This article is from the Australian Property Journal archive
PROPERTY valuations carried ALE Property Group to a sizable increase in first half profit, as the pubs landlord awaits a Supreme Court decision regarding rent rates for its Victorian assets.
ALE’s venues are leased to Woolworths-backed ALH Group, which is the largest pub operator in the country. Its net profit after tax of $68.1 million was 232% higher than that previous corresponding period following a 4.4% valuation uplift – or $51.6 million – in its portfolio value to nearly $1.226 billion. The valuations as at the end of October were adopted as December valuations, and the weighted average yield tighten from 5.08% to 4.94%.
Woolworths has paid full rent during the pandemic and ALE did not receive any government COVID-19 relief payments.
Independent valuers determined that the uncapped rent for the overall portfolio is about 33% higher than current passing rent, although the variance is not distributed evenly across the portfolio.
Distributable profit increased by 14.8% to $17.9 million for the half year. This was helped by a 2.2% increase in rental income, itself driven by CPI increases and the outcome of rental determination.
ALE is currently challenging independent valuers’ assessments in the Supreme Court of Victoria that rent across 19 assets in the state as of November 2018 should remain mostly unchanged. ALE does not expect the proceedings to be finalised until the next financial year.
The 2018 determinations were received in September and stated that rent for the 43 properties subject to determinations remain substantially unchanged. Including rents for the 36 properties that were previously agreed to increase by a full 10% cap, the rent for 79 properties subject to review increased by 4.4%.
Rent determinations were made across 43 assets in its portfolio after ALH refused to agree to 10% increases following a November 2018 rent review that stipulated maximum movement of 10% higher or lower. In addition to the 2018 rent reviews, 85 of ALE’s 86 property leases continue to benefit from annual CPI increases.
