Palace Capital Share Discussion Threads

[baner] 22/12/2022 10:11

PC is in good shape no doubt. Strong cash flow, low LTV and a well diversified portfolio. Reduced overhead costs that should see a further £1m go in 2023. 15p of dividend secure. NAV should still be well north of 300p so good upside value in the liquidation process. Very sound risk/reward and the new BOD seems to be doing the right things with the assets currently. Maybe time for another round of share buy backs as soon as further flats are sold in York.

[nickrl] 22/12/2022 09:44

To be fair they have managed to shift five units at Hudson Qtr since the interim results update on 24/11 so I wonder if they are happy to close the deal now when Sinclair told me they wouldn't be cutting prices.

What they never tell you, and they aren't the only ones, is how much rent they have forgone with these sales but as i said above they are exposed on unhedged debt as much is linked to SONIA+near 2% margin so up another 0.5% already. They say nothing about this and need to prompt them for what strategy is.

[spectoacc] 22/12/2022 08:22

Maybe needs an analysis rather than a copy/paste.

Still 22 to sell at Hudson Qtr eh - and that's assuming the 7 (sorry, seven) under offer go through.


"...Continues to monitor the timing of significant property disposals for the time being."

That means what exactly? Nothing more near-term I assume?

[cwa1] 22/12/2022 08:19

Disposals and Debt Position Update

Palace Capital today provides an update on its property disposals and debt position since its half year report ended 30 September 2022 announced on 24 November 2022.

Disposals

· Since 30 September 2022, the Company has completed on investment property disposals totalling £7.6m, at an aggregate 3% premium to the 31 March 2022 book valuation. These include:

o 127 Above Bar Street, a leisure asset in Southampton, for £3.75m, reflecting a 21% premium to 31 March 2022 book valuation.

o Staple House, an office building in Winchester, for £3.55m, 10% below the 31 March 2022 book value.

o A residential unit in Banbury for £0.3m, in line with the 31 March 2022 book value.

· Apartment sales at Hudson Quarter, York have continued to progress well, providing additional unencumbered cash for the Company. A further eight apartments have completed in the period since 30 September, for a total of £3.4m, with one unit exchanged to the value £0.7m, resulting in aggregate proceeds of the 98 units completed or exchanged totalling £35.5m. A further seven units are under offer to the value of £2.8m, leaving 22 units remaining.

Debt position

· As at 21 December 2022, gross debt has reduced by 10.6% from 30 September to £79.3m (30 September 2022: £88.7m) and cash reserves totalled £12.9m, resulting in net debt of £66.4m (30 September 2022: £75.8m). Proforma loan to value ratio has reduced from 32.2% at 30 September 2022 to 29.6% as at today's date.

Commenting on today's update, Steven Owen, Interim Executive Chairman said:

"The Company continues to make steady progress with smaller asset disposals being achieved in a difficult environment.

"The Board is mindful of the potential for further instability, including interest rate rises, and therefore continues to monitor the timing of significant property disposals for the time being. In the meantime, the focus on disposal of smaller assets, active asset management and debt repayment continues."

[baner] 28/11/2022 13:00

hpcg - a REIT in run down using proceeds to buy back its own shares will not at all necessarily have a decreasing dividend! PC today yield a bit north of 7% and as York flats are sold and admin costs further reduced, there will in fact be room for a higher divi even before buy backs.

[hpcg] 27/11/2022 21:28

A REIT in rundown will always have a decreasing dividend. I consider the dividend a bonus and the meat is the money from asset disposals. That is clearly not going to be at book, so the question is what amounts to an attractive discount. It is so difficult to say that I can understand reticence to sell or buy.

[nickrl] 26/11/2022 11:17

Had a run through PCA results in detail and they are quite exposed on debt with nearly 60% floating although this is like SREI as its declared as the statement date. The biggest hedge is on the Barclays facility and that expires in Jan 23 so floating will shift upto 90%.

The Santander facility which is SONIA+2.2% looks most expensive although got to give them credit for getting margin reduced from 2.5% a few mths back. They are targeting disposals and Hudson Qtr resi sales income to reducing it knocking it down another 5m post H2 and have exchange contracts on a Southampton building for 3.75m so a bit more off the Sanatander facility. The Barclays loan post hedge expiry reverts to SONIA+1.95%. Im surprised they didn't point that out at HY and ive emailed them for clarity as thats 28m at c5% vs about 1.5% now if ive interpreted the hedging note correctly.

They need those HQ sales to reduce debt further and potentially have c10-12m still to go and it looks like they are prepared to do "deals" as they've made modest 1.8m write down in value over the half. Getting all these away is worth 0.5m off interest costs although clock is ticking down on the Lloyds loan (03/24) as well.

Also once you read the small print you find the 0.9m headline increase to NRI is actually only 0.2m after disposals and voids arising although at least its in there unlike some. Offsetting increased interest costs is the savings they say will come through on admin costs of 1.2m pa which won't filter through to bottom line until FY24.

Divi isn't covered at cash level but thats because of payoff Sinclair and the property director of 1.38m The annual report will interesting reading about who got what and mustn't forget those two are sitting on a lot of shares and options and presumably are free to sell.

Im out of here currently but imv the divi is vulnerable if they want to keep it covered as they will either need to sell off more assets to cover debt expires or pay out more in interest costs. On the hand if debt cost are on in decline by H2 23 could work in their favour.

[davebowler] 25/11/2022 09:25

Simon Thompson -Palace Capital's high yielding shares have delivered a modest total return of only two per cent since I initiated coverage (Alpha Research: ‘A Reit royal value play’, 11 March 2021), well ahead of the 28 per cent loss on the FTSE Aim All-share Total Return index, albeit the shares have given back a chunk of their gains since my last buy call over the summer (‘Hot property’, 22 August 2022). Trading 42.4 per cent below book value, and offering a prospective dividend yield of 7.3 per cent, the shares are still worth holding onto for their income and should offer capital upside when the market stabilises.

[konradpuss] 24/11/2022 20:26

SpectooAc, how spot on. There will be many more vacant offices. O.K. the big companies will still occupy less space in the best BREAM (energy efficient) buildings.

Smaller occupiers will want less space and much more flexibility and will have to pay for that.

Now just try and repurpose (to residential mostly) some of these redundant office buildings. Not easy, not cheap.

Retail was a car crash, now offices to follow in my humble. The only honest office agent to report this recently was LSH. The likes of Savills will not be honest as their big clients would not like to hear the truth.

[konradpuss] 24/11/2022 20:10

Makinbuks, are you sure? It's like a new car, drive it around the block and it aint new.

It would probably cost as much to redecorate etc. than the net rent.

Best to just slowly sell.

Sinclair was a very greedy CEO with little skin in the game. Glad the fellow is gone to enjoy lush Mayfair wine bars now at his own expense.

[spectoacc] 24/11/2022 13:39

@Makinbuks - but if the Tories do indeed abolish S21 notices? PCA meant to be in wind-up mode.

Hudson Qtr a red flag throughout - couldn't shift them in a massive property bull mkt.

Thanks @nickrl - there'll be more & more "single building with issues" coming up for offices IMO. The issues in future being no tenant, empty rates liability, huge ESG capex needed. Not saying that's (yet) PCA's issue.

PCA still cheap compared to what RLE directors pay each other.. So many execs milking co's for all they're worth, and more obvious at the lower mkt cap REIT end.

[makinbuks] 24/11/2022 12:37

I reiterate I’d like to see them rent out 12 of those remaining 24 flats at Hudson, generate rent c. £150K pa and aim to close out the rest within a year

[nickrl] 24/11/2022 09:24

From PCA analyst briefing

1.4m paid out to Sinclair and his mates!

59% debt still floating but watching swap rates

office worst occupancy at 84% and valuation down 8.6% but seems one building in Leeds has issues so has exacerbated movement but RGL holders take note

Hudson Qtr grinding on still at least 24 left but at least it all goes to bottom line now

[2wild] 09/11/2022 13:19

nickrl interim results are due 24th November, as stated in in last month trading statement.

[nickrl] 07/11/2022 23:28

@2wild well since they first went on sale they've talked up the sales but they then under deliver when we get the next update. That said they've covered the development loan now so every quid goes to the bottom line now.

[2wild] 07/11/2022 23:02

It will be interesting to see how many of the Hudson Quarter flats that were under offer have completed.

[nickrl] 07/11/2022 22:21

@m_kerr its looking better than it was and might be getting into interesting territory again. I certainly applaud the savings they've made by bailing out of Sinclairs expensive Mayfair emporium - he costs the shareholders a fortune with that unnecessary office to play to his vanity.

Interims maybe next week.

[m_kerr] 07/11/2022 21:18

they have a good spread of assets. also been deleveraging over the past year, mainly by getting rid of their lower quality or obsolete offices at a premium to book value. i like that they've now got a stated intention to maximise cash returns which can only be a positive for shareholders.

looks like one of the lower risk property opportunities out there.

[cwa1] 20/10/2022 11:47

Director Dealing

Palace Capital announces that Matthew Simpson, Chief Financial Officer, today purchased 8,471 ordinary shares of 10p each at 236.094p per share.

[konradpuss] 19/10/2022 18:30

Except when it comes to fire fighting companies! Assetco Plc......

I would rather see Peter upping his stake.

[baner] 19/10/2022 18:02

Excellent news - Harwood are AAA competent investors.

[cwa1] 18/10/2022 16:19

Increase in holding by Harwood:-

[2wild] 12/10/2022 19:32

Unfortunately I now own a shedload of UKCM. The increased, barely covered, 3.4p annualised dividend is below 3.1% of latest NAV. 5 to 30-year UK gilts yields increased from below 1% to 5% within a year. In hindsight it's hardly surprising low yielding REITs in particular have been totally crushed. Oh well I suppose I could have brought bitcoin at over 60k.

[spectoacc] 12/10/2022 14:07

The council tax on the vacant ones will start to bite - or have they a way out of that, eg claiming they're not finished?

@baner - I think that applied before today's RNS. Now I think it could be several years before large disposals, and then at significant discounts.

But horses for courses, and good luck. The economy seems particularly ropey & difficult to get a handle on atm.

PCA is arguably like my own REIT holdings - too late to sell, too soon to buy.

[makinbuks] 12/10/2022 14:00

If we're sitting tight for a while maybe we should rent some of them out. Bring them back to market gradually as tenants vacate