Town Centre drops rents to help retailers

The Leeds-based firm has cut rents by two to three per cent to help retailers who are struggling in the toughest economic conditions in living memory.

Town Centre reported an 11 per cent fall in underlying pre-tax profits from £8.2m to £7.3m for the year to June 30.

Chairman and chief executive Edward Ziff said that the £1m shortfall was due to increased finance costs and lower rents.

The finance costs increased following a deliberate decision to refinance early to avoid doing it at the same time as rivals.

The group has agreed £90m of revolving credit facilities with RBS, Lloyds and Handelsbanken to replace existing facilities of £85m.

Rents fell by around £500,000.

“That’s the price we paid to maintain high occupancy,” said Mr Ziff. “The knock is lower property values because the rents are lower.”

Merrion fell in value by 3.7 per cent to £113m.

“We feel the most important thing we can do is maintain occupancy.

“A lot of stores are suffering. There’s no point in holding out for rents you’re not going to achieve,” he added.

Retail occupancy at the Merrion Centre rose from 97 per cent to 98 per cent over the year.

Town Centre experienced 11 tenant administrations during the year including Peacocks, Bonmarché and Game Group, but retained or replaced tenants for most of the affected units.

The group said it is making progress with its master plan for Merrion. Planning permission has been granted for the Merrion New Front Project, which includes the Northern elevation that faces the new arena.

“In an ideal world we’d knock it down and rebuild it, but we can’t because of the need for the car park and we have leases in place,” said Mr Ziff.

Under the plans, Merrion will house seven new units, of which five are pre-let or under offer.

“We had a quasi market hall covering 20,000 sq ft that was never successful,” said Mr Ziff. “We are refurbishing and re-adapting it and there are proposals for a gym, restaurants, a bar and coffee shop.”

Footfall at Merrion has risen from 160,000 people a week last year to 170,000 people.

“Rising footfall has helped us to mitigate falling rents,” said Mr Ziff.

Leeds City Council, which has office space at Merrion, recently announced plans to refurbish and extend Merrion House.

The space will be increased from 110,000 sq ft to 160,00 sq ft.

Since the year end Town Centre has bought 6/7 Park Row, Leeds, the former regional head office of Lloyds Bank, for £7m.

It also bought Apperley Bridge, a 6.8 acre site straddling the Leeds/Bradford boundary, housing the head office and storage facilities occupied by Barratt Trading, which it bought for £2.3m.

After  a  revaluation  deficit  of  £11.4m, due to poor sentiment generally towards property outside London, Town Centre reported a statutory loss after tax of £4.2m. 

Following the most recent valuation of its properties, their aggregate valuation fell to £287.6m, down from £296.5m in 2011.

The board is recommending an unchanged final dividend of 7.34p per share.

Together with the interim dividend of 3.1p per share, the total dividend for the year is 10.44p, which is also unchanged.

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