The original ALH landlord has posted its half-yearly property results, demonstrating why the hotel market continues to attract hungry investment.

Listed entity ALE (ASX: LEP) reports the value of its portfolio of 86 freeholds grew by a healthy 10 per cent in FY16, up $90.0 million to $990.48 million.

ALE says the value uplift was predominantly driven by a reduction in its weighted average capitalisation rate, down from 5.99 per cent to 5.53 per cent, along with the CPI-based rental increases.

The entire portfolio is leased to the country’s biggest publican, Australian Leisure & Hospitality (ALH) with contracted rental increases. Furthermore, 83 or the 86 leases are essentially ‘triple-net’ and 79 will see a rental review, capped and collared at 10 per cent, in 2018.

Future projections are strong, given the mandated rental increases and ALH’s undertaking (subject to regulatory changes and requirements) that it will not reduce gaming entitlements below 90 per cent of current levels.

The reassessment of ALE’s property carrying value was based on independent valuations of 31 properties by CBRE and Heron Todd White (HTW).

While the valuation saw a $90m overall increase, the gain since the last report at 31 December 2015 was only $36.62 million, or 41 per cent.


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