Ann: Market update, page-2

This ELC update speaks to 'Strong macroeconomic drivers' and 'Federal Government investment'. However recent ABC 7:30 reporting has raised many concerns and the fallout from the Joshua Brown arrest has triggered a multi-agency crisis which could reshape the regulatory landscape.

The Victorian Government is reviewing mandatory CCTV, National working with children Check harmonisation, and educator to child ratios and supervision protocols. Federal legislation is being fast-tracked to cut funding to centres with safety breaches.

The sector also faces litigation and insurance risks, with potential class actions against operators and landlords. Insurers may reassess public liability coverage, potentially raising premiums.

While Arena is not directly implicated, the reputational and operational risks are material. Should any of Arena's tenants be found to have employed Brown or failed in safeguarding, it could result in lease terminations, or brand damage. Affinity Education, a major tenant, is reviewing its records after revelations Brown may have worked longer than initially disclosed.

If regulatory changes increase operator costs or reduce margins, it could weaken market sentiment towards childcare REITS.
With risks increasing, I am seriously considering whether to continue holding or exit. Would be interested to learn what others are doing.