ALE Property Group, the landlord for Woolworths-backed operator ALH, is collecting more rent as a series of scheduled rent reviews are resolved in its favour with 10 per cent escalations.
The pubs owner’s passing net rent has increased 4.47 per cent to $59.17 million following the partial completion of the 2018 rent review.
Earlier this month, Woolworths announced plans to combine Endeavour Drinks, which owns liquor chains Dan Murphy’s and BWS, and pubs and pokies company ALH into a $10 billion business and spin it off next year.
Meanwhile ALE, led by Andrew Wilkinson, and its tenant have been working through rent reviews for the pubs portfolio. During the 2019 financial year, the first major rent review began for 79 of ALE’s 86 investment properties.
Of the remaining seven properties, four properties have later review dates and three properties have non-standard leases.
In August last year, ALE issued notices advising that the rent on each of the 79 properties should increase by 10 per cent.
ALE and ALH had already agreed that two properties’ rents would increase by 10 per cent and ALH accepted the rent notices on 32 of the properties. But the Woolworths-controlled tenant rejected the remaining 45 notices.
Since then, ALH has accepted two additional properties. leaving 43 properties still to be determined. That is expected during the 2020 financial year.
“As a result the passing rent for those individual properties may increase or decrease by up to 10 per cent,” the pubs landlord said on Monday.
The overall value of ALE’s 86 properties ticked up by $26.97 million, or 2.37 per cent, to $1,163.23 million over the 2019 financial year. The average yield softened slightly, from 4.98 per cent to 5.09 per cent.
The current round of market rent reviews is capped at 10 per cent. Investors are looking forward to a round of uncapped rent reviews due in 2028, which could potentially deliver a bigger income boost to the trust.
ALE’s valuers noted that “the 2028 (open) rent reviews are drawing closer and that has made the properties increasingly attractive as investors take this into account”, the company said.
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