Town Centre Securities – a sound property portfolio

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. ​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 deemphasise retail and leisure by developing its landbank, repurposing assets and disposing of assets in those areas.
Top ten tenants
 
 
Proportion of portfolio value

Leeds City Council
 
9%

Waitrose
 
7%

Wm Morrison
 
6%

Pure Gym
 
4%

Premier Inn
 
4%

Aldi
 
3%

Step Change Debt Charity
 
3%

Home Bargains
 
3%

Dune Group
 
2%

The Deltic Group
 
2%

(Source: 2020 Annual Report)
 
Tenant Deltic did go bust last year so TOWN lost some rent, but it won’t be long before the unit is let again: “Deltic, occupying a nightclub in the Merrion Centre and accounting for £0.2m of rent…As a prime spot, close to the student heart of the city, we have already received good interest in the premises from a number of operators and are confident of our ability to quickly secure a new long‐term lease.” (Interim Report to December 2020)
 
Some of TCS’s properties
 
Merrion Estate, Leeds
This has been a key asset in the portfolio for over 55 years. It is a mixed-use complex worth £148m: retail, offices, hotel, a 960 space car park. It now accounts for about one-half of the Group’s total currently let portfolio.
The Merrion Centre is a 1m sq. ft. island site in a prime location in Leeds city centre with footfall of over 200,000 internal visitors per week.
Major tenants include Morrisons, Sainsbury’s, Iceland, Boots, O2, PureGym. Leeds City Council as well as ………………To read more subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1