Boost for ALE pub portfolio
The pubs in the ALE Property Group portfolio have increased in value.
A valuation for ALE, owner of 86 pubs across Australia, found that the hotels increased in value by $90.0 million to $990.5 million
That’s a 10 per cent increase for the year to 30 June 2016.
The uplift was driven by a reduction in the weighted average capitalisation rate from 5.99 per cent to 5.53 per cent, along with the properties’ annual CPI based rent increases.
The reassessment of the carrying value of ALE properties was based upon independent valuations of 31 properties by CBRE and Heron Todd White.
The directors of ALE Property Group valuated the remaining 55 properties.
On advice from CBRE and HTW, they applied the same percentage movement for the entire portfolio.
The valuers said the low interest rate environment was critical.
They said an investment in ALE’s pub properties represents a long term securely leased property to a major corporate entity. In a low interest rate environment these types of investments have become increasingly attractive to the long term passive investors.
According to the valuers, the decrease in capitalisation rates and the properties’ annual CPI-based rent increases would account for a large portion of the extra $90 million in value in the past year.
They found that ALH’s capital expenditure and in particular the addition of Dan Murphy’s liquor stores was materially adding to the profitability of the tenant’s operations and ALE’s future rent prospects.
ALE also has strong assignment protections with ALH.
That means ALH will guarantee any new tenant’s obligations within the 13-year lease. ALH have also committed maintaining gaming entitlements held by ALE properties to no less than 90 per cent of original numbers at the beginning of the lease.
The result: ALH continues to have a strong gaming presence within its pubs and ALE maintains strong profit protections.
by Leon Gettler, June 17th 2016
