IN the wake of the financial crash, the real-estate sector was deemed to be toxic. Values fell off a cliff and investors ran for the hills. As the sector started to recover, London led the swing in values. Well-let commercial property assets were attracting investment capital and investors battled to secure prize buildings in central London. But commercial property assets in the regions were left behind despite the recovery gathering pace. However, a number of investors spotted the opportunities emerging now that there was a disconnect between the market and what was happening on the ground. Many had tightened their belts during the recession, but they were emerging in a pretty good mood. Commercial property assets were not the sea of unlettable buildings, as some had feared.
I recently joined one of these early-moving quoted property companies. AIM-listed Palace Capital was effectively a shell when it completed its first significant property portfolio deal in 2013. It has now raised fresh equity three times. The team was tiny and most of the group’s operations were outsourced, leaving the CEO focused on sourcing property deals.
My career has always been in the real-estate sector. Having worked for a private property investment business in Sydney, I returned to the UK in 2012. I joined NewRiver Retail, another AIM-listed real-estate business. It was an amazing ride. But I wanted to develop my skills as an FD. Palace was the perfect opportunity.
The team had completed three significant acquisitions and had grown to a market capitalisation of £100m. But it was facing different challenges. Managing the larger portfolio of assets and the network of lenders was becoming complicated. That was the challenge I took on. Palace is growing up fast, but now it needs to put down some deeper roots. My role takes me into corporate governance, dealing directly with property managing agents, working with our banking partners and investor relations.
The main challenge has proved to be that the step up to FD involves dealing with so many more external organisations. A significant amount of my time is now spent on our investor relations programme. It is important to build long-term relationships with our investors and promote our strategy and potential to more people. And in a small team, I am right at the heart of the decision-making process. We have assembled an exciting portfolio of assets that all have angles from which we can create value for our shareholders. These include some large-scale development projects where we are investing in the buildings. This requires us to be working together.
Our priority is to build the platform that will support the growth of the business. Palace has been running an outsourced model for accounting and other operational functions. Now I have the remit to build our own internal accounting and property management platform. We are recruiting and I am looking forward to the challenge of building the team.
The company remains on the lookout for deals. We are aware we are still too small to feature on a fund manager’s radar and we intend to address this. We have an excellent management team with proven experience in the industry and continue to grow and improve liquidity of our shares. Again, I am at the centre of this, using my contacts to seek out opportunities. Many people continue to have legacy issues on debt and have been caught with long-term derivatives that are now out of money, and they are looking for a clean exit. In a short space of time, Palace has built a reputation for delivery and speed of execution. We are conservatively geared, and have cash resources and access to funds that enable us to act quickly.
I am spinning lots of plates. It is never nine to five, but we have a close team, so I get calls at all sorts of times from colleagues with ideas, asking for my advice. It is great fun and very rewarding. Some have said we are ‘building the Palace’ – we still think there is a long way to go. ?
Stephen Silvester is finance director at Palace Capital