Town Centre powers ahead despite retail malaise

Property developer Town Centre Securities has reported a rise in occupancy levels to 96 per cent despite a "challenging" market where retail CVAs and administrations have become "widespread and highly publicised".

Town Centre Securities' joint venture development Burlington House

The Leeds-based firm said the strength and focus of its retail portfolio - with no exposure and reliance on the big high street names - has helped mitigate the impact to a relatively modest level.

In the year to June 30, TCS saw eight tenants either going into administration or launching a CVA. Of those eight units, three have been re-let to new tenants and another three have seen the incumbent retailer choose to remain at the same rent, leaving two units now void and in the process of being re-let. These two units represent 0.5 per cent of the total rent roll.

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The six units that have been re-let or where occupancy has continued, have seen a modest 1 per cent increase in base rent.

TCS said there was a short-term cost to the company in the form of void periods and new tenant incentives, but it said the speed with which it ensured the units were occupied is testament to the quality of its portfolio.

The firm said it sees no short-term cessation to this level of retail disruption and the financial pressure it puts TCS under.

As a result, it will continue to reduce its exposure to the retail market and will reinvest to reposition its portfolio, even if this impacts income in the short term.

Chairman and chief executive Edward Ziff said: “We continue to improve the business for the long term in line with our strategy of repositioning our portfolio, strengthening it through asset management and investing in our development pipeline.

“We have been able to mitigate the continued disruption within the retail sector, through our proven ability to quickly re-let units impacted by CVAs and administrations while improving rents.

"This highlights the quality of our assets and the fact that stronger performing retailers trade well within them. We are not complacent however, and our sale this year of Rochdale Retail park reinforces our willingness to continue to focus on recycling our portfolio, this freeing up funds for investment and development.”

The group said its annual performance was in line with expectations and it continues to produce consistent operational results despite the challenging market, and remains focused on delivering improving long-term returns.

Like-for-like passing rent rose 2.6 per cent and at least 94 per cent of rent was paid within four days of the due date.

Analyst James Ashley at Liberum said: "Town Centre Securities' trading update has confirmed good progress across the business.

"While TCS has not been immune to wider retail pain, minimal exposure to the retailers most affected, as well as in-house asset management capabilities, has helped mitigate the impact on the group and provided opportunity to reposition assets.

"TCS offers exposure to regional UK property markets (primarily Leeds and Manchester) as well as a significant development pipeline which provides long-term income and capital growth prospect. A conservative management team, aligned with shareholder interest and focused on cash return, provides added attraction."