Palace Capital has exchanged contracts for the sale of six industrial properties for £34.0m, as it continues to sell down its assets.
The sale of the portfolio, to Clearbell Property Partners IV LLP (Clearbell), a fund managed by Clearbell Capital LLP, reflects a net initial yield (NIY) of 6.2% and is another indication of valuation stability in the industrial sector after heavy declines in the second half of last year.
The disposal is 3.0% ahead of 31 March 2023 book value and a discount of 1.7% to 30 September 2022 book value. Completion of five of the properties is expected later this month with the sixth property expected to complete in early July.
The six properties – located in Newbury, Coventry, Kettering, Avonmouth, Verwood, and Burgess Hill – generates annual rental income of £2.2m.
The company says that it intends to deploy the proceeds from the sale to reduce the company’s debt to around £25m, equating to a proforma LTV based on the valuation as at 31 March 2023 of around 16%.
The company has also exchanged contracts for the sale of an Aldi supermarket, in Gosport, for £5.6m at a NIY of 5.5%, which is 7.3% ahead of the 31 March 2023 valuation. Proforma net debt and proforma LTV is expected to be £18m and 12% respectively, with the completion of these sales as well as apartment sales at its Hudson Quarter development in York.
The board’s strategy is to maximise cash returns to shareholders, “whilst continuing to remain mindful of consolidation in the Real Estate sector”. As part of its considerations, certain properties are either being marketed for sale or are being prepared and readied for sale whilst other properties are undergoing asset management initiatives in order to prepare them for sale at a future date.
Steven Owen, interim executive chairman said: “The disposal of the majority of the Company’s industrial portfolio is a significant step forward in reducing its debt and LTV and means we can remain focussed on maximising cash returns to shareholders. The Company is in a strong financial position and its low leverage provides it with the flexibility and optionality regarding the timing of further disposals and other strategic initiatives. The Company has capitalised on the recent stabilisation and, in some cases, the recovery of pricing in the investment property market to sell and market for sale selected properties.”
PCA : Palace Capital sells industrial portfolio ahead of valuation