Iconic pubs close, but landlord still demands rent
Whilst most businesses have suffered tremendously due to forced closures during the pandemic, one of Australia’s biggest pub landlords is seemingly thriving.
ALE Property Group is yet to be adversely affected financially, as it continues to charge full rent to its major tenant, the Woolworths-backed operator ALH.
ALE has received rent in full for the entirety of the past financial year, despite ALH Group having to shut iconic venues such as Melbourne’s Young & Jackson’s.
ALE expects rent to be paid in full at all of ALH Group’s 33 Victorian sites, worth a collective $565 million, despite only bottle shops permitted to remain open.
ALH is the country’s leading pub operator. In February this year it merged with the Bruce Mathieson backed Endeavour Group, which operates approximately 330 venues, with over 900 bars and night clubs. Woolworths owns 85.4% of Endeavour Group, with the Bruce Mathieson Group holding the remaining 14.6%. Woolworths plans to separate from Endeavour Group in the second half of 2021 due to COVID-19’s detrimental impact.
Many of ALH Group’s venues, including restaurants and bistros, are under tremendous pressure due to COVID-19 restrictions, but ALE has no plans to negotiate rents.
In fact, having reviewed some pub rents, ALE found many were below market rates and have already been increased by 10%. ALE undertook its rent review on 79 of its 86 investment properties in 2019, accepting a 10% rise on 36 properties with the remainder subject to independent determination.
As The Australian reported, ALE said the COVID-19 pandemic had hit market activity in many sectors in the economy and this had been particularly evident in the pub sector where trading restrictions are in place.
But it said notwithstanding the uncertainty the situation was having on property values, a valuation assessment undertaken by the group indicated that demand still existed for prime assets secured by strong tenants. It is still expecting rents from ALH but values might be hit if ALH does not pay contracted rents.
“In the event that the impacts of COVID-19 become material or more prolonged than anticipated, and ALH does not continue to meet its rental obligations … this may have an adverse impact to the fair value of ALE’s property portfolio,” the listed pub trust said.
The pandemic has decimated the hotel industry, with all 86 ALH hotels closing during the first lockdown. ALH continued to operate 66 BWS and 23 Dan Murphy’s owned by ALE.
ALE said recovery will take a long time and the months ahead will be very difficult, yet its financials have been solid. It generated a distributable profit of $30.4 million; its property income was also up 2 per cent to $61.4 million due to rent increases.
Furthermore, its portfolio lifted by 0.9 per cent to $1.17 billion.
Analyst, Macquarie Equities noted the revaluations were a good outcome for ALE, within the COVID-19 environment.
Irit Jackson, 6th August 2020
