London-listed Palace Capital has unveiled plans to divest its industrial and logistics portfolio, in order to concentrate on creating ESG-aligned office assets.
Following a strategic review, the group said it would specialise in creating value from offices with relatively low EPC ratings, such as D (brown offices) through refurbishment and other asset management initiatives, to deliver high EPC ratings such as B (green offices) whilst improving the carbon footprint of such buildings.
The review also found that the group could achieve much greater impact 'with its ESG strategy in relation to its current and future office portfolio than it can with its industrial portfolio'.
This is in line with the company's goal to generate increased rental and capital values, reduce the risk of obsolescence from the existing portfolio, enhance the group’s ESG credentials and further establish it as a specialist regional office player.
In order to execute and finance this strategy, Palace plans to market for sale the seven industrial assets it owns, together with an additional property previously classified as a retail warehouse property, as a single portfolio. The independent valuation of these properties as at 31 March was £46.5 mln (€54 mln).
This year the group has so far made £4.5 mln of non-core disposals, and has earmarked other such assets for sale.
The proceeds of these divestments will be re-invested into improving the existing regional office portfolio and also into new opportunities in the regional office market that offer ESG enhancing prospects.
Going forward, the group will also be operating with a lower loan to value (LTV) ratio than in previous years. It has determined that it will operate within a LTV limit of 35% and on a normalised basis within the 25%-35% range. The LTV as at 31 March was 28%.
Given the company's current LTV, the board will this month commence a share buyback programme of up to 5% of the group's issued capital.
Said Steven Owen, interim executive chairman: 'This is a transformational strategy that builds on the strong platform we already have in place but will provide us with a clear focus and distinct differentiation.
'The board believes this change in our strategy considerably enhances the investment case for the Group and is a key step in the board’s commitment to maximising value for shareholders and closing the current share price discount to NAV.'
