ASX: MQG) has on the ASX REIT.
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Macquarie updates its 12-month outlook
In a recent note to investors, the broker confirmed the outperform rating on Arena REIT. It also raised the target price to $4.01, up from $3.96 previously.
At the time of writing on early Friday morning, this represents a potential 3.6% upside for investors over the next 12 months.
"Valuation: TP +1.3% to $4.01 reflecting roll-forward of the valuation and minor assumption adjustments," Macquarie said.
"Maintain Outperform. ARF 12-month forward DPS yield is 5.2% while also offering an attractive and defensive DPSg profile (above asset heavy AREITs) of +4.5% 3-year CAGR FY25-28."
What else did Macquarie have to say?
The broker notes that the REIT's income growth has been boosted by rent reviews.
Arena REIT completed 30 market rent reviews in FY25 at an average increase of 6.8%. Of those reviews, 25 were capped at 7.5%, with the reviews hitting the cap on 21 properties. In FY26, ARF has 43 market rent reviews representing 10% of the portfolio's income. Of the reviews, 31 are capped at 7.5% and 12 are uncapped.
Macquarie believes the company has scope to push rents, given that net rent to gross ELC operator revenue dropped to 9.9%. The broker assumes a 6.0% growth of income, subject to market review in FY26.
"ARF long-term total return has outperformed the AREIT sector and closest peer CQE. ELC outperformance can be attributed to strong underlying rent growth, limited cash leakage (to incentive and maintenance capital expenditure) and capitalisation rate compression," the broker said in its note.
It also noted that returns have been enhanced by an enlarged and accelerating development pipeline.
"ARF's 29 project development pipeline is the largest on record. ARF has increased resources to take advantage of the opportunity now given the phase of the cycle. The $176m of capex outstanding (total $227m) will be spread evenly over FY26/27 with a target yield on cost of 6.0% vs. the passing yield for the ELC portfolio of 5.41%."
On another note, Macquarie also comments about Arena REIT CEO Rob De Vos' plans to step down after the company's AGM in November. He'll be replaced by CIO Justin Bailey.
"We expect a continuation of ARF's strong strategy execution and financial discipline that has driven outperformance of A-REIT peers over the last 6.5 years (facilitated by generating an underlying business compound annual total return of 14.9% based on change in NTA plus distributions)," Macquarie said.
