TIDMPCA
RNS Number : 8519L
Palace Capital PLC
24 April 2018
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ("MAR").
24 April 2018
Palace Capital PLC
("Palace Capital", the "Company" or the "Group")
Portfolio and trading update
The Board of Palace Capital, the property investment company
that focuses on commercial property predominantly outside London,
today announces an update on activity in its property portfolio
since the publication of the Company's interim results on 4
December 2017.
These are exciting times for the Company - it owns a
high-quality property portfolio with significant development and
income generation potential.
Highlights
General
1) Move up to the Main Market of the London Stock Exchange, from AIM, on 28 March 2018.
2) The acquisition of RT Warren (Investments) Ltd ("RT Warren")
in October 2017 at below the independent valuation is already
bearing fruit. The acquisition comprised 21 commercial buildings
and 65 residential units.
3) Strong cash position is allowing the Company to pursue
several potential acquisitions to boost its rental income.
Recent portfolio activity
4) Ongoing discussions to sell 60 of the RT Warren residential
units with 3 residential units already sold at 14% above book value
(2 units will be retained by the Company for strategic
reasons).
5) Acquisition of Nicholson Gate Fareham, a 5,500 sq ft office
building with vacant possession for GBP750,000 adjoining Admiral
House, High Street, Fareham (part of the RT Warren portfolio).
Collectively these two properties stand in approximately 1.3 acres
and, based on planning advice, have the medium-term potential for
development.
6) Solaris House, Milton Keynes let to Monier Redland for 10
years at headline rent of GBP240,000 per annum exclusive (GBP16.55
per sq ft), indicating the potential for rental increase at the
forthcoming reviews on the Company's adjoining office buildings in
December 2018 where GBP10.55 per sq ft is currently being paid.
7) Demolition underway at Hudson House, York which should result
in a saving of GBP750,000 per annum from February 2018 in respect
of rates and service charge shortfall.
Financial
8) Adjusted profit before tax, allowing for the major
acquisition and fundraise, likely to be ahead of market
expectations (before profits on disposals and any revaluation
gains).
9) 3 properties at Exeter, Coventry and West Molesey sold for
total proceeds of GBP4,762,000, which was above book value and
continues the Company's policy of actively recycling its
capital.
10) Refinancing of Nationwide and Barclays facilities with a new
5-year GBP40 million facility with Barclays signed in January
2018.
11) Santander and Barclays facilities hedged in March 2018 -
interest on 70% of the Company's debt is now fixed and the average
cost of debt for the Group as at 31 March 2018 was 3.4%.
12) Commencement of quarterly dividend payments from April
2018.
Overview
Palace Capital continues to implement its brand of active asset
management to grow both its rental income and net asset value per
share. Two senior asset managers have recently been appointed to
join the Company's management team.
During the period three properties, which were either vacant or
had limited or no growth potential, have been sold above book
value.
Significant property developments
Portfolio financials
Taking into account the recent letting at Milton Keynes, the
Company now has a contracted rent roll of GBP18.1 million per annum
and an effective net rental income of GBP16.88 million per annum
after the deduction of GBP1.22 million per annum in respect of
empty rates, service charge shortfalls and head rents.
The recent refinancing with Barclays, the existing cash balances
and the recent sales gives the Company considerable firepower to
make significant acquisitions and to boost its returns. Palace
Capital is presently looking at several propositions, but the Board
is very conscious of its strict policy criteria for acquisition
suitability; stock selection and price remain of paramount
importance to the Company.
Borrowings
The Company has close relationships with its lenders which
comprise Barclays, NatWest, Santander & Lloyds who have all
indicated an appetite to increase lending to the Group where
appropriate.
The Company has debt facilities of GBP115 million of which
GBP101 million had been drawn as at 31 March 2018 giving a loan to
value ratio net of cash of 31% based on 30 September 2017 values.
The average debt maturity is 4.7 years at an average interest cost
of 3.4% of which 70% is hedged.
Property review
The Company can report substantial progress on several of its
properties:
1) HUDSON HOUSE, TOFT GREEN, YORK
Demolition has commenced at this 2-acre site located within the
ancient City Wall and one minute's walk from York Railway Station.
York has recently been voted by the Sunday Times as the Best Place
to Live 2018 and is regarded as a prime location, there being a 110
minutes non-stop train service to London and 145 minutes to
Edinburgh.
The Company had previously indicated that it was in discussion
with a potential joint venture partner. However, the Board have
taken the decision that it is in the Company's interest to proceed
alone with this exciting development which has planning consent for
127 apartments, 35,000 sq ft offices, 5,000 sq ft of commercial and
car parking.
The Company has been encouraged by the prices secured for recent
developments and refurbishments in York and considers that this
development will attract strong demand. Leading agents have been
appointed for both the commercial and residential elements and
discussions have commenced with potential lenders to finance the
construction. As the existing property is not charged the Company
only expects to commit a limited amount of its cash during the
construction phase which was expected to start in November 2018 but
is now expected to start in early 2019.
The Northern Region and York/Harrogate are fast becoming one of
the best performing residential property markets as the North/South
divide continues to narrow. As mentioned in an earlier update there
is an increasing shift from country to town/city centre living. The
"flight to the city" continues to attract country and suburban
dwellers as well as new buyers. "The Residence" in York is sold out
whilst "St Leonard's Place", also in York, has 41 units sold of the
42 available. The "Old Police Station" in Harrogate is sold out.
Finally, the Company also understands that the first 10 units
launched recently at "The Stonebow" in York's city centre have been
sold prior to the completion of the refurbishment.
The Company has been aware of recent Grade A office requirements
for York but due to the lack of development the companies concerned
have relocated elsewhere. Hiscox UK are an exception as they
acquired and built a 68,000 sq ft office building for their own
occupation. Strong interest in the office element of the Hudson
House development is expected.
City of York Council and Network Rail are positive about moving
forward with York Central the 72-hectare site surrounding York
Station. It is intended to create a new urban quarter potentially
delivering 2,500 homes and up to 1.3 million sq ft of commercial
space. It is led by a partnership between Network Rail, City of
York Council, Homes and Communities Agency and the National Railway
Museum.
2) SOL CENTRAL, MAREFAIR, NORTHAMPTON
As highlighted in the national press the casual dining sector
has been going through challenging times. This period has been used
to carry out improvements to the property, including repairing the
external lighting and a new roof. New agents have been appointed to
market the vacant space but in the meantime the Company is seeking
to increase income from the car park following the appointment of
external managers. In addition, Palace Capital is receiving an
additional GBP100,000 from Accor Hotels from turnover rent. The
Ibis Hotel is trading well so pending new lettings we are achieving
a satisfactory return.
1 Angel Square, which is the County Council's Headquarters
housing over 3,000 people and situated only 5 minutes' walk away,
is now operational whilst the new GBP335m Northampton University
campus for 14,000 students, situated only 10 minutes' walk away, is
due to be completed within the next 2 months.
3) BROAD STREET PLAZA, HALIFAX
One of the smaller restaurant tenants in this scheme has gone
into liquidation and Prezzo, who recently announced a Company
Voluntary Arrangement, is also a tenant. However, The Piece Hall in
Halifax, which was built as a cloth hall for handloom weavers to
sell the woollen cloth "pieces", has recently undergone a GBP20
million renovation. This has resulted in over 1 million visitors to
Halifax since August 2017. The town will be the starting point for
the major "Tour de Yorkshire" cycle race and the Company will be
undertaking continuing marketing initiatives to boost footfall and
to let the vacant space on which new agents have been
appointed.
4) ST JAMES GATE, NEWCASTLE-UPON-TYNE
The Company is planning an upgrade to this property to enhance
the visual impact. Plans are being discussed with advisers but in
the meantime Serco, whose lease was expiring at the end of May,
have now extended their lease to 31 May 2019. They will be paying
an increased rental of GBP221,882 per annum from 1 June 2018, an
increase of 10% on the current rent.
5) SOLARIS HOUSE, PITFIELDS, MILTON KEYNES
The Company recently announced that they had let this 14,500 sq
ft refurbished office building to Monier Redland part of the BMI
Group for a term of 10 years without a break with provision for
rent review at the end of the 5(th) year at a headline rental of
GBP240,000 per annum (GBP16.55 per sq ft) although in lieu of rent
free GBP120,000 per annum is payable until August 2021. The
adjoining office buildings comprising 38,300 sq ft are let until
December 2026 at GBP398,196 per annum (10.40 per sq ft) and a rent
review is due this December.
6) 249 MIDSUMMER BOULEVARD, MILTON KEYNES
The Company has carried out some refurbishment works to this
property including 5,300 sq ft on the second floor which became
vacant and a further 8,600 sq ft which will become vacant this
month. When this property was bought in December 2015 no rental
exceeded GBP14.90 per sq ft whilst most leases were in the range of
GBP12.50 - GBP13.50 per sq ft. Since the turn of the year the
office market in Milton Keynes has picked up considerably and
agents advise that the Company is likely to achieve in excess of
GBP18 per sq ft which demonstrates its growth potential since
purchase.
7) BRIDGE HOUSE, 41-45 HIGH STREET, WEYBRIDGE
This is a 3 storey 12,000 sq ft property comprising shops on the
ground floor and two floors of offices plus car parking. The
property will become vacant in early 2019 and the Company has
instructed a professional team with a view to submitting a planning
application to redevelop the site either for commercial or
residential purposes.
8) PRIORY HOUSE, GOOCH STREET NORTH, BIRMINGHAM
This 60,000 sq ft office building is currently let to Forensic
Science Ltd until December 2027 with provision for rent review in
December 2021. The rent payable was GBP260,000 per annum but this
has now increased to GBP322,000 per annum exclusive payable from
December 2016 following a rent review.
9) BOLTON HOUSE, CHORLTON STREET, MANCHESTER
When this property was acquired in June 2016 the rents passing
were in the range of GBP12-GBP13 per sq ft. After a limited
refurbishment the Company announced a letting of 5,500 sq ft last
August at the rate of GBP17.25 per sq ft.
Completed property sales
The Company continues to actively recycle its capital. It had
sold most of its surplus properties in the previous financial years
but a further three, of which two were vacant, have been sold in
the last financial year for the total sum of GBP4,762,000. These
were:
a) BPC Building, Exeter;
b) Whittle House, Coventry; and
c) 138 Molesey Road, West Molesey.
Notice of results
The Company intends to announce its results for the year ended
31 March 2018 on Monday, 11 June 2018.
Neil Sinclair, the Chief Executive of Palace Capital
commented:
"I am delighted with our progress since December of last year.
In acquiring RT Warren, we have bought the best portfolio we have
seen in over two years and I expect us to make a very strong return
from it, as we have from the Sequel and PIH portfolios.
Our potential development in York with its strong residential
market is provoking strong interest. This, together with our active
management strategy on other properties pursued by our excellent
team, means we are very well placed to serve our shareholders well
in the future.
I continue to be positive not only about securing the right
opportunities outside London but also our prospects for the
existing portfolio."
Date: 24 April 2018
For further information, contact:
Palace Capital plc
Neil Sinclair, Chief Executive
Stephen Silvester, Finance Director
Tel. +44 (0)20 3301 8331
Arden Partners plc (Joint Broker)
Chris Hardie / Ciaran Walsh
Tel. +44 (0)207 614 5917
Allenby Capital Limited (Joint Broker)
Nick Naylor / James Reeve / Asha Chotai
Tel. +44 (0)20 3328 5656
Capital Access Group (Financial PR)
Scott Fulton
Tel. +44 (0)20 3763 3400
About Palace Capital plc (www.palacecapitalplc.com):
Palace Capital is a UK property investment company with a
premium listing on the London Stock Exchange plc's main market
(LSE: PCA). The Company is not sector specific and looks for
opportunities where it can enhance the long-term income and capital
value through asset management and strategic capital development in
locations outside London. In its last reported financial year,
Palace Capital produced a 20.0% increase in adjusted profit before
tax, a 7.0% uplift in EPRA NAV per share and a 16.0% increase in
dividends.
This information is provided by RNS
The company news service from the London Stock Exchange
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