ALE results highlight pub property appetite
ALE Property Group (ASX:LEP) has released its results for FY17, demonstrating that pub freeholds continue to be hot property.
ALE owns 86 freehold properties, all leasedto ALH Group. The business has recorded a distributable profit of $29 million for the financial year, only $100,000 less than FY16’s results. The net profit after tax was $75.1 million.
With 100 per cent of the group’s assets being utilised by ALH and 83 of the 86 on triple-net leases, total asset valuation has increased by five per cent, or $54.7 million. Rents are also expected to increase during the rent review to be held later this year, as well as again in 2028; therefore future income is expected to escalate.
Covering a cumulative 95 hectares of land, 90 per cent of ALE’s properties are located within capital or major cities, with just under half of all properties located in Victoria.
Redevelopment of the venues by ALH has increased the valuation of many of ALE’s properties. For example, ALE purchased the Miami Tavern on Queensland’s Gold Coast in 2003 for $4.1 million at a cap rate of 8.4 per cent. A new Dan Murphy’s was opened on the property at the end of last year, and the adjoining site was purchased for $1.4 million in April. Due to these investments, the freehold was valued in June this year at $14.9 million with a cap rate of 4.9 per cent.
ALH’s recent launch of its accommodation offering, Nightcap Hotels, in a number of venues has also added to the increased value of multiple ALE properties – 497 rooms are located across 27 ALE freeholds.
ALE’s total net debt at the end of FY17 sits at $480 million, with debt maturities to be diversified over the next five and a half years, and a cash interest rate of 4.26 per cent fixed until August 2020.
With long leases averaging 10 years for all its properties, and current total rent substantially below market averages, ALE’s directors are confident that revenue will increase in FY18 and beyond due to rent increases.