TIDMPCA
RNS Number : 7980D
Palace Capital PLC
02 May 2017
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").
Palace Capital plc
("Palace Capital" or the "Company")
PORTFOLIO AND TRADING UPDATE
The Board of Palace Capital, the property investment company
that focuses on real estate outside London, today announces an
update on the recent activity in its commercial property portfolio
following the Company's interim results published on 21 November
2016.
Highlights
-- Net asset value at year end expected to be ahead of market expectations;
-- Significant progress and success within the development of
the on-going portfolio, including application for planning
permission at Hudson House, York to include 127 apartments;
-- Palace Capital's active asset management has produced c.
GBP12.6 million of disposal proceeds above an aggregated book value
of GBP9.2 million, in the year to 31 March 2017;
-- Trading for the year ended 31 March 2017 in line with
expectations, before profits realised on property disposals;
-- Materially strengthened cash position, improving ability to
benefit from market opportunities;
-- Continued strategy of growth through active and efficient asset management approach;
-- Terms agreed for the corporate acquisition of a significant
fully let office building for circa GBP20 million.
Introduction
Palace Capital has continued to implement its strategy of growth
through an active asset management approach. A number of properties
with limited or no growth potential have been sold either at or
significantly above book value. As a number of these properties
carried no debt charge, the Company's cash position and capacity to
invest further has been strengthened as a result of these
sales.
Early indications are that the Company's net asset value as at
31 March 2017 will be ahead of market expectations.
Significant property review
The Company is pleased to report meaningful progress on a number
of projects which are detailed below.
1) HUDSON HOUSE, TOFT GREEN, YORK
This 103,000 sq ft office building on a 2-acre site is located
within the ancient City Wall and one minute's walk from York
Railway Station. York is regarded as a prime location as there is a
110-minute non-stop train service to London and 145 minutes to
Edinburgh.
Palace Capital already has two planning consents for Hudson
House; one for a change of use and conversion to 139 apartments and
the other for conversion to 82 apartments and 37,000 sq ft of
offices. However, the Board considers that optimum value can be
generated from this site by redevelopment. Thus, after extensive
consultation with City of York Council and local interest groups, a
planning application was submitted in March 2017 for 127
apartments, 34,000 sq ft of office space, 5,000 sq ft of other
commercial space plus car parking. A decision is anticipated in the
summer of this year.
The Board considers that the Northern region is fast becoming
one of the best performing residential property markets due to the
increasing demand for a limited supply of property. Local agents
advise that they are clearly experiencing a shift in trend from
country to town/city centre living. The "flight to the city" trend
is attracting country and suburban dwellers as well as new buyers.
This is happening in both York and Harrogate, with the success of
"The Residence" in York which is sold out and "The Old Police
Station" in Harrogate & St Leonard's Place in York which have
nearly sold out.
In addition, City of York Council and Network Rail are moving
forward with "York Central", the proposed redevelopment of surplus
railway land at York Station. The Company is well placed to take
advantage of the potential growth in York and its immediate
environs.
2) SOL CENTRAL, MAREFAIR, NORTHAMPTON
There is continuing development activity in Northampton most of
which is taking place within the town centre and close to Sol
Central. The new County Council headquarters office building known
as 1 Angel Square is nearing completion and is in the process of
internal fitting out. This will accommodate up to 2,000 people. In
addition, the new GBP335 million Northampton University campus is
due to be completed in the summer of 2018. The Company understands
that Northampton University has 14,000 students at the present
time.
Due to the leisure market slowing somewhat since last summer,
the Company is deferring its major reconfiguration but is going
ahead with installing a new roof and implementing a major lighting
scheme for this building.
The Company has received an additional GBP90,000 from its hotel
tenant under the provision in the lease agreement whereby the
landlord receives a percentage of gross turnover above a certain
figure, so the rent received from Accor this year is circa
GBP600,000, which is a 17.7% increase on the passing rent. This
property is providing the Company with a very satisfactory
return.
The Company has also engaged a major firm of parking consultants
to consider whether it is capable of increasing revenue from the
car park. The consultants have monitored the car park for several
months and have made recommendations. As a result, there is
potential for a major increase in revenue in the second half of the
current financial year.
3) BROAD STREET PLAZA, HALIFAX
There are only two small units unlet in this 113,000 sq ft
5-year-old leisure complex. The Company has a rental guarantee on
one unit until March 2018 and has completed the installation of a
new shopfront, which should help attract new tenants.
There are fixed rental increases of GBP154,000 per annum by
August of this year from Vue, Apcoa, JD Wetherspoon, TGI Friday's
& Pure Gym which will take the rental income to GBP1.93 million
per annum. Taking into account that interest is only being paid at
the rate of 2.9% on the fixed loan from Scottish Widows, this will
provide the Company with a return of 16.5% on the initial equity
investment made in March 2016.
Palace Capital is an active manager not a passive owner. The
Company has commissioned a marketing company to further increase
footfall at the complex, adopting a strategy that has been web
driven as well as a campaign with a local radio station. Early
results are most encouraging. One restaurant group has advised that
it has seen a significant increase in trade and that it is pleased
with the marketing activity undertaken on the Plaza. The Company
will report more fully when its Annual Results are announced.
4) THE COPPERFIELD CENTRE, DARTFORD
The Company completed the GBP2.25 million conversion of the
vacant first floor offices into 13 self-contained flats last
December and this was successfully let for 10 years to Dartford
Council at a rental of GBP146,500 per annum (inclusive of service
charge) with 2.5% annual rental uplifts. Together with the retail
units, this property is now generating recurring income in excess
of GBP320,000 per annum and has demonstrated management's ability
to identify and deliver income growth.
5) SOLARIS HOUSE, PITFIELDS, MILTON KEYNES
The refurbishment of this 14,500 sq ft office building was
completed earlier this year. It is now being offered for letting
with an encouraging number of viewings to date.
6) 249, MIDSUMMER BOULEVARD, MILTON KEYNES
Just over 5,300 sq ft will become available this July in this
50,000 sq ft office building situated only 3 minutes' walk from
Milton Keynes Railway Station. Rental values have moved ahead since
the property was acquired in March of last year so the Company is
taking the opportunity to refurbish the common parts and the
pending vacant office floor. The Company continues to be very
positive about Milton Keynes, which is one of the fastest growing
cities in the UK.
7) BOULTON HOUSE, CHORLTON STREET, MANCHESTER
The refurbishment of the 18,000 sq ft of vacant office space was
completed earlier this year and the Company plans to do some
limited works to the façade within the course of the next few
months.
This 77,000 sq ft property, situated within close proximity of
Manchester Piccadilly Station, is located in an area due for major
regeneration and the new HS2 station. It is currently let at modest
rents and the Company is seeing a number of inspections from
prospective tenants at considerably higher quoting rentals.
The Directors of Palace Capital are very pleased with this
purchase, completed in August 2016, and recognise the potential for
considerable growth in the medium term.
8) BANK HOUSE, KING STREET, LEEDS.
The refurbishment of the 13,300 sq ft office space, formerly
occupied by AXA, was completed earlier this year. Coupled with the
adjoining vacant space, the Company is seeking to let 16,700 sq ft
on a single floor at a rental considerably lower than that required
for a new building.
There have been several inspections with some preliminary
interest shown already and Palace Capital sees considerable medium
term growth on this 88,000 sq ft building situated near Leeds
Railway Station.
9) OVEST HOUSE, WEST STREET, BRIGHTON
The letting of the final office floor to Quarto Publishing plc
was completed in February 2017, so the building is now fully let.
Brighton has just been named by Property Week as the city with the
hottest office property market. The Company agreed GBP20.00 per sq
ft in February 2016 for the whole building and lettings have taken
place recently in other parts of the city at higher rentals. Palace
Capital acquired this property through the Property Investment
Holdings Ltd acquisition in 2014 and the Company considers this as
an excellent long term investment.
10) BRIDGE HOUSE, 41-45, HIGH STREET, WEYBRIDGE
This 12,000 sq ft, 3 storey, property comprises three shops and
two floors of offices where the latest lease expires in April 2020.
Planning consultants have been instructed to advise as to what
development/refurbishment opportunity might be available in this
prosperous town in Surrey, about 28 miles from London.
Completed property sales
The Company takes the view that it is important to recycle its
capital, particularly with properties where it sees limited
opportunity for growth. Palace Capital has sold the following
properties in the last financial year for a total consideration of
GBP12.6 million, of which GBP7.6 million was not subject to a
charge, thereby increasing the Company's cash balances:
1) Units B & G, Argent Court, Tolworth
2) Former Portmeirion Property, Victoria Road, Stoke-on-Trent
3) 4 Hall Road, Maldon
4) 5, Hall Road, Maldon
5) ICS Buildings, Maldon
6) Unit C, Meadowcourt III, Sheffield
7) Warwick House, Wade Lane, Leeds
8) Allen House, Ashton Road, Stockport
9) Land at Island Farm Road, West Molesey
10) Freehold Land, West Molesey
11) 1-7, High Street, Nantwich
12) 7 Earle Street, Crewe
13) 23-25, Market Street, Crewe
Other portfolio activity
The Company has completed or has in hand renewals of leases,
rent reviews and lettings at:
a) Russell House, Molesey Road, Walton-on-Thames
b) Point 4 Trading Estate, Avonmouth
c) Saxon House, Henson Way, Kettering
d) 2-5, Devonshire Row Mews, London W1
e) Princeton House, Victoria Road, Farnborough
f) Priory House, Gooch Street North Birmingham
g) Car Park, Foleshill Enterprise Park, Coventry
h) Imperial House, Holly Walk, Leamington Spa
i) Bridgwater House, Edleston Road, Crewe
j) 127 Above Bar Street, Southampton
k) The Forum, Barnfield Road, Exeter
Portfolio summary and prospective acquisition
The Company now has a reduced contractual rent roll of GBP12.8
million per annum and a net rental income of GBP10.9 million per
annum (after the deduction for head rent, service charge shortfall
and empty rates). It continues to mitigate its rates liabilities,
particularly at Hudson House, so that revenue leakage is kept to a
minimum.
In addition, although the recent successful sales have reduced
rentals this has boosted the cash balances and capacity for
acquisitions. Consequently, the Company has been seeking
alternative income producing properties that fit its criteria, but
the Board is mindful of the need to satisfy Palace Capital's strict
criteria for suitability.
The Company has just agreed terms for the corporate acquisition
of a significant fully let office building for circa GBP20 million.
If successfully concluded, it will considerably enhance rental
income and more than replace the lost income from disposals.
Borrowings
The Company has close relationships with its lenders who
understand its outlook, strategy and approach. Over GBP78 million
of debt facilities have been drawn, giving a loan to value ratio of
39% net of cash based on 30 September 2016 values. The average debt
maturity is 4.6 years at an average cost of 2.9%, which the Company
considers to be one of the lowest in the sector.
Independent valuation
The Board has commissioned independent valuations of the
portfolio and the updated values of the properties will be
disclosed within the Company's Annual Results announcement in early
June. The Board anticipates that this will show significant
progress as a result of the Company's active property management
strategy.
Notice of results
The Company intends to announce its final results for the year
ended 31 March 2017 on Tuesday, 6 June 2017.
Neil Sinclair, the Chief Executive of Palace Capital,
commented:
"We are making excellent progress. We believe we are one of the
most exciting companies in the sector with strategic assets in
growth locations having taken early advantage of the regional
upturn.
"Our active management strategy, coupled with securing
attractive off market corporate opportunities, has enabled us to
grow both the NAV and the dividend. We continue to be very positive
about the opportunities available to us outside London."
Date: 02 May 2017
For further information, contact:
Palace Capital plc
Neil Sinclair, Chief Executive
Stephen Silvester, Finance Director
Tel. +44 (0)20 3301 8331
Allenby Capital Limited (Nominated Adviser and Joint Broker)
Nick Naylor / James Reeve
Tel. +44 (0)20 3328 5656
Arden Partners plc (Joint Broker)
Chris Hardie / Ciaran Walsh
Tel. +44 (0)207 614 5917
Capital Access Group (Financial PR)
Scott Fulton / Jessica Bradford
Tel. +44 (0)20 3763 3400
This information is provided by RNS
The company news service from the London Stock Exchange
END
TSTBLGDURXGBGRB
(END) Dow Jones Newswires
May 02, 2017 02:01 ET (06:01 GMT)
Palace Capital (LSE:PCA)
Historical Stock Chart
From Apr 2024 to May 2024
Palace Capital (LSE:PCA)
Historical Stock Chart
From May 2023 to May 2024