Slide 1: Palace Capital Plc Annual Results
EXPERTS IN REGIONAL PROPERTY PALACE CAPITAL PLC ANNUAL RESULTS YEAR TO 31 MARCH 2019
Slide 2: Experts in regional property investment
EXPERTS IN REGIONAL PROPERTY Palace Capital are experts in regional property investment unlocking value to deliver attractive total returns HIGHLIGHTS | STRATEGY | FINANCIAL REVIEW | PROPERTY REVIEW | CONCLUSION | APPENDICES Page 1 | Palace Capital plc | Investor Presentation June 2019 | palacecapit
Slide 3: Introduction
Introduction NEIL SINCLAIR STEPHEN SILVESTER RICHARD STARR Chief Executive Finance Director Executive Property Director Page 2 | Palace Capital plc | Investor Presentation June 2019 | palacecapitalplc.com
Slide 4: Regional focus continues to deliver income and capital growth
HIGHLIGHTS Regional focus continues to deliver income and capital growth ⚫ Total property return of 7.1% (FY18: 10.2%) ⚫ Passing rent of £17.7m pa with significant reversionary potential (ERV: £21.5m pa) ⚫ 37 lease events across 235,000 sq ft generating £3.4m rental income pa, averaging 14.4% ahead
Slide 5: Experts in regional property
STRATEGY Experts in regional property RETURNS FOR SHAREHOLDERS Palace Capital plc (PCA) is a property investment company with a regional focus delivering attractive total returns ⚫ Entrepreneurial & opportunistic approach 5.5 Year Total Accounting Return vs peer group (EPRA NAV growth + dividends as
Slide 6: Outlook supports regional strategy
STRATEGY Outlook supports regional strategy ERV Growth 2019 - 2023 % pa Total Return 2019 - 2023 % pa Sector Split Market outlook Standard Industrials 3.0% Distribution Warehouses 6.6% supports Palace Distribution Warehouses 2.7% Standard Industrials 6.3% Capital regional Standard Offices Rest of UK
Slide 7: FY19: Financial Review
FY19: FINANCIAL REVIEW Stephen Silvester Finance Director FY19: FINANCIAL REVIEW
Slide 8: Financial highlights
FY19: FINANCIAL REVIEW Financial highlights Robust financial performance FY19 FY18 Growth INCOME Net rental income £16.4m £14.9m +10% Adjusted profit before tax* £8.9m £8.5m +5% IFRS profit before tax £6.4m £13.3m -52% Dividend per share 19p 19p - CAPITAL Property portfolio £286.3m £276.7m +3.5% EPR
Slide 9: REIT conversion
FY19: FINANCIAL REVIEW REIT conversion 1st August 2019 ⚫ The Company received independent advice from Deloitte ⚫ Supports our total return strategy by maximising dividends ⚫ Eliminates double-tax, saving over £1m tax pa, adding +2 pps to earnings ⚫ Expected to broaden shareholder base and increase l
Slide 10: Balance sheet
FY19: FINANCIAL REVIEW Balance sheet Positioned for growth FY19 FY18 £m £m Property portfolio 286.3 276.7 £22.9m cash available Cash 22.9 19.0 IFRS net assets total £180.3m Other assets 7.1 4.5 Group LTV of 34% at 31 March Borrowings (118.0) (99.8) 2019 and within our target range Deferred tax liabi
Slide 11: Debt maturity & hedging
FY19: FINANCIAL REVIEW Debt maturity & hedging Debt maturity Fixed/Floating (£m) (£m) Group LTV at 34% within 80.0 45 Floating target range 70.0 40 Fixed 35 Average debt maturity 60.0 30 of 3.6 years 50.0 40.0 25 Average cost of 20 debt 3.3% 30.0 15 20.0 10 Fixed/hedged: 59% 10.0 5 Headroom on debt
Slide 12: EPRA NAV per share
FY19: FINANCIAL REVIEW EPRA NAV per share 440 435 0.5 430 Movements 425 17.3 (19.0) in EPRA NAV 420 per share for the year ended 415 31 March 2019 410 (3.9) (Pence) (1.9) 405 415 (0.6) (0.4) 400 407 395 EPRA NAV Adjusted Profits on Dividends Sale of R.T. Cost of Cost of Fair value EPRA NAV Mar-18 ea
Slide 13: Continued growth in recurring earnings
FY19: FINANCIAL REVIEW Continued growth in recurring earnings FY19 FY18 £m £m Growth Gross rental and other income 18.8 16.7 +12% Property operating expenses (2.4) (1.8) Net rental income 16.4 14.9 +10% Gross property income Administrative expenses (3.8) (3.3) increased 12% to £18.8m Net finance cos
Slide 14: Substantial opportunity to grow rental income by +25%
FY19: FINANCIAL REVIEW Substantial opportunity to grow rental income by +25% 25.0 24.0 23.0 22.0 0.9 21.0 0.7 Gross passing 20.0 rental income per 19.0 2.8 annum (£m) 0.3 22.4 18.0 21.5 17.0 17.7 16.0 15.0 Passing rent at Rent in rent free Vacant space Reversion Total ERV Under Total potential 31-Ma
Slide 15: Property Review
PROPERTY REVIEW Richard Starr Executive Property Director PROPERTY REVIEW
Slide 16: Active Management Strategy
PROPERTY REVIEW Active Management Strategy Unlocking value ⚫ 37 lease events across 235,000 sq ft generating £3.4m annual rental income, averaging 14.4% ahead of ERV ⚫ Overall EPRA occupancy remains high at 87% (FY18: 90%) ⚫ WAULT of 4.5 years to break and 6.2 years to expiry ⚫ Funding secured and c
Slide 17: Regional portfolio
New cast le PROPERTY REVIEW Regional portfolio Focussed on growth sectors York Leed s Halifax M an ch est er Liverp ool Sh ef fi eld Core Sectors 33 10 9 2 2 1 Office Industrial Retail Leisure Retail Development warehouse Birm in gh am Coven t r y Ket t erin g Leam in gt on Sp a Geography N or t h am
Slide 18: Diversified portfolio
PROPERTY REVIEW Diversified portfolio By tenant and industry Contracted Contracted Tenant Industry Rent £’000 Tenant Industry Rent £’000 Leisure 913 Auto 325 Charity 595 Government 322 Legal 568 Legal 310 Top 20 tenants Hotel 510 Retail 294 Good income make up 44% of visibility with broad Insurance
Slide 19: York – Hudson Quarter
PROPERTY REVIEW York – Hudson Quarter October 2018 ⚫ Planning consent granted for 127 apartments, 35,000 sq ft offices, 5,000 sq ft of commercial and car parking ⚫ Development facility secured with Barclays for £26.5m ⚫ 2 year design and build construction contract commenced Feb 2019 ⚫ GDV £69m – ex
Slide 20: Acquisitions and disposals
PROPERTY REVIEW Acquisitions and disposals Disposal of 50 non-core residential units ⚫ Acquired as part of the R.T. Warren portfolio in Oct 2017 average NIY 3.5% ⚫ Sold on aggregate for £18.2m at 97% book value – ahead of business plan Funds recycled into… One Derby Square, Liverpool ⚫ Acquired Dec
Slide 21: Gosport – Aldi
PROPERTY REVIEW Gosport – Aldi ⚫ Prime location in town centre ⚫ Acquired in 2017 as part of the R.T. Warren portfolio ⚫ Let to Aldi with 12 years remaining at £0.25m p.a. ⚫ New lease completed for 20 years at 17% increase in passing rent, now £0.29m p.a. ⚫ Secure income with benefit of minimum upli
Slide 22: Value creation
PROPERTY REVIEW Value creation Future upside within the portfolio Status Historic Performance Future Potential Hudson Quarter, York Planning consent achieved for 127 apartments, 35,000 sq ft offices, Acquired in 2013 for £3.8m. GDV £69m 5,000 sq ft of commercial and car parking Uplift in value to da
Slide 23: Confident outlook for regional strategy
CONCLUSION Confident outlook for regional strategy Income and capital growth ⚫ Right assets in the right locations in the right sectors Regional ⚫ +25% income reversion within portfolio: expertise – Repositioning city centre office assets with short WAULT of 2.8yrs – +£4.7m potential future income g
Slide 24: Appendices
EXPERTS IN REGIONAL PROPERTY APPENDICES
Slide 25: Our story so far
Our story so far 31-03-2013 31-03-2019 Net asset value £0.6m £180.3m Property portfolio £2.0m £286.3m Contractual rental income £0.2m £17.7m Total Accounting Return since 2013 126% July 2010 Management taking Board control of the Company October 2017 Acquisition of the R.T. Warren Portfolio for £68m
Slide 26: Financial track record
Financial track record Balance Sheet FY15 FY16 FY17 FY18 FY19 Property portfolio £102.8m £173.4m £183.2m £276.7m £286.3m Net assets £80.0m £106.8m £109.6m £183.3m £180.3m EPRA NAV per share 393p 414p 443p 415p* 407p Group LTV 23% 37% 37% 30% 34% Income Statement IFRS profit before tax £13.9m £11.8m
Slide 27: £145.9m debt facilities
£145.9m debt facilities Strong relationship with existing lenders. Low cost of debt maintained and conservative LTV. 59% debt fixed/hedged to mitigate interest rate risk. Debt Facility Debt Drawn Debt Lender (£m) (£m) Maturity Hedging Mar-18 Mar-19 Barclays 39.1 39.1 Jan-2023 £35.5m fixed Property p
Slide 28: Income security supported by diversified portfolio
Income security supported by diversified portfolio 4.4 Lease expiries 3.27 to first break by Clear income visibility gross rental 2.44 with WAULT of 4.5 years income (£m) 1.98 to first break. 1.77 1.55 1.28 0.38 0.55 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28+ Page 27 | Palace Capital plc | Invest
Slide 29: Regional returns outperforming London
Regional returns outperforming London London vs. regional UK office Office conversion to residential Regional office returns (% p.a. total property returns) (England) (million. sq. ft.) have exceeded those 14 20 generated by London 18 every year since 2016. 12 16 10 Regional offices (47% of our 14 p
Slide 30: Urbanisation and connectivity
Urbanisation and connectivity BOULTON HOUSE, MANCHESTER NEWCASTLE The Northern Powerhouse is a prime example of a growth hub, where 101 miles ST JAMES’ GATE, NEWCASTLE investment in road and rail connectivity 81 minutes has supported rising rents and growth. 44 miles Graduate retention is high in st
Slide 31: City centre offices
City centre offices Location is crucial when investing in the regions According to Centre for Cities strong city centres have a higher than average share of jobs in exporting firms and a lower than average share of these are high- skilled. The majority of city centre offices within the Palace Capita
Slide 32: Top assets by value
Top 10 assets by value 53% of total portfolio Area Gross rental Reversionary WAULT to break Property Name (sq ft) income (£) yield* (yrs) Broad Street Plaza, Halifax 117,767 1,710,070 7.07% 12.3 2 & 3 St James Gate, Newcastle 99,129 1,473,832 8.45% 3.3 Sol, Northampton 129,703 1,769,994 7.64% 7.7 Hu
Slide 33: Sector splits
Sector splits Office and Industrial focus Market value % of Portfolio 31 March 2019 by market No. No. Contractual rental WAULT Total ERV (£) value properties leases Area (sq ft) income (£) ERV (£)* (yrs) of void (£) Offices 135,455,000 47.3% 33 122 794,726 8,959,579 12,094,259 2.8 1,928,197 Leisure
Slide 34: Newcastle – St James' Gate
Newcastle – St James’ Gate ⚫ Purchased August 2017 for £20m ⚫ 82,500 sq ft offices average rents £19 psf ⚫ City centre multi let offices ⚫ Recently vacated 3rd floor still being refurbished as well as the ground floor entrance and landscaping upgrade during 2019 for £1.6m ⚫ Limited new build offices
Slide 35: Manchester – Boulton House
Manchester – Boulton House ⚫ Purchased August 2016 for £10.5m ⚫ 75,000 sq. ft. of multi-let offices in City Centre ⚫ Average rents £12 psf ⚫ 18,000 sq ft vacant space & ground floor reception refurbished with 10,700 sq ft let at headline rentals of £18.50 psf ⚫ Further refurbishments planned ⚫ Since
Slide 36: Biographies
Biographies NEIL SINCLAIR STEPHEN SILVESTER RICHARD STARR Chief Executive Finance Director Executive Property Director Chartered Surveyor FRICS Chartered Accountant FCA Chartered Surveyor MRICS Neil co-founded Palace Capital and Stephen joined Palace Capital in 2015 and Richard joined Palace Capital
Slide 37: Disclaimer
Disclaimer The information in this presentation may include forward-looking statements, which are based on current expectations and projections about future events. These forward looking statements reflect the Directors’ beliefs and expectations and are subject to risks, uncertainties and assumption
Slide 38: mi noon
mi noon oon jelole! aaa PALACE CAPITAL plc