Deferred rent and extended leases strengthen HPI/QVC deal
Hotel Property Investments (ASX:HPI) has released its annual report, showing that it provided rent relief for its main tenant, Queensland Venue Co (QVC).
While still recording a net profit of $40.9m for FY20 (down from $49.3m in FY19), HPI provided rent relief to QVC this financial year, in response to the COVID-19 crisis. $3.4m in rent was deferred, and $400,000 was abated, totalling 7.5 per cent of HPI’s FY20 rental income.
Other major pub landlord, ALE, recently revealed in it’s major report that it’s lessee ALH has been paying rent in full for the use of its properties, despite the harsh trading conditions of the current crisis.
HPI owns 45 pub and accommodation properties, 41 of which are leased to QVC, the Queensland joint venture between Australian Venue Co (AVC) and Coles, which was established in early 2019. Adding to the portfolio outside of the QVC-leased properties, HPI also acquired the freeholds of Gregory Hills Hotel in south-western Sydney and the Acacia Ridge Hotel in Brisbane earlier this year for $60m.
While HPI did defer a small portion of QVC’s rents, it did also extend its lease agreements with the hospitality operator. The leases for 28 pubs were set to expire in CY2021, but QVC exercised options to extend 20 of the leases by 3×5 years, and eight of the leases by 2×5 years. While rent remains unchanged for the former option, the latter deal will see rent reset at $3m lower than at June 2020 levels.
While under the new terms rental income may have decreased slightly, HPI’s WALE by income increase from 4.4 years to 11.4 years, securing its long-term relationship with QVC.
As part of it’s outlook, HPI said in a statement that one way it would pursue the capital growth of the portfolio would be to identify opportunities to include accommodation at various sites.
“We work with tenants to enhance the value of the portfolio through investment and upgrades to achieve better site utilisation with the objective of increasing distributions and capital growth by:
- Focusing on expanding site accommodation; and
- Exploring opportunities to create new income streams on underutilised land.
“HPI will continue to pursue pub acquisitions that meet our investment criteria.”
HPI’s 45 properties are currently valued at $785.9m.
Image: (Palm Cove Tavern/Facebook)