Development gains boost Town Centre Securities

Town Centre Securities (TCS) has reported positive NAV growth in full-year results despite recording a significant fall in the value of the Merrion Centre in Leeds.

EPRA NAV per share edged up 0.6% in the six months to the end of June boosted by a 20.1% increase in the like-for-like value of developments.

However, the like-for-like value of the investment portfolio fell by 1.4% to £323.1m, dragged down by a 6.2% fall in the value of the Merrion Centre to £106.9m where the yield moved out 100bps to 7.3%.

Despite the lower valuation for the Merrion Centre, TCS reported that the rent roll at the shopping centre had increased by 3.3% on a like-for-like basis and occupancy stood at 99%.

Across the portfolio, passing rent was up 2.3% like-for-like and total ERV rose by 2.7% like-for-like.

“The development programme has gone well and continues to drive increases in income throughout the portfolio which has allowed us to be bold in terms of disposing of mature properties,” said chairman and chief executive Edward Ziff.

During the half-year, TCS sold properties in Scotland for a total of £19.5m, with sales achieved ahead of previous valuations.

Looking forward, the company said it expected to make further disposals and re-invest into its development programme, which is on track to deliver increases of £1.8m per annum in income and over £10m in net assets.

TCS has a development pipeline worth £60m and its dry powder, currently at £26m, would be used to fund it, Ziff told Property Week.

“Our capital recycling programme has accelerated with the disposals from our Scottish portfolio and we expect to make further disposals this year,” said Ziff. “We are actively looking to reinvest the proceeds of these sales as and when we see the right opportunities.”

In a note to investors, analysts at Liberum said: “Development activity provided the greatest enhancement to returns in the year and will remain a key driver of future value.

“TCS offers exposure to lagged recovery in regional property as well as significant value potential in development activity.”

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