By Vanessa Cavasinni, editor Australian Hotelier

ALE Property Group (ASX: LEP), owner of 86 pubs across Australia, has had its portfolio of hotels valuated at $990.5 million – a 10 per cent increase for the year to 30 June 2016.

Independent valuations were made on 31 of the properties by CBRE and Heron Todd White (HTW). The valuations found that ALE’s weighted average capitalisation rate reduced from 5.99 percent in June 2015, to 5.53 per cent.  The directors of ALE Property Group valuated the remaining 55 properties, and on advice from CBRE and HTW, applied the same percentage movement for the entire portfolio.

Andrew Wilkinson, managing director of ALE Property Group, attributed the general qualities found in ALE properties to the portfolio’s increase in value.

“The increase in the property value was in line with the general compression that’s occurring in the market, in terms of cap rates, particularly for high-quality, well-located, smaller-ticket, long-term lease, high-grade tenant properties like ours.

“The character of what we own and that’s what’s in particular demand in the market today, and I must say it has been consistently, going back to 2008-2010, when the world was pretty dark for other types of real estate.”

Valuers for ALE have suggested that the decrease in capitalisation rates and the properties’ annual CPI-based rent increases have accounted for a large portion of the extra $90 million in value in the past year. Also noted in the valuations was the capital expenditure by and operating agreements with ALH Group, who currently lease all of ALE’s pubs under lease agreements lasting until November 2028.

The valuations noted that ALH had added Dan Murphy’s liquor stores to many of the properties, adding to ALH’s profitability, and to ALE’s future rent prospects. ALE also has strong assignment protections with ALH, meaning ALH will guarantee any new tenant’s obligations within the 13-year lease. ALH have also committed maintaining gaming entitlements held by ALE properties to no less than 90 per cent of original numbers at the beginning of the lease, meaning that ALH continues to have a strong gaming presence within its pubs, ALE maintains strong profit protections.

Wilkinson also said that ALE Property Group is always looking to add to the portfolio, and stated that the good relationship with tenants ALH, was a big factor in looking for other hotels.

“We’re always on the look-out for new acquisitions. We’ve got a pretty strong focus on quality, in terms of an operator. Our existing operator, ALH, does an excellent job and we’re very attracted to any freehold that might have them on the end of the lease.”

The Shout Team

The leading online news service for Australia's beer, wine, spirits and hospitality industries.

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