Palace Capital, the property investment company that focuses on commercial property outside London, announces that it has completed the acquisition of the entire issued share capital of SM Newcastle OB Ltd (“SM Newcastle”) for £20.0 million. The Company previously announced that terms had been agreed on this acquisition in the Company’s Portfolio Update of 2 May 2017. The acquisition has been funded by a new loan of £11.5 million from Santander, with the balance being funded from the Company’s own cash resources.
SM Newcastle owns the freeholds of 1, 2 & 3 St James Gate, Newcastle-upon-Tyne as well as the Jury’s Inn Newcastle-upon-Tyne (together the “Properties”). The Properties are situated close to Newcastle Railway Station and were originally developed by The McAleer & Rushe Group.
The Jury’s Inn (which comprises a 274-bedroom hotel), 1 St James Gate (comprising 61,000 sq ft of office space) and the residential element of 3 St James Gate (comprising 145 apartments) have previously been sold on 999-year leases.
2 St James Gate is a fully multi-let office building of 82,500 sq ft, erected in 2006 and producing a net income of £1.605 million per annum. Tenants include the National Lottery Charities Board, Eldon Insurance Services, Serco and UBS. The small retail element of 3 St James Gate, comprising 16,500 sq ft, produces a net income of £0.16 million per annum.
The total net income from the Properties is £1.765 million per annum which, after costs, produces a net initial yield of 8.6%.
Neil Sinclair, the Chief Executive of Palace Capital, commented:
“We are delighted with this corporate purchase, which continues our strategy of acquiring high quality buildings close to transport links in major cities. We have bought the Properties on an attractive initial yield resulting in over £600k per annum in excess of the income foregone on our recent disposals and the recent administration of our tenant at Marsh Barton, Exeter. This acquisition increases the value of our portfolio to over £200 million.
“This transaction demonstrates our skills at recycling our capital – we have used the proceeds of our recent sales on unencumbered properties to fund approaching 50% of the consideration.”
Knight Frank acted for Palace Capital and Steerforth Partners & Sanderson Weatherall acted for the vendors.
Date: 7 August 2017
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Palace Capital plc
(“Palace Capital” or the “Company”)