HELSINKI, Nov. 10, 2022 /PRNewswire/ —
STRONG OPERATIONAL PERFORMANCE
Like–for-like net rental income in Q3 increased 3.4% compared to the previous year
Year–to-date, LFL net rental income increased 5.2%
Standing net rental income in Q3 increased in 5.3% and year-to-date 7.8%
Like–for-like footfall in Q3 increased 4.3% and year-to-date 12.1%
Like–for-like tenant sales in Q3 increased 0.1%; 7.9% higher than the same period in Q3/2019 (pre-pandemic level)
Year–to-date, like-for-like tenant sales increased 7.0% compared to previous year and 7.2% compared to Q1-Q3/2019 (pre pandemic level)
Year–to-date, total average rent per sq.m. increased by EUR +1.0 to EUR 23.6 per sq.m through the combination of indexation and positive leasing spread
(Indexation is calculated at the end of each year so 2023 will benefit from current of inflation impact on rents)
Operating properties recorded a seventh consecutive quarter of uplift as fair value change of investment properties in Q3/2022 increased by EUR 0.9 million
DEVELOPMENT ACTIVITIES: CAPITAL EXPENDITURES DECLINING
With the completion of the retail phase of Lippulaiva and limited capital commitments in 2023, we anticipate that Citycon’s capital expenditures will be lower in 2023.
Currently, all construction commitments are at guaranteed fix pricing
6 of 8 residential towers in Lippulaiva under construction and opening between 2022-2024 (Citycon will own 6).
Continue to execute on approximately EUR 300 million of additional building rights’ potential in our existing portfolio with minimal capital expenditure required
Trekanten, Norway: new zoning plan approved signaling a significant milestone in the realization of the building rights
Opportunity to sell, develop or execute strategic joint ventures
BALANCE SHEET: CONTINUED CAPITAL RECYCLING TO REPURCHASE DEBT
Repurchased EUR 29 million of notional bonds in September and subsequent to quarter end
Citycon has now completed EUR 108.3 million notional amount of bond repurchases by using approx. EUR 98.7 million of cash
Citycon registered two assets worth approximately EUR 125 million as ‘held for sale’ with the sale proceeds earmarked to pay down debt.
Excluding these assets, we have sold EUR 400 million of assets since 2021
Over the next 24 months, Citycon is targeting EUR 500 million of asset sales, inclusive of the two assets held for sale, and intends to use the proceeds to repay debt.
Investment grade balance sheet:
No significant maturities until October 2024
95% of debt is fixed
100% of assets unencumbered
Approximately EUR 537 million of liquidity.
1) Standing portfolio key figures include only income and expenses from investment properties that were on group balance sheet on 30 September 2022. The portfolio is the same in the reporting period and in the comparison period, hence the numbers are comparable. Lippulaiva (opened on the 31st of March 2022) is included in the standing portfolio.
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 key figure includes hybrid bond coupons and amortized fees.
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 key figure includes hybrid bond coupons and amortized fees.
4) Highly liquid cash investments has been taken into account in net debt.
5) Calculation updated from this and comparison periods. Divided by number of shares at balance sheet date instead of average amount of shares during the reporting period.
6) LTV Q4/2021 changed due to correction related to presentation of IFRS 16 assets. Previously reported LTV for Q4/2021 was 40.7
CEO REMARKS:
Citycon continued to demonstrate strong performance amidst a challenging macroeconomic environment. Just as the company outperformed during the covid crisis, the stability of our business model continues to prove itself.
During the third quarter, like-for-like net rental income increased 3.4% and 5.2% year-to-date over the same periods last year. This improvement was driven by like-for-like tenant sales, which were 7.0% above YTD 2021. Footfall continued its positive development as like-for-like footfall Q3/2022 and YTD was 4.3% and 12.1% above the same periods last year, respectively.
Operational key figures have surpassed pre-covid, 2019 levels. Like-for-like tenant sales were 7.2% above YTD 2019 and average rent has increased EUR 0.8 compared to Q3/2019. This reflects the stability of Citycon´s grocery- and municipal-anchored centres that are connected to transportation hubs.
Our leasing activity remained strong in Q3 as we signed 21,000 square meters of new leases with a positive leasing spread of 1.7%. Retail occupancy at the quarter´s end was 94.9%. This is a testament to the attractiveness of our locations for our tenants to generate sales and operate profitably. This leasing activity contributed to retail occupancy remaining high and an average rent increase of EUR 1.0 to EUR 23.6 per sq.m. from the year end 2021.
Citycon will realize rental growth due to inflation in Q1/2023 with 92% of our leases indexed to inflation. In our markets inflation estimates are approximately 7-8%, which bodes well for growth in 2023. It should be noted that our tenants have some of the lowest occupancy cost ratios in the retail space. Inclusive of service charges, the average OCR of our portfolio is 9.0%, providing ample headroom for rent growth in a rising sales environment. Further, our limited reliance on fashion in favour of necessity-based goods and services, such as groceries, are less dependent on discretionary income.
With the completion of the retail phase of Lippulaiva (along with the recently announced opening of the metro station on December 3, 2022) and limited capital commitments in 2023, we anticipate that Citycon’s capital expenditures will be materially lower in 2023. In addition to typical maintenance and tenant improvement capex, in 2023 we have only approximately EUR 8 million committed development capex at guaranteed, fixed pricing. We continue to make progress on creating development rights, requiring minimal capital. These reduced capital commitments increase operational free cash flow, providing additional support for the balance sheet.
Looking to our balance sheet, Citycon continues to recycle capital in order to strengthen its investment grade balance sheet and maintain flexibility. In September, and subsequent to quarter end, we repurchased additional unsecured bonds at a discount in the open market for EUR 29.0 million notional. Year-to-date, Citycon has now repurchased EUR 108.3 million of notional bonds during 2022 by using approx. EUR 98.7 million of cash at an average yield of 4.9%.
(CONTINUA)