In Finance by Clyde Mooney

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The biggest landlord to Australia’s biggest publican reports strong half-yearly results, boding well for the industry and commercial interests.

Listed A-REIT ALE (ASX: LEP) released end of 2017 results Wednesday, showing distributable profit down slightly (three per cent) but distributions up (1.97 per cent).

Directors’ valuations during the course of the year saw the book value of the portfolio of 86 pub freeholds increase a modest 1.88 per cent to $1.1bn, while average capitalisation rate remained unchanged at 5.14 per cent, and gearing at an historical low of 41.7 per cent.

ALE CEO Andrew Wilkinson

The benchmark of the blue-chip REITs (Real Estate Investment Trust) in Australian pubs, the portfolio is entirely tenanted by ALH, backed by Woolworths, predominantly on triple-net leases.

Ongoing regular rental increases are mostly capped, with a major periodic market-based review taking into account individual venue EBITDA and outlook due on 76 of ALE’s freeholds in November this year. This could see “enhanced distributions and/or capital management initiatives”.

The conservative valuations were supported by independent advice from CBRE and Harron Todd White, which ALE reported saw favourable conditions ahead for the type of assets it holds.

“It was noted by both valuers that there continues to be significant demand across all classes of investment grade commercial property, particularly for properties with individual property values similar to those owned by ALE,” stated the ASX announcement.

A starting investment of $1.00 in ALE in 2003 would now hold an accumulated value of $15.62, reflecting an annualised return of 21.5 per cent.