PALACE CAPITAL PLC
LETTINGS IN YORK AND BRISTOL
Introduction
Palace Capital PLC ("Palace Capital" or the "Company"), the property company focussed on investing in the UK's secondary property market outside London, announces that it has let over 10,000 sq. ft. of previously vacant space at Hudson House, Toft Street, York and the final unit at the Point Four Industrial Estate, in Avonmouth, Bristol.
Background
On 21 October 2013, Palace Capital was readmitted to AIM following the acquisition of the Sequel Portfolio for £39.25m ("the Acquisition"). The portfolio was comprised of twenty four mixed use commercial properties purchased from Quintain Estates and Development plc ("Quintain"). The Acquisition was financed with a £20m debt facility from the Nationwide Building Society and £23.5m of new equity, raised from institutional and other investors at 200p per share.
At the time of the Acquisition the Palace Capital Board estimated that the gross income from the Sequel Portfolio was circa £6.5m per annum. However, it was estimated that gross income would be reduced by the impact of irrecoverable expenditure due largely to rates payable on empty properties. These would reduce the gross income on the portfolio by approximately £1.3m per annum, giving an estimated annual net income of £5.2m. The purchase price for the Sequel Portfolio of £39.25m therefore equated to a net acquisition yield of 13.2%.
Letting at Hudson House, Toft Street, York
As part of the Company's plan to manage the Sequel Portfolio actively, the Board is pleased to announce that it has let 10,380 sq. ft. on the first and fifth floors at Hudson House, Toft Street, York.
Hudson House is a 103,000 sq. ft. 1960s office building situated within the city walls, close to York Station and immediately adjacent to the new offices of York City Council and George Stephenson House, the Regional Headquarters of Network Rail.
The Company is in the early stages of planning a major refurbishment of Hudson House which is due to commence no earlier than the beginning of 2016 and, in the meantime, the Company will focus on letting the vacant space on short term tenancies.
The first and fifth floors of Hudson House have been let to Instant Managed Offices Ltd for occupation by Amey OWR Ltd for a five year term. Under the terms of the tenancy agreement, the tenant has the right to break after eight months and the Company has the right to break after two years to allow for any potential refurbishment of Hudson House. Inclusive of car parking the tenant is paying an average annual rental of £110,000 per annum.
This letting has the effect of reducing the irrecoverable expenditure (largely rates payable on unlet space, or 'empty rates') on the Sequel Portfolio by a similar amount and will therefore benefit the Company's cash flow by circa £220,000 per annum.
Letting at Point Four Industrial Estate, Avonmouth, Bristol
This property is located on an industrial estate and comprises a total floor area of 84,700 sq. ft. and at the time of acquisition was producing a gross rental income of approximately £350,000 per annum. However the gross income was reduced by £17,900 per annum due to empty rates and circa £2,000 per annum of service charge shortfall.
Unit 7B, comprising 8,806 sq. ft., has now been let on a short term tenancy to Furniture Village Ltd. The tenancy is for twelve months with a six month break clause and at an annual rental of £56,000 inclusive of service charge.
The property is now fully let and the net rental income has increased to circa £407,000 per annum with the irrecoverable expenditure reduced by circa £19,900 per annum.
Conclusion
The Board of Palace Capital continues to focus its attention on reducing the irrecoverable expenditure inherited with the Acquisition and the related £20m debt facility from Nationwide, so as to increase net income in order to deliver value and income to Palace Capital shareholders.
Commenting on the new lettings Neil Sinclair, Managing Director said:
"Since acquiring the Sequel Portfolio in October, we have been focussed on improving our cash flows by reducing the irrecoverable expenditure inherited with the portfolio. The lettings at Hudson House in York and the Avonmouth unit to Furniture Village are the first of many such initiatives that we anticipate will improve the portfolio's performance, leading to improved shareholder returns."
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Date: 2 December 2013
For further information contact
Palace Capital Plc |
Tel. +44 (0)20 7722 7603 |
Stanley Davis, Non-executive Chairman |
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Neil Sinclair, Managing Director |
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Allenby Capital Limited |
Tel. +44 (0) 20 3328 5656 |
Nick Naylor, Corporate Finance |
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Mark Connelly, Corporate Finance |
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Arden Partners plc |
Tel: +44 (0) 20 7614 5917 |
Christopher Hardie, Corporate Finance |
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Broker Profile (Financial PR) |
Tel. +44(0) 20 7448 3244 |
Simon Courtenay Tamsin Shephard |
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