Citycon CEO KOKKEEL on 1H2016: stable financial results driven by the good performance in Sweden and Norway

HELSINKI, FINLAND, 2016-Jul-17 — /EPR Retail News/ —

APRIL-JUNE 2016
– Gross rental income increased to EUR 62.2 million (Q2/2015: 46.6) mainly due to the acquisition of Norwegian shopping centre company Sektor Gruppen AS (Sektor) in July 2015. Gross rental income of Citycon’s Norwegian operations amounted to EUR 20.9 million. The acquisition also increased net rental income by EUR 18.1 million.
– EPRA Earnings increased by EUR 8.4 million, or 27.9%, to EUR 38.7 million especially due to the acquisition of the Norwegian operations. EPRA Earnings per share (basic) was EUR 0.043 (EUR 0.047).
– Earnings per share was EUR 0.04 (EUR 0.06). The decrease resulted mainly from higher net financing expenses, deferred taxes and higher number of shares.
– The company specifies its guidance relating to EPRA Operating profit, EPRA Earnings and EPRA Earnings per share.

JANUARY-JUNE 2016
– Gross rental income increased to EUR 125.4 million (Q1-Q2/2015: 92.6) mainly due to the acquisition of Sektor. Gross rental income of Citycon’s Norwegian operations amounted to EUR 41.6 million. The acquisition also increased net rental income by EUR 36.4 million.
– EPRA Earnings increased by EUR 17.2 million, or 29.9%, to EUR 74.6 million especially due to the Norwegian acquisition. EPRA Earnings per share (basic) decreased slightly to EUR 0.084 (0.090) due to the substantially higher number of shares.
– Earnings per share (basic) increased to EUR 0.11 (0.10). The increase was mainly a result of higher fair value gains.

KEY FIGURES

Q2/2016 Q2/2015 %2) Q1–Q2/2016 Q1–Q2/2015 %2) 2015
Net rental income MEUR 57.0 42.6 33.9 112.2 82.3 36.3 199.6
Direct Operating profit3) MEUR 50.5 37.6 34.3 98.4 72.5 35.8 175.4
Earnings per share (basic)1) EUR 0.04 0.06 -24.1 0.11 0.10 9.0 0.14
Fair value of investment properties MEUR 4,110.0 2,819.6 45.8 4,110.0 2,819.6 45.8 4,091.6
Loan to Value (LTV)3) % 45.4 41.5 9.5 45.4 41.5 9.5 45.7
EPRA based key figures3)
EPRA Earnings MEUR 38.7 30.2 27.9 74.6 57.5 29.9 130.8
EPRA Earnings per share (basic)1) EUR 0.043 0.047 -8.5 0.084 0.090 -7.0 0.173
EPRA NAV per share EUR 2.80 2.99 -6.3 2.80 2.99 -6.3 2.74

1) Calculated with the issue-adjusted number of shares resulting from the rights issue completed in July 2015.
2) Change from previous year. Change-% is calculated from exact figures.
3) New ESMA (European Securities and Markets Authority) guidelines on alternative performance measures are effective for the financial year 2016. Citycon presents alternative performance measures, such as EPRA performance measures and loan to value, to reflect the underlying business performance and to enhance comparability between financial periods. Alternative performance measures presented in this report should not be considered as a substitute for measures of performance in accordance with the IFRS.

CEO, MARCEL KOKKEEL:
The first half of 2016 showed stable financial results driven by the good performance in Sweden and Norway. Despite the weaker economic environment in Finland we still see good tenant demand for high quality properties. Our like-for-like net rental income including Norway and Kista Galleria was 0.9%.

The solid demand for prime properties is reflected in our leasing success in Iso Omena where we signed an agreement with Zara, the first and only one in the western Helsinki area. We have been successful in attracting appealing fashion, design and restaurant brands to Iso Omena that, so far, have exclusively been featured in central Helsinki. The first phase of Iso Omena, to be opened in mid-August, is now 95% pre-let.

The integration of the Norwegian operations has proceeded well and is completed. We have been able to achieve much better results than initially targeted. During the quarter, we completed a cost savings programme of EUR 5 million through further reorganization measures and synergies. The savings, to be achieved in 2017, are in addition to the already materialized administrative cost savings in Norway of approximately EUR 1.5 million.

We successfully continued the recycling of capital in line with our strategy to focus on urban, grocery-anchored shopping centres. During 2016, we have divested a shopping centre in Tallinn and a portfolio of five assets in Finland for a total value of EUR 100 million, both above their IFRS fair value. Citycon aims to divest an additional EUR 200-250 million of non-core assets, mainly in Finland, within the coming 1-2 years.

BUSINESS ENVIRONMENT
The macroeconomic environment in Citycon’s operating countries remained unchanged during the second quarter of 2016. The countries are still on diverging macroeconomic courses: the business environment in Norway, Sweden, Estonia and Denmark remains strong or relatively strong, while the Finnish economy is showing weaker growth.

In 2016, the European Commission forecasts Euro area GDP growth to reach 1.6%. Sweden and Estonia are showing stronger growth figures than the Euro area average while Norway and Denmark are predicted to grow slightly below the Euro area forecast. The GDP growth for Finland is still expected to remain modest, although the trend is positive also in Finland. Finland’s GDP growth is dependent on domestic demand, structural reforms and recovery of the country’s stagnating export markets.

BUSINESS ENVIRONMENT KEY FIGURES

% Finland Norway Sweden Estonia Denmark Euro
area
GDP growth forecast for 2016 0.7 1.2 3.4 1.9 1.2 1.6
Unemployment, May 2016 9.0 4.6 7.2 6.4 6.1 10.1
Retail sales growth, Jan–May 2016 0.4 3.0 4.5 6.0 -1.0 1.6

Sources: European Commission, Eurostat, Statistics Finland/ Norway/Sweden/ Estonia/ Denmark

The unemployment rates in all Citycon’s operating countries remain below the Euro area average (10.1%). During the first half of 2016 consumer confidence levels have stayed stable in Citycon’s operating countries, however, with a positive trend in Finland. The consumer confidence levels in Finland, Sweden and Denmark remain positive, while the consumer confidence in Norway, Estonia and on average in Euro area is still slightly negative. (Source: Eurostat) Consumer prices have remained relatively unchanged compared to the previous year in all Citycon’s operating countries apart from Norway where  prices have increased. (Source: Statistics Finland/Norway/Sweden/Estonia/Denmark)

Retail sales growth for the first five months of 2016 has been strong in Estonia, Sweden and Norway, mildly positive in Finland, but negative in Denmark. (Source: Statistics Finland/Norway/Sweden/Estonia/Denmark)

In Finland and in Norway prime rents are forecasted to remain unchanged in 2016. In Sweden, prime shopping centre rents are forecasted to increase during the year while in Estonia downwards pressure on rents has increased due to intensifying competition. (Source: JLL)

In Finland the demand for prime properties is strong and the demand for secondary properties has increased. In Norway the investment market is expected to remain active and yields to remain stable in the short-term. In Sweden the investors’ risk-taking has changed to more opportunistic direction and besides prime shopping centres, also yields for secondary shopping centres have decreased. Prime yields are also expected to continue decreasing in Estonia. (Source: JLL)

RISKS
The company’s core risks and uncertainties, along with its main risk management actions and principles, are described in detail in the Annual and Sustainability Report 2015 and in the Financial Statements 2015.

Citycon’s Board of Directors believes there have been no material changes to the key risk areas outlined in the Annual and Sustainability Report 2015. The main risks are associated with property values, leasing, development projects, operations, environment and people and the availability and cost of financing.

DIVIDEND AND EQUITY REPAYMENT
Citycon’s dividend paid in 2016 for the financial year 2015 and equity repayment in 2016:

Dividends and equity repayments paid on 30 June 2016
Dividend
   (record date 18 March 2016, payment date 29 March 2016) 1 EUR / share 0.01
Equity repayment
   (record date 18 March 2016, payment date 29 March 2016) 1 EUR / share 0.0275
Equity repayment Q2
   (record date 22 June 2016, payment date 30 June 2016) 2 EUR / share 0.0375
Board’s authorization remaining for equity repayments 3
Equity repayments Q3 and Q4 in total maximum EUR / share 0.0750
   – equity repayment Q3 (possible payment date 30 September 2016)
   – equity repayment Q4 (possible payment date 30 December 2016)

1) AGM 2016 decision.
2) AGM 2016 authorized the Board to decide on the distribution of assets from the invested unrestricted equity fund. The amount to be distributed based on the authorization shall not exceed EUR 0.1125 per share.
3) Unless the Board of Directors decides otherwise for a justified reason, the authorization granted by AGM 2016 can be used to distribute equity repayment three times. Following equity repayment of 30 June 2016 the payment dates of the possible further equity repayments in 2016 will be on 30 September 2016 and 30 December 2016. The equity repayment will be paid to a shareholder registered in the company’s shareholders’ register maintained by Euroclear Finland Ltd on the record date for the equity repayment. The Board of Directors will decide on the record date in connection with each equity repayment decision. Citycon shall make separate announcements of such Board resolutions.

OUTLOOK
The company specifies its outlook. Citycon forecasts the 2016 Direct Operating profit to change by EUR 17 to 26 million (previously 16–30) and EPRA Earnings to change by EUR 11 to 20 million (previously 9–23) from previous year. Additionally, the company expects EPRA EPS (basic) to be EUR 0.1575–0.1725 (previously 0.155–0.175).

The specified outlook acknowledges the impact of the completed non-core portfolio divestment in Finland as well as the weaker Norwegian krone and the impact of the metro delay in Iso Omena. These estimates are also 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. Premises taken offline for planned or ongoing (re)development projects reduce net rental income during the year.

FINANCIAL CALENDAR
Interim report Jan–Sept 2016     20 October around 9 a.m.

Citycon is an owner, developer and manager of urban grocery-anchored shopping centres in the Nordic and Baltic region, managing assets that total EUR 4.7 billion and with market capitalisation of close to EUR 2 billion. Citycon is the No. 1 shopping centre owner in Finland and Estonia and among the market leaders in Norway and Sweden. Citycon has also established a foothold in Denmark.

Citycon has investment-grade credit ratings from Moody’s (Baa1) and Standard & Poor’s (BBB). Citycon Oyj’s share is listed in Nasdaq Helsinki.

For further information, please contact:
Eero Sihvonen
Executive VP and CFO
Tel. +358 50 557 9137
eero.sihvonen@citycon.com

Henrica Ginström
VP, IR and Communications
Tel. +358 50 554 4296
henrica.ginstrom@citycon.com

###

Citycon CEO KOKKEEL on 1H2016: stable financial results driven by the good performance in Sweden and Norway
Citycon CEO KOKKEEL on 1H2016: stable financial results driven by the good performance in Sweden and Norway

 

Source: Citycon

Citycon CEO KOKKEEL on 1H2016: stable financial results driven by the good performance in Sweden and Norway

HELSINKI, FINLAND, 2016-Jul-16 — /EPR Retail News/ —

 

APRIL-JUNE 2016
– Gross rental income increased to EUR 62.2 million (Q2/2015: 46.6) mainly due to the acquisition of Norwegian shopping centre company Sektor Gruppen AS (Sektor) in July 2015. Gross rental income of Citycon’s Norwegian operations amounted to EUR 20.9 million. The acquisition also increased net rental income by EUR 18.1 million.
– EPRA Earnings increased by EUR 8.4 million, or 27.9%, to EUR 38.7 million especially due to the acquisition of the Norwegian operations. EPRA Earnings per share (basic) was EUR 0.043 (EUR 0.047).
– Earnings per share was EUR 0.04 (EUR 0.06). The decrease resulted mainly from higher net financing expenses, deferred taxes and higher number of shares.
– The company specifies its guidance relating to EPRA Operating profit, EPRA Earnings and EPRA Earnings per share.

JANUARY-JUNE 2016
– Gross rental income increased to EUR 125.4 million (Q1-Q2/2015: 92.6) mainly due to the acquisition of Sektor. Gross rental income of Citycon’s Norwegian operations amounted to EUR 41.6 million. The acquisition also increased net rental income by EUR 36.4 million.
– EPRA Earnings increased by EUR 17.2 million, or 29.9%, to EUR 74.6 million especially due to the Norwegian acquisition. EPRA Earnings per share (basic) decreased slightly to EUR 0.084 (0.090) due to the substantially higher number of shares.
– Earnings per share (basic) increased to EUR 0.11 (0.10). The increase was mainly a result of higher fair value gains.

KEY FIGURES

Q2/
2016
Q2/
2015
%2)  Q1–Q2/
2016
Q1–Q2/
2015
%2)  2015
Net rental income MEUR 57.0 42.6 33.9 112.2 82.3 36.3 199.6
Direct Operating profit3) MEUR 50.5 37.6 34.3 98.4 72.5 35.8 175.4
Earnings per share (basic)1) EUR 0.04 0.06 -24.1 0.11 0.10 9.0 0.14
Fair value of investment properties MEUR 4,110.0 2,819.6 45.8 4,110.0 2,819.6 45.8 4,091.6
Loan to Value (LTV)3) % 45.4 41.5 9.5 45.4 41.5 9.5 45.7
EPRA based key figures3)
EPRA Earnings MEUR 38.7 30.2 27.9 74.6 57.5 29.9 130.8
EPRA Earnings per share (basic)1) EUR 0.043 0.047 -8.5 0.084 0.090 -7.0 0.173
EPRA NAV per share EUR 2.80 2.99 -6.3 2.80 2.99 -6.3 2.74

1) Calculated with the issue-adjusted number of shares resulting from the rights issue completed in July 2015.
2) Change from previous year. Change-% is calculated from exact figures.
3) New ESMA (European Securities and Markets Authority) guidelines on alternative performance measures are effective for the financial year 2016. Citycon presents alternative performance measures, such as EPRA performance measures and loan to value, to reflect the underlying business performance and to enhance comparability between financial periods. Alternative performance measures presented in this report should not be considered as a substitute for measures of performance in accordance with the IFRS.

CEO, MARCEL KOKKEEL:
The first half of 2016 showed stable financial results driven by the good performance in Sweden and Norway. Despite the weaker economic environment in Finland we still see good tenant demand for high quality properties. Our like-for-like net rental income including Norway and Kista Galleria was 0.9%.

The solid demand for prime properties is reflected in our leasing success in Iso Omena where we signed an agreement with Zara, the first and only one in the western Helsinki area. We have been successful in attracting appealing fashion, design and restaurant brands to Iso Omena that, so far, have exclusively been featured in central Helsinki. The first phase of Iso Omena, to be opened in mid-August, is now 95% pre-let.

The integration of the Norwegian operations has proceeded well and is completed. We have been able to achieve much better results than initially targeted. During the quarter, we completed a cost savings programme of EUR 5 million through further reorganisation measures and synergies. The savings, to be achieved in 2017, are in addition to the already materialised administrative cost savings in Norway of approximately EUR 1.5 million.

We successfully continued the recycling of capital in line with our strategy to focus on urban, grocery-anchored shopping centres. During 2016, we have divested a shopping centre in Tallinn and a portfolio of five assets in Finland for a total value of EUR 100 million, both above their IFRS fair value. Citycon aims to divest an additional EUR 200-250 million of non-core assets, mainly in Finland, within the coming 1-2 years.

BUSINESS ENVIRONMENT
The macroeconomic environment in Citycon’s operating countries remained unchanged during the second quarter of 2016. The countries are still on diverging macroeconomic courses: the business environment in Norway, Sweden, Estonia and Denmark remains strong or relatively strong, while the Finnish economy is showing weaker growth.

In 2016, the European Commission forecasts Euro area GDP growth to reach 1.6%. Sweden and Estonia are showing stronger growth figures than the Euro area average while Norway and Denmark are predicted to grow slightly below the Euro area forecast. The GDP growth for Finland is still expected to remain modest, although the trend is positive also in Finland. Finland’s GDP growth is dependent on domestic demand, structural reforms and recovery of the country’s stagnating export markets.

BUSINESS ENVIRONMENT KEY FIGURES

% Finland Norway Sweden Estonia Denmark Euro
area
GDP growth forecast for 2016 0.7 1.2 3.4 1.9 1.2 1.6
Unemployment, May 2016 9.0 4.6 7.2 6.4 6.1 10.1
Retail sales growth, Jan–May 2016 0.4 3.0 4.5 6.0 -1.0 1.6

Sources: European Commission, Eurostat, Statistics Finland/ Norway/Sweden/ Estonia/ Denmark

The unemployment rates in all Citycon’s operating countries remain below the Euro area average (10.1%). During the first half of 2016 consumer confidence levels have stayed stable in Citycon’s operating countries, however, with a positive trend in Finland. The consumer confidence levels in Finland, Sweden and Denmark remain positive, while the consumer confidence in Norway, Estonia and on average in Euro area is still slightly negative. (Source: Eurostat) Consumer prices have remained relatively unchanged compared to the previous year in all Citycon’s operating countries apart from Norway where  prices have increased. (Source: Statistics Finland/Norway/Sweden/Estonia/Denmark)

Retail sales growth for the first five months of 2016 has been strong in Estonia, Sweden and Norway, mildly positive in Finland, but negative in Denmark. (Source: Statistics Finland/Norway/Sweden/Estonia/Denmark)

In Finland and in Norway prime rents are forecasted to remain unchanged in 2016. In Sweden, prime shopping centre rents are forecasted to increase during the year while in Estonia downwards pressure on rents has increased due to intensifying competition. (Source: JLL)

In Finland the demand for prime properties is strong and the demand for secondary properties has increased. In Norway the investment market is expected to remain active and yields to remain stable in the short-term. In Sweden the investors’ risk-taking has changed to more opportunistic direction and besides prime shopping centres, also yields for secondary shopping centres have decreased. Prime yields are also expected to continue decreasing in Estonia. (Source: JLL)

RISKS
The company’s core risks and uncertainties, along with its main risk management actions and principles, are described in detail in the Annual and Sustainability Report 2015 and in the Financial Statements 2015.

Citycon’s Board of Directors believes there have been no material changes to the key risk areas outlined in the Annual and Sustainability Report 2015. The main risks are associated with property values, leasing, development projects, operations, environment and people and the availability and cost of financing.

DIVIDEND AND EQUITY REPAYMENT
Citycon’s dividend paid in 2016 for the financial year 2015 and equity repayment in 2016:

Dividends and equity repayments paid on 30 June 2016
Dividend
   (record date 18 March 2016, payment date 29 March 2016) 1 EUR / share 0.01
Equity repayment
   (record date 18 March 2016, payment date 29 March 2016) 1 EUR / share 0.0275
Equity repayment Q2
   (record date 22 June 2016, payment date 30 June 2016) 2 EUR / share 0.0375
Board’s authorisation remaining for equity repayments 3
Equity repayments Q3 and Q4 in total maximum EUR / share 0.0750
   – equity repayment Q3 (possible payment date 30 September 2016)
   – equity repayment Q4 (possible payment date 30 December 2016)

1) AGM 2016 decision.
2) AGM 2016 authorised the Board to decide on the distribution of assets from the invested unrestricted equity fund. The amount to be distributed based on the authorisation shall not exceed EUR 0.1125 per share.
3) Unless the Board of Directors decides otherwise for a justified reason, the authorisation granted by AGM 2016 can be used to distribute equity repayment three times. Following equity repayment of 30 June 2016 the payment dates of the possible further equity repayments in 2016 will be on 30 September 2016 and 30 December 2016. The equity repayment will be paid to a shareholder registered in the company’s shareholders’ register maintained by Euroclear Finland Ltd on the record date for the equity repayment. The Board of Directors will decide on the record date in connection with each equity repayment decision. Citycon shall make separate announcements of such Board resolutions.
OUTLOOK
The company specifies its outlook. Citycon forecasts the 2016 Direct Operating profit to change by EUR 17 to 26 million (previously 16–30) and EPRA Earnings to change by EUR 11 to 20 million (previously 9–23) from previous year. Additionally, the company expects EPRA EPS (basic) to be EUR 0.1575–0.1725 (previously 0.155–0.175).

The specified outlook acknowledges the impact of the completed non-core portfolio divestment in Finland as well as the weaker Norwegian krone and the impact of the metro delay in Iso Omena. These estimates are also 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. Premises taken offline for planned or ongoing (re)development projects reduce net rental income during the year.

FINANCIAL CALENDAR
Interim report Jan–Sept 2016     20 October around 9 a.m.

Helsinki, 13 July 2016
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

Henrica Ginström, VP, IR and Communications
Tel. +358 50 554 4296
henrica.ginstrom@citycon.com

Citycon is an owner, developer and manager of urban grocery-anchored shopping centres in the Nordic and Baltic region, managing assets that total EUR 4.7 billion and with market capitalisation of close to EUR 2 billion. Citycon is the No. 1 shopping centre owner in Finland and Estonia and among the market leaders in Norway and Sweden. Citycon has also established a foothold in Denmark.

Citycon has investment-grade credit ratings from Moody’s (Baa1) and Standard & Poor’s (BBB). Citycon Oyj’s share is listed in Nasdaq Helsinki.

www.citycon.com

SOURCE: Citycon

Citycon CEO KOKKEEL on Q3-2015: Sektor acquisition one of the most important events in Citycon’s history

Helsinki, Finland, 2015-11-03 — /EPR Retail News/ —

THIRD QUARTER OF 2015
– Turnover increased to EUR 86.0 million (Q3/2014: EUR 61.4 million) mainly due to the acquisition of Norwegian shopping centre company Sektor Gruppen AS (Sektor). Turnover of Sektor amounted to EUR 27.7 million. This also increased net rental income which came to EUR 59.7 million (EUR 44.2 million).
– EPRA Earnings increased by EUR 9.4 million, or 31.7%, to EUR 38.9 million mainly due to Sektor acquisition. The impact of Sektor acquisition to EPRA Operating profit was EUR 16.4 million. EPRA Earnings per share (basic) decreased slightly to EUR 0.046 (EUR 0.047) due to the increased number of shares, which resulted from the rights issue completed in July 2015.
– Earnings per share was EUR 0.03 (EUR 0.04). The decrease was mainly a result of non-recurring transaction costs related to the Sektor acquisition (EUR 6.0 million), increased number of shares and higher losses on sale.

JANUARY–SEPTEMBER 2015
-Turnover increased to EUR 206.2 million (Q1–Q3/2014: EUR 184.5 million) mainly due to the Sektor acquisition. Divestments decreased turnover by EUR 4.6 million.
– Net rental income increased by EUR 14.2 million, or 11.1%, to EUR 142.1 million (EUR 127.8 million) mainly due to the reasons explained above. Net rental income of like-for-like properties increased by EUR 0.5 million, or 0.6%, excluding currency changes.
– EPRA Earnings increased by EUR 20.9 million, or 27.7% mainly as a result of the Sektor acquisition. In addition, lower direct financing expenses of EUR 7.2 million increased EPRA Earnings. EPRA Earnings per share (basic) was EUR 0.136 (EUR 0.141).
– Earnings per share was EUR 0.12 (EUR 0.11).
– Net cash from operating activities per share increased to EUR 0.14 (EUR 0.11) mainly due to Sektor acquisition and lower paid interest costs.

CEO, MARCEL KOKKEEL:
The most important event during this quarter and one of the most important events also in Citycon’s history was the completion of the acquisition of Sektor in July. The results for Citycon’s Norwegian operations, included in the company’s financials for the first time, were in line with our expectations. The property fair values were reconfirmed by our valuator to be in line with the price we paid for the acquisition of Sektor.

Overall Citycon’s operating performance during the first three quarters has been stable, with like-for-like net rental income growing by 0.6% and occupancy increasing to 96.7%. The operating results in Sweden have been especially strong, while the economic and retail environment in Finland has continued to be weak. In Estonia, the competition in the shopping centre sector has increased lately.

During the quarter, we secured the refinancing of the Sektor acquisition through three successful bond placements, one denominated in EUR and two in NOK. Hence, our financial position is built on a strong basis and we remain committed to an LTV target of 40-45% going forward.

Immediately after the closing of the Sektor transaction, we started an intensive process to integrate the operations to Citycon. Thanks to an efficient process, we have been able to reach key milestones at a fast pace, including the implementation of a “One Citycon” organisation model with key appointments and rebranding Sektor as Citycon. We are ready for the next steps in aligning business processes and systems and thereby reaching additional efficiencies.

The further quality upgrade of the portfolio remains one of the top priorities for management. We successfully continued the disposal of our non-core assets with a sale of a portfolio of 13 supermarket and shop properties in Finland. Including the two properties sold in October, we have divested 42 properties for a total value of more than 250 million since the strategy update in July 2011. We currently aim to dispose of an additional EUR 100-150 million within the next 1.5 years.

We also continued to strengthen our portfolio through our active (re)development strategy. The (re)developed and extended IsoKristiina had a successful grand opening in Lappeenranta and we started the construction of Mölndal Galleria in Gothenburg. We also made good progress in the leasing of Iso Omena, reaching a pre-leasing ratio of 65% for the first phase to be opened in Q3/2016.

ACQUISITION OF SEKTOR GRUPPEN – CITYCON BECAME THE LARGEST LISTED SHOPPING CENTRE SPECIALIST IN THE NORDICS
On 14 July 2015 Citycon acquired all the shares in the Norwegian shopping centre company Sektor Gruppen AS (Sektor). The debt-free acquisition price amounted to approximately EUR 1.47 billion and the cash purchase price to approximately EUR 540 million. Sektor is consolidated in Citycon’s financial numbers as of 1 July.

Sektor, rebranded as Citycon on 15 October, is the second largest owner, manager and developer of shopping centres in Norway. The portfolio comprises a total of 34 shopping centres of which 20 are fully or majority-owned, 4 minority-owned, 2 rented and 8 managed.

The acquisition consolidates Citycon as the largest listed shopping centre specialist in the Nordics by gross asset value (GAV) and the third largest listed continental European operator. With the acquisition, Citycon gained exposure throughout the entire Nordic region, while increasing its GAV from EUR 3.4 billion to EUR 4.7 billion.

The fair value of Citycon’s Norwegian properties amounted to EUR 1.33 billion at the end of Q3. The acquisition price of EUR 1.47 billion (NOK 12.3 billion) included some customary adjustments and was based on an exchange rate of 8.4. At the end of Q3 the exchange rate was 9.5. Lower fair value in EUR at the end of Q3 is due to the lower NOK exchange rate. The acquisition generated a goodwill of EUR 182.8 million (with the Q3 exchange rates), which consists of two parts, one that arose mainly from the deferred tax liabilities and the other which was due to the FX-change from the fixed NOK/EUR-rate.  Information on the goodwill generated by the acquisition can be found in the notes on page 30.

The financing of the transaction included a rights issue of approximately EUR 600 million, NOK bonds of approximately NOK 2.65 billion and a Eurobond of approximately EUR 300 million. Further information on the financing can be found in section ‘Financing update’.

BUSINESS ENVIRONMENT
The economic outlook in Citycon’s operating countries remained relatively unchanged during the third quarter of 2015. The macroeconomic environment in Norway, Sweden, Estonia and Denmark remained strong or relatively strong, while market conditions continued to be challenging in Finland.

In 2015, the European Commission forecasts Euro area GDP growth to reach 1.5%, with Norway forecasted to match that level (1.5%) despite the impact of the fall in oil price. Sweden (2.5%), Estonia (2.3%) and Denmark (1.8%) are showing stronger growth figures than the Euro area average while the GDP growth for Finland (0.3%) is expected to remain modest for a fourth year in a row and is dependent on both the recovery of the country’s export markets as well as domestic demand.

During the reporting period, consumer confidence levels have stayed stable in Citycon’s operating countries. The consumer confidence levels in Finland, Sweden and Denmark remain positive, while the consumer confidence in Norway, Estonia and on average in Euro area is still slightly negative. Consumer prices have remained nearly unchanged compared to the previous year in all Citycon’s operating countries apart from Norway where the prices have increased (2.1%). (Sources: Statistics Finland/Norway/Sweden/Estonia/Denmark) The unemployment rates are below the Euro area average (11.0%) in all Citycon’s operating countries. (Source: Eurostat)

Retail sales growth for the first eight months of 2015 has been particularly strong in Estonia (8.0%) and positive in Norway (3.2%), Sweden (3.1%) and Denmark (1.2%), but negative in Finland (-1.1%). (Sources: Statistics Finland/Norway/Sweden/Estonia/Denmark)

Prime shopping centre rents in Finland decreased by around 2% compared to the previous quarter and by around 3% year-on-year. The weak outlook for retail sales limits the rental growth potential and prime rental forecast in 2015 assumes a slight decrease in rents to continue. In Sweden, year-on-year prime shopping centre rents increased by around 2-3% over the last year with a similar rate of growth forecast for the forthcoming year. In Estonia, downward pressure on rents has increased due to intensifying competition. However, prime shopping centre rental growth is expected to remain flat in 2015. (Source: JLL)

In Finland, despite the sluggish development of real economy, the activity in investment market has continued and the investment volume for the first three quarters of 2015 has even surpassed the total for year 2014. The demand for core assets is strong and an increase in investment demand outside prime properties has also been evident, driven mainly by new funds and the return of international investors. Due to strong investment demand, shopping centre prime yields are expected to see a small compression during the last part of the year. In Sweden, the activity in investment market has continued strong and during the first three quarters of 2015 the investment volume was around SEK 17 billion. Prime shopping centre yields have moved in during the last 9 months given strong demand and low supply as well as continued low interest rates. Also yields for secondary shopping centres have somewhat decreased. In addition, investors are seen to be willing to pay a premium for portfolios of assets, compared to individual assets. In Estonia, prime yields are forecasted to continue to decrease driven by low interest rate expectations. (Source: JLL)

EVENTS AFTER THE REPORTING PERIOD
The divestment of non-core property in Talvikkitie 7-9 in Tikkurila, Vantaa, was closed on 1 October. The purchase price amounted to approximately EUR 9 million.

The divestment of shopping centre Strömpilen in Umeå was closed on 1 October. The purchase price amounted to approximately EUR 39 million.

OUTLOOK
In 2015 Citycon forecasts the EPRA EPS (basic) to be EUR 0.17–0.18 (Q2/2015: 0.155–0.175). Furthermore, Citycon expects its EPRA Operating profit to change by EUR 23 to 29 million (Q2/2015: 17–32) and its EPRA Earnings to change by EUR 28 to 34 million (Q2/2015: 17–32) from the previous year.

These estimates are based on the existing property portfolio as well as on the prevailing level of inflation, the euro-krona exchange rates, and current interest rates. Premises taken offline for planned or ongoing (re)development projects reduce net rental income during the year. Citycon’s outlook also includes the impact of the Sektor acquisition and the rights issue executed in July.

Citycon Oyj
Board of Directors

For further information please contact:
Marcel Kokkeel
CEO
Tel. +358 20 766 4521 or +358 40 154 6760
marcel.kokkeel@citycon.com

Eero Sihvonen
CFO, Executive Vice President
Tel. +358 20 766 4459 or +358 50 557 9137
eero.sihvonen@citycon.com

Citycon is an owner, developer and manager of urban grocery-anchored shopping centres in the Nordic and Baltic region, managing assets that total close to EUR 5 billion and with market capitalisation of approximately EUR 2 billion. Citycon is the No. 1 shopping centre owner in Finland and Estonia and among the market leaders in Norway and Sweden. Citycon has also established a foothold in Denmark.

Citycon has investment-grade credit ratings from Standard & Poor’s (BBB) and Moody’s (Baa2). Citycon Oyj’s share is listed in NASDAQ Helsinki.