ALE Property Group pubs deliver through crisis

Pubs have held firm during the crisis with the country’s biggest landlord getting paid even when venues shut down.

ALE Property Group’s Melbourne hotel Young & Jackson pictured on a Saturday night during lockdown. Picture: Ian Currie

Pubs may have been shut due to the pandemic but the ALE Property Group, owner of Australia’s largest portfolio of freehold pub properties, has unveiled a jump in profit to $68.1m in the first half.

The landlord said its pub portfolio was highly resilient during COVID-19, with all pub rent paid when due despite lockdowns hitting Victoria and hotels in some other states being restricted.

All pubs owned by ALE are open, albeit with state-based restrictions, with famed watering holes including Brisbane’s Breakfast Creek Hotel, Melbourne’s Young & Jackson, and the Crows Nest Hotel in Sydney affected.

The pubs are run by ALH, Australia’s largest pub operator, which has been merged with the Woolworths-controlled Endeavour Drinks, forming the country’s largest drinks and hospitality business

The landlord is mired in a rent dispute with ALH, which is controlled by billionaire Bruce Mathieson and supermarket giant Woolworths, but lifted its distributable profit by 14.8 per cent to $17.9m. ALE considers that rent determinations issued for 19 Victorian pubs were not made in accordance with their leases and took court action.

In a sign of the value inherent in its pokies-heavy pubs, the company said its portfolio was assessed by valuers as 33 per cent under-rented, meaning it could be in for a big uplift in 2028 when rents are reviewed against the market.

ALE gave guidance of a 3 per cent lift in full-year distribution guidance to 21.5¢ per unit and expects that distributions after this year will increase by at least the rate of inflation.

The trust’s property valuations were up by 4.4 per cent as its portfolio hit $1.22bn. But it dug slightly into its cash reserves to pay a first half distribution of 10.75¢ per unit despite the distributable profit, that excludes non-cash items, being 9.07¢ per unit.

Profit was up due to the 2.2 per cent increase in rental income due to CPI increases, the outcome of the rental determination and lower interest expenses. The trust did not receive any government COVID-19 relief payments as income kept rolling in from its 86 pubs.

The separation of Endeavour Drinks and Woolworths was deferred to this year, and the trust expects that if a demerger happens then Endeavour Drinks will target an investment grade rating capital structure.

ALE units added 7c on Wednesday to $4.73.