Rent rises on ice for ALH Group pubs after landlord dispute

The country’s largest listed pub landlord ALE Property Group has failed to win hoped-for increases in rent from the Woolworths-backed ALH Group, with a long-running dispute between the pair resulting in only limited rises.

The properties that make up the trust’s $1bn portfolio are all leased to ALH, a unit of Endeavour Group, which is 85.4% owned by Woolworths, with the remainder held by billionaire Bruce Mathieson.

But the landlord is still dragging in rents from its 86 venues even though its tenant is unable to run its famed Victorian pubs, including Young & Jackson in the Melbourne CBD, while coronavirus restrictions are in place.

The listed trust had been at loggerheads with ALH about rent increases it had pushed for across its portfolio in the wake of a review dating back to 2018.

The notion of rent rises to come had partly driven investors to back ALE and it expects a further jump in rents in 2028 to full market levels as it argues that ALH pays too little relative to market.

ALE said on Monday it had received the 2018 rent determinations from the five independent determining valuers called in to the resolve their dispute.

The valuers assessed that rent for the 43 properties in dispute, that were the subject of determinations, would remain “substantially unchanged” from the rent immediately preceding November 2018 with the outcome being a small 0.1 per cent dip.

ALE shares fell 6.1% to $4.49.

But in some pubs ALE got through rises — notably rents for the 36 properties that had previously been increased by 10 per cent, the most allowed under a cap arrangement. This meant the rent for 79 properties subject to review had increased by 4.4%.

In addition to the 2018 rent reviews, 85 of ALE’s 86 property leases continue to benefit from annual CPI increases.

Macquarie analysts said the outcome was below expectations that the 43 pubs could get a lift of about 5%. “While the level of under-renting on the remaining 43 properties was below expectations, we still believe the assets are significantly under-rented at the group levels,” it said.

This article originally appeared on www.theaustralian.com.au/property.