Shoppers helping Merrion defy the downturn

Town Centre's chairman and chief executive Edward Ziff said that the Merrion Centre has just the sort of retail tenants that are doing well in the current market.

"The value end of retail is enjoying a good run in this environment," he said. "The Merrion Centre is not particularly attractive architecturally, but financially it does unbelievably well. There will always be good demand for that sort of retail."

In the year to June 30 the Merrion Centre grew its income by nearly four per cent to 9m.

Mr Ziff said only two per cent of space was not let, which was a record for the centre.

Town Centre is keen to start buying more property, but Mr Ziff said he wasn't prepared "to pay tomorrow's price today".

Instead the group will focus on its existing portfolio, particularly the Merrion Centre. Mr Ziff said the group is gearing up for the 2013 opening of the Leeds Arena next door to the centre.

"The Leeds Arena will change the dynamic and the nature of footfall and trade in this part of Leeds," he said. He added 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, which is now owned by Town Centre, should also benefit.

"We're the nominated car park for Arena nights and we're expecting an increase in footfall in the centre itself," said Mr Ziff.

The group reported underlying profits of 7.6m for the year to June 30, slightly down on last year's 7.8m. Mr Ziff said 2010 has been much more stable in contrast to last year.

"I am encouraged by the way in which we successfully negotiated the severe downturn and demonstrated the strength and resilience of our business," he said.

The group believes there will be income and investment management opportunities in the new financial year although the outlook for rental income and capital growth is relatively flat.

"I am also hopeful that at the Merrion Centre we can add long term value and growth to what has already proven to be an extremely resilient asset that underpins the quality of our income," said Mr Ziff.

He added that the results showed that Town Centre Securities has come out of the protracted downturn in the property market in a strong position.

The board is recommending a final dividend of 7.34p per ordinary share, up from 5.4p last year.

Analyst Graham Jones at Arbuthnot Securities said that Town Centre's management continues to adopt a progressive and sustainable dividend policy.

He added that the group is improving operational metrics, with vacancy reducing despite difficult market conditions.

The group's gearing has reduced to 48.3 per cent with borrowings of 141.3m compared to 166.3m last year.

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

Following refurbishment of the site's office space, the offices are essentially fully let.

"The announcement that the Leeds Arena is to be developed adjacent to the site should provide significant medium-term redevelopment opportunities," said Mr Jones, who retained his 'buy' recommendation.

The group's property values have increased by 11 per cent to 272.5m.

Shares were up 18p to 157p.

Centre of attention

The construction of the Merrion Centre began in 1962 and was officially opened in May 1964.

Throughout the late 1960s and early 1970s, it was seen as a symbol of the resurgence of Leeds city centre and was once the largest shopping centre of its kind in Europe.

Originally open air, the centre had a roof installed during the 1970s.

At the time the centre, with its wide-ranging offer and inspiration from American shopping malls, was seen as ahead of its time.

The Merrion Centre extends to over 800,000 sq ft and over half this space is retail and leisure. The rest is offices situated in Merrion House, Wade House and Town Centre House.

There is also a multi-storey car par.