Leeds-based Town Centre Securities saw its portfolio's net asset value fall from £515m to £450m in the year to June.
Edward Ziff, chairman and chief executive, said in his full year results statement: "While I remain optimistic for the continued long-term success of our business, we are facing very challenging times.
"Property values continue to fall and I believe it will be later in 2009, at the earliest, before prices stabilise. We are also wary of the potential impact of tenancy failures."
Piccadilly Basin is a 12-acre mixed-use scheme in central Manchester, home to BDP's new regional base, the successful Carver's Warehouse office refurbishment but also the large retail unit let to collapsed furniture store Ilva.
Of Ilva, Ziff said: "We have incurred a number of exceptional costs totalling some £1.7m which include provisions in respect of the administration of Ilva, our retail tenant at Piccadilly, Manchester. These relate to the write-off of the tenant lease incentive and the expectation of irrecoverable void costs in forthcoming months. We see a significant opportunity to re-let the store on improved terms. The excellent location and high quality of the 120,000 sq ft building, with an open retail consent, should attract good interest."
TCS also owns the redeveloped former Daisy & Tom store at 118 to 124 Deansgate, let this year to office supplies retailer Staples and outdoor clothing chain Cotswolds.
TCS reported underlying profits of £7.2m, unchanged from 2007. NAV per share slipped to 420p from 451p. The board proposed an unchanged final dividend of 5.40p.