Palace Capital PLC (LON:PCA) has announced the disposals of two properties: one in Leeds and one in Stockport. The rationale for each is clear and in line with the company’s strategy to deliver shareholder value through capital and income growth. The disposals, totalling £3.7m, will crystallise value from active asset management, free capital to be recycled, increase the portfolio’s average unexpired lease term to first break and reduce void costs. We have adjusted our forecasts accordingly and expect Palace will reinvest the proceeds in other regional property assets in due course.
One disposal increases value…
The sale of the long leasehold at Warwick House in Leeds for £2.15m is well above the carrying value of £1.4m, representing a 54% gain before expenses. The tenant, Interserve, pays rent of £196.3k a year, or £172.5k after ground rent due to the freeholder, Leeds City Council, and has an option to break the lease in August 2017. Palace has been able to reduce the risk of vacancy and make a disposal well above the price paid when the property was bought from Quintain in 2013 as part of the Sequel portfolio. The uplift to the carrying value is significant and shows Palace’s ability to generate capital value growth through active asset management.
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