Palace Capital is a UK property investment company. It is not sector-specific and looks for opportunities where it can enhance long-term income and capital value through asset management and strategic capital development in locations outside London.
The flagship Hudson Quarter development in York, which we expect to be a key driver of income growth and value creation over the next couple of years, continues to make good progress. The number of residential units pre-sold or under offer has reached 30% of the total and a first pre-let has been signed for the commercial space at a record high rent for the City of York. H120 property level return was a positive 1.5%, supported by a focus on regional office and industrial property and low retail exposure. Recurring adjusted earnings of £3.9m (H119: £4.3m) or 8.5p per share showed the expected impact of lettings deferral as the company invests in several assets to improve their quality and enhance future income and capital value potential. DPS was maintained at 9.5p, 90% covered by current earnings, reflecting management’s confidence in the prospects for future income (and value) growth. EPRA NAV per share was 391p.
The supply demand balance for regional office and industrial property remains generally firm, and a positive yield spread between the regions and London offers potential for further narrowing. Rents and capital values in the retail sector have continued to weaken.