Palace Capital Regulatory News (PCA)

Palace Capital plc

("Palace Capital" or the "Company")

PALACE CAPITAL GRANTED CONSENT FOR RESIDENTIAL CHANGE OF USE & CONVERSION

AT ITS MAJOR ASSET IN YORK

Palace Capital, the AIM quoted property investment company focusing on the secondary commercial market outside London, announces an update on its property, Hudson House, Toft Green, York. Palace Capital has been advised by City of York Council that prior approval for a change of use and conversion to residential on the majority of Hudson House will not be required.

Hudson House is a 103,000 sq ft office building adjoining York Railway Station. It was acquired by the Company in October 2013 as part of the Sequel Portfolio. At the time of acquisition it was virtually empty and was valued by Cushman & Wakefield at £4.3 million. Since buying the asset, Palace Capital has worked hard to let vacant space and strive for a potential change of use to residential accommodation. The latest Cushman & Wakefield valuation, as at 30 September 2014, reflected the progress that has been made and had grown to £9.65 million.

On 14 October 2014 Palace made an Application for Determination to City of York Council as to whether prior approval would be required for a change of use and conversion of the upper floors and one of the ground floor wings at Hudson House from offices to 115 residential apartments as a Permitted Development of circa 81,000 sq ft. The Application of Determination was for 77 two bedroom and 38 one bedroom apartments. The remaining space will continue to be designated for office use.

The Company yesterday received written notification from City of York Council that prior approval for change of use is not required.

Notwithstanding that prior approval is not required, the Company is working with its professional team on an alternative, larger development scheme. The Board believes that the larger scheme will result in it providing better returns for its shareholders. The Board currently envisage that this alternative scheme will require a full planning application. Discussions with City of York Council are on-going and it is anticipated a formal application will be made by Palace Capital in the late Spring or early Summer of 2015.

Neil Sinclair, the Chief Executive of Palace Capital, said:

"This is excellent news for Palace Capital. This is our largest asset in our portfolio and one where we have worked hard to maximise the potential value from the property. The determination by the Council that approval for the change use and conversion is not required paves the way for us to ultimately create an exciting mixed use development right in the heart of York, where demand for space is strong.

" We will keep shareholders updated on the progress that we make."

-ends-

Date: 18 December 2014

For further information, please contact: