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 remains at appraisal levels. Hudson Quarter is within the York city walls, has been selling well and is a material positive, set to generate approaching £70m cash for recycling investment. The current returns from this count for zero in reported numbers or forward estimates this year. Even after having devoted significant resource to this successful site, the income yield is above the market average, and with below-market risk.

  • FY’20 results: 84% of rents due end-June are paid (or being paid monthly), on time. 93% of March rents are now in. Unsurprisingly, asset values are down but, from here, we expect stable valuations at Palace Capital’s office assets. Some new lettings are taking place. Asset total return outperformed the benchmark.
  • Robust balance sheet: Year-end loan to value (LTV) stood at 38%. Loan covenants are fully compliant. £20m gross cash is held, with no facilities maturing until 2022. By that point, Hudson Quarter will have generated significant cash for reinvestment, thereby enhancing ongoing income.
  • Valuation: This is a strongly positioned regional REIT. The regional peer group tends not to undertake development, which we see as a Palace Capital upside, but the market does not price as such. Price to historical NAV for Palace Capital is 31ppts below the (unweighted) average for the regional REIT universe.
  • Risks: LTV is set for ca.40% at the peak of the apartment and office development project within York city walls. The latter can be retained or sold, thereby ensuring enhanced income, as well as reduced debt. Current markets are uncertain, and Palace Capital has not commented on calendar 2020.
  • Investment summary: A comparison with the sector is straightforward. The sectoral and regional exposures point to outperformance in capital values, rental change and total returns. The value uplift and cash-generation benefits from the 13.6% of the portfolio in development assets are clearly visible, but not reflected in the accounts. The balance sheet remains robust.

DOWNLOAD THE FULL REPORT

Click to view all articles for the EPIC:
Or click to view the full company profile:
    Share on facebook
    Facebook
    Share on twitter
    Twitter
    Share on linkedin
    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 disposals (modest

    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 profile. Hudson

    Hardman & Co

    Palace Capital plc upside clear in FY22 (Analyst Interview)

    Palace Capital plc (LON:PCA) is the topic of conversation when Mike Foster, Analyst at Hardman & Co joins DirectorsTalk. Mike explains what the company invests in as a REIT, how it has performed, provides a bigger view on strategy,

    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, why the

    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% above passing

    Hardman & Co

    Palace Capital Conversion to REIT status; FY19 results announced

    Palace Capital’s (LON: PCA) results (4 June) show 37 new leases were completed. Most importantly, these were 14% above ERV (i.e. the level which previous valuers had estimated). This is one of several factors underpinning significant medium-term expansion

    Hardman & Co

    Palace Capital Portfolio and trading update

    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

    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 this location

    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 being overweight

    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 portfolio is

    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. Palace Capital