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Town Centre Securities (LSE:TOWN) is selling at half price relative to net current asset value – see earlier newsletter. Its shares have been driven down by perceived vulnerability to devaluations because of its high exposure to the high street. So, before I bought its shares at £1.426 (market capitalisation £75.5m) I checked out the quality of its portfolio of properties.
TOWN has over 360,000 sq ft of prime office space and over 1m sq ft of retail space, residential properties car parks and hotels. About 61% is in Leeds, 18% in Manchester, 13% in Scotland and 8% in London.
Types of properties
| Percentage of portfolio by value | Description | |||
| Offices | 22% | Over 360,000 sq ft of prime, let to longstanding tenants | ||
| Retail and Leisure | 47% | Focused on more stable supermarket, discount and convenience retailing. Leisure portfolio includes restaurants, coffee shops, gyms and a tenpin bowling facility | ||
| Hotels | 6% | Two hotels in Leeds, one let to Premier Inn, one managed by TOWN under the ibis brand. | ||
| Residential | 6% | Completed first purpose-built private rental building in 2019 in Manchester. Plans to develop more residential properties | ||
| Car parks | 7% | Leeds, Manchester, London, Watford, Cheltenham, Rickmansworth | ||
| Developments | 10% | Gross development value £600m. Principally Piccadilly Basin, Manchester and Whitehall Road, Leeds. | ||
| Distribution | 2% |
Rental income and value by type of property
| Passing rent (payable now), £m | Estimated Rental Value. (that expected on a new letting or rent review), £m
|
Value, £m | % of the portfolio | Yield with passing rent | ||||||
| Retail & Leisure (other than Merrion Centre) | 2.3 | 2.6 | 30.8 | 9% | 7.2% | |||||
| Merrion Centre, Leeds (excluding offices) | 5.6 | 7.6 | 82.6 | 25% | 6.4% | |||||
| Offices | 5.3 | 6.2 | 86.9 | 26% | 5.8% | |||||
| Hotels | 1.2 | 1.6 | 23.1 | 7% | 4.8% | |||||
| Out of town retail | 1.1 | 1.2 | 14.5 | 4% | 7.1% | |||||
| Distribution | 0.4 | 0.4 | 6.0 | 2% | 6.5% | |||||
| Residential | 1.1 | 1.1 | 20.8 | 6% | 4.8% | |||||
| Development property | 1.6 | 1.6 | 40.1 | 12% | ||||||
| Other car parks | 0.9 | 0.9 | 26.8 | 8% | ||||||
| Let Portfolio | 19.5 | 23.1 | 331.4 | 100% | 6.1% |
Source: Interim report to December 2020
Clearly, today most of the portfolio is outside of retail or leisure. In the half-year to December, at the worst of the Covid-19 crisis, the value of TOWN’s offices, residential and development properties rose in value, now accounting for 42% of the portfolio. A further 15% of the portfolio, in hotels and other car parks, held steady at a combined value of £49.9m.
The firm is continuing to de-emphasise retail and leisure by developing its landbank, repurposing assets and disposing of assets in those areas.
Top ten tenants
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