Citycon Oyj · OMXHEX:CTY1S
Citycon Oyj — Investor Day (September 2013)
72 slides from Citycon Oyj's investor day presentation, Sep 12, 2013
Slide 1: Capital Markets Day
Capital Markets Day 12 September 2013 Kista Galleria, Stockholm
Slide 2: Agenda
Agenda 13:15 Business, strategy and finance update CEO Marcel Kokkeel CFO, Exec. VP Eero Sihvonen Operational update COO Harri Holmström Nordic property market and Kista Galleria case study CIO Nils Styf 15:00 Coffee break 15:30 Chairman of the Board, Chaim Katzman (via video conference) 16:00 Summa
Slide 3: Citycon's Vision
Citycon’s Vision Iso Omena, Helsinki Metropolitan Area 3
Slide 4: Citycon's Vision
Citycon’s Vision • Be the household name for Nordic and Baltic retail real estate • Offer the best retail and social experience in urban, grocery-anchored shopping centres • Be “recognised” by retailers, shoppers, and investors as the leader in its class Lippulaiva, Helsinki Metropolitan Area IsoKri
Slide 5: Strategy
Strategy Liljeholmstorget Galleria, Stockholm 5
Slide 6: Focus on Nordic and Baltic retail real estate
Focus on Nordic and Baltic retail real estate Geographical positioning1) Baltic Countries & New Business 10% Finland Sweden Sweden 52% 38% Finland 1) Kista Galleria included 100% Estonia Denmark Lithuania Myyrmanni, Helsinki Metropolitan Area All operating countries have robust fundamentals 6
Slide 7: Leading position in core markets
Leading position in core markets GAV1) of retail real estate portfolio in the Nordic and Baltic regions Steen&Strøm 4.2 Citycon 2) 3.2 Unibail-Rodamco 2.3 3) Atrium Ljungberg 1.5 4) Hufvudstaden 0.8 Sponda 5) 0.7 6) Eurocommercial 0.7 Wereldhave 0.5 0 1 2 3 4 5 Source: Company financials EUR billion
Slide 8: Focus on urban locations driven by strong demographics
Focus on urban locations driven by strong demographics Core assets: • Located close to where people live and work • Natural population growth • Connected to public transportation • Benefit from high barriers to entry e.g., land constraints, zoning restrictions • Shared access to education, healthcar
Slide 9: Urbanisation in Nordics still ongoing
Urbanisation in Nordics still ongoing Population growth estimate % (2011-2025) 30% 25% 23.8% 22.9% 20% 14.5% 15% 9.6% 10% 5% 2.0% 1.6% 1.1% 0.7% 0% -5% -2.9% Source: Statistics Finland, Norway, Sweden, Denmark and www.demographia.com Stockholm and Helsinki are two of the three fastest growing cities
Slide 10: Core portfolio of grocery-anchored shopping centres
Core portfolio of grocery-anchored shopping centres, a stable asset class with predictable cash flows Shopping centre rental income by branches (2012) Cafes and restaurants 8% Leisure, home supplies 17% Health and beauty 8% Other specialty stores 3% Department stores 7% Services and offices 10% Groc
Slide 11: Strategic Execution
Strategic Execution Koskikeskus, Tampere 11
Slide 12: Strategic execution
Strategic execution Operational • Strong like-for-like NRI performance distinction • Improved footfall • Increased cost savings • Stable occupancy Stronger • Balanced and better-quality portfolio property • Strategic joint ventures with top investors portfolio • Extended average lease maturity • Sel
Slide 13: Strong organic growth, like-for-like NRI
Strong organic growth, like-for-like NRI 6% 4.9% 4.8% 5% 3.8% 4% 3.6% 3% 2% 0.8% 1% 0% 2008 2009 2010 2011 2012 H1 2013 -0.3% -1% Weighted inflation L-f-L NRI growth Improved cash flow from existing operations 13
Slide 14: Solid footfall and sales growth
Solid footfall and sales growth Footfall Sales 170 3% 6% 2 400 4% 150 2% 4% 4% 2% 2% 2 200 2% 2% 3% 130 1% 2 000 2% L-f-L footfall growth L-f-L sales growth Footfall in millions Sales in millions 0% 0% 1 800 110 0% 0% 0% 0% 1 600 90 -1% -2% 1 400 -3% 70 -2% -4% 1 200 50 -3% 1 000 -6% 2008 2009 2010
Slide 15: Decreased administrative expenses
Decreased administrative expenses 30 27.7 26.5 25 23.3 Forecast Total administrative expenses, 20 EUR in million 17.8 16.9 15 10 10.5 5 0 2008 2009 2010 2011 2012 2013E Cost savings program on track in 2013 (up to EUR 5 million) 15
Slide 16: High occupancy sustained throughout the cycle
High occupancy sustained throughout the cycle 99% 97% 96.0% 95.5% 95.7% 95.0% 95.1% 94.8% 95% Occupancy level 93% 91% 89% 87% 85% 2008 2009 2010 2011 2012 H1 2013 Strong portfolio with low income volatility and strong income predictability 16
Slide 17: Strategic execution
Strategic execution Operational • Strong like-for-like NRI performance distinction • Improved footfall • Increased cost savings • Stable occupancy Stronger • Balanced and better-quality portfolio property • Strategic joint ventures with top investors portfolio • Extended average lease maturity • Sel
Slide 18: Balanced and improved property portfolio
Balanced and improved property portfolio More balanced Nordic portfolio1) JV partner of choice for top investors Kista Galleria Baltics 8% • IFRS market value: EUR 530 million • GLA: 90,000 sq.m. Sweden 2008 19% • JV partner: CPPIB 50%/50% Finland 74% IsoKristiina • IFRS market value: EUR 37 million
Slide 19: Average lease maturity in Nordics shorter than in Europe
Average lease maturity in Nordics shorter than in Europe 4,0 3.6 3.5 3,5 3.4 3.2 Lease maturity in years 3.1 3.1 3,0 2,5 2,0 2008 2009 2010 2011 2012 H1 2013 Clear improvement in lease maturities 19
Slide 20: Focus on organic growth supported by selective strategic acquisitions
Focus on organic growth supported by selective strategic acquisitions Kista Galleria 3 500 Kristiine 1) 3,241 Iso Omena 3 000 2,714 2,522 2 500 2,368 IFRS property value, EUR in million 2,249 2,112 2,147 2 000 1 500 1 000 500 0 2007 2008 2009 2010 2011 2012 H1 2013 -500 Investment property Organic g
Slide 21: Non-core divestments on-going
Non-core divestments on-going, executed sales of EUR 70 million Divestments during 7/2011 – 6/2013 80 12% 68.9 70 65.4 10% 10% 60 50.7 8% 48.5 50 EUR in million 40 6% 5% 30 4% 4% 20 3% 13.9 12.7 2% 10 4.3 4.2 0 0% Retail Residential Land Total # of properties 10 2 1 13 Sales price IFRS value Premium
Slide 22: Strategic execution
Strategic execution Operational • Strong like-for-like NRI performance distinction • Improved footfall • Increased cost savings • Stable occupancy Stronger • Balanced and better-quality portfolio property • Strategic joint ventures with top investors portfolio • Extended average lease maturity • Sel
Slide 23: Robust balance sheet
Robust balance sheet 2013 key events: 44% EUR 200 million • 99.7% covered by 42.7% rights issue primary subscription • 1.5x oversubscribed 42% Two investment- • S&P and Moody’s 40% grade credit • Only Nordic real estate ratings company 38.5% 37.8% 38% EUR 500 million • 1.6x oversubscribed Equity rat
Slide 24: Trends in a Changing Landscape
Trends in a Changing Landscape Liljeholmstorget, Stockholm 24
Slide 25: Responding to the changing retail landscape
Responding to the changing retail landscape Citycon: Urbanisation • Growing urban population • 87% of total portfolio in main • Increased urban GDP per capita cities • 70% in capital cities Convenience • Demand for proximity, security, • Vast majority of centres cleanliness, services, and atmosphere
Slide 26: What's next?
What’s next? Rocca al Mare, Tallinn 26
Slide 27: Continue focusing on organic growth
Continue focusing on organic growth Further improve asset and • One Company = One Citycon property management • Building a brand • Efficiency improvements Focus on successful • Organic growth through selected redevelopments (re)developments • ~EUR 100-125 million /p.a. Implement active joint • Long-
Slide 28: Financials
Financials Forum, Jyväskylä 28
Slide 29: Continued execution of financial strategy
Continued execution of financial strategy EUR 200 million rights • Rights issue was a strategic transaction intended to permanently issue completed in reduce leverage March 2013 • Creates a stronger base from which to execute the business plan Two corporate • BBB- from Standard & Poor’s investment-g
Slide 30: Successful EUR 200 million equity issue in Q1 2013
Successful EUR 200 million equity issue in Q1 2013 Successful • 114,408,000 new shares for approximately EUR 200 million execution • Oversubscribed 1.5x in total • Major shareholder participation • Strategic transaction carried out to reduce permanently Citycon’s Use of proceeds leverage • Prerequis
Slide 31: Investment-grade credit ratings received by two leading agencies
Investment-grade credit ratings received by two leading global rating agencies Baa3 (Stable Outlook) BBB- (Stable Outlook) 16th May 2013 10th May 2013 • “Citycon's Baa3 rating primarily reflects its recurring • “Finland-based retail real estate investment company rental income with inflation-indexed
Slide 32: EUR 500 million unsecured 7-year eurobond successfully executed
EUR 500 million unsecured 7-year eurobond successfully executed Transaction Terms Final allocation Issuer Citycon Oyj Banks Other Status Senior, Unsecured, RegS Bearer Notes 3% 3% Insurance Rating Baa3 (stable) / BBB- (stable) 7% Maturity 24 June 2020 Size EUR 500,000,000 Pension Funds 13% Coupon 3.
Slide 33: EUR 500 million eurobond trading data
EUR 500 million eurobond trading data Issue: 14th June Price: 99.511% Spread to Mid swaps: 245 bps Price (ask) Yield: 3.831% • iTraxx Main has since Spread to come in 5bps from Mid swaps 109bps to 104bps bps (ask) • iTraxx Crossover has come in 42bps from 452bps to 410bps Yield (%) • iBoxx BBB Finan
Slide 34: Financial performance in H1 2013
Financial performance in H1 2013 H1 2013 incl. EUR million H1 2013 100% Kista H1 2012 FY 2012 Galleria1) Net Rental Income, total 83.0 98.7 77.3 162.0 NRI Finland 50.3 50.3 47.3 98.2 NRI Sweden 20.1 35.8 18.6 39.2 NRI Baltic Countries & New Business 12.7 12.7 11.4 24.6 EPRA Operating Profit 73.2 87.
Slide 35: Snapshot of statement of comprehensive income
Snapshot of statement of comprehensive income EUR million H1 2013 H1 2012 2012 Gross rental income 117.3 109.9 225.9 Service charge income 7.2 6.3 13.3 Turnover 124.5 116.2 239.2 Property operating expenses 41.0 37.9 75.8 Other expenses from leasing operations 0.5 1.0 1.4 Net rental income 83.0 77.3
Slide 36: Snapshot of statement of financial position
Snapshot of statement of financial position 30 Jun 30 Jun 31 Dec Statement of financial position, EUR million 2013 2012 2012 Investment properties 2,711.3 2,602.0 2,714.2 Total non-current assets 2,879.2 2,621.0 2,737.6 Total current assets 98.2 88.0 75.5 Total assets 2,983.9 2,720.5 2,818.5 Total s
Slide 37: Key figures of property portfolio
Key figures of property portfolio Q2 2013 Q2 2012 Q1 2013 2012 Number of leases started 125 247 167 792 during the period Total area of leases started 35,423 33,254 35,387 141,167 (sq.m.)1) Average rent of leases started 19.1 19.1 20.7 20.5 (EUR/sq.m.)1) Number of leases ended 200 200 250 1,064 duri
Slide 38: Execution of financial strategy
Execution of financial strategy Reduced leverage • LTV 61.5% to 54.2% (Q2 2011-Q2 2013) • Target LTV of 50% or below Interest hedging policy mainly • Interest hedging ratio 76.0% to 90.2% (Q2 2011- based on fixed rates Q2 2013) • Target between 70-90% fixed Increased average loan • 3.1 years to 4.4
Slide 39: Debt diversification and extended maturity profile
Debt diversification and extended maturity profile Maturity profile of loans and derivatives Interest-bearing debt by type Loans (EUR 1,556 million) Undrawn committed credit lines (EUR 380 million) Other CP 8% 2% Bank term loans 44% Convertible bond EUR 39.8 million repaid in August Bonds 45% • Long
Slide 40: Outlook
Outlook EPRA Operating Profit EPRA Earnings 143.7- 81.9- 170 100 153.7 91.9 150 90 80 130 EUR in million EUR in million 70 110 143,7 60 135.7 81,9 90 117.4 50 105.3 107.7 105.0 63.9 70 40 50.9 53.3 43.8 47.3 50 30 2008 2009 2010 2011 2012 2013E 2008 2009 2010 2011 2012 2013E EPRA Operating Profit Ou
Slide 41: Ownership 30 June 2013 and summary overview
Ownership 30 June 2013 and summary overview • Established and listed on the Helsinki Stock Shareholders Exchange since 1988 Domestic International • Market cap EUR 1 054.7 million 23.9% • Number of domestic shareholders increased: total 8,613 (5,825) registered 76.1% shareholders, 23.9% (19.2%) of t
Slide 42: Thank you Q&A
Thank you Q&A Kista Galleria, Stockholm 42
Slide 43: Operational update
Operational update Harri Holmström, COO
Slide 44: Organisational Initiatives
Organisational Initiatives Duo, Tampere 44
Slide 45: Driving efficiency and cost savings through organisational change
Driving efficiency and cost savings through organisational change From a country based to a cluster based organisation in 2013: • 8 clusters with similar composition of staff and competences • Reduction of one management layer • Supermarket and shop properties integrated into clusters • Clear line r
Slide 46: Maximising value of the assets through operational distinction
Maximising value of the assets through operational distinction Standardisation and harmonisation of operations throughout all regions e.g.: • Cross-border leasing • Specialty leasing • Marketing • Procurement Recent launch of three key initiatives in all clusters: • Improve quality and minimise cost
Slide 47: Income Drivers
Income Drivers Kristiine, Tallinn 47
Slide 48: Realised rental growth through stable occupancy over the cycle
Realised rental growth through stable occupancy over the cycle 25 100% 21.5 98% 20.7 95.0 % 19.7 20 96% 18.7 96.0 % 95.7 % 17.4 95.5 % Average rent level (EUR/sq.m./month) 95.1 % 94.8 % 94% 16.5 15 92% Occupancy level 90% 10 88% 86% 5 84% 82% 0 80% 2008 2009 2010 2011 2012 H1 2013 Improved portfolio
Slide 49: Enhanced value through extended lease maturity
Enhanced value through extended lease maturity Kesko lease package: • Kesko extended leases on 44,000 sq.m. in 11 assets in supermarket and shop portfolio • Contract lenghts range from 10 to 15 years • Increase entire Citycon portfolio’s average lease maturity by 4 months Sinikalliontie, Helsinki Me
Slide 50: Demonstrated leasing success by regional approach
Demonstrated leasing success by regional approach A true Nordic and Baltic partner for key regional and international retailers 50
Slide 51: Nordic countries offer great potential for new international retailers
Nordic countries offer great potential for new international retailers 800 Number of international retail brands 700 600 500 400 Brand penetration in the Nordics 300 40% below European average 200 100 0 Nordics is the “best kept secret” for retailers 51
Slide 52: Accelerated non-rental income
Accelerated non-rental income 4 Forecast 3 2.8 EUR in million 2 2.0 1.7 1.3 1 0.9 0.5 0 2008 2009 2010 2011 2012 2013E Potential for further growth of specialty leasing 52
Slide 53: Cost Optimisation
Cost Optimisation Myyrmanni, Helsinki Metropolitan Area 53
Slide 54: Successful tendering of property maintenance services in Finland
Succesful tendering of property maintenance services in Finland Property Maintenance Security All property management services Cleaning and waste Substantial savings achieved from Finnish tendering, same method to be applied in Sweden 54
Slide 55: Achieved energy efficiency through sustainability program
Achieved energy efficiency through sustainability program Results: • Total investment 2010-2016: EUR 3.3 million • Average payback time: 5 years • L-f-L energy consumption last 2 years: -1.7% (2012) and -16.2% (2011) Iso Omena, Helsinki Metropolitan Area Considerable savings from energy reduction pr
Slide 56: Marketing Initiatives
Marketing Initiatives Martinlaakso, Helsinki Metropolitan Area 56
Slide 57: Adoption of digital marketing
Adoption of digital marketing Digital marketing: • Creation of Citycon’s social media community started 1.5 years ago • Iso Omena and Koskikeskus #1 and #2 in terms of Facebook fans in Finland • Rocca al Mare #1 in Estonia • Kista Galleria #3 in Stockholm • Unified layout in shopping centre websites
Slide 58: Nordic property market and Kista Galleria case study
Nordic property market and Kista Galleria case study Nils Styf, CIO
Slide 59: Nordic Investment Market
Population: Nordic Investment 5.4 M Market Population: 5.0 M Population: 9.4 M Population: 1.3 M Population: 2.2 M Population: Kista Galleria, Stockholm Population: 3.1 M 5.6 M The Nordic and Baltic Markets 59
Slide 60: Strong investor demand for Nordic markets
Strong investor demand for Nordic markets Market overview Sweden • One of the most liquid real estate markets in Europe • Very strong demand from domestic investors • Continued high inflow of “new” international capital and domestic buyers Strong investor demand with increasing interest for “seconda
Slide 61: Nordic region: active investment market
Nordic region: active investment market Key highlights • Sweden is by far the most liquid investment market Countries • Finland lagging behind, but substantial investor interest • Primary focus on core assets, but interest for secondary assets increasing • Strong demand for residential (rental) prod
Slide 62: Historically large yield gap
Historically large yield gap Yield gap – Prime real estate vs. Finnish government bond 7% Key highlights • Little or no differences in prime 5% Yield gap approx. 430 yields between countries bps Prime yields • Prime shopping centre yields: 5.0- 3% 5.5% • Prime office yields: 4.50-5.25% 1% • Low tran
Slide 63: Investments and Divestments
Investments and Divestments Kista Galleria, Stockholm Population: 3.1 M 63
Slide 64: Investments and divestments
Investments and divestments Investments • Focus on organic growth rather than acquisitions • Strict monitoring of ongoing redevelopments • Evaluation of new accretive extension and redevelopment potential Divestments • Implement value-add initiatives before selling • Divested approx. EUR 70 million
Slide 65: Kista Case Study
Kista Case Study Kista Galleria, Stockholm 65
Slide 66: Kista Galleria is uniquely positioned in one of the most dynamic areas
Kista Galleria is uniquely positioned in one of the most dynamic and urban areas in Stockholm • Sweden’s largest office sub-market Population forecast (indexed), 2011=100 • 75,000 employees 117 115 • Kista area growing twice as fast as the rest 113 of Stockholm 111 109 • Direct catchment of 130,000
Slide 67: Kista has superior transportation links
Kista has superior transportation links Commuter train station (16 trains/hour) Local bus terminal (22 buses/hour) Tramway (2017) Metro station (26 trains /hour) The E4 highway as well as Kymlingelänken linking the E4 and E18 highways Aerial map of Kista with transportation links Kista Galleria has
Slide 68: Further development of Kista Galleria in line with Kista City 2018 vision
Further development of Kista Galleria in line with “Kista City 2018” vision KISTA MEDICAL CENTRE 10,000 SQ. M. NEW RETAIL & LEISURE STAYING IN KISTA – ADDITONAL HOTEL FACILITIES 70% MORE STUDENT HOUSING KISTA IDEA CITY GROCERIES AND NECESSITY Joint vision with Municipality of Stockholm 68
Slide 69: Significant potential for optimising urban space
Significant potential for optimising urban space Short-term (1-3 years): • “Kista Idea City” – unique library concept • Expansion of seating area in the food court • Face-lift and commercialisation of the mall corridors Medium-term (3-5 years): • New and larger food court • Conversion of existing fo
Slide 70: Creating Kista Idea City in 2014
Creating Kista Idea City in 2014 • 2,400 sq.m. concept library leased on a 10-year lease to the City of Stockholm • Creation of 400 sq.m. new space • Significant political and monetary investment by the City of Stockholm Rendering of the entrance to Kista Idea City • New library concept in Sweden wi
Slide 71: Wet waste project in Kista Galleria
Wet waste project in Kista Galleria • Kista food court creates up to 900kg of wet waste every day • Advanced food mill and two giant tanks installed in the basement to turn wet waste into biogas Advanced food mill to turn wet waste into biogas • Close cooperation with the City of Stockholm and Stock
Slide 72: Thank you Q&A
Thank you Q&A Kista Galleria, Stockholm 72