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Childcare Centre Operators Offer More Value Than Childcare REITs

Analyst Note

| Gareth James, CFA |

The childcare sector came close to collapse in March 2020, when coronavirus emerged in Australia and lockdowns caused childcare centre occupancy rates to plummet. Childcare centre operators, which live and die by their occupancy rates, were particularly vulnerable and G8 Education’s share price plummeted. However, the prospect of bankrupt tenants across their portfolios also threatened the childcare-exposed real estate investment trusts, or REITs, including Arena REIT and Charter Hall Social Infrastructure Trust, or CQE.

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Company Profile

Business Description

Arena REIT is the second-largest childcare centre-focused real estate investment trust, or REIT, in Australia. The trust owns a portfolio of more than 230 long day care centres in Australia which provide preschool care for children aged from 0 to 5 years. Arena also owns 10 healthcare centres but childcare comprises 85% of its portfolio based on property value. The Australian childcare and healthcare sectors both receive a significant amount of government funding which we expect to continue due to the essential nature of the services they provide.

Level 5, 41 Exhibition Street
Melbourne, VIC, 3000, Australia
T +61 390939000
Sector Real Estate
Industry REIT - Specialty
Most Recent Earnings
Fiscal Year End Jun 30, 2021
Stock Type

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