Following completion of independent valuation and a rent-determination process, ASX-listed ALE Property Group has recorded a $51.6 million gain in the value of its 86-venue portfolio and further support to its case for rental increases.
As of 31 October the portfolio was independently valued at $1.226 billion, up 4.43 per cent from the figure of $1.174 billion reported at 30 June. All the properties are leased to ALH – hotels arm of Woolworths-backed Endeavour, and the largest pub group in Australia.
The valuation produced a new low weighted average yield, tightening 14 basis points to 4.94 per cent, and reaching 4.58 per cent in NSW.
The country’s largest pub landlord has collected full rent from ALH this year, despite the temporary closures during the COVID-19 pandemic and restricted trading since hotels reopened. Since Victoria came back online 9 November, all of ALE’s properties have now reopened.
In 2018 a rent review on 43 of the venues flagged 10 per cent increases, but when ALH baulked at the rise an assessment was completed by independent valuers, announcing in September rates at most of the properties should stay roughly the same.
ALE struck back, seeking to have the determinations set aside for 19 of the properties in Victoria, on the basis that the reviews did not consider “what a good average manager would have achieved” at the pubs.
The weighted average lease expiry (WALE) across the portfolio is 8.3 years, and ALE’s ASX market capitalisation is at $973.0 million.
The audit also provided an estimate of the “Uncapped/Uncollared Rental” levels for the pub freeholds – as at 31 October 2020. The independent valuers were provided with the Determinations as received in September and made adjustments to estimates to account for the period since November 2018, as well as the “potential positive rental benefit” of refurbishments or material capex at the properties.
It was calculated the uncapped/uncollared rental income might be as much as 33 per cent higher than current levels, at $82.9 million annually.
ALE (ASX:LEP) closed at $4.460 today, up 0.667 per cent.
