US Edition Town Centre Securities
232½p+8½
Questor says BUY
LEEDS based property investment fund Town Centre Securities has reported pre-tax profits soaring on a regional property recovery.
“Town Centre Securities has benefitted from the improved sentiment towards the regional property market as well as from our focus on property management activity and the development projects we have committed to undertake in Leeds, Glasgow and elsewhere,” said chairman and chief executive, Edward Ziff.
Pre-tax profits soared to £12.3m for the six months ended December 31, from £0.1m in the comparable period. However, split out the gains from changes in the value of property which can be very volatile and the underlying pre-tax profits were a more stable £4m, up from £3.8m previously.
In yesterday’s update the property was 98pc full of tenants and the portfolio was valued at £313m. The company had borrowings of £158m to fund that portfolio, which leaves a net asset value of £151m, or 283p per share.
Town Centre Securities is a real estate investment trust that is focused on property in the north of England. The property portfolio is split, with 58pc in Leeds, 24pc in Glasgow and Edinburgh, and 16pc in Manchester. The company also has a small presence in London.
The property group has an exposure of roughly a quarter to retail and leisure, a quarter to one large shopping centre called the Merrion Centre in Leeds, a quarter to offices, and the remaining quarter a mixture of car parks and out-of-town retail.
The borrowing levels look manageable because £106m out of the total £158m in debt is funded by way of a fixed interest debenture on an interest rate of 5.4pc. The interest charge on that debt during the six-month period was £3.8m, which was more than twice covered by cash generated from rent of £9.3m.
The company held its interim dividend at 3.1p, and that offers a yield of 4.7pc. Questor recommended buying the shares (232.5p, December 3) because of a discount to net asset value, and that dicsount just got bigger. Buy.