Listed UK regional property specialist Palace Capital is selling its industrial and logistics portfolio to become an ESG-driven office specialist, adding value in buildings with low EPC ratings through refurbishment and financing.
The property investor announced the outcome of its strategy review and its intention to drive an ESG agenda across its portfolio of regional offices and to sell its £46.5 million industrial portfolio.
The Board agreed that the group can make far greater impact with its ESG strategy in relation to its current and future office portfolio than it can with its industrial portfolio. This strategy seeks 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.
“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”, said Steven Owen, interim Chairman of the Board, Palace Capital. “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.”
The Group intends to have a pure focus as an ESG driven, regional office market specialist where its expertise can be used to create 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.
In order to execute and finance this strategy, it is proposed that the industrial portfolio, comprising seven assets, together with an additional property previously classified as a retail warehouse property, will be marketed for sale as a single portfolio independently valued at £46.5 million.
The group will continue to dispose of non-core investment properties during the current financial year. The proceeds of these sales 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 that will generate rental and capital value growth.
If potential acquisitions that meet the criteria are not found, Capital Partners will consider returning excess capital to shareholders. The Board also announced a share buyback programme of up to 5% of the Group’s issued share capital, financed by the cash generated from recent sales.