Activist Lakestreet Capital has won the battle for Palace Capital (PCA), with the founder and chairman of the Swiss firm both joining the board of the £42m property investment company reaching the end of a three-and-a-half year wind-down.
Their arrival was announced with news on Friday that Palace Capital’s two board directors, executive chair Steven Owen and senior independent director Mark Davies, had resigned with immediate effect having lost the support of shareholders.
Basel-based Lakestreet, which has a total stake of 22.3% in Palace Capital, withdrew the requisition for a general meeting at which its founder and chief executive Christian Kappelhoff-Wulff and chair Valentin Pierburg sought election to the board of a real estate investment trust.
“Having consulted with shareholders, the board determined that the resolutions which would have been proposed at the requisitioned general meeting would have passed and that it is not in the company’s best interest to continue with that process in light of the expectation that the company will shortly only have two remaining investment properties,” Palace Capital said.
Owen, a former chair of Primary Health Properties (PHP) who had dismissed Lakestreet’s criticism of his pay as “misleading“, thanked the Palace team and its advisers for helping to deliver on the managed wind-down launched in July 2022.
Davies, who is also chief executive of PHP, said Palace Capital had returned £64m to shareholders since 2022 and only had five investment properties left, three of which, in Halifax, Leamington Spa and Exeter, were expected to be sold in the next few weeks.
“Having consulted with shareholders, I have decided that now is the right time to step down from the board and allow me to concentrate fully on my role as CEO of PHP,” Davies said.
This is the second time Kappelhoff-Wulff, who becomes Palace Capital’s non-executive chair, has taken control of a UK listed company. For three years until 2022 he was a non-exec at John Menzies and chair of its strategic committee which sold the global distribution company, by then called Menzies Aviation, to Abu Dhabi’s Agility for £763m in 2022.
Our view
Richard Williams, senior analyst at QuotedData, said: “I’m a bit in the middle on this one. It is true that the former chair’s pay looked excessive given the small number of assets left in the portfolio and against the annual income of those, but that was because he had successfully sold down the vast majority of the portfolio, paid off debt and returned capital to shareholders. It felt a bit unfair for Lakestreet to come in when the job was almost done and state that the pay was now too high. Perhaps in future managed wind-downs, executive pay should be better aligned from the start so that shareholders get value for money throughout and executives are incentivised.”
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