Palace Capital Plc · LSE:PCA
Palace Capital — Investor Presentation (April 2020)
36 slides from Palace Capital's investor presentation, April 2020
Slide 1: Palace Capital Plc April 2020 Investor Update
EXPERTS IN REGIONAL PROPERTY PALACE CAPITAL PLC APRIL 2020 INVESTOR UPDATE
Slide 2: Experts in regional property
EXPERTS IN REGIONAL PROPERTY Palace Capital are experts in regional property. Focused on unlocking value to deliver attractive total returns. Page 1 | Palace Capital plc | 2020 Update | palacecapitalplc.com
Slide 3: Experts in regional property
REGIONAL STRATEGY Experts in regional property RETURNS FOR SHAREHOLDERS Palace Capital plc (PCA) is a property investment & development company with a regional focus delivering attractive total returns Management has a deep knowledge of 6 Year Total Accounting Return vs peer group the UK regions f
Slide 4: COVID-19 Impact
ECONOMY COVID-19 Impact Our priority has remained the health and well-being of our colleagues & tenants, whilst protecting the long-term value of the company Support for our occupiers, particularly smaller, independent brands that are less resilient to the enforced closure of their space We ha
Slide 5: COVID-19 Impact: Q1 March 2020 Rent Collection
ECONOMY COVID-19 Impact Q1 March 2020 Rent Collection As expected, March 2020 rent quarter Rent collection vs demanded (£m) collection down on same quarter last year but robust 2.0 1.8 Demanded Collected 70% collected as at 1 April adjusted for monthly 1.6 payers and deferrals agreed or being di
Slide 6: COVID-19 Impact: Cash, Debt Facilities & Covenants
ECONOMY COVID-19 Impact Cash, Debt Facilities & Covenants The Board believes that maintaining maximum liquidity at this time is a prudent approach, in order ICR covenants range to comply with its lenders' loan covenants 225% - 250% Investment portfolio is highly cash generative - rental income w
Slide 7: Diversified and sustainable portfolio
Diversified and sustainable portfolio By tenant and industry Contracted Rent Contracted Tenant Industry £’000 Tenant Industry Rent £’000 Leisure 913 Legal 310 Auto 544 Retail 294 Hotel 510 Retail 291 Good income Top 20 tenants make Charity 444 Local Authority 283 up 45% of passing visibility with br
Slide 8: Regional returns outperforming London
REGIONAL STRATEGY Regional returns outperforming London London vs. regional UK office Office conversion to residential (% p.a. total property returns) (England) (million. sq. ft.) Regional office returns 14 20 have exceeded those generated by 18 London every year since 2016. 12 16 10 Regional office
Slide 9: 'Boris Bounce' positive for the Midlands and the North
NON-COVID-19 PRESS ‘Boris Bounce’ positive for the Midlands and the North Government confirms ‘Notice to proceed’ on High Speed 2 (15th April) ‘Goldman Sachs appoints JLL for move to regions’ – Estates Gazette ‘KPMGs pension arm seeking offices in up to 9 regional cities’ – React News ‘Hisco
Slide 10: Positive impact of urbanisation and increased connectivity
Positive impact of urbanisation BOULTON HOUSE, MANCHESTER and increased NEWCASTLE connectivity 101 miles 81 minutes ST JAMES’ GATE, NEWCASTLE The Northern Powerhouse is a prime example of a growth hub, where investment in road and rail 44 miles connectivity is expected to support rising rents and 47
Slide 11: Financial track record
FINANCIALS Financial track record Solid growth of the portfolio driving earnings Balance Sheet FY16 FY17 FY18 FY19 HY20 Property portfolio £173.4m £183.2m £276.7m £286.3m £275.8m Net assets £106.8m £109.6m £183.3m £180.3m £178.7m EPRA NAV per share 414p 443p 415p* 407p 391p** Group LTV 37% 37% 30% 3
Slide 12: Balance sheet
FINANCIALS Balance sheet Well positioned to support growth 30 Sep 19 31 Mar 19 £m £m Property portfolio 275.8 286.3 Cash 14.0 22.9 Cash and undrawn RCF facilities available Other assets 8.8 7.1 Debt reduced in period Borrowings (106.8) (118.0) Group LTV of 34% and well within our target Deferred tax
Slide 13: £154.6m debt facilities
FINANCIALS £154.6m debt facilities Strong relationship with lenders Debt Facility Debt Drawn Debt Lender (£m) (£m) Maturity Hedging Mar-19 Sept-19 Barclays 41.3 41.3 Jun-2024 £35.1m fixed Property portfolio £286.3m £275.8m NatWest (RCF) 40.0 20.0 Aug-2024 100% floating Gross debt £119.4m £108.1m San
Slide 14: Debt maturity & hedging
FINANCIALS Debt maturity & hedging Sustainable capital structure Debt maturity Fixed/Floating (£m) (£m) 70.0 45 Group LTV at 34%, well within 40 Floating target range 60.0 Fixed 35 50.0 Average debt maturity 30 of 4.5 years 40.0 25 20 Average cost of 30.0 15 debt 3.2% 20.0 10 Fixed/hedged: 63% 10.0
Slide 15: REIT conversion
FINANCIALS REIT conversion 1st August 2019 Supports our total return strategy by maximising dividends Eliminates tax on rental profits, saving over £1m pa, adding +2 pps to earnings Expected to broaden shareholder base and increase liquidity in shares £3.7m credit to the income statement for
Slide 16: Substantial opportunity to grow rental income by +30%
FINANCIALS Substantial opportunity to grow rental income by +30% 23.0 0.1 22.0 -0.8 0.9 21.0 0.6 21.4 21.2 0.8 20.0 Gross passing 2.6 19.0 rental income per annum 18.0 (£m) 17.0 0.9 16.0 16.3 15.0 Passing rent at Rent in rent Vacant space Disposed or Reversion Total ERV Under Planning Disposed or To
Slide 17: Regional portfolio
New cast le PROPERTY REVIEW Regional portfolio Focused on office & York industrial growth sectors Halifax Leed s M an ch est er Liverp ool Sh ef fi eld Core Sectors 31 10 8 2 2 2 Office Industrial Retail Leisure Retail Development warehouse Birm in gh am Coven t ry Ket t erin g Leam in gt on Sp a Geo
Slide 18: Active Management Strategy
PROPERTY REVIEW Active Management Strategy Unlocking portfolio value 54% of our portfolio is invested in Core-Plus, generating strong income streams to support our dividend yield 31% of our portfolio is invested in Value-Add assets requiring capex for refurbishment in order to capitalise on risi
Slide 19: How we deliver value: Hudson Quarter Development
PROPERTY REVIEW How we deliver value: Hudson Quarter Development October 2019 Construction of 127 apartments, 39,000 sq ft of offices and car parking Acquired for £3.8m in 2013, valued at £16m in Sep 17 when planning permission was granted £69m GDV, +£10m further surplus forecast, delivering >
Slide 20: Opportunistic Development
PROPERTY REVIEW Opportunistic Development Pipeline to generate capital growth Description and Status Estimated build cost Timing High Street, Weybridge 28 Residential Units. Planning achieved and architect appointed £7m Possible 2021 start High Street, Uxbridge 10 Residential Units. Planning permiss
Slide 21: Alternative Use: Commercial to Mixed use
PROPERTY REVIEW Alternative Use: Commercial Mixed use Full evaluation undertaken to maximise shareholder value in wealthy Surrey commuter town Planning consent granted in July 2019 for a development of 28 apartments and 4,000 sq ft of retail space The apartments are a mix of 1 & 2 bedrooms,
Slide 22: Refurbishment: Boulton House
PROPERTY REVIEW Refurbishment: 44% valuation uplift since acquisition in August 2016 for £10.6m, (£4.6m uplift including £0.8m part-refurbishment) Average rents of £12 psf at purchase, Headline rentals now £18.50 psf following refurbishment Revolving refurbishment programme in progress as unit
Slide 23: Optimising Occupancy
PROPERTY REVIEW Optimising Occupancy: Acquired in December 2019 for £14.0m reflecting a 6.75% NIY Average rents of £12 psf at purchase, Headline rentals now at £17.0 psf with further growth expected 96% occupied with a WAULT of 3.3 years to break Tenants include Tesco, Pret a Manger, Medicas
Slide 24: Repositioning: Sol, Northampton
PROPERTY REVIEW Repositioning: 90% let following new lettings to Soo Yoga and Gravity Fitness in 2019 (21,000 sq ft being marketed) £226,000 per annum added to the annual rent roll, reflecting a 14% uplift on previous net passing rent Transformational refurbishment plans being finalised to com
Slide 25: Value creation
PROPERTY REVIEW Value creation Future upside within the next 2 years Status Historic Performance Future Potential Timing Hudson Quarter, York Construction of new development of 127 Acquired in 2013 for £3.8m. GDV £69m Forecast to complete in apartments, 39,000 sq ft of offices and car parking Uplift
Slide 26: 2021-2022 Projections beyond HQ York
LOOKING FORWARD 2021-2022 Projections beyond HQ York Disposal of HQ York residential in 2021 will release +£50m funds for deployment into earnings enhancing acquisitions Projections below provide indicative growth assuming a 6% yield leveraged at 50% with a 3% cost of debt Portfolio Growth £276m*
Slide 27: Confident outlook for regional strategy
CONCLUSION Confident outlook for regional strategy Income and capital growth We hold the right assets in the right locations in the right sectors with value-add potential +30% income reversion within portfolio: Regional – Repositioning city centre office assets with short WAULT of 3.2yrs – +£5.0
Slide 28: Appendices
EXPERTS IN REGIONAL PROPERTY APPENDICES
Slide 29: Our story so far
Our story so far 31-03-2013 30-09-2019 July 2010 Management taking Board control of the Company valued at £0.1m with Net asset value £0.6m £178.7m a vision to invest in regional property Property portfolio £2.0m £275.8m October 2011 HockenhullEstates portfolio acquired for £1.8m consisting of nine C
Slide 30: Outlook supports regional strategy
REGIONAL STRATEGY Outlook supports regional strategy Focus on office and industrial sectors ERV Growth 2019 - 2023 % pa Total Return 2019 - 2023 % pa Standard Industrials 2.7% Standard Industrials 6.6% Distribution Warehouses 2.5% Distribution Warehouses 6.4% Market outlook supports Standard Offices
Slide 31: Sector splits
Sector splits Regional Office and Industrial focus Market value 30 September 2019 % of Portfolio by No. No. Contractual rental WAULT Total ERV (£) market value properties leases Area (sq ft) income p.a. (£) ERV (£)* (yrs) of void (£) Offices 132,465,000 48.0% 31 121 789,902 7,612,960 12,091,030 3.2
Slide 32: Top 10 assets by value
Top 10 assets by value 54% of total portfolio Area Gross rental income Reversionary WAULT to break Property Name (sq ft) p.a. (£) yield* (yrs) Hudson Quarter, York development n/a n/a n/a n/a Broad Street Plaza, Halifax 117,767 1,765,883 6.90% 11.9 2 & 3 St James Gate, Newcastle 99,125 964,913 8.31%
Slide 33: Hudson Quarter Timeline
Hudson Quarter Timeline 2 0 2 1 C o m p l e t i o n Aug 2017 2019 s Sep 2013 Feb 2016 Feb 2019 2021 Planning permission Dec 2018 Ground-breaking c Acquired as part of Planning permission Funding secured from Completion scheduled for development Demolition completed ceremony with h Quintain portfolio
Slide 34: Biographies
Biographies NEIL SINCLAIR STEPHEN SILVESTER RICHARD STARR STANLEY DAVIS Chief Executive Finance Director Executive Property Director Chairman Chartered Surveyor FRICS Chartered Accountant FCA Chartered Surveyor MRICS Stanley is a successful entrepreneur who Neil co-founded Palace Capital and Stephen
Slide 35: 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 36: mnoo ny
mnoo ny oon jelole! aaa PALACE CAPITAL plc