Arena REIT (ARF.AU) shares plummeted 5.47% intraday on Tuesday, extending a sharp sell-off after the childcare-focused landlord disclosed that its third-largest tenant, Edge Early Learning, failed to pay August rent.

The missed payment has sparked concerns over earnings quality and contagion risk across the portfolio. Jefferies downgraded Arena REIT to "hold" from "buy" and slashed its price target by 24% to A$2.74, citing uncertainty around tenant health and visibility. Morningstar also cut its fair value estimate by 8% to A$3.50, warning that replacing Edge Early Learning across 31 childcare centres could take time if the operator defaults.

With the stock already down 22% on Monday following the initial disclosure, analysts now see the shares trading at a 30% discount to net tangible assets. However, Jefferies cautioned that "concerns around contagion risk across the sector will likely weigh on the share price in the near term."