Merrion proving a beacon of success for owner Town Centre

The mall, with its focus on discount retailing, continues to beat the downturn as shoppers tighten their belts.

Town Centre’s chairman and chief executive Edward Ziff said the slowdown widely reported by retailers in January had proved a double edged sword for the company.

“We’ve won some customers and lost some,” he said. “Leeds is quite dependent on the Health Service and local authorities for employment so we have seen some impact. But in these times people tend to drift towards value for money which is good for Merrion.”

He added that the group expects to preserve market share rather than grow it during 2011, which is predicted to be a very tough year for retail.

“We’re seeing business at the same level as last year. There’s no doubt it’s not pretty for retail at the moment, but for us it’s business as usual. Merrion continues to be a strong performer.”

He said that the Merrion Centre has just the sort of retail tenants that are doing well in the current market.

Only three per cent of space was not let at the mall, which compares to 12 per cent void levels for the whole of Leeds, as reported in a recent Drivers Jonas Deloitte survey.

Leeds-based Town Centre said that rent collections throughout the period were strong and, for the recent December quarter day collections, over 98 per cent of rentals due were collected within five days of the due date.

“We have a very balanced spread of tenants with only one tenant with four tenancies, two tenants with three and seven with two,” said Mr Ziff.

The group’s shares closed up 11p at 181p.

Underlying profit before tax for the six months to December 31 rose 76 per cent to £4.4m.

Profit before tax was £7.8m, down from £31.5m in 2009 – but this figure included a £9m profit on repurchase of debenture stock and valuation movement of £19.7m.

Rental income from investment property for the six-month period was unchanged at £8.9m.

“This reflects our efforts to reduce voids in the last 12 months and, excluding disposed properties, total rental income has increased by 1.8 per cent,” said Mr Ziff.

Income from car parks was also unchanged at £2.4m.

Net assets are now £147.0m, an increase of 2.9 per cent compared to June 30, 2010 when they amounted to £142.9m.

The interim dividend has been increased to 3.10p per share from 3.02p per share.

Looking forward, Mr Ziff said the group could spend £50m on acquisitions if it found the right target.

Possible acquisitions include car parks and retail, possibly in the London suburbs.

Last July, the group took back the management of the Merrion Centre multi-storey car park. It has introduced its Town Centre Car Park branding and instigated a number of marketing initiatives which have increased parking volumes and the overall footfall in the Merrion Centre.

Town Centre sold a former cotton mill in Bradford during the sixmonth period for less than £1m.

Alison Watson, senior analyst at Matrix, said: “Town Centre has produced a good set of results with net asset value coming in four per cent ahead of our forecast, showing growth of three per cent in the first half and managing to buck the trend of falling values in secondary property by demonstrating underlying portfolio growth of 1.6 per cent.

“Occupancy levels improved in the first half to 95.6 per cent with The Merrion Centre retail element 97 per cent occupied and also reporting income growth of 4.7 per cent over the period.”

She reiterated her ‘add’ recommendation.

Town Centre is gearing up for the 2013 opening of the Leeds Arena next door to the centre.

Mr Ziff said that the opening of the Arena presents new opportunities for leisure units such as restaurants, bars and pubs which can cater for visitors. The Merrion Centre car park should also benefit as it is the nominated car park for Arena nights.

Analysts said that Town Centre Securities has come out of the protracted downturn in the property market in a strong position.

Town Centre’s property portfolio is dominated by the Merrion Centre, which represents over 40 per cent of the group’s portfolio.

[email protected]