By Andy Young
The owner of Australia's largest portfolio of freehold pub properties, ALE Property Group, has announced a $14.8 million profit for its half-year to 31 December 2015.
The company said it was boosted by increased distributions of 17.9 per cent and that it forecasts an increase in full-year distributions. The group's assets have been revalued to $953.9m, which also helped it record the 2.8 per cent increase in net profit.
ALE owns 86 properties, which are operated by the Woolworths-backed ALH.
Andrew Wilkinson, managing director of the ALE Property Group said: "It was another good six-monthly result, the valuation of our property increased, our distribution increased by nearly 18 per cent during the period and overall ALE's capital structure is in a very good position."
Wilkinson added: "Pretty much across the board the value of properties have increased. Why? Because the capitalisation rates have reduced and the rental incomes have increased.
"There is a very strong demand for high quality, long-term lease pub properties, like ours, which are sub $20m in value, a highly liquid end of the property market."
Speaking about the highlights for the group over the half-year, Wilkinson added: "Interest rates keep going lower, as each day goes past it is extraordinary how far they have fallen. ALE hasn't waited for the bottom of the market, it's hedged its interest rates for the long-term and that sees ALE's interest expense, each year for the next, nearly 10 years at a very low rate.
"Over and above that our security holders have seen over the last calendar year, to 31 December, nearly 30 per cent total return for both distributions and increases in security price, which has seen us outperform many others in the property trust sector."
And as for the next 12 months, Wilkinson said the focus will be financial structure and value for security holders: "It will always be on keeping the capital structure in a very good space, opportunistically looking for acquisitions that make sense for security holders and we have unashamedly a fussy set of criteria which we make sure apply."
In terms of the outlook, in its results statement, the group said: "The outlook for both the 2018 and 2028 rent reviews remains positive given the increase in ALH’s operating profitability across a large number of ALE’s properties.
"Current expectation is for the portfolio’s rents to increase at the November 2018 rent review with increases for each property capped and collared at 10 per cent. The EBITDAR levels for each property in the years leading up to 2018 will be an important factor in the final determination. There is a continuing positive outlook for significant market rent increases in 2028.
"There is increasing engagement between ALE and ALH to identify opportunities to monetise or develop underutilised parts of 970,000sm (approx.) of total land area to further to enhance portfolio returns."