Town Centre signs Merrion House deal with Leeds City Council
The council will advance all the base rent due from 2018 until the lease ends in 2043. As a result, Town Centre Securities (TCS) will receive £26.4m in cash on July 24.
The firm said the proceeds will be used to reduce debt, giving more flexibility to invest in its acquisition and development pipeline for future growth.
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Hide AdTCS announced practical completion of its Merrion House redevelopment in February. The 170,000 sq ft, ten-storey building is jointly owned by TCS and Leeds City Council, with the council occupying the building on a new 25-year lease.
Edward Ziff, chairman and chief executive, said: “We’re delighted to announce this agreement with Leeds City Council which gives us both enhanced financial flexibility to fund our ambitious growth plans and an immediate benefit to our leverage ratios.
“The innovative transaction allows us to maintain joint ownership of Merrion House and benefit from future rental increases, whilst giving the company a material cash injection." The proceeds will be used to immediately reduce debt, whilst giving more flexibility to invest in the group's pipeline for future growth, including the recently announced George Street development in Leeds.
“This agreement adds to our growing momentum and follows our recent announcement of the £9m purchase of Ducie House in Manchester, which is a valuable addition to our existing assets at the Piccadilly Basin site and strengthens our wider portfolio of opportunities," said Mr Ziff.
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Hide AdAnalyst David Brockton at Liberum said: "Town Centre Securities' £26m rent advance at Merrion House immediately reduces leverage from 49 to 42 per cent and will help fund the group’s significant development schemes.
"TCS will still benefit from additional RPI-linked rent increases on the lease and retains its share of the freehold.
"The transaction highlights the group’s strong relationship with Leeds City Council, where additional new opportunities exist."