If Edward Ziff looks like he has a bit of a bounce in his step these days, there’s a simple explanation: the chief executive of Town Centre Securities is confident that the company’s debt is finally under control.
Just a few years ago, that outcome couldn’t have been taken for granted, but Ziff claims the London-listed company has been “reset”. “We find ourselves in a place much better than it was five years ago,” Ziff tells EG. “We have spent much of the past five years repositioning the balance sheet, working hard to get gearing down, working hard to make the business more resilient.”
Ziff – a TCS lifer, son of founder Arnold Ziff and the company’s chief executive since 2001 – knows he has to appreciate this moment. He is a keen golfer and quotes Ben Hogan, who said: “As you walk down the fairway of life you must smell the roses, for you only get to play one round.” For too long, Ziff says, he and his colleagues had forgotten to smell the roses. “We were so busy with our head down, doing what we were doing,” he says.
But he also knows that he can’t let the roses distract him from the game – there’s still a lot to play for.
Less stress
The company has three strands to it: property investment, development and car park operation. Much of the first of these was once accounted for by retail assets, a sector that has lessened in importance under Ziff’s watch and allowed the company to flourish.
“The thing that really troubled us was the unpredictable nature of where we thought retail was going,” he says now of the pivot. “Historically, we had an 85-87% retail portfolio. Retail was hugely important. By the time we got to Covid, it was probably 55%, 60%, something like that. But what we were finding was that all these properties we owned, we were running really hard to stand still. While it seemed, on the face of it, that they were generating a lot of cash, every three years or five years or whenever the lease event came around, we were finding it a challenge.”
As of the company’s latest results, covering the six months to 31 December 2023, retail accounted for 30% of the portfolio, with offices at 29%, car parks at 16%, residential at 13%, development sites at 8% and hotels at 4%. Selling down the retail properties meant “less gearing and less to worry about”, Ziff says.
“It freed up capital, it freed up management time, and it reduced the stress,” he adds. “The combination of those things has put the business on a completely different level to where we would have been if we had carried on, head down.”
Net borrowings at the end of last year stood at £138.1m against a portfolio valued at £255.6m. That’s good enough for Ziff to joke that he’s walking around surrounded by a glow like characters in the 1970s adverts for Ready Brek porridge. “I feel a bit like that with our debt, given where the market is,” he says. “That sensation of being safe and secure is something that I am enjoying. And some of my colleagues here might tell you that I’m enjoying it too much because it takes away a bit of the ability to want to take on risks. But right now, there’s a lot out there that could become difficult.”
TCS is looking at acquisitions, but Ziff is cautious of undoing the hard work to get the gearing under control. During the most recent interim reporting period, the company bought just one asset – a Sheffield city centre car park, leased to NCP, for £1.5m. Ziff is keen to make selective moves back into retail as well. “Retail provides some really interesting opportunities,” he says. “There are certainly people who have been making some big moves in the retail sector. And we’re beginning to look at some, but at this moment in time we haven’t got anything under offer.”
The company has also been buying back shares. In November last year it launched a tender offer and bought then cancelled more than 6.29m shares at 145p each. The move saw the company exit the REIT regime. But the upside was worth it, Ziff says. “That has been tremendously accretive from a net asset value per share perspective, and that is the bit that compensated for the downturn in the half-year valuation,” he adds. “Whether we’ll continue to do tender offers depends on our view of the market, our view of the availability of cash. What we don’t want to do is put ourselves back in a position where we are feeling overwhelmed by debt costs.”
What ifs
Ziff is glad the business feels in good shape given the uncertain markets in which it now operates.
“Property has always done well in inflationary times, but it doesn’t seem to be doing that well through the inflationary period we’ve just had,” he says. “Certainly, there’s no evidence to show that property remains that great hedge against inflation. Not at present, because it needs the income to grow. And income and rental growth are precious commodities. We have had one rent review at a higher rent than was settled five years ago, where we had the outcome about three weeks ago. I’m not a drinker, but if I was I’d have cracked open the champagne.”
Ziff spends a lot of time looking back. Sometimes that’s useful, reminding him of what to avoid in today’s decisions. But he also knows he can too often become caught up in “what ifs”.
“I probably spend more time valuing the properties we don’t own than the ones we do – the ones that we could have owned,” he says, laughing. “We lose an awful lot of money on deals we didn’t do… There are a few deals that I wish we had maybe taken a bit more seriously and looked at a bit more closely.”
In what is almost certainly an election year, Ziff is now thinking about a change in leadership for the country and what it could mean for his industry. “Historically, property has always done better under a Labour government,” he says. He thinks back to when that party last came to power. “When I look back to when Tony Blair took over as prime minister, I remember dreading it, and thinking it’ll never be as good as it was,” he says. “[Now] I can’t believe it can be as bad as it is.”
He adds: “It’s a tough time. And whichever way you look at it, this government hasn’t done an amazing job over the past few years. They’ve had a few car smashes that were no fault of their own that they’ve had to navigate, and I’m sure they did try in good faith to do it to the best of their ability. But it’s tough out there.”
Ziff has a long memory, but he knows that history doesn’t always repeat itself. “Every cycle is slightly different, otherwise I guess we would all know exactly when to do what,” he says. Sometimes you just have to live in the moment. Ben Hogan would probably approve.
Images from Town Centre Securities
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