Palace Capital Portfolio and trading update

Hardman & Co Report Report Downloads

Palace Capital (LON:PCA) portfolio and trading update of 2 May showed underlying values up year- on-year. A lease event, resulting in a profit and cash upgrade, was announced on 7 May. This showed a cash premium being agreed to be paid by the tenant. The loan-to-value (LTV) stood at 33%. Palace Capital 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.” Construction has recently commenced for the Hudson Quarter, York, mixed residential-commercial development inside the city walls. This is one of several factors underpinning significant medium-term expansion in capacity to pay growing dividends.

Update from 2 May: “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.”

Minor estimate changes: We reduce FY19E revenue and profit by £0.5m, as Palace Capital points to increased opportunities for lease renewals into FY20. As to FY20E, we raise our revenue and profit figures by £2.3m as a result of the tenant-requested lease surrender at the Birmingham office, net of costs.

Location and active asset management: Many of the top 10 assets (by value and rental income) are along the M62 corridor. A recent (5 April) Property Week survey placed 10 of the top 20 UK non-London office “hotspots” in that M62 corridor. “Northern Powerhouse” commercial real estate opportunities grow.

A track record of outperformance: In each of the past five years, Palace Capital’s accounting return has been in the first or second quartile vs. our small basket of six most comparable regional UK REITs. (Note that, in FY18, this excluded the distorting effect of equity.) Since 2013, NAV has more than doubled.

Risks: The normal risks of real estate apply. The weighted average length of unexpired lease to break is ca.5.4 years. Generally, covenants are good. Retail exposure (bar Wickes and Booker) is minimal. Gearing, at 33% LTV, is conservative and, although expected to increase as the York development progresses, management has previously stated an intention to keep it below 40%.

Click to view all articles for the EPIC:
Or click to view the full company profile:
    Facebook
    Twitter
    LinkedIn
    Hardman & Co

    More articles like this

    Hardman & Co

    Palace Capital: Dividend recovery ahead of expectations

    Palace Capital plc (LON:PCA) March 2021 annual results were ahead of our expectations; notably, rent was £17.3m vs. our estimated £16.4m. FY20 rent stood at £18.3m, excluding a lease surrender premium, and there have been net

    Hardman & Co

    Palace Capital: Strong trading update

    Palace Capital plc (LON:PCA) December 2020 quarter rents showed 92% received; as of the 14 April trading update, 82% of the rents due end-March under the monthly payment plans had been received – a good initial

    Hardman & Co

    Palace Capital Encouraging full-year results

    The healthy liquidity position of Palace Capital plc (LON:PCA) takes risks down to a modest level, as does the overweight to regional offices and minimal shops. The Hudson Quarter mixed-development site is selling well, and profitability

    Hardman & Co

    Palace Capital 1H’20 results announced

    Palace Capital (LON: PCA) is the topic of conversation when Mike Foster, Analyst at Hardman & Co joins DirectorsTalk. Mike provides a little background on the company, talks us through the results, the company as a developer,

    Hardman & Co

    Palace Capital 1H’20 results announced

    Palace Capital (LON:PCA) 1H’20 results were announced on 19 November. Seventeen lease events have been completed. Impressively, these were 25% above passing rent and 3% above ERV (i.e. previous estimated valuers’ levels). FY19 was struck 14%

    Hardman & Co

    Palace Capital Hudson Quarter, York, development commences

    Palace Capital (LON:PCA)  is a real estate investor. It has recently commenced construction of its mixed residential and commercial development at Hudson Quarter, having secured a new £26.5m debt facility and fixed price contract. Supply in

    Hardman & Co

    Palace Capital Interim results to September 2018 reported

    Palace Capital (LON:PCA) reported 1H’19 (six months to September 2018) results on 26 November, in line with expectations. We reduce our forward estimates due to disposal and minor trimming of some 2020 income. The strategy of

    Hardman & Co

    Palace Capital Initiation of coverage

    Palace Capital (LON:PCA) has almost doubled NAV since the initial investment in October 2013. Good income generation is evidenced by the EPRA EPS and the DPS track record, whilst undertaking incremental refurbishments and development. The investment

    Hardman & Co

    INTERVIEW: Palace Capital – Hardman say it ticks all boxes

    Palace Capital plc (LON:PCA) is the topic of conversation when Hardman & Co Analyst Mike Foster talks to DirectorsTalk. Mike Explains who the company are, talks about the portfolio, its asset types, income generated, risks and valuation.