Morningstar | Hotel Property’s Moat Rating Downgraded on Uncertainty About Coles’ Pub Strategy, But FVE Unchanged
Hotel Property Investments’ portfolio of freehold pub properties primarily in Queensland, leased almost exclusively to subsidiaries of supermarket giant Coles generates a defensive and predictable income stream. Most of the long-term triple-net leases provide for annual rental growth at the lower of 4% and 2 times the previous 5-year average CPI. It also benefits from no material lease expiries until 2021, strong population growth and restrictive liquor licensing laws in Queensland. However, there are growing risks to some of these defensive characteristics, stemming from our view that it is Coles’ desire to exit its pub business, including by attempting to circumvent Queensland licensing laws.Hotel Property Investments is an Australian Real Estate Investment Trust. Co. is engaged in real estate investment in the pub freehold sector in Australia. Co. owns a portfolio of 48 investment properties including 41 freehold pubs (and adjacent specialty tenancies) and 7 detached bottleshops leased to members of the Coles Group.
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