What’s driving Arena REIT’s huge weekly share price gain?

The Arena REIT No 1 (ASX: ARF) share price is up 10.5% since last Monday’s closing bell. Over the same 5 days, the S&P/ASX 300 Index (ASX: XKO) – comprising the 300 largest companies on the ASX – is down 0.5%.

At the current $2.42 per share, Arena has a market cap of $825 million.

Long-term investors have enjoyed solid share price gains and regular dividends since the company listed on the ASX in June 2013. But, like with most companies, that came to an ugly end in February when COVID-19 sent investors rushing for the exits.

From 20 February through 23 March, the Arena REIT share price tumbled 58%. It’s rebounded strongly since then, gaining 71% since that low. But Arena’s share price still remains down 16% year-to-date.

What does Arena REIT do?

Arena is a real estate investment trust (REIT). The trust owns, manages and develops properties across Australia. Its portfolio of social infrastructure properties is primarily leased to early learning and healthcare operators, along with some government-tenanted facilities. The company aims to provide investors with earnings growth prospects over the medium to long-term.

Arena REIT is included in the S&P/ASX 300 Index.

Why is the share price up 10.5% in 5 days?

It hasn’t fully recovered from the market rout in February and March, but Arena REIT’s share price has done better than most property shares.

This is largely due to its focus on long-term leases in the 2 sectors that have, in most cases, continued to operate in Australia despite coronavirus lockdowns. Namely, early learning centres and healthcare providers.

Having said that, in its 2020 financial year results released on Thursday, the company noted the rent relief it had provided to some tenant partners amounted to 4% of contracted rent for the 12-month reporting period.

Arena REIT’s share price has gained strongly over the past few days, following positive results in Thursday’s report.

Those included a 16% increase in net operating profit, which reached $43.8 million.

Total assets also increased, up 23% year-over-year to hit $1.01 billion. This was mostly due to acquisitions, development capital expenditure and a positive revaluation of its portfolio. Additionally, the company has been paying down debt, with its debt to equity ratio standing at 14.8% compared to 22.1% the previous year.

With managing director Rob de Vos forecasting that Arena remains well positioned to deliver “earnings growth prospects over the medium to long term”, the Arena REIT share price may yet close the calendar year in the green.

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Motley Fool contributor Bernd Struben 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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