TIDMPCA
RNS Number : 8196X
Palace Capital PLC
02 May 2019
2 May 2019
Palace Capital plc
("Palace Capital", the "Company" or the "Group")
Portfolio and Trading Update
Palace Capital (LSE: PCA), the Main Market listed real estate
investment company that has a diversified portfolio of UK
commercial real estate in carefully selected locations outside of
London, provides the following trading and portfolio update ahead
of its results for the year ended 31 March 2019, which will be
announced on Tuesday 4 June 2019.
Portfolio highlights
-- Disposal of 50 residential units (part of the Warren
Portfolio) for GBP18.2 million to Barnet Council which completed
yesterday (1 May 2019).
-- Acquisition of 1 Derby Square, Liverpool in December for
GBP14.0 million producing GBP1.0 million in annual income with
considerable reversionary potential.
-- 37 leases and rent reviews completed in the year-ended 31
March 2019 at an average 14% ahead of Estimated Rental Value
("ERV") generating GBP3.4 million rent per annum, reflecting an
uplift on previous passing rents of GBP0.8 million.
-- Building contract signed and GBP26.5 million facility secured
with Barclays Bank for the Hudson Quarter development in York, on
very competitive terms.
-- Resolution to grant planning consent from Elmbridge Borough
Council for the development of three retail units and 28 apartments
at 41- 45 High Street, Weybridge, Surrey.
Financial highlights
-- Strong cash position along with unutilised debt facilities to
fund the Company's refurbishment and development projects as well
as capacity for future acquisitions.
-- Group remains conservatively geared at 33% net Loan to Value (LTV).
-- First full year on the Main Market of the London Stock Exchange.
Neil Sinclair, Chief Executive of Palace Capital, commented:
"Palace Capital is making substantial progress across the
portfolio, notwithstanding the uncertain environment. During the
year we took the strategic decision to hold back on letting some of
our vacant space where we see the opportunity to drive value and
income potential through refurbishment or redevelopment. While this
means that our adjusted profits are likely to be slightly below
expectations for the financial year ended 31 March 2019, it will
enable us to further improve our portfolio of high quality, income
producing properties that are let to first class tenants. We also
have an exciting development in York, with its buoyant local
economy, and a strong development pipeline of investment
opportunities in core city centre locations."
"We remain conservatively geared and, with strong cash balances,
are in an excellent position to take advantage of opportunities
that meet with our investment criteria. This provides the Board
with the confidence to recommend that the current level of dividend
payments is maintained. We continue to be very positive about our
prospects as we look to create value for shareholders and generate
attractive total returns."
Portfolio activity
Disposals and acquisitions
55 non-core assets sold in the year for GBP21.8 million and an
acquisition in December 2018 of 1 Derby Square, Liverpool for
GBP14.0 million producing GBP1.0 million in annual income with
considerable reversionary potential.
50 houses originally acquired as part of the Warren Portfolio
were sold to Barnet Council for GBP18.2 million. Post the year end
two more residential properties have been sold for GBP0.8 million
and, overall, the Company has achieved 98% of book value on these
disposals to date, well ahead of the business plan on acquisition.
The Company has a further 8 residential properties remaining in its
portfolio that are on track for disposal within the next few
months.
During the period, three non-core assets in Weybridge, Banbury
and Crewe were also sold for combined proceeds of GBP3.6 million as
the Company continues to recycle capital into higher yielding
opportunities.
Developments
At the Hudson Quarter development in York, demolition has been
completed and the contractor is on site. A ground-breaking event
took place last month where the Archbishop of York, John Sentamu,
officiated the commencement of building works on site. The scheme
will be formally launched on 20 June 2019, when the first batch of
apartments will be offered for sale with strong interest already
received at this early stage.
The Company continues to benefit from operating in this buoyant
location. This is borne out in the Nationwide House Price Index for
Q1-2019 where the annual change in house prices is up 2% for
Yorkshire & Humberside, but down almost 4% for London. Outside
the portfolio, progress continues on the proposed development at
York Railway Station known as York Central which is being
undertaken close to Hudson Quarter and which will be complementary
to it. Outline planning consent was granted in March for up to
2,500 homes and 932,000 sq ft of offices.
The Company has also secured a resolution to grant planning
consent for the development of three retail units and 28
apartments, subject to a Section 106 agreement, in High Street,
Weybridge, Surrey. The Company is in active discussion with the
Council with a view to securing a formal planning approval in Q3 of
this year.
Leasing
In the year-ended 31 March 2019, 37 leases and rent reviews have
been completed at an average 14% ahead of ERV, generating GBP3.4
million rent p.a. an uplift on the previous passing rent of GBP0.8
million.
Stand out transactions include the 15-year lease at Sol
Northampton with Soo Yoga Group at a headline rent of GBP85,000 per
annum, with RPI-linked uplifts and a minimum uplift at first review
to GBP100,000 per annum.
The Hotel Ibis at Sol Northampton is trading extremely well and,
for the third year running, has delivered a turnover rent in excess
of GBP100,000 in addition to the passing rent of GBP510,000 per
annum. This represents a significant improvement from the date of
acquisition in June 2015 when no turnover rent was being
received.
A lease renewal has also been concluded at Courtauld House,
Coventry with Brose Ltd, a supplier to the automotive industry, at
a rental of GBP431,500 per annum reflecting a 33% uplift on the
previous rent of GBP325,000 per annum, effective from 30 June
2019.
Financials
The Company's valuers have confirmed that there is a marginal
increase in the underlying valuations of the investment portfolio
at year-end compared to the prior year.
At 31 March 2019, the Company had a gross passing rent of
GBP17.7 million per annum (excluding the residential portfolio held
for sale) and, after deduction of non-recoverable property costs of
GBP1.9 million, the net effective rental income was GBP15.8 million
per annum.
The ERV of the Portfolio is GBP21.5 million per annum, excluding
what is currently under development, so there remains considerable
reversionary growth and latent value to be captured.
The sale of the majority of the Warren Residential Portfolio
plus other sales in the period has boosted the Company's cash
balances considerably. Subsequently, the Group remains
conservatively geared at 33% net Loan to Value (LTV). The Company
thus has the financial firepower to take advantage of significant
acquisition opportunities that meet its investment criteria.
ENDS
About Palace Capital plc (www.palacecapitalplc.com):
Palace Capital plc (LSE: PCA) is a Main Market listed property
investment company that has a c. GBP285 million diversified
portfolio of UK regional commercial property. The Company, which is
managed by a team of experts in the regional real estate markets
with an extensive track record, maintains a disciplined investment
strategy focused on towns and cities outside of London that are
characterised by thriving local economies and strengthening
fundamentals. Within those locations, the highly experienced
management team selects assets that provide opportunity to drive
both capital value and long-term rental income through tailored,
pro-active strategies, ultimately delivering attractive shareholder
returns.
For further information, contact:
Palace Capital plc Tel: +44 (0)20 3301 8331
Neil Sinclair, Chief Executive
Stephen Silvester, Finance Director
Numis Securities Tel: +44 (0)20 7260 1000
Heraclis Economides / Oliver
Hardy
Arden Partners plc Tel: +44 (0)207 614 5900
Paul Shackleton / Ciaran Walsh
/ Alex Penney
FTI Consulting (Financial PR) Tel: +44 (0)20 3727 1000
Claire Turvey / Methuselah Tanyanyiwa palacecapital@fticonsulting.com
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END
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