ALE Property’s FY19/20 results show that lessee ALH has been paying full rent for its 86 properties, despite the harsh trading realities of the COVID-19 pandemic.

ALE released their financial results yesterday, which showed that its revenues from ALH leases had remained stable, despite severely curtailed trading conditions for pubs in the first half of 2020. In fact, CPI rent increases on 43 properties averaged 1.7 per cent during the year, with property revenue increasing by 2 per cent on the previous corresponding period, to $61.4 million.

This is particularly surprising given that many leasehold operators across the country have been negotiating current reduced rent obligations with landlords due to the pandemic. In the case of ALE and ALH, it is especially surprising given that almost half of its pub properties are located in Victoria, which has undergone the toughest trading conditions in the country this year.

“ALE continues to monitor the situation closely and expect the year ahead to be challenging as the recovery from the effects of the pandemic, from a  financial and community perspective, will be long lasting,” the company outlined in a statement.

“To date there has been minimal impact to operating performance and property values have been maintained at pre-COVID-19 levels, showing resilience and the strength of the lease covenant.”

While rent reviews in November 2018 increased rent for 36 properties at the capped 10 per cent mark, the remaining 43 properties are still subject to independent and binding determinations, based on the November 2018 outlook, rather than 2020 conditions. This could result in a worst case scenario for ALE of a one-off back payment to ALH of $5.4 million, and a best case scenario of ALH having to back-pay its landlord $5.5 million.

Andrew Wilkinson is expected to step down as CEO after receipt of the rent determinations, when Guy Farrands will be appointed his successor.

Independent valuations by CBRE and Savills now values the ALE portfolio of 86 properties at $1.174 billion, based on passing rental income. ALE’s net debt sits at $517 million, divided between secured and unsecured debt facilities.

Australian Hotelier reached out to ALH for comment on its current rental payments to ALE, but had not heard back at time of publication.

Image: (Ashley Hotel/Facebook)

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