Continuing high rent collection levels
Rent collection continues to be very strong, despite the backdrop, with 92% of rents received for the December quarter and 94% collected for the financial year to 31 March 2021. As at the date of this announcement 82% of March 2021 quarter rents have been collected or are expected to be received under monthly payment plans, with 69% cash collected, 3% lease amendments and deferrals and 10% on payment plans or monthly not yet due. We expect to have collected in excess of 90% by the beginning of the June 2021 quarter, as we have in previous quarters.
Consistently high levels of rent collection, as a result of proactive asset management initiatives and positive tenant engagement, have enabled Palace Capital to pay successive quarterly dividends of 2.5p since July 2020, including the recent quarterly dividend of 2.5p, paid on 9 April 2021.
Cash reserves at 31 March 2021 were £9.4 million with a further £5.0 million available from the revolving credit facility, providing good liquidity.
Net debt as at 31 March 2021 was £117.9million.
Hudson Quarter
Notwithstanding the tight restrictions imposed due to the pandemic over the last 12 months, the Company's flagship Hudson Quarter development in York is due to be completed on budget and handed over to Palace Capital before the end of this month. 40 apartments have been sold at an aggregate value of £10.77 million, with a further six under offer at a total of £1.75 million. Most of the apartments sold to date have been studios and one-bedroom apartments, with the larger, higher value apartments still available, and accordingly the average value has been at the lower price point for the scheme.
Encouragingly, since the Government's announcement on 23 February providing a roadmap out of lockdown, enquiries and reservations on the residential units have increased significantly. Based on enquiry levels, interest to date and insight into the local residential market, the Company currently expects no less than 50% of the remaining 81 available apartments to be sold by the end of this financial year. All things being equal, these sales would generate circa £20 million allowing the Company to repay the Barclays loan facility in full by the end of 2021. Only £9.5 million of the £26.5 million loan will remain outstanding once the 40 apartments sold have been handed over and those transactions complete.
The 34,500 sq ft office building at Hudson Quarter, known as HQ, is the only newly developed office space in the City of York, positioning it well for the flight to quality that is expected in the office market post pandemic. It is grade A standard and has secured BREEAM excellent and WiredScore Platinum ratings. 4,588 sq ft of the office space was pre-let in February 2020 to the listed law firm Knights, on a 10-year lease at a record rent for the city of £25.00 per sq ft.
Given the significant supply constraints in the market, the direction of underlying occupier trends and the high quality of the space available at HQ, it is expected that the remaining space should be let or under offer by the end of this financial year.
Continuing asset management and portfolio activity
Since December, 22,000 sq ft of office space at Bank House, King Street, Leeds has been let on short term leases to coincide with the other lettings in the building, providing income streams until 2023, pending a major accretive refurbishment of the asset.
Four lettings have been secured since the start of the year at the Company's two leisure assets in Northampton and Halifax. At Halifax which we acquired in 2016 a letting to the Secretary of State for Communities & Local Government was agreed, providing a strong covenant and resilient income of £71,424 per annum on a five year term, and a small restaurant chain has taken a 15 year lease without a break at £50,000 per annum. A further unit was leased to a sports bar operator the day after the Company's financial year end.
A pizza operator has signed an agreement to lease a unit at Sol Northampton for 15 years at a rental of £22,000 per annum.
While these two assets have unsurprisingly been impacted by the government enforced lockdown, they have continued to contribute strong cash flow from good covenants. The current expectation is that the UK's leisure investment market will recover as hospitality returns to normal and international travel continues to be restricted. As the portfolio is refocused towards the office and industrial sectors, exit plans will be implemented for these assets and the capital recycled.
The ongoing disposal strategy, focused on non-core properties, largely where the Company's business plan has been concluded, has continued with the sales at a premium to book value of Harbour Court in Portsmouth and 124-126 Upper Bar Street, Southampton for a total of £2.45 million.
At least a further 15 properties with an aggregate value in excess of £30 million have been identified for disposal during the course of this financial year. Since the Company listed in 2013, 15 non-core properties with a value greater than £1 million have been sold, all of which were completed at or in excess of book value, delivering significant shareholder value and further improving the portfolio quality and income profile.
Neil Sinclair, Chief Executive of Palace Capital commented: “The last 12 months have no doubt been the most testing of the Company's history, as they have been for many businesses. Despite the constraints, we will have reached a significant milestone with the imminent completion of Hudson Quarter and our proactive asset management has resulted in continued strong rental collections, enabling us to maintain our dividend payments uninterrupted since July last year.”