Arena REIT : 2021 AGM Chair's address and Managing Director's report

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25 NOVEMBER 2021

2021 AGM CHAIR'S ADDRESS AND MANAGING DIRECTOR'S REPORT

Chair's Address

Highlights for 2021 Financial Year

In a period affected by the direct and indirect challenges of COVID-19, Arena has produced strong earnings, distribution and capital growth, successfully delivered acquisitions and development completions, replenished the development pipeline, further extended the portfolio's existing long WALE through a post balance date portfolio lease renegotiation and further improved our progress with regard to sustainability outcomes.

These positive outcomes are a result of the resilience and support of our stakeholders, particularly our tenant partners; the quality of Arena's portfolio, the proactive approach of Arena's management team and the strong macro-economic themes that support investment in social infrastructure property. It is also an endorsement of Arena's disciplined strategy and ability to deliver against our investment objective.

Arena's statutory net profit for the year was $165.4 million, an increase of 116% on the prior year primarily due to the revaluation uplift during FY21.

Underlying net operating profit increased by 18.5% to $51.9 million.

Key contributors to higher operating income include contracted annual rent growth and positive outcomes on market rent reviews, acquisition of operating early learning centre (ELC) properties and development projects completed during the 2020 financial year (FY20) and FY21. The result represents earnings per security of 15.2 cents, an increase of 4.5% over the prior year.

Arena has paid a full-year distribution per security of 14.8 cents, up 5.7% on the prior year.

Arena's total assets increased by 14% to $1,151.5 million as a result of acquisitions, development capital expenditure and the positive revaluation of the portfolio. The revaluation uplift was the primary contributor to the 15% increase in net asset value per security to $2.56 at 30 June 2021.

Arena REIT Limited (ACN 602 365 186)

Arena REIT Management Limited ACN 600 069 761 AFSL No. 465754 as responsible entity of Arena REIT No. 1 (ARSN 106 891 641) and Arena REIT No. 2 (ARSN 101 067 878)

Level 32, 8 Exhibition Street Melbourne VIC 3000 www.arena.com.au

Locked Bag 32002 Collins Street East	T [phone]
Melbourne VIC 8003	Freecall 1800 008 494
[e-mail]

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Arena continues to operate well within its banking covenant requirements. As at 30 June, Arena's gearing was 19.9%1 with $90 million of undrawn debt capacity to fund the balance of the development capital expenditure of $57 million and future social infrastructure property investments consistent with strategy.

Sustainability

Sustainability is fundamental to Arena's investment approach and we believe that approach best positions Arena to achieve positive long term commercial outcomes.

Arena's portfolio of social infrastructure properties provides direct access to essential community services. Our ELCs provide early childhood education and care which allows parents and carers the opportunity to remain in or re-join the workforce. Arena's medical centres provide local, community- based primary health care services. Our specialist disability accommodation is designed to provide a better quality of life for residents with high physical support needs.

Given the environmental and social footprint of its assets, Arena has an opportunity to leverage its own sustainability initiatives to create a multiplier effect on its sustainability impacts by partnering with its tenants. Accordingly, Arena's overarching approach to sustainability is to actively seek out 'Partnerships for Change.' Our partnership approach delivers mutually beneficial outcomes for our communities, team, tenant partners and ultimately our investors.

Post balance date Arena released its 2021 Sustainability Report which provides detail on our commitment to strategies that address sustainability challenges faced by Arena and our stakeholders and identifies opportunities to progress positive change. It outlines goals and targets over the short and medium term for ongoing action and future reporting.

We continue to welcome feedback from all stakeholders to ensure that we can build upon our disclosures moving forward.

Remuneration

Arena's key remuneration objectives are to attract, retain and incentivise talent by providing market competitive rewards, with incentive opportunity designed to align remuneration with performance and strategy, and to guide the behaviour and actions of executive Key Management Personnel (KMP).

There were no changes to the remuneration framework in FY21. Executive KMP remuneration and target remuneration mix was maintained at FY20 levels and there were no changes to Board fees.

1 Gearing calculated as ratio of net borrowing over total assets less cash.

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The remuneration outcomes in FY21 reflect Arena's strong financial performance of 4.5% earnings per security growth and 5.7% distribution per security growth and strong operational outcomes achieved notwithstanding the COVID-19 pandemic.

Executive KMP were awarded 95% of their target Short Term Incentive (STI) which reflects:

• the delivery of above target distribution and earnings growth in FY21; and
• the performance of Executive KMP in respect of non-financial objectives.

The FY19 Long Term Incentive (LTI) was tested as at 30 June 2021 and will fully vest as the FY21 Distributable Income of 15.2 cents per security (representing a 5.1% compound annual growth rate (CAGR) over the three year performance period) exceeded the high hurdle of 15.0 cents per security and Arena's TSR of 83% (equivalent to a 22% CAGR) for the 3 year period ended 30 June 2021 ranked at the 89th percentile of the ASX300 A-REIT comparator group.

An independent review of Arena's remuneration framework was completed in FY21 for implementation in FY22; details of the review are provided in the Remuneration Report. In the four years since the previous independent review, Arena has experienced significant growth, including a 60% increase in property income, an 85% increase in total assets and a 134% increase in market capitalisation.

The key decisions to be implemented with respect to FY22 remuneration reflect contemporary market practice, talent retention in an increasingly competitive market, the progression of Arena's strategy and individual and collective employee performance.

Strategy

Government support of the ELC sector was reinforced through the various COVID-19 related funding commitments2, undertaken by the Federal Government over the last 18 months.

The Federal Government has also recently committed a further investment of $1.7 billion3 to the sector to:

• Support ongoing economic recovery in the short term; and
• Improve workforce participation, gender equality, women's financial security and economic activity over the medium to long term4.

1. https://www.dese.gov.au/covid-19/childcare;https://ministers.dese.gov.au/.
2. https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/making-child-care-more-affordable-and-boosting
3. https://grattan.edu.au/wp-content/uploads/2020/08/Cheaper-Childcare-Grattan-Institute-Report.pdf.

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Strong structural demand for services and a record female workforce participation rate continue to drive increased long day care participation rates over the medium to long term5'6.

Macro-economic drivers also continue to support Australian healthcare accommodation, including a growing and ageing population and increased prevalence of chronic health conditions. Strong occupancy has been also maintained across the specialist disability accommodation portfolio.

Healthcare properties remain strongly sought after, with increased domestic and international interest in Australian healthcare property and increasing interest in social infrastructure property more generally.

In this environment, Arena continues to differentiate its brand in the marketplace through a partnership approach, working collaboratively with our tenants and other stakeholders.

Arena's management team has specialist asset management and development expertise and a strong track record that includes the successful delivery of 54 development projects for our tenant partners over the past nine years at a total cost of $262 million.

Outlook

Arena remains well positioned to navigate ongoing and emerging economic and investment challenges and to consider new opportunities that are consistent with Arena's investment objective of delivering an attractive and predictable distribution to investors with earnings growth prospects over the medium to long term.

As in previous years, I am pleased to advise that we are forecasting distribution growth for FY22 and distribution guidance for FY22 of 15.8 cents per security7 was issued in August 2021 reflecting 6.8% growth over FY21.

Conclusion

Before handing over to Arena's Managing Director, Rob de Vos I would like to take the opportunity on behalf of the Board and the management team to thank our investors, tenants and business partners for their ongoing support.

1. ABS Female Labour Force Participation Rate (aged 20-74 at least one dependent child of ELC age).
2. Australian Government 'Early Childhood and Child Care in Summary' Reports 2012-2020.
3. FY22 distribution guidance is estimated on a status quo basis assuming no new acquisitions or disposals, all developments in progress are completed in line with forecast assumptions, tenants comply with their existing or adjusted lease obligations and is based on Arena's current assessment of the future impact of COVID-19 pandemic (which is subject to a wide range of uncertainties) and assumes ongoing government support of the early learning sector.

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On behalf of the Board, I would also like to acknowledge and express our appreciation to the Arena management team for their ongoing commitment and contribution to Arena's performance.

We will continue to work hard for our Securityholders and look forward to reporting to you in 2022.

Thank you.

Managing Director's Report

Thank you David.

I would also like to acknowledge the Traditional Custodians of the various lands on which we meet today, and recognise their ongoing connection to land, waters and community and to offer a warm welcome to Arena REIT's 2021, Annual General Meeting.

Community well-being is at the very core of the services that our tenant partners provide from within Arena's property portfolio. The last 18 months have been an uncertain and challenging period for our tenant partners and their staff, who played a vital role in ensuring that the essential community services they provide remained open to support community well-being during the COVID-19 pandemic. I would like to take this opportunity to thank our tenant partners for their resilience and tenacity.

Looking forward, we anticipate that the community need for the services that Arena accommodates will continue to increase. The services that Arena accommodates are fundamental to well performing communities and in relation to early learning services, integral to allowing working families get back to work and assist broader economic recovery.

These factors will of course drive demand for the types of assets that Arena owns and develops; and as such will assist Arena's investment objective of delivering an attractive and predictable distribution to investors with earnings growth prospects over the medium to long term.

Delivering on Strategy

Despite the broad challenges COVID-19 has presented our stakeholders, Arena's disciplined strategy has supported overall positive operational and financial outcomes.

We have receipted all contracted rent and maintained 100% occupancy across the portfolio; and achieved average rental growth of 3.3%.

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