Palace Capital Plc · LSE:PCA
Palace Capital — FY2021 Earnings Presentation
39 slides from Palace Capital's earnings presentation, June 2021
Slide 1: Palace Capital Plc Final Results Year Ended 31 March 2021
EXPERTS IN REGIONAL PROPERTY PALACE CAPITAL PLC FINAL RESULTS YEAR ENDED 31 MARCH 2021
Slide 2: Experts in regional property investment
EXPERTS IN REGIONAL PROPERTY Palace Capital are experts in regional property investment. Focused on unlocking value to deliver attractive total returns. INTRODUCTION | FINANCIAL REVIEW | PROPERTY REVIEW | CONCLUSION | APPENDICES Page 1 | Palace Capital plc | Investor Presentation June 2021 | palacec
Slide 3: Highlights
INTRODUCTION Highlights Strong rent collection and Hudson Quarter completed ⚫ Rent collection has been strong – average of 95% collected during the year ⚫ £30m disposal programme underway with £9.4m worth of assets either exchanged or completed since year-end ⚫ Total Property Return of 1.0% in line
Slide 4: Hudson Quarter: Flagship development completed
HUDSON QUARTER, YORK Hudson Quarter: Flagship development completed ⚫ Completed on budget on 20 April 2021 with first occupiers already moved in ⚫ 43 units sold or exchanged with a sales value of £11.6m, with a further 7 under offer with a sales value of £3.3m and 77 units remaining to be sold ⚫ For
Slide 5: Regional Property Investment
INVESTMENT CASE Regional Property Investment Office and Industrial sector focus ⚫ Regional commercial property retains attractive fundamentals despite recent impact of Covid ⚫ Signs of recovery in both regional investment and occupational markets ⚫ PCA investment concentrated in university towns and
Slide 6: Future of the office and industrial sectors
INVESTMENT CASE Future of the office and industrial sectors Anticipating structural changes Future of the regional office market ⚫ Expectation of return to the office post lockdown ⚫ “Working from Home” is an option not a replacement for an office environment ⚫ Collaboration is key in any industry a
Slide 7: Rent Collection
FY21: FINANCIAL REVIEW Rent Collection Strong performance throughout the year despite the Covid backdrop 95% rent collected in FY21 FY21 Mar-21 Qtr Sector FY21 Rent FY21 Rent FY21 Cash Collection collection 98% rents secured from top Demanded Concessions Collected rate rate* 20 tenants Office £8.6m
Slide 8: Covid-19 share price impact
FY21: FINANCIAL REVIEW Covid-19 share price impact Share price recovering, supported by strategy to continue to close the discount 350p Share Price Performance since January 2020 Palace Capital discount to NAV vs REIT sector 10% 300p 0% 250p -10% 200p -20% -30% 150p -40% 100p -50% 50p -60% Apr-15 Ap
Slide 9: Financial Performance
FY21: FINANCIAL REVIEW Financial Performance Year ended 31 March 2021 FY21 FY20 Change INCOME STATEMENT Resilient performance despite Underlying rental income £17.2m £17.9m -3.9% Covid-19 disruption Surrender premium & £0.1m £3.4m other income FY21 FY20 Total income £17.3m £21.3m BALANCE SHEET Bad d
Slide 10: Profit reconciliation & sustainable dividend
FY21: FINANCIAL REVIEW Profit reconciliation & sustainable dividend Year ended 31 March 2021 FY21 FY20 (£’m) (£’m) Q1 Q2 Q3 Q4 TOTAL INCOME STATEMENT FY21 DIVIDENDS Adjusted profit after tax 7.5 8.0 Adjusted EPS 3.7p 3.6p 4.7p 4.4p 16.4p Surrender premium & fair DPS 2.5p 2.5p 2.5p 3.0p 10.5p (0.3) 2
Slide 11: Valuation bridge
FY21: FINANCIAL REVIEW Valuation bridge Investment in Hudson Quarter offsets portfolio fair value reduction £300m £2.2m £295m £290m (14.0m) £285m £18.5m £280m (£4.4m) £275m £270m £265m £278.6m £276.3m £260m £255m £250m Property portfolio valuation at 31 Capex on Hudson Quarter Capex on refurbishment
Slide 12: Valuations
FY21: FINANCIAL REVIEW Valuations H2 valuation recovery following Covid impact in H1 EPRA ⚫ Office values impacted Market value H1 Market value H2 Market value topped-up 31 March 2020 Gain/(loss) 30 Sept 2020 Gain/(loss) 31 March 2021 NIY by vacancy but positive (£) % (£) % (£) % outlook on lettings
Slide 13: Net Tangible Asset bridging chart
FY21: FINANCIAL REVIEW Net Tangible Asset bridging chart EPRA NTA per share movements in the year 375p 370p 7.3 365p (21.8) 1.4 360p 4.9 (8.5) 355p 364.4 9.1 (5.0) 0.8 350p (2.5) (0.5) 345p 349.6 346.9 340p EPRA NTA 31 Adjusted Property Dividends paid Other EPRA NTA 30 Adjusted Fair value adj. Profi
Slide 14: £141.7m debt facilities
FY21: FINANCIAL REVIEW LTV: 42%* (FY20: 38%) £141.7m debt facilities Average Cost of Debt: Interest Cover: 3.0% (FY20: 3.1%) 2.7x (FY20: 3.5x) Diversified loan book supporting a Hedging: 49% (FY20: 56%) stable capital structure Debt Debt Debt Lender Facility Drawn Hedging Debt maturity (£m) Maturity
Slide 15: Management of Financial Covenants
FY21: FINANCIAL REVIEW Management of Financial Covenants Dealing with the Covid impact on rent collection ⚫ All covenant tests passed or waivers obtained in the year ⚫ Covenant waivers obtained in April 2021 on leisure properties where concessions and rent deferrals focused – not expected to be nece
Slide 16: Property Portfolio - Overview
PROPERTY REVIEW Property Portfolio - Overview Post pandemic recovery underway in H2 March March 2020 2021 FY21 Total Property Return performance by Sector Portfolio value (£m) £277.8m £282.8m H2 outperforms H1 Net initial yield (%) 6.0% 5.6% 10.0% FY21 H1 FY21 H2 7.64% 7.91% Reversionary yield (%) 6
Slide 17: Asset Management
PROPERTY REVIEW Asset Management Letting activity in the year and strong recovery continuing post year end ⚫ 31 lease events in the year providing £1.2m additional income of £0.9m pa +16% ⚫ 14 new leases: 16% ahead of ERV, £0.9m +12% +13% providing additional income of £0.7m pa Adding value ⚫ 11 lea
Slide 18: Sustainable rents across portfolio
PROPERTY REVIEW Sustainable rents across portfolio Rent vs ERV (psf) £20.00 £15.94 £16.31 ⚫ Majority of reversion can £14.89£16.07 £14.11 £15.00 £12.44 £10.97 £11.06 be captured through £10.00 £6.30 £7.02 letting vacant office space £5.00 £- ⚫ Supply-demand dynamics Office Leisure Industrial Retail
Slide 19: Current Rent Roll to ERV Bridge
PROPERTY REVIEW Current Rent Roll to ERV Bridge +25% potential uplift £21.0m 60% new build or recently refurbished £0.4m (£0.4m) ⚫ Majority of reversion is £0.5m £20.0m £0.5m through letting vacant space £0.9m £19.0m ⚫ Dedicated resource in the £18.0m £20.6m team focused on letting £2.3m vacant unit
Slide 20: Unlocking Value
PROPERTY REVIEW Unlocking Value Releasing cash through Hudson Quarter and disposals programme ⚫ Healthy cash position at year end of £14.4m including RCF ⚫ £30m of cash to be realised from sales at Hudson Quarter once fully sold, after debt repayment ⚫ £30m disposal programme underway for assets ide
Slide 21: Development/Refurbishment pipeline
PROPERTY REVIEW Development/Refurbishment pipeline Opportunity to generate capital growth Description and Status Timing High Street, 7 Residential Units. Planning permission granted subject to S106 To be sold in 2021 Uxbridge Milbarn Medical, Mixed use development of c10,000 sq ft B1 and 10 flats be
Slide 22: Cash on Cash returns
PROPERTY REVIEW Cash on Cash returns How our disposal programme has delivered total returns ⚫ 31 commercial buildings sold since 2013 to date ⚫ Total purchase prices: £39.4m ⚫ Total income produced: £15.9m ⚫ Net sales proceeds: £41.9m ⚫ Total cash return: £18.4m ⚫ Total return generated: 47% ⚫ Avera
Slide 23: Active Asset Management
PROPERTY REVIEW Active Asset Management How our regional portfolio is delivering total returns Strategy Status Performance Total Return Hudson Quarter, ▪ Development ▪ Acquired in 2013 for £3.8m ▪ New development of 127 apartments ▪ Forecast cash on York ▪ 103,000 sq ft office building close to York
Slide 24: ESG Focus
PROPERTY REVIEW ESG FOCUS Playing our part in being a responsible business FUTURE PROOFING THE CULTURE BEING A RESPONSIBLE PORTFOLIO BUSINESS Fostering a culture of Appointed ESG consultant to inclusivity and consideration improve portfolio Ensuring ethical business for stakeholders’ interests perfo
Slide 25: 2021 and beyond…
LOOKING FORWARD 2021 and beyond… ⚫ On-going disposal strategy to recycle capital, £9.4m of £30m target already completed or exchanged ⚫ £3.2m ERV per annum to be captured through letting of vacant space ⚫ Residential sales at Hudson Quarter York will initially be 249 Midsummer Boulevard– sold April
Slide 26: Confident outlook for regional strategy
CONCLUSION Confident outlook for regional strategy Income and capital growth ⚫ Rent collection has been strong - 95% collected for the year ⚫ We hold the right properties in the right locations focused in the right sectors with reliable tenants Regional ⚫ Residential sales at Hudson Quarter York and
Slide 27: Appendices
EXPERTS IN REGIONAL PROPERTY APPENDICES
Slide 28: Our story so far
Our story so far 31-03-2013 31-03-2021 November 2010 Management taking Board control of the Company Net asset value £0.6m £157.8m valued at £0.1m with a vision to invest in regional property Property portfolio £2.0m £282.8m October 2011 Hockenhull Estates portfolio acquired for £1.8m consisting Cont
Slide 29: Regional portfolio
APPENDICES Regional portfolio Focused on office & industrial growth sectors ⚫ Balanced portfolio of 48 properties ⚫ Diversified granular income 182 tenants in the portfolio Top 20 tenants represent 44% of portfolio WAULT to break of 4.8 years ⚫ Low risk & defensive characteristics ⚫ Located close to
Slide 30: Hudson Quarter Timeline
Hudson Quarter Timeline 2 0 2 1 C o m p l e t i o Feb 2016 Aug 2017 n 2021 s Sep 2013 Planning Planning Dec 2018 Feb 2019 2020 Acquired as part of permission permission for Demolition Funding secured Construction on- Development c completed on 20 h Quintain portfolio granted for development complete
Slide 31: Strong track record of outperformance
APPENDICES Strong track record of outperformance Income and Capital Return 3 Year Total Property Return Vs MSCI Dividend Pay-Out Benchmark £40m 10.0% Outperformed the £35m 8.0% 9.1% MSCI benchmark £30m over a 3 year period 6.0% £25m 5.3% £20m 4.0% £15m £37m of dividends 2.0% £10m paid to date £5m 0.
Slide 32: Sector splits
APPENDICES Sector splits Regional Office and Industrial focus Market value % of Portfolio WAULT No. No. Contractual rental Total ERV 31 March 2021 by market Area (sq ft) ERV (£)* to break properties leases income p.a. (£) of void (£) (£) value (yrs) Offices 116,280,000 41.1% 25 101 669,711 7,926,082
Slide 33: Top assets by value
APPENDICES Top 10 assets by value 62% of total portfolio Area Gross rental Reversionary WAULT to Property Name Sector (sq ft) income p.a. (£) yield* break (yrs) Hudson Quarter, York Development Development n/a n/a n/a n/a Broad Street Plaza, Halifax Leisure 117767 1,723,806 7.36% 10.9 2 & 3 St James
Slide 34: EPRA Occupancy
APPENDICES EPRA Occupancy Significant asset management in progress 95.0% 90.0% 1.5% 85.0% 1.8% 2.3% (12.5%) 80.0% 6.4% 87.3% 86.4% 75.0% (0.4%) 70.0% 65.0% EPRA Occupancy at At risk through Tenants lost via Lease renewals and Disposals New leases Changes in ERV EPRA Occupancy at 31 March 2020 expiri
Slide 35: Top 20 Tenant Rent Collection
APPENDICES 98% of rent secured Top 20 Tenant Rent Collection from Top 20 Tenants for Sustainable income: 44% of passing rents from top 20 tenants the year Contracted Contracted Q1 rent Q2 rent Q3 rent Q4 rent Q1 rent Q2 rent Q3 rent Q4 rent Tenant Industry Rent pa Tenant Industry Rent pa collection
Slide 36: Analysis of bad debt provisions
APPENDICES Analysis of bad debt provisions Year ended 31 March 2021 BY ACTIVITY CVA/administration £0.5m ⚫ Conservative approach taken Other leisure and retail £0.5m against recoverability of debtors Other provisions £0.3m Bad debt provisions held on Balance Sheet £1.3m Bad debt provision by sector
Slide 37: Biographies
Biographies NEIL SINCLAIR STEPHEN SILVESTER RICHARD STARR STANLEY DAVIS Chief Executive Chief Financial Officer Executive Property Director Chairman Chartered Surveyor FRICS Chartered Accountant FCA Chartered Surveyor MRICS Stanley is a successful Neil co-founded Palace Stephen joined Palace Capital
Slide 38: 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 39: mi noon
mi noon oon jelole! aaa PALACE CAPITAL plc