2021-10-28 08:00:00 CEST
2021-10-28 08:00:26 CEST
REGULATED INFORMATION
Citycon Oyj - Interim report (Q1 and Q3)
Citycon Oyj´s Interim Report for 1 January-30 September 2021: Continued strong operational and capital recycling performance
Citycon Oyj Interim Report 28 October 2021 at 09:00 hrs
- Net rental income in Q3/2021 was 51.3 MEUR and increased by +0.4% compared to
Q3/2020 on like-for-like basis.
- Q3/2021 is the third consecutive quarter with quarter over quarter net rental
income growth while the net rental income is close to pre-covid levels.
- The disposal of Columbus, a non-core asset, at gross pricing of 106.2 MEUR vs.
valuation of 96.3 MEUR in Q4/2020. Consider to use some of the proceeds to
repurchase shares.
- Rent collection for YTD stands currently at 96 %, Q3/2021 currently at 96% and
Q2/2021 at 97%
- Like-for-like tenant sales 2.2% above previous year level and only -1.4% below
comparable pre-covid levels in 2019.
JULY—SEPTEMBER 2021
- Net rental income was 51.3 MEUR (Q3/2020: 52.9). The decrease was primarily
due to the divestments made in Q1/2021. Stronger currencies increased net rental
income by 0.8 MEUR. On a like-for-like basis, net rental income increased by
0.4% compared to previous year.
- EPRA Earnings decreased to 32.5 MEUR (33.5) due to divestments and lower
direct share of profit of joint ventures and associated companies, which were
compensated by lower direct financial expenses. EPRA Earnings per share (basic)
was 0.183 EUR (0.188).
- Adjusted EPRA earnings were 24.9 MEUR (29.4) and were impacted by the newly
issued hybrid bond coupons.
- IFRS-based earnings per share was 0.01 EUR (-0.00)
JANUARY—SEPTEMBER 2021
- Net rental income was 152.5 MEUR (Q1-Q3/2020: 155.5). The quarterly trend is
positive as Q3/2021 net rental income exceeds Q2/2021 levels. Net rental income
continued to be affected negatively by COVID-19 pandemic and its impact on
vacancy, as well as straight-lined discounts from 2020. Higher property
operating expenses also decreased the net rental income. However, there was
positive development in specialty leasing.
- EPRA Earnings were 96.8 MEUR (104.5) as a result of higher direct financial
expenses due to hybrid issuance and lower direct share of profit of joint
ventures and associated companies. EPRA Earnings per share (basic) was 0.544 EUR
(0.587) impact from stronger currencies being 0.017 EUR per share.
- Adjusted EPRA earnings were 80.1 MEUR (92.4) due to hybrid bond coupons.
- IFRS earnings per share improved to 0.32 EUR (-0.18) mainly due to stronger
result in property valuations.
KEY FIGURES
Q3/2021 Q3/2020 % FX Adjusted % 1)
Net rental income MEUR 51.3 52.9 -3.1 % -4.5 %
Direct Operating MEUR 44.7 47.1 -5.1 % -6.5 %
profit 2)
IFRS Earnings per EUR 0.01 0.00 - -
share (basic) 3)
Fair value of MEUR 4215.3 4155.1 1.4 % -
investment properties
Loan to Value (LTV) % 39.6 46.8 -15.3 % -
2) 4)
EPRA based key
figures 2)
EPRA Earnings MEUR 32.5 33.5 -3.0 % -4.6 %
Adjusted EPRA MEUR 24.9 29.4 -15.2 % -16.8 %
Earnings 3)
EPRA Earnings per EUR 0.183 0.188 -3.0 % -4.6 %
share (basic)
Adjusted EPRA EUR 0.140 0.165 -15.2 % -16.8 %
Earnings per share
(basic) 3)
EPRA NRV per share EUR 11.58 11.32 2.3 % -
Q1 Q1 % FX Adjusted % 1) 2020
-Q3/202 -Q3/202
1 0
Net rental income MEUR 152.5 155.5 -1.9 % -4.3 % 205.4
Direct Operating MEUR 133.7 137.3 -2.6 % -5.1 % 180.4
profit 2)
IFRS Earnings per EUR 0.32 -0.18 - - -0.25
share (basic) 3)
Fair value of MEUR 4215.3 4155.1 1.4 % - 4152.2
investment properties
Loan to Value (LTV) % 39.6 46.8 -15.3 % - 46.9
2) 4)
EPRA based key
figures 2)
EPRA Earnings MEUR 96.8 104.5 -7.4 % -10.1 % 136.6
Adjusted EPRA MEUR 80.1 92.4 -13.3 % -16.1 % 120.3
Earnings 3)
EPRA Earnings per EUR 0.544 0.587 -7.4 % -10.1 % 0.767
share (basic)
Adjusted EPRA EUR 0.450 0.519 -13.3 % -16.1 % 0.676
Earnings per share
(basic) 3)
EPRA NRV per share EUR 11.58 11.32 2.3 % - 11.48
1) Change from previous year (comparable exchange rates). Change-% is
calculated from exact figures.
2) Citycon presents alternative performance measures according to the European
Securities and Markets Authority (ESMA) guidelines. More information is
presented in Basis of Preparation and Accounting Policies in the notes to the
accounts.
3) The adjusted key figure includes hybrid bond coupons and amortized fees.
4) Highly liquid cash investments have been taken into account in net debt.
CEO F. SCOTT BALL:
Citycon achieved another solid quarter on both the operational and transactional
fronts amidst an improving macro-economic environment in our Nordic markets. We
are encouraged to see continued performance and valuation improvement at our
centres, with operations nearly back to pre-covid levels.
Citycon’s operational performance showed continued improvement in the quarter
with like-for-like net rental income in Q3 0.4% above in the same period last
year for properties excluding divestments. While certainly a positive trend, we
are even more pleased to note that performance at our properties is nearly back
to pre-covid levels. On an unadjusted basis, we would also point out a
consistent, quarter-over-quarter improvement, with Q3/2021 representing the
third consecutive quarter of growth over the prior, with unadjusted net rental
income of 51.3 MEUR, which is 1.0 % points over Q2/2021. The direct operating
profit is similarly ahead of Q2/2021, standing at 44.7 MEUR in Q3/2021.
On the transaction front, the Nordic real estate transaction market has
continued to be very active with a great deal of both domestic and foreign
capital flooding the space and cap rates continuing to compress. One trade of
note this quarter was the recently announced Akelius residential transaction for
over 9 billion euros, at indicative pricing yields approaching 2%. Looking
through to our portfolio and residential development rights, this appears to
indicate that our existing residential building rights are significantly more
valuable, while also suggesting that cap rates for our well located, necessity
-based retail should be declining as well as global investors search for
stability and yield. As for our Q3 valuations, the operating properties recorded
a third consecutive quarter of uplift, however we were negatively impacted by an
IFRS16 adjustment as well as additional construction expense at Lippulaiva where
we have decided to build the remaining two residential towers ourselves. This
will now mean that we will construct 6 of the 8 towers ourselves for residential
rental units.
Speaking of valuations, post quarter end, we agreed to sell our Columbus
shopping centre in Finland, for a gross price of 106.2 MEUR, which is 10 MEUR
above its Q4/2020 valuation. This deal is a great example of Citycon´s
comprehensive ability to create value at every stage of an asset’s life cycle.
Our asset management team has done a tremendous job activating the center and
establishing the optimal tenant mix while working hand in hand with our
development team to execute a disposition at an attractive price, increasing
valuations, as well as the demand for high-quality Nordic real estate assets.
The last step in the capital recycling process is to allocate capital
effectively and, as noted in our release yesterday, we are considering using
a proportion of the Columbus sale proceeds to repurchase shares. This
opportunistic capital recycling will take advantage of our large discount to NRV
and emphasizes our belief that our current share price does not reflect the
inherent value of our unique portfolio and development opportunities.
These development opportunities will provide significant organic growth for us
going forward, particularly on the residential front and serves to enhance and
improve our existing hubs. As we have stated previously, increasing the
densification and diversity of our urban hubs improves both the stability of our
existing assets while providing to excellent growth and value enhancement from
the newly developed buildings coming online. The first milestone of this
strategy is our exciting Lippulaiva project (opening spring 2022), which
includes in total approx. 550 apartments and will bring our existing residential
component of the portfolio to 2.8% of our total GLA.
On the operating front, like-for-like tenant sales have picked up year-to-date
and now stand at 2.2% above the same period last year. Once again, it is worth
noting that we are seeing like-for-like tenant sales reaching pre-covid levels,
which we believe sets us apart from our retail peers and is a testament to our
strategy of owning necessity-based retail in growing locations with access to
excellent public transportation. This is evident in tenant demand for our urban
hubs as we continued to demonstrate strong leasing activity in the quarter with
approximately 41,000 square meters leased. We are particularly pleased with
the improvement in specialty leasing, which has shown significant growth
recently as tenant interest in pop-ups and common area leasing has dramatically
picked up in line with the economic recovery. Specialty leasing is an important
operational initiative for us as it offers not only additional income and new
GLA but also serves as an important ‘farm system’ to find, identify and build a
relationship with tomorrow’s long-term tenants.
As has remained the case throughout the pandemic, Citycon´s non-adjusted rent
collection remained at a high level, and stands at 96%, year-to-date. Final
collection rates are again expected to increase beyond this already high level.
We would also note that this strong level of collection continues to be a result
of our necessity-based tenant focus, in addition to our excellent Nordic city
locations.
Continuing with the balance sheet, we announced our intentions in September to
redeem the 161.7 MEUR remaining on our senior notes maturing in 2022. In
addition, we redeemed nearly all of our outstanding CP and now have no
significant near-term maturities until 2024. This additional balance sheet
strength provides us the ability to pursue our long-term strategic goals.
We believe the company is well positioned for today and our future, as
demonstrated by our solid Q3 results. We continue to demonstrate the strength of
our strategy, focusing on necessity-based retail hubs in top Nordic locations.
Our tenant mix, of municipal and grocery anchor tenants, brings resilience to
our portfolio, which distinguishing against our more fashion-oriented peers
through the pandemic and should continue to do so going forward. This stable
cash flow combined with the significant value creation associated with our
development pipeline provides an attractive value proposition for all
stakeholders. Finally, we were pleased to see the lifting of government
restrictions in our operating countries in September, which gives us confidence
for the rest of the year. As a result of our year-to-date results, confident in
tightening our full year guidance and now anticipate EPRA EPS to be in the range
of EUR 0.683-0.723 for the full year 2021.
OUTLOOK 2021 SPECIFIED
Citycon forecasts the 2021 direct operating profit to be in range EUR 173–180
million, EPRA EPS EUR 0.683–0.723 and adjusted EPRA EPS EUR 0.558-0.598.
Adjusted EPRA Earnings per share outlook includes also the coupons of the
recently issued EUR 350 million hybrid issued in June 2021.
Previously
Direct operating profit MEUR 173–180 173–184
EPRA Earnings per share (basic) EUR 0.683–0.723 0.676–0.726
Adjusted EPRA Earnings per share (basic) EUR 0.558-0.598 0.558–0.608
The outlook assumes that there are no major changes in macroeconomic factors and
that there will not be another wave of COVID-19 with restrictions resulting in
significant store closures. These estimates are based on the existing property
portfolio as well as on the prevailing level of inflation, the EUR–SEK and
EUR–NOK exchange rates, and current interest rates.
AUDIOCAST
Citycon's investor, analyst and press conference call and live audiocast will be
arranged on Thursday 28 October 2021 at 10 am EEST. The audiocast can be
participated by calling in and followed live on the following website:
https://citycon.videosync.fi/2021-q3
-results (https://eur03.safelinks.protection.outlook.com/?url=https%3A%2F%2Fcityc
on.videosync.fi%2F2021-q3
-results&data=04%7C01%7C%7C5abca4d6b573483cb7d608d993ace1e1%7Cb8ce972b3da445f6994
995d1668226c6%7C0%7C0%7C637703198208284634%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLj
AwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C1000&sdata=iTj7n2H%2FsRQkr
FRImFiGY8qKUnEZZJsB%2Bo3AisY%2BUN4%3D&reserved=0)
Conference call numbers are:
Participants from Europe +44 3333 000 804 PIN: 66105049#
Participants from the US +1 6319 131 422 PIN: 66105049#
For more investor information, please visit the company’s website at
www.citycon.com.
Helsinki, 28 October 2021
Citycon Oyj
Board of Directors
For further information, please contact:
Eero Sihvonen
Executive VP and CFO
Tel. +358 50 557 9137
eero.sihvonen@citycon.com
Laura Jauhiainen
Vice President, Strategy & Investor Relations
Tel. +358 40 823 9497
laura.jauhiainen@citycon.com
Citycon is a leading owner, manager and developer of mixed-use centres for urban
living including retail, office space and housing. We are committed to
sustainable property management in the Nordic region with assets that total
approximately EUR 4.5 billion. Our centres are located in urban hubs with a
direct connection to public transport. Placed in the heart of communities, our
centres are anchored by groceries, healthcare and services to cater for the
everyday needs of customers.
Citycon has investment-grade credit ratings from Moody's (Baa3), Fitch (BBB-)
and Standard & Poor's (BBB-). Citycon Oyj’s share is listed in Nasdaq Helsinki.
www.citycon.com
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