Charter Hall and Hostplus have teamed again to pay around $1.7 billion for the entire portfolio of ASX-listed ALE – the previous largest pub landlord in the land.
Funds manager Charter Hall has secured purchase of ALE (ASX:LEP) through the listed Charter Hall Long WALE REIT (ASX:CLW) and with ongoing real estate partner Hostplus, for a reported $1.2bn plus debt. Each is set to own 50 per cent of the entity.
ALE’s high-value collection, entirely operated by Endeavour Group’s ALH, amounts to 78 pubs, including some famous individuals such as Brisbane’s Breakfast Creek, Sydney’s Crows Nest and Melbourne’s Young & Jacksons.
After years of speculation on the move, a Charter Hall consortium put an offer to the ALE board in July. The proposal was endorsed by the independent board committee and major stakeholder Will Vicars’ Caledonia.
It swiftly met shareholder approval, with securityholders set to receive for each ALE security $3.673 in cash plus 0.408 Long WALE REIT securities, plus their September quarter distribution of 5.5c.
This represents a 43 per cent premium to ALE’s most recent valuations.
ALE shares jumped at the news, up 19.96 per cent since Friday, to close today at $5.65.
This is just shy of where ALE shares were trading pre-COVID, but since that time it has divested a half-dozen assets. It reported a 13 per cent rise in distributable earnings for FY2021, to $34.4 million.
Despite having collected all rent throughout the shutdowns from its corporate-backed tenant, ALH, ALE is still part of ongoing litigation with ALH concerning rental increases at more than a dozen of its Victorian properties.
ALE’s board recommended the Charter Hall proposal subject to the lack of a better offer, but this was becoming increasing unlikely given the number of private equity funds adopting ESG (environment, social and governance) targets. This reality was also a factor in Redcape’s recent decision to delist.
The purchase will more than double Charter Hall’s pub exposure, from $1.4 to $3 billion. It says the deal is in line with its strategy to invest in high quality real estate assets, predominantly leased to corporate tenants, on long-term leases.
Ninety-five per cent of the ALE leases are triple net, with WALE of 7.5 years, four x 10-year options, and annual CPI increases.
Shares in Long WALE have gone down on the news, falling 3.60 per cent since Friday to close today at $5.09.
It’s anticipated that Charter Hall will continue the buying spree, having already demonstrated its eagerness to acquire pubs with ALH, paying around $40 million for the Terrey Hills Tavern in July,
