Palace Capital activist pushes for share buyback

A Swedish activist investor is urging Palace Capital to start buying back its London-listed stock, claiming that the share price’s steep discount to NAV makes the move right for the company and its shareholders. Peter Gyllenhammar’s eponymous Stockholm-based investment firm has taken a 4% stake in Palace Capital, making it the fifth largest external shareholder in the company. Gyllenhammar and Palace chief executive Neil Sinclair held an initial meeting over Microsoft Teams on Monday. In an interview with EG, Gyllenhammar praised Sinclair and the management team, describing them as “first-class real estate professionals”, and singled out the company’s mixed-use Hudson Quarter scheme in York (pictured) for its quality. But he added that there are challenges and opportunities from the company’s discount to NAV of around 50% and its shareholder register – on which the largest shareholding is a 7.7% stake owned by AXA Investment Managers. “It has an excellent management team, it has good assets, it has a good track record – but it trades at 50% of net asset value with a wide-open ownership structure,” Gyllenhammar said. “Will that continue? No, it can’t continue. Either they need to bridge the gap by taking action or someone will certainly bid for the company.” Gyllenhammar said a share buyback “must be done”, adding: “It’s in the best interests of the company, it is in the best interest of the shareholders. No stakeholder will suffer from it.” He continued: “I think it’s a big mistake not to trigger a buyback programme. By not doing that, the board doesn’t communicate to the stock market that it believes that these [asset] values are real. If you feel as a board that these values are real and the discount is 50%, how can you justify not buying £2 for £1?” In a separate interview, Sinclair confirmed that he and Gyllenhammar had discussed a buyback during their virtual meeting this week. “It’s on the board agenda every time,” Sinclair told EG. “But we always thought it wasn’t the right time.” Sinclair added that he told Gyllenhammar the team would next consider the issue after the publication of Palace’s interim results in mid-November. The Palace Capital CEO said he had not discussed with Gyllenhammar whether the Swedish investor planned to take his stake above 4%, adding: “Is he the sort of guy who would be happy at 4%? Probably not, but we don’t know.” Asked the question by EG, Gyllenhammar said: “Put it this way – as long as you can buy £1 for 50p, I think it’s very attractive.” To send feedback, e-mail tim.burke@egi.co.uk or tweet @_tim_burke or @estatesgazette