Town Centre Securities is a UK REIT focused primarily on Leeds, Manchester, Scotland and (mainly suburban) London. It also has a car parking operation (CitiPark). The investment portfolio is intensively managed for income and capital growth.
The company will report results for the year ended 30 June 2019 (FY19) on 24 September. Ahead of that, a recent trading update stated that the year ended in line with expectations despite the tough retail environment with continuing progress in the strategy of repositioning the portfolio away from retail and recycling capital into more attractive areas, including the group’s significant pipeline of development opportunities. Llike-for-like passing rents increased and occupancy rose to 96% (FY18: 95%). The car parking operations continued to grow revenues and profits. A lack of exposure to the big high street names in its retail portfolio, and a tenant profile that includes a number of strong covenants, mitigated the impact of retail sector problems and the fast re-letting of most of the vacated properties, on favourable terms, is a positive indicator for the quality of the portfolio. We forecast robust recurring earnings and expect an unchanged but fully covered dividend, providing an attractive yield. NAV is likely to reflect the continued market weakness in retail valuations.
The supply demand balance for regional office and industrial property remains generally firm, and a positive yield spread between the regions and London offers potential for further narrowing. Parts of the retail sector are displaying clear signs of stress.