ALE Property pub rent stoush with Woolworths-backed ALH heads to court

The pub company run by Woolworths and billionaire Bruce Mathieson is again at loggerheads with its landlord.

ALE Property Group chief executive Guy Farrands.

The long-running stoush between the country’s largest listed pub landlord ALE Property and its tenant, the Woolworths-backed ALH, is back on despite appearing to have been settled in September.

The pair have disagreed on rent increases that ALE claims are due on a series of pubs it owns in its $1bn empire which came up for review in 2018.

ALH, a unit of Endeavour, which is 85.4 per cent-owned by Woolworths, with the remainder held by billionaire Bruce Mathieson, looked to have won out in September as the landlord was awarded only limited increases.

But now ALE has run to the Supreme Court of Victoria, seeking declarations that rent determinations on 19 Victorian venues are not binding on the parties.

Court documents show the properties where the landlord is questioning the rents include the Bayswater Hotel, the Boundary Hotel, the Ferntree Gully Hotel, the Sandbelt Hotel and the Sandringham Hotel, as well as a series of other suburban pubs.

The landlord is taking issue with valuations issued by Knight Frank and arguing about the methods used to determine the pub valuations.

All up the listed trust ALE owns 86 pubs run by ALH including famed properties like the Breakfast Creek Hotel and Melbourne’s Young & Jackson Hotel.

ALH’s Victorian operations have already been hit by the harsh coronavirus-related lockdowns, and the closure of many venues also brings the court case into sharp focus. The tenant runs 330 venues around the country but its Melbourne venues are closed for on-premise service. It declined to comment on the legal case.

ALE said that following a “detailed review” of the 2018 rent determinations it considers that the determinations were “not made in accordance with the requirements of the rent review provisions of the relevant leases”.

The pub landlord, now headed by Guy Farrands, said the valuer that made the determinations had erred by not taking into account an estimate of earnings before rent based upon “what a good average manager would have achieved in relation to each of the Victorian properties”.

It also claimed that the valuer took into account a submission from ALH when it was “not permitted” to do so. ALE questioned the use of this information provided by Cropley Commercial Hotel Valuations in assessing rents.

The landlord is banking on the court giving it a better result than the valuer and is also acting so when rents are next reviewed in 2028 it is in a good position.

ALE said it expected a court decision on the rents would be “relevant” to rent determinations due in eight years, when an uncapped and uncollared review is due for all properties where the tenant has exercised its option to renew the lease for a further decade. ALE shares closed 2.1 per cent higher at $4.36.