Chief Executive Review


We are delighted to report the Company’s results for the year ended 31 March 2016, which show that we made a profit before tax of £11.8m. Net Asset Value per share increased by 5% from 396p to 414p and this includes the absorption of the dilutive impact of our £20m share placing last June at 360p per share.

The carrying value of the Company’s portfolio is now at £174.5m compared to £103.0m 12 months prior largely reflecting acquisitions of £66m during the year.

Our contracted rent roll is now £13.5m per annum with a net income of £11.8m per annum allowing for head rents, service charge shortfall and empty rates. The latter would have been considerably lower but for the fact that one of our significant assets at Hudson House, York, the 103,000 sq ft office building adjoining the Railway Station, cannot be let on reasonable leases as it is pending refurbishment/redevelopment. Our bank borrowings are at £71.9m representing a net LTV of 37% meaning we remain conservatively geared.

We have adopted a progressive dividend policy allowing our shareholders to benefit as the company prospers. We paid an interim dividend of 7.0 pence per share on 30 December 2015 and as we stated on 10 May 2016 we intend to pay a final dividend of 9.0 pence per share on 29 July 2016 to those shareholders on the register as at 8 July 2016.

We are making sure and steady progress. We have strict criteria on any potential acquisition so we are cautious but very opportunistic and only focus on those where we can achieve the desired return. We are constantly travelling around the country meeting owners and agents and this has helped us to source and conclude off-market acquisitions.

Our focus has been to acquire properties outside London. We made the small £1.8m acquisition of Hockenhull Estates in 2011 comprising nine Cheshire based income producing properties but then made the significant £39.25m corporate acquisition of the Quintain subsidiary known as the Signal Portfolio in October 2013 comprising 24 properties and the £32m corporate acquisition of Property Investment Holdings Ltd in August 2014 comprising 17 properties.

We were investing in the regional market at a time when there were very few players with no talk of a Northern Powerhouse or Regional Devolution. We have seen very considerable growth from these two major acquisitions. The remaining properties in the Signal Portfolio have recently been valued at £71.0m and it is worth bearing in mind that £3.9m of sales have already taken place. In addition the remaining properties in the PIH portfolio have been valued at £36.5m with £2.0m of sales having been completed from this portfolio. The Board considers there are still considerable asset management opportunities on these two portfolios and we envisage continuing growth from them.

Our enlarged network has allowed us to make five opportunistic acquisitions totalling £66.0m in the last financial year three of which were off market. These were:


- Bank House, King Street, Leeds - £10.0m

- Sol Central, Northampton - £20.7m

- 46-54 High Street, Sutton - £3.95m

- 249 Midsummer Boulevard, Milton Keynes - £7.225m

- Broad Street Plaza, Halifax - £24.18m


Further details of these acquisitions are contained in our Property Report.  As with the rest of our portfolio,  we will apply our own style of active management to all of these acquisitions, however, in our Portfolio Update announced on 10 May 2016 we made particular reference to Broad Street Plaza, Halifax. We have now received credit approval from a major insurance company to replace the existing short-term facility with a new loan of £15.2m for a term of ten years at a fixed interest rate of 3.5% including margin. Not only does this provide us with a current return on our equity of 14.5% but this rises to 16% in 2017 when the fixed rent increases take place. In addition, we have also been advised that we can claim full capital allowances as these have not been claimed to date so we have every opportunity of an exceptional return from this property. We are cash managers as well as property asset managers and Broad Street Plaza is a particular example.

Broad Street Plaza is within half a mile of one of the country’s most successful but largely unknown urban regeneration schemes. Dean Clough in Halifax is a former mill which was once a carpet factory and which closed in 1983. It is now flourishing after tens of millions of pounds of investment with over 1,000,000 sq. ft of offices, restaurants, galleries and retail and is virtually fully occupied. This is very complementary to Broad Street Plaza.

We are really excited about Hudson House, York situated within a minute’s walk from the Railway Station. City of York Council are one of only three councils in the country to recently announce a major initiative to see surplus railway land developed into thriving office, retail and residential schemes. This will be known as York Central and can only benefit our 103,000 sq ft office building where we are planning a major office and residential scheme. Our view is that public transport and in particular railway hubs such as York will play an increasing part for an office and residential development to be successful. We are exceptionally well placed at Hudson House as York is a growing business, educational and tourist destination.

We are delighted to have appointed Stephen Silvester as Group Finance Director and Matthew Simpson as Finance Manager during the year.  We are also pleased to report that our Property Director, Richard Starr will be joining us as a full-time Executive Director on Monday 4 July 2016. They have made a significant contribution to the growth of Palace Capital.  With Andrew Thomas joining us on 13 June 2016  as Investment Manager, we will have a formidable acquisition, asset management and finance team.

We are looking at a number of significant opportunities at the moment as we strive to grow the Company and joining the Official List of the London Stock Exchange remains our objective. Our acquisition strategy remains cautious but opportunistic. We are very grateful for the support shown by our shareholders and we believe we have the management team to achieve our goals. We look to the future with continued confidence.


Neil Sinclair FRICS

Chief Executive

3 June 2016