REG - Palace Capital PLC - RESPONSE TO LAKESTREET CAPITAL’S ANNOUNCEMENT

Palace CapitalAnnouncement

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RNS Number : 0745O  Palace Capital PLC  08 January 2026

 

Palace Capital PLC

("Palace Capital" or the "Company")

 

RESPONSE TO LAKESTREET CAPITAL'S ANNOUNCEMENT

 

 

Palace Capital confirms it received a valid requisition notice (the "Notice of
Requisition") on Saturday 3(rd) January 2026 from Lakestreet Capital Partners
("Lakestreet") (via Aurora Nominees Limited), seeking to appoint Christian
Kappelhoff-Wulff and Valentin Pierburg to the Board and remove the current
Executive Chairman Steven Owen with immediate effect.

Accordingly, the Board will convene a general meeting to consider Lakestreet's
proposals (the "Requisitioned General Meeting"). A circular, including the
notice of the Requisitioned General Meeting, will be posted to shareholders in
due course in accordance with the requirements of the Companies Act 2006.

On 5 January 2026, Lakestreet published an announcement which included a
number of comments about Steven Owen's remuneration, which are inaccurate and
misleading and reflect clear misunderstandings about Palace Capital's recent
corporate history which is summarised below.

Since Palace Capital's managed wind down strategy was announced in July
2022, the Company has sold over £160 million of assets, repaid all bank debt
(£95.4m as at 30 June 2022) and returned over £64 million in cash to
shareholders. Dividends paid to shareholders since July 2022 total
approximately £18.7 million, which will increase to £19.4 million at the
end of January 2026.

The Company now has only five investment properties remaining, which were
valued at £41.3 million as at 30 September 2025. Two of these assets (Halifax
and Leamington Spa) are under offer, and a third asset (Exeter) is being
marketed for sale and is also expected to go under offer in the coming
weeks.

The remaining two assets (Northampton and Newcastle) require the completion of
ongoing asset management activities, including material capital expenditure at
Newcastle, in order to appeal to potential purchasers. In addition, nine
apartments remain at Hudson Quarter in York, together with a ground rent
freehold interest, valued at £4.2 million as at 30 September 2025, although
two of these apartments are currently under offer which, if the disposals are
completed, will reduce the number of apartments remaining to seven.

The Company has made significant progress to date on reducing administrative
expenses as the portfolio reduces in size following disposals. The Company has
closed its head office and reduced its headcount from an average of seven
directors and nine employees for the year ending March 2022 to two directors
and two employees. Directors' fees have also been reduced significantly as a
consequence.

Recurring administrative expenses at HY26 were reduced by a further £0.3
million compared to HY 25. Other, ongoing cost reduction measures, when fully
implemented, are expected to result in annualised administrative expenses of
c.£0.7 million from the first quarter of 2026. As part of this process, as
previously disclosed, the Board is also reviewing its composition.

 

Detailed response to Lakestreet Capital's comments

Board costs significantly reduced

The cost of the Board has reduced significantly since Steven Owen became
Chairman, the Board having been reduced from seven directors to two.  The
sales of the properties at Halifax, Leamington Spa and Exeter have not yet
completed therefore comparing the current cost with a future position is
misleading.  As has already been announced, the composition of the Board is
currently under review as part of ongoing cost reduction measures and to
reflect the expected disposals of Halifax, Leamington Spa and Exeter. The
figure of £0.7 million noted above in relation to annualised administrative
expenses includes a significant reduction in the cost of the Board. Disclosing
a ratio to net income does not reflect the strategy of the Company to wind
down and return capital to shareholders.

Steven Owen's remuneration supported by over 90% of shareholders at the last
three AGMs

To compare Steven Owen's remuneration as Executive Chairman with the
remuneration of the previous five non-executive directors is misleading as
these were all non-executive roles. There were previously three executive
directors in addition to the non-executives. The executive directors'
remuneration for the year ended 31 March 2022 was as follows: Chief Executive
- £590,675 (of which £303,000 was salary) Property Director - £453,565 (of
which £229,500 was salary), Chief Financial Officer - £148,723 (of which
£61,973 was salary reflecting his appointment during the year).

The Remuneration Committee, chaired by Mark Davies as the sole Non-Executive
Director, with assistance and advice from its independent remuneration
advisors, Korn Ferry, determines salary and remuneration. Shareholders have
been consulted on remuneration and are asked to vote on the Remuneration
Report annually at the AGM. The Executive Chairman does not set his own salary
or remuneration.

Steven Owen joined the Board as Non-Executive Chairman on 1 January 2022 at an
annual fee of £110,000. In June 2022 he assumed the role of Interim Executive
Chairman and was appointed Executive Chairman in July 2023 effectively
combining the role of Chairman and CEO. Therefore, he has acted in an
Executive capacity for over three and a half years of the four years that he
has served on the Board.

Since November 2023, Steven Owen has been the only Executive Director of the
Company and has been directing and implementing the strategy, and since June
2025 has been one of only two employees with senior executive roles in the
Company.

At the Company's AGMs held over the last three years, shareholders have
approved the Remuneration Report with an overwhelming >90% majority in
favour.

 

 Year  Vote                 For (%)  Against (%)  Votes withheld
 2025  Remuneration Report  99.5     0.5          1,597
 2024  Remuneration Report  99.7     0.3          1,671
 2023  Remuneration Report  90.4     9.6          6,811
 2023  STIP                 97.5     2.5
 2023  Remuneration Policy  97.7     2.3

 

Executive headcount has reduced significantly

As Steven Owen is an executive member of staff he is included in the head
count numbers. The Company's employees now comprise the Executive Chairman
working with the Head of Property and a part time Finance Manager.  In
addition, Mark Davies is the Senior Independent Non-Executive Director who is
Chair of both the Remuneration and Audit Committees. The Company also retains
the services of an external part time company secretary.

Short Term Incentive Plan received 97.5% of the votes in favour at the July
2023 AGM

The Short Term Incentive Plan ("STIP") was introduced in 2023 following
extensive shareholder consultation by the Senior Independent Director ("SID")
with shareholders representing over 45% of the then register. The STIP
received 97.5% of the votes in favour at the July 2023 AGM. Shareholders at
the time complimented the Company for the alignment of executive remuneration
with the return of capital strategy.

At the same time as the STIP was implemented, it was agreed that Steven Owen
would not receive an annual bonus. An illustration of the potential amounts
payable if the strategy was successfully implemented was included with the
2023 AGM notice when the STIP was proposed, ensuring that shareholders had
visibility on what was being proposed.

The STIP was created for the benefit of all employees. Reallocations of lapsed
awards for leavers were made to senior executives, not just Steven Owen, to
reflect their performance, the need to retain them to implement the strategy
and for taking on additional responsibilities following the departures of
other employees.

Steven Owen's 12 month notice period is market standard for executive
directors

This notice period was introduced in July 2023 when Mr Owen was appointed
Executive Chairman, reflecting his importance to the implementation of the
strategy. His appointment and re-election have been approved by shareholders
at the 2023 AGM and subsequently at the 2024 and 2025 AGMs.

The notice period of 12 months is considered to be market standard for
executive directors and applies to both parties and reflects the Company's
policy on notice periods for senior executives for many years prior to Steven
Owen's appointment.

Extension of the financial year of Palace Capital from 31 March 2026 to 30
September 2026 to reduce administrative costs

As stated in the HY26 interim results announcement, the FY26 year end was
extended by six months to 30 September 2026 to provide strategic flexibility
and optionality and facilitate further administrative cost reductions
(including the significant level of audit fees likely to be incurred for the
FY26 audit notwithstanding the reduction in size of the portfolio). As a
comparison, the audit fee for the FY25 accounts was £169,000. If the
remaining assets were to be disposed of in time, then there may not be a need
for a FY26 audit as the Company may be in the process of being wound up and
the remaining cash distributed to shareholders. The decision to extend the
year end was a Board decision and is unconnected to Steven Owen's remuneration
package.  As stated above, Steven Owen's remuneration package is disclosed
annually in the Directors' Remuneration Report and the STIP and Remuneration
Policy were approved by shareholders by a vote of 97.5% and 97.7% respectively
in favour at the 2023 AGM.  The Company strongly refutes any suggestion that
there has been an attempt to delay or obscure information regarding Steven
Owen's remuneration package, or to extend his tenure on the Board.

Over 90% of shareholder votes supported the re-election of Steven Owen at the
Annual General Meeting in 2025, 2024 and 2023.

It is inaccurate for Lakestreet to say that Steven Owen received significant
NO and ABSTAIN votes with regards to his re-election. Voting detail is
provided below.

 Year  Vote                        For (%)  Against (%)  Votes withheld
 2025  Re-election of Steven Owen  94.8     5.2          210,387
 2024  Re-election of Steven Owen  95.6     4.4          1,255,464
 2023  Re-election of Steven Owen  77.1*    22.9         1,546,254

* Clarified that 91% intended to vote FOR following administrative error from
shareholder

Asset sales progressing well, led by Palace Capital's property experts

As stated in the HY26 interim results announcement, the appropriate timing for
the disposal of the Northampton property was unlikely to be before the end of
the first quarter of 2026 and would be subject to market conditions at that
time, as there are asset management initiatives to be completed.  As also set
out in that announcement, further lettings of the vacant space at the
Newcastle property are required in order to increase the occupancy from 61% as
at September 2025 and extend the WAULT prior to the asset being ready for
sale. The Company is pleased to note that occupancy has increased under the
management agreement with Orega and this trend will need to be further
established before a sale can be contemplated.  In the Company's view this is
unlikely to be before the second quarter of 2026. The Board and management
consider that to sell prematurely, whilst being achievable at any price, would
not maximise value for shareholders.

Lakestreet's statement does not accurately reflect Palace Capital's successful
wind-down of the Company, which has been carried out solely in accordance with
the wishes of shareholders (as evidenced by the strong support received by the
Board at the Company's AGMs) in a difficult UK property market.

 

For further information please contact:

 Palace Capital plc                           via FTI Consulting

 Cavendish Capital Markets                    Tel: 020 7220 0500

 Matthew Lewis, Katy Birkin, Edward Whiley

 FTI Consulting                               Tel: 020 3727 1000

 Dido Laurimore, Giles Barrie, Andrew Davis   palacecapital@fticonsulting.com (mailto:palacecapital@fticonsulting.com)

 

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