Long leases key to pub success: ALE Property Group
Listed pub trust ALE Property Group has attributed the 6% boost to the value of its 87-strong pub portfolio to its long lease agreements and tenancy agreement with the Australian Leisure and Hospitality Group, which is 75% owned by Woolworths.
Results for the year to June 2011 released earlier this year revealed distributable profit of $31 million, a fall of 18% from profit of $38 million recorded in 2010, but 7.8% above February 2011 expectations.
The ALE portfolio is now valued at $758.3 million compared with $714 million a year ago, with 34 Victorian pubs making up 51% of the portfolio, a combined value of $382 million.
Among the notable pubs it owns is the Young and Jackson pub on the corner of Flinders Street and Swanston Street opposite Flinders Station in Melbourne, which was valued at $9.4 million as of June 2011, up from a valuation of $8.9 million a year ago.
During the financial year, ALE redeveloped the New Brighton Hotel, on The Corso in Manly (valued at $12 million, up $100,000) and Racehorse Hotel, Ipswich (valued at $2.5 million up from $1.6 million)
It has 32 pubs in Queensland, with a cumulative value of $219 million.
Speaking at the 2011 AGM this week, chairman of ALE Peter Warne said the improved valuations were due to rental increases and stronger average capitalisation rates across the properties.
Commenting on the difficult market environment in general, Warne said “the valuations of quality investment properties in Australia, especially those on long-term leases to quality tenants remained very firm”.
“[ALE’s improved valuation] was independently assessed to be attributable to the high quality of the properties’ long leases and our sole tenant, ALH who continues to enjoy success as Australia’s leading pub operator and liquor retailer,” Warne said.
“Our tenant continues to trade very profitably despite the problems in some other parts of the pub sector, which we often see reported in the press.”
The strong performance of ALE is in contrast with an otherwise struggling pub sector, marked by the recent collapse of National Leisure and Gaming, operator of 35 hotels in New South Wales and Queensland, that blamed "onerous leases" for its collapse.