The ALE Property Group (ASX: LEP) share price fell today after the property group released its FY19 result to the ASX.
ALE Property Group was established in 2003 and is the owner of Australia’s largest portfolio of freehold pub properties with close to 90 properties across Australia’s five mainland states.
All of the properties are leased to Australian Leisure and Hospitality Group Limited (ALH) for an average initial term of around a further 13 years. ALH is joint ventures between Woolworths Group Ltd (ASX: WOW), which owns 75%, and the Bruce Mathieson Group (BMG), which owns 25%.
Taking A Swig Of ALE Property’s Result
ALE Property reported that the revenue from its properties increased 3.7% to $60.2 million thanks to rent increases of 10% for 36 of its properties from November 2018 and CPI or fixed rent increases for seven properties which are not subject to the 2018 fixed rent review process.
Borrowing expenses increased slightly by $0.2 million to $22.2 million, but management expenses increased by 33% to $7.6 million due to additional costs of preparing rent review submissions for determination according to management.
Fortunately, valuations of ALE’s properties increased by 2.4% to $1.16 billion because of independent valuations from CBRE and Savills.
Distributable profit fell by 2.4% largely because of the increased management costs relating to rent reviews and the distributable profit per share fell by 2.6% to 14.45 cents.
ALE’s Dividend/Distribution
The real estate business increased its distribution to 20.9 cents per share from 20.8 cents. ALE Property explained that the distribution, which was bigger than profit, was paid out of capital and funded from existing cash reserves.
Rents may increase or decrease by up to 10% for the remaining 43 rent review determinations. The range of gross passing rent for the portfolio of 86 properties is between $58.5 million and $63.7 million, which would represent rent being flat to growth up to 8.9% compared to the rent before November 2018.
I certainly don’t think it was a bad report, not something that needs “drowning sorrows” about, if you can excuse the pun.
It’s hard to say if ALE Property is a buy or not. I’m not sure what the future of pubs looks like, so I’d rather stick to investing in the other shares and ASX ETFs.
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Disclosure: At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.
