ALE Property Group talks H1 FY16 results

Interviews

Transcription of Finance News Network Interview with ALE Property Group (ASX:LEP) Managing Director, Andrew Wilkinson
 
 
Carolyn Herbert: Hello I’m Carolyn Herbert from the Finance News Network and joining me from ALE Property Group (ASX:LEP) is Managing Director Andrew Wilkinson. Andrew, welcome back.
 
Andrew Wilkinson:Thank you very much for having me.
 
Carolyn Herbert: You’ve just released your H12016 results. What were the highlights?
 
Andrew Wilkinson: It was another good six monthly result, the valuation of our properties increased. Our distribution increased by nearly 18 per cent, during the period. And overall, ALE’s capital structure is in a very good position.
 
Carolyn Herbert: What’s the value of the portfolio today and how does that compare to say, the past six or 12 months?
 
Andrew Wilkinson: It comes in at just over $950 million today, that’s at a capitalisation rate of 5.74 per cent. That’s reduced by about 25 basis points over the last six months. If I go back 12 months, it’s reduced by nearly 60 basis points.
 
Carolyn Herbert: So which areas and properties did best?
 
Andrew Wilkinson: Pretty much across the board the value of the properties have increased. Why, because the capitalisation rates have reduced and the rental incomes increased. There’s a very strong demand for high quality, long-term lease pub properties like ours, which are sub $20 million in value, a highly liquid end of the property market.
 
Carolyn Herbert: What potential is there for further appreciation?
 
Andrew Wilkinson: I never call future valuations, we always defer to our independent valuers. But if low interest rates prevail or indeed head lower, there may be pressure for the cap rates to reduce. But again, we will defer to our independent valuers every time.
 
Carolyn Herbert: Now to your cost of debt, what’s the company paying now?
 
Andrew Wilkinson: Our current cash all up cost of debt is 4.35 per cent. We have some refinancing in financial year 2018, and also in financial year 2021 and beyond. We’ve got all of our debt spread over the next eight years, at a very cost effective rate. And indeed, we’ve extended our hedging arrangements out to nearly 10 years, on 100 per cent of our debt, so very low cost, low risk capital package.
 
Carolyn Herbert: Still on finance, what are your gearing levels at the moment, and is it the company’s intention to move this higher in line with your target gearing levels?
 
Andrew Wilkinson: Yes, the Board does have a gearing range or a target of 50 to 55 per cent. It’s currently 45.7 per cent and that’s a matter the Board will give ongoing consideration to. But at this point, we’re happy at 45.7.
 
Carolyn Herbert:Are there any other aspects of ALE’s performance, or general market conditions you’d like to mention?
 
Andrew Wilkinson: Interest rates keep going lower; as each day goes past it’s extraordinary how far they’ve fallen. ALE hasn’t waited for the bottom of the market; it’s hedged its interest rates for the long-term. And that sees ALE’s interest expense each year for the next nearly 10 years, locked in at a very low rate. Over and above that our security holders have seen, over the last calendar year to 31 December, a nearly 30 per cent total return, for both distributions and increases in the security price, which has seen us outperform many others in the property trust sector.
 
Carolyn Herbert: Finally Andrew, what’s your focus for the next 12 months?
 
Andrew Wilkinson: It will always be on keeping the capital structure in a very good space. Opportunistically, looking for acquisitions that make sense for security holders. And we have unashamedly a fussy set of criteria, which we make sure apply, but the most important one is that it’s value accretive for our security holders.
 
Carolyn Herbert: Andrew Wilkinson, thanks for the update on ALE Property Group.
 
Andrew Wilkinson: Thank you for having me.
 
 
Ends

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