CITYCON INVESTOR PRESENTATION
Q2/2020 TABLE OF CONTENTS
1. COMPANY CITYCON IS A LEADING NORDIC PLAYER… OVERVIEW 2. OPERATING …OPERATING IN STABLE BUSINESS ENVIRONMENT… ENVIRONMENT 3. BUSINESS …WITH A BUSINESS MODEL THAT PROVIDES PROTECTION EVEN DURING CRISIS… MODEL 4. MAXIMIZING … AND SERVES AS A PLATFORM FOR ATTRACTIVE LONG-TERM OPPORTUNITIES... VALUE 5. SUSTAINABILITY … WITH AMBITIOUS SUSTAINABILITY TARGETS… STRATEGY
6. KEY FINANCIALS … AND HIGHLIGHTING VERY GOOD Q1 RESULT AND STRONG LIQUIDITY.
APPENDIX FINANCIAL AND OPERATIONAL INFORMATION
2 1. COMPANY OVERVIEW
3 LEADING OWNER, MANAGER AND DEVELOPER OF URBAN COMMUNITY HUBS IN THE NORDICS
▪ Net rental income in 2019 MEUR 217 1) ▪ Portfolio value EUR 4.4BN 2,3) ▪ 40 premises 2,3) ▪ 223 employees 2) ▪ 170 million visitors p.a. 1) ▪ Investment grade credit ratings: ▪ GLA 1.2 million sq.m. 2) Baa3, BBB- & BBB-
10 Finland Stable business model and diversified tenant mix
Pan-Nordic reach with leading positions in Finland, 17 9 2 Norway Sweden 2 Sweden, Norway and Estonia Estonia Nordic countries less severely affected by COVID-19 than rest of Europe and better equipped to support companies through the crises 2 1) As of 31 December 2019 2 4 2) Key figures 30 June 2020 Denmark 3) Including Kista Galleria Number of shopping centres LEADING OWNER, MANAGER AND DEVELOPER OF URBAN COMMUNITY HUBS IN THE NORDICS
LEADING OPERATOR AND DEVELOPER OF – A €4.4bn portfolio of urban community hubs in the heart where people live and work and connect to 1 public transportation provides natural visitor flow URBAN COMMUNITY HUBS IN NORDICS – Centres with retail, municipal services and entertainment under one roof
CONSISTENTLY HIGH OCCUPANCY LEVELS – Consistently high occupancy levels around 93.5% with a 3.1 year average lease term and with top 5 2 FROM DIVERSIFIED TENANT BASE BRINGS A tenants representing only 18% of rental income STABLE CASH FLOW – Ca 85% of rental income linked to indexation
FOCUS ON AFFLUENT AND STABLE NORDIC – Strong pan-nordic asset portfolio brings stability and diversification 3 COUNTRIES – Operating countries with high credit ratings and residents with high purchasing power
- Demonstrated ability to convert our property portfolio more towards larger and higher quality urban EARNINGS GROWTH UNDERPINNED BY 4 assets and to develop individual assets DEVELOPMENT PIPELINE OF OWNED ASSETS - Significant residential potential
ROBUST BALANCE SHEET, MODERATE LTV – 5 LTV target of 40-45% AND ASSETS LARGELY UNENCUMBERED – 90.4% of debt is unsecured
– Fitch: BBB- (stable outlook) 6 INVESTMENT GRADE RATINGS – Moody’s: Baa3 (negative outlook) – S&P: BBB- (negative outlook) – Citycon is committed to maintaining investment grade credit ratings
5 2. OPERATING ENVIRONMENT
6 NORDICS HAVE BEEN A SAFE HAVEN IN AN UNSTABLE WORLD
KEY ECONOMIC INDICATORS IN OUR OPERATING COUNTRIES
Finland Norway Sweden Denmark Estonia
Credit ratings AA+ AAA AAA AAA AA- 5.5M GDP growth, 2019 1.4% 2.5% 1.1% 2.0% 3.2%
Unemployment, 5/2020 7.3 % 4.6 % 9.2 % 5.0 % 6.0 % 5.3M 10M 1.3M Inflation, 5/2020 -0.2 % 1.3 % 0.0 % 0.0 % -1.7 %
Retail sales growth, 1- 2.5 % 2.8 % 2.3 % 0.3 % -1.0 % 4/2020 5.8M
7 Sources: SEB Nordic Outlook, Nordea Economic Outlook, European Commission, Eurostat, Population Statistics Finland/Norway/Sweden/Estonia/Denmark. Some figures are based on estimates. UNPRECEDENTED SUPPORT TO RETAILERS FROM NORDIC COUNTRIES POSITIVELY AFFECTED SECTOR AND Q2 PERFORMANCE
Actions Taken By Governments ▪ Gvt package 3,2 bill EUR to support businesses with a decrease of income with 30% or more in March and April. ▪ Credit guarantees to specific industries, plus specific SME measures ▪ 3 months of tax deferrals ▪ New regulations for short-term layoffs including 65%+ of salary capped at SEK44,000 month. Government also to pay full cost of sick-pay in April & May ▪ Norwegian Government has announced a significant relief program covering 80-90% of fixed costs of companies with a revenue decline above 30%. Implementation of the package already started ▪ Rent reduction for the landlords to tenants, will reduce the tenant support from the government. Uncertainty about details in the government packages has made landlords to postpone decisions about discounts. ▪ New loans offered and various stimulus/support packages for specific industries including loans for SMEs ▪ 2 month cut in social security payments; postpone wealth tax payments and re-allocate losses to previous years taxed surplus ▪ Self-employed are paid 80% of their average income over the past three years. Unemployment benefits already high and in-situ ▪ Comprehensive rent relief program launched for March-May ▪ 75% Government loan guarantee; irrecoverable cost compensation of 25%-80% ▪ VAT, corporate tax and social security contributions postponed ▪ 75% of salaries for 3 months, up to 90% for PT / hourly paid staff ▪ It has been decided to compensate rental reliefs of retail tenants in the SC-s in maximum amount 25% of monthly rent. Max amount is EUR 4 million. Period support will be given and conditions are under planning. Most likely support will be given for the period after re-opening.
▪ Government has announced and is working on several additional aid programs ▪ Aid package for business, including loans via Finnvera, plus support for SMEs and midcaps. The Finnish Government has prepared an extensive package of approximately €1.45bn to support companies and alleviate the negative effects of COVID-19 epidemic ▪ It has also increased the financing mandate of the Finnish Export Credit Agency to €12bn ▪ Specific labour market support TBD, but unemployment benefits high and in-situ 8 FISCAL MEASURES RANK AMONGST HIGHEST REGARDING DEPTH AND BREADTH OF RESPONSE
EUROPEAN MAP DEPTH & BREADTH OF NATIONAL POLICY RESPONSE
Slovakia 2.5 Sweden Netherlands 5.0 Norway Croatia 2.5 Denmark Norway 4.0 Germany Ireland 2.5 Finland Sweden 4.0 Netherlands Israel 2.5 Belgium Denmark 4.0 Russia Italy 2.5 United Kingdom Latvia United Kingdom 4.0 Czechia Latvia 2.5 Ireland Germany 4.0 Poland Portugal 2.5 Finland 3.5 Switzerland Slovakia France Austria 2.0 Austria Romania Belgium 3.0 Spain 2.0 France 3.0 Portugal Spain Italy Bulgaria United Arab Emirates 2.0 Greece Romania 2.5 Croatia Serbia 2.0 Hungary Israel Switzerland 2.5 Poland 1.5 Serbia Greece 2.5 United Arab Kingdom of Saudi Arabia 1.5 Emirates Czechia 2.5 Hungary 1.5 Bulgaria 2.5 Kingdom of Russia 1.0 Saudi Arabia Nordic countries
1 5 Source: Colliers COVID-19 European Real Estate Markets Government Response (Apr-20) 1.0 1.5 2.0 2.5 3.0 3.5 4.0 5.0 9 STRONG PUBLIC FINANCES PROVIDE CONFIDENCE AND SUSTAINABILITY OF CURRENT AND FUTURE SUPPORT MEASURES
PUBLIC DEBT (as a % of GDP)
Average: 85.5%
Average: 94.4%
147,2
134,554
121,6
117,2
105,9
102,4
100,8
99,1
95,5
85,1
76,2
71
70
68
63,5
62,1
59,2
59
58,8
51,4
49,3
40,1
38,5
34,9
34,6 32,8
SE DK NO FI AT FR DE IE IT NL PT ES GB
Debt to GDP (2019A, %) Debt to GDP (2024E, %) Nordic countries 10 Source: EIU CountryData MORE RELAXED NORDIC GOVERNMENT LOCKDOWN MEASURES…
EUROPE: CORONAVIRUS INTERVENTIONS LOCKDOWNS SELF -ISOLATION, CASES SOCIAL DISTANCING PUBLIC EVENTS SCHOOL CLOSURES ORDERED MANDATED ENCOURAGED BANNED ORDERED MARCH 01 07 13 19 25 01 07 13 19 25 01 07 13 19 25 01 07 13 19 25 01 07 13 19 25
Nordic countries 11 Source: Imperial College London …HAVE ERODED CONSUMER CONFIDENCE TO A LESSER EXTENT DURING APR-20 VS. WESTERN AND SOUTHERN EUROPE
CONSUMER CONFIDENCE INDICATOR — June 2020
(0,8) (2,0) (4,9) (8,3) (10,8) (12,9) (14,7) (15,8) (18,5)
(25,5) (25,6)
Average: (16.5%)
12 Source: EU Programme of Business and Consumer Surveys (June-20) Nordic countries STRONGER NORDIC HOUSEHOLD FINANCIAL SITUATION SUPPORTS A POTENTIAL REBOUND IN CONSUMER SPENDING
FINANCIAL SITUATION OF HOUSEHOLDS OVER NEXT 12 MONTHS — June 2020
11,4 11,1 8,8
Average: (5.2%) 0,1
(0,3)
(4,4) (5,7) (5,3) (5,3)
(10,0) (10,6)
DK SE FI AT FR DE IE IT NL PT ES
13 Source: EU Programme of Business and Consumer Surveys (Apr-20) Nordic countries OVER LONG-TERM OUR OPERATING ENVIRONMENT IS CHARACTERISED BY STRONG URBANISATION...
PERCENTAGE OF POPULATION IN URBAN AREAS POPULATION GROWTH 2015–2035 100% Sweden 93% 95% Denmark 92% 90% Norway 85% and Finland TAMPERE 12% 90% 80% HELSINKI Estonia 15% 77% 75% OSLO STOCKHOLM 29% 25% TALLINN 70% 10% GOTHEN- BURG 65% 22% 1980 2018 2030 2050 COPEN- Finland Norway Sweden Denmark Estonia HAGEN 16% 14 Source: UN World Urbanization Prospects 2018 …AND STRONG PURCHASING POWER
GDP PER CAPITA GDP OF NORDICS 67,900 Estonia EUR 1.7% Denmark Finland 21.2% 16.4%
50,000 47,100
40,500 Euro area average 34,500 1.4 Equivalent approx. to Canada EU average EUR trillion 29,900 19,800 Norway 25.7%
Sweden 35.1%
Norway Denmark Sweden Finland Estonia
15 Source: IMF 3. BUSINESS MODEL
16 OUR OPERATIONAL MODEL BASED ON EFFICIENT URBAN HUBS AND LARGE SHARE OF NECESSITY TENANTS BRINGS STABILITY
GROCERY-ANCHORED CENTRES − Large proportion of resilient necessity-based tenants
OPERATIONAL EXCELLENCE − Harmonizing practices − Centralizing procurement − Maintain strict control on operating expenses and capital expenditure.
MIX USE DEVELOPMENT − Developing urban community hubs with retail, public services and entertainment under same roof − Further value to all stakeholders through densification and increased catchment
GROWTH FROM SPECIALITY LEASING − 170 million visitors provide strong basis for specialty leasing opportunities
17 CONNECTION TO PUBLIC TRANSPORTATION PROVIDES NATURAL FOOTFALL
100% OF OUR SHOPPING ➢All of our centres are accessible by bus CENTRES ➢10 centres directly connected to metro lines, 17 to CONNECTED TO train lines and 6 to tram lines. PUBLIC TRANSPORTATION 54% ➢ OF VISITORS ARRIVE Almost 4,000 dedicated bicycle parking spaces. BY PUBLIC ➢Almost 90% of our shopping centres have dedicated TRANSPORTATION, areas for secure bicycle parking FOOT OR BICYCLE
ISO OMENA ➢Footfall increased +74 % to 20 million annual visitors IS A GREAT EXAMPLE OF after metro opening. POWERFUL PUBLIC ➢Tenant sales +17%, same-store sales +7%. TRANSPORTATION
18 OUR FOCUS ON GROCERY-ANCHORED, MULTIFUNCTIONAL SHOPPING CENTRES GIVES STABILITY TO OUR BUSINESS
OVER 35 % OF GROSS RENTAL INCOME IS FROM GROSS INCOME BY CATEGORY ”NECESSITY TENANTS” (Q2/2020) ▪ Focus on the daily needs of customers Groceries 18% ▪ 4 out of the top 5 tenants are grocery stores Health care 4% Municipality services 3% Offices 3 % Pharmacies 3% SMALL PORTION OF TURNOVER BASED RENTS Banks 3% ▪ In 2019 only 2.9% of our income was from Residentials and hotels 1% turnover based rents. Cafés and Restaurants 10% Cosmetics 5% Wellness 4% PUBLIC SECTOR TENANTS ARE GROWING PART OF Other services 1 % OUR BUSINESS Leisure 1% ▪ Currently public sector tenants and healthcare Specialty stores 1% present approx. 7% of our GLA Home and Sporting Goods 19% ▪ Newest municipal service square opened in Fashion and Accessories 24% January 2020 in our shopping centre Trio ▪ Three new deals approved for Trio, Kista and
19 Tumba WE HAVE A SIGNIFICANTLY HIGHER “ESSENTIAL” BUSINESS EXPOSURE THAN OTHER PAN-EUROPEAN RETAIL PEERS
Proportion of groceries in Top 10 tenancies - peer group Citycon Peer 1 comparison Kesko Group Grocery 5.0% Varner Group Fashion 4.1% Peer 4 S Group Grocery 3.9% ICA Group Grocery 2.3% Peer 3 H&M Fashion 2.2% Coop Grocery 2.2% Peer Group avg Gresvig Fashion 1.9% Lindex Fashion 1.7% Peer 2 NorgesGruppen Grocery 1.7% Peer 1 Clas Ohlson Home 1.7%
Top 10 Tenants 26.7% Citycon Grocery in Top 10 15.1% 0,0% 2,0% 4,0% 6,0% 8,0% 10,0% 12,0% 14,0% 16,0%
Notes:* Pan-European Peers: Unibail, Klepierre, Eurocommercial and Wereldhave Per 2019 Financials
20 LOW OCR SUPPORTS PROFITABILITY OF OUR TENANTS AND CITYCON’S COMPETITIVENESS ALSO GOING FORWARD OCCUPANCY COST RATIO VS PEERS
Citycon 9.3%
Peer 1 10.4%
Peer 2 11.6%
Peer 3 12.4%
Peer group 14.4% average
Peer 4 15.5%
Peer 5 22.2%
Peer group: Hammersson, Klepierre, Mercialys, Unibail-Rodamco-Westfield, Wereldhave Source: Companies' annual reports 21 WE HAVE A STABLE AND HIGH OCCUPANCY RATE
− 4,465 lease agreements with an average length of 3.1 years OCCUPANCY RATE DEVELOPMENT − Clear majority of tenants pay fixed market rent. Only a small portion of tenants pay turnover-based rent 96.0% 96.4% 95.9% 95.6% 95.3% 95.5% 94.5% 93.5% 94.0% − Majority of tenants pay service charge covering the running costs of the property, such as heating, electricity, water and marketing − Majority of rent agreements are tied to CPI indices
94.2% 92.8% 93.5% 93.5%
2017 2018 Q1/2019 Q2/2019 Q3/2019 Q4/2019 Q1/2020 Q2/2020 Retail occupancy Finland & Estonia Norway Sweden & Total rate Denmark Q2/2020 22 1) Including Kista Galleria (50%) PUBLIC SECTOR TENANTS - A GROWING PART OF OUR BUSINESS
SWEDEN NORWAY FINLAND ESTONIA DENMARK TOTAL
CREDIT RATING* AAA AAA AA+ AA- AAA
MUNICIPAL/GOVERNMENTAL TENANTS
Leased GLA ~35,000 ~3,000 ~14,000 ~100 ~3,000 ~55,000 1% Share of total 11% 1% 4% 0% 6% ~4% GRI % ALCOHOL MONOPOLY (ALKO, SYSTEMBOLAGET, VINMONOPOLET) TENANTS 1% Total GLA4% 2 851 Leased GLA ~8,000 ~6,000 ~2,000 - - ~16,000 2% Share of total 2% 1% 1% - - ~1% GRI % 1% 11% SHARE OF TOTAL GLA%, MUNICIPAL AND ALCOHOL MONOPOLY TENANTS ~6%
*Source: S&P 6% Share of GRI (municipal tenants) 2 23 Share of GRI (alcohol monopolies) HIGH INDEXATION LEVEL ON RENTS INCREASES THE STABILITY OF OUR BUSINESS MODEL
SWEDEN NORWAY FINLAND ESTONIA DENMARK
Leases indexed based 85% 80% 95% 95% 90% on rental income
Average indexation based on rental 2.2% 3.4% 2.1% 3.3% 1.6% income 95% Total GLA 2 851
80% 85%
95%
90% 2 24 Leases indexed (%) RENT COLLECTION REMAINED STRONG
RENT COLLECTION STATUS 2020 Rent collection remained strong at 93% in H1 ‒ Rent collection remained strong and stands at 93% for H1 at the end of 97% 93% July. To date, rent collection for Q2 is at 88% (86% cash collection + 2% 88% accrued subsidies) and 97% for Q1. ‒ The final collection rate is expected to be higher due to delays in payments experienced during COVID-19 ‒ Strong rent collection was driven by both resilient tenant-mix in line with our strategy, based on necessity-based anchor tenants, and operating in the Nordics where a holistic approach to support viability of economies and businesses was taken.
Q1/2020 Q2/2020* H1/2020
* In Q2 ncludes 2% of accrued rents from govenment subsidies in addition to cash collected 25 OPERATIONAL PERFORMANCE FOR Q2 WAS SOLID AS RECOVERY CONTINUES
Footfall vs. Prior Year Comparable Period Operationally Q2 was a solid quarter and the gradual bounce-back continues – 95% All shopping centres remained open throughout the period – all tenants are now open 85% 81% – Footfall declined following the government restrictions and like-for-like footfall was -29% in Q2. April was clearly the worst month. At the end of June the footfall had increased to 85% of 2019 level and has continued to increase being 95% for the last week of July. – Tenant sales fell less than footfall due to increased average customer spending per visit that increased by 28%. Like-for-like tenant sales for the period declined by - 8.7%, while footfall fell by -29%.
Q2/2020 average visitor spending development*
Avg spending per visitor BUSINESS UNITS Q2/20 vs Q2/19 Finland & Estonia 27.9 % Norway 27.0 % Sweden & Denmark (Kista 50%) 21.2 % Q2/2020 End of June Last week of July Total (inc. Kista 50%) 28.4 % * Year-on year 26 WE HAVE CLEAR PRIORITIES TO TACKLE THE CRISIS
1. SECURING THE SAFETY AND FUTURE OF OUR STAKEHOLDERS ‒ Ensuring the safety of our employees, tenants and customers ‒ Actively supporting our tenants and surrounding communities
2. PREPARING FOR POST-COVID ‒Preparing for gradual re-opening already started in the Nordics ‒Ensuring safe and controlled return to normal
3. ENSURING CITYCON’S POSITION AS A TOP INVESTMENT − Strict capex and cost control − Ensuring flexibility and securing the platform for future growth with investors interests’ in mind
27 2 WORKING TOGETHER WITH TENANTS AND OTHER STAKEHOLDERS TO OVERCOME THE CRISIS
- Rental easements are assessed on a case by case basis and primary means have been rental postponements and, to a limited extent, granting rental reliefs – In March 2020 rent collection was ca 92%. – For April, which is expected to be the weakest month, Citycon has by May 12th collected and/or accrued as government assistance guarantees approximately 75% of its billed rent for the month. Cash collection from tenants amounted to approximately 65% of billed rent, while 10% of billed rent has been accrued and deferred until the relevant government program offsets the tenant’s fixed cost. – Citycon has taken an active role in supporting its tenants and local communities around our shopping centres. – A few examples of the actions taken during COVID-19 outbreak:
– Delivery of food and medicines to risk groups; – Sharing up-to date information on the tenant specific opening hours in social media and our web page; – Arranging drive-in cinema in Citycon parking area; – Arranging a “shop locally” campaign to support customers to purchase our tenants’ products and services – Continuing the work to support our tenants and other stakeholders is our focus also going forward – We are planning our strategy for the business “post-crisis”, and we believe we are well-positioned to 28 come through this crisis stronger and better SUMMARY OF COVID-19 EFFECTS
COVID -19 affected the quarter, operations have been steadily improving since April ‒ Footfall recovered and is at 95% of prior year level at the end of July ‒ Rent collection for H1 2020 remained solid at 93%* ‒ 100% of centres remained open throughout the quarter. At the end of July, all our tenants are open for business ‒ The impact of rent discounts for the quarter was approximately EUR -0.4 millions ‒ Occupancy was affected by COVID-19 – retail occupancy for Q2 was 94% and total occupancy 93.5%. ‒ Valuations -2.1% with a financial impact of EUR 76 million in Q2 ‒ COVID-19 related bankruptcies are estimated to have a maximum impact of EUR 1.9 million assuming that all stores of the bankrupt tenants are immediately closed and that space is not re-let
29 4. MAXIMIZING VALUE
30 OUR STRATEGY BRINGS STABILITY AND REMAINS HIGHLY RELEVANT ALSO AT TIMES OF CRISIS
URBAN COMMUNITY HUBS − Best centres with all services under one roof attract visitors and allow our tenants businesses to flourish − Grocery-anchored, multifunctional shopping centres − Meeting points in the hearts of communities SUPERIOR LOCATIONS − Located in transportation hubs provides natural flow of customers − Areas with strong demographics
GROWTH & DIVERSIFICATION THROUGH DENSIFICATION/ RESIDENTIAL − Natural growth opportunities in growing communities − Diversification from stable residential exposure
31 COVID-19: CITYCON’S STRATEGY PROVIDES STABILITY
GUIDANCE FOR 2020 WAS WITHDRAWN IN MARCH DUE TO ECONOMIC UNCERTAINTY CAUSED BY COVID-19
STRATEGY BASED ON GROCERY-ANCHORED MIXED-USE SHOPPING CENTRES BRINGS STABILITY ‒ Citycon’s strategy is focused on grocery-anchored mixed-use centres: ‒ Over 30% of gross rental income is from “necessity based” tenants balancing fluctuation of retail demand ‒ Public sector tenants providing critical services to citizens are also a growing part of the business
CONSERVATIVE FINANCING STRATEGY AND HIGH LIQUIDITY ‒ Citycon’s financing strategy is based on unsecured debt with long-maturities and keeping healthy loan to value ‒ Strong liquidity gives financial strength and flexibility, and supports Citycon’s ability to meet its commitments ‒ High proportion of unencumbered assets gives flexibility to consider secured loan options ‒ ECB has announced a EUR 750 bn bond purchase program, Citycon is eligible for ECB bond purchases
LONG-TERM STRATEGY TO FOCUS ON URBAN COMMUNITY HUBS REMAINS HIGHLY RELEVANT ‒ Citycon’s strategy to focus on mixed-use urban community hubs remains highly relevant: ‒ Focus on mixed-use is strategically important to attract visitors. Having retail, public and private services as well as entertainment under one accessible location creates unique competitive advantage. ‒ Location in transportation hubs supports natural customer flow and accessibility ‒ Tenant diversification and focus on creating urban community hubs supports Citycon’s position as tenants are implementing their omnichannel strategies
16 STRATEGIC ATTRIBUTES OF CITYCON’S ASSETS
NRI POTENTIAL OVER 5 YEARS TOP 1 OR 2 CITY IN THE COUNTRY
VALUE-ADD POTENTIAL IRREPLACEABLE LOCATION
CAPEX REQUIREMENTS AREA DEMOGRAPHICS
MINIMUM SIZE DOMINANT CENTRE WITHIN ITS CATCHMENT AREA
TENANT MIX CONNECTION TO PUBLIC TRANSPORTATION
33 WE FOCUS ON MULTI-FUNCTIONAL SHOPPING CENTRES IN GROWING URBAN AREAS - SINCE 2015 WE HAVE DISPOSED ASSETS FOR OVER 700 MEUR
2011 2020 OUR PERFORMANCE INDICATORS ARE SHOWING THE POSITIVE EFFECT30 OF # OF SHOPPING CENTRES OUR TRANSFORMATION 78 40 AND DISPOSITION STRATEGY.
WE WILL CONTINUE OUR REPOSITIONING STRATEGY ALTHOUGH THE MAJORITY 32 AVERAGE SIZE, MEUR OF DISPOSALS HAVE 118 ALREADY BEEN DONE.
34 THE COMPANY CONTINUES TO FOCUS ON EXPANDING ITS RESIDENTIAL BUSINESS IN LINE WITH ITS STRATEGY
– Citycon is using the current environment as an opportunity to work with municipalities to advance entitlements/ permits for residential development rights. – As part of the residential development strategy, the company announced a recruitment of Director, Residential Development in June 2020. – In addition to Lippulaiva, Citycon announced additional details on its residential project in Oasen Norway where the municipality is currently building a tram line that will increase both attractiveness of the centre and footfall.
35 OUR ONGOING DEVELOPMENT PROJECT LIPPULAIVA IS A SHOWCASE OF OUR RESIDENTIAL POTENTIAL BRINGING STABILITY AND DIVERSIFICATION TO OUR PORTFOLIO
– Lippulaiva will be the new heart of the growing area of Espoonlahti in greater Helsinki. In addition to the position as the community centre, there is significant residential potential with ca 500 flats – We are pleased that despite the situation with COVID-19 the project is ALL OTHER progressing as planned DEVELOPMENT PROJECTS HAVE BEEN POTENTIAL GBA CAN EITHER BE DEVELOPED AS RESIDENTIAL OR OFFICES DEPENDING ON DEMAND AND MARKET SITUATION POSTPONED SWEDEN NORWAY FINLAND ESTONIA DENMARK TOTAL Potential Gross Building Area ~115,000 ~55,000 ~120,000 ~10,000 ~20,000 ~320,000 (approx.)
Number of potential Units if developed as ~1,560 ~500 ~2,000 ~150 ~300 ~4,500 apartments*
36 OUR DEVELOPMENT PROJECT IN LIPPULAIVA IS PROGRESSING AS PLANNED DESPITE COVID-19
– Lippulaiva will be the new heart of the growing area of Espoonlahti in greater Helsinki supporting our Status update strategy Q2/2020: – We are pleased that despite the Construction situation with COVID-19 the project work is is progressing as planned. progressing as – The shopping centre will house a planned wide range of private and public services. One of the most significant public services will be the new Espoonlahti regional library. A Service Point of the City of Espoo will also open in the library. – Also eight residential towers will be built consisting of 500 units of rental condos. 37 IT WILL ALSO BE ANOTHER GREAT EXAMPLE OF OUR DEVELOPMENT CAPABILITIES
38 5. SUSTAINABILITY STRATEGY
39 OUR SUSTAINABILITY STRATEGY CARBON NEUTRAL ACCESSIBLE CONVENIENT AND SAFE − Citycon is carbon neutral by 2030 − 100% of assets are connected to − Tenant satisfaction stays consistently public transportation, encouraging above 90% in areas of safety, security, green ways to visit our centres hospitality and service-mindedness.
Citycon puts best sustainability practices into effect by following a clear roadmap and monitoring success EXCELLENCE IN ACTION
40 WE HAVE MADE GOOD PROGRESS IN SUSTAINABILITY MATTERS
- 56 % - 10 % - 58 % GREENHOUSE GAS ENERGY INTENSITY FROM CLIMATE CHANGE IMPACT INTENSITY FROM BASELINE BASELINE 2014 FROM BASELINE 2014 2014 (KGCO2E/SQ.M.) (KWH/SQ.M.) (TCO2E)
100 % 84 % SHARE OF RENEWABLE OF PORTFOLIO (MEASURED ELECTRICITY USED FOR OWN BY GLA) BREEAM IN-USE CONSUMPTION SERTIFIED
41 Q2/2020: CITYCON’S STRATEGY VALIDATED IN THE FACE OF THE PANDEMIC
42 Q2/2020: CITYCON’S STRATEGY VALIDATED IN THE FACE OF THE PANDEMIC Short-term effects of COVID-19 impacted Q2 results, yet Citycon’s assets demonstrate resilience and defensive nature of assets ‒ NRI was 50.2 million euros compared to 53.8 million euros for the comparable quarter, using the same currency exchange rates ‒ Like for-like NRI for Q2 with comparable exchange rates decreased by 4.1% as a result of COVID-19 pandemic. ‒ The decline was substantially driven by COVID-19 and the negative impact on footfall and tenant sales during the period, leading to lower income from turnover-based rents, specialty leasing income and parking fees ‒ Subsequent strengthening in footfall and tenant sales are a positive forward-looking indicator for the above- mentioned income ‒ Citycon’s resilient properties and tenant mix positively affected the outcome, and Citycon’s asset values outperformed the sector average
Fair values of properties declined while exchange rate gains positively affected EPRA NAV ‒ EPRA NAV of 11.33 for Q2/2020 compared to 11.36 for Q1/2020 with only a modest decline of 0.3% ‒ The decline in fair values of 2.1% was largely due to COVID-19. NOK and SEK exchange rates recovered from Q1 lows (NOK + 19% and SEK +8%). Strengthening of currencies positively affected equity through positive impact on asset fair values.
EPRA EPS and adjusted EPRA EPS amounted to EUR 0.204 and EUR 0.181 respectively increasing from EUR 0.195 and EUR 0.173 in Q1/2020 (+4.2%; +4.7%) ‒ EPRA EPS was EUR 0.204 compared to EUR 0.217 in Q2/2019, exchange rates explaining EUR -0.011 of the decline. ‒ Adjusted EPRA EPS was 0.181 and adjusted for the impact of currency (-0.011) and issuance of the hybrid bond in 43 H2/2019 (approximation of -0.011), 0.203 compared to Q2/2019 (-6.6%) H1/2020 FINANCIALS
H1/2020 MEUR H1/2020 H1/2019 Change % INCL. KISTA 50%
Gross rental income 111.5 118.5 -5.9% 117.3
Net rental income 102.6 109.7 -6.5% 106.8
Direct operating profit 90.2 98.4 -8.4% 94.1 Divestment, hybrid, and EPRA Earnings 71.0 74.5 -4.6% N/A FX impacted on adjusted AdjustedEPRAEarnings (1 63.0 74.5 -15.4% N/A EPRA EPS EPRA EPS (basic) 0.399 0.418 -4.6% N/A Adjusted EPRA EPS 0.354 0.418 -15.4% N/A (basic) (1 EPRA NAV per share 11.33 12.77 -11.3% N/A
1) The adjusted figure includes hybrid bond (issued November 2019) coupons and amortized fees. 44 MAIN FINANCING METRICS
▪ Debt portfolio's hedge ratio 81.5% ▪ Investment-grade credit ratings BBB-/BBB-/Baa3 ▪ Financing mainly unsecured 90.4% ▪ Substantial liquidity buffer MEUR 583 ▪ Loan to Value 46.2% ▪ Average maturity of loan portfolio 3.9
45 WE HAVE STEADY CASH AND EARNINGS GENERATION
EPRA EPS EUR
0.96 0.87 0.86 0.84 0.81 0.82
2014 2015 2016 2017 2018 2019
46 HISTORY OF SUSTAINABLE DIVIDENDS
DIVIDEND/EQUITY REPAYMENT AND YIELD DIVIDEND/EPRA EPS
87% 0.75 0.75 81% 79% 77% 76% 0.65 0.65 0.65 0.65
6.8% 7.0% 6.8% 6.3% 5.8% 5.6% Target payout ratio >50%
2014 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
47 WE HAVE A SOLID BALANCE SHEET
LOAN TO VALUE (LTV) INTEREST COVER RATIO 54.5% 4.2x 4.2x 49.3% 48.7% 3.8x 3.8x 3.8x 3.8x 45.7% 46.6% 46.7% 46.2% 42.4% 38.6% 3.1x 2.4x 2.1x
2012 2013 2014 2015 2016 2017 2018 2019 Q2/2020 2012 2013 2014 2015 2016 2017 2018 2019 Q2/2020
WEIGHTED AVERAGE INTEREST RATE AVERAGE LOAN MATURITY YEARS 4.25% 5.9 4.12% 5.5 5.6 5.1 5.0 3.28% 4.6 3.04% 2.86% 2.78% 4.1 3.9 2.35% 2.29% 2.31% 3.2
2012 2013 2014 2015 2016 2017 2018 2019 Q2/2020 2012 2013 2014 2015 2016 2017 2018 2019 Q2/2020 48 BALANCED MATURITY PROFILE
DEBT BREAKDOWN BY TYPE DEBT MATURITIES Bank loans 15% CP 6% 2,155.3 EUR million
Bonds 79 % DEBT BREAKDOWN BY CURRENCY SEK 15%
EUR 64% NOK 2,155.3 21% EUR million Part of EUR debt has been converted to SEK and NOK using cross- currency swaps
49 GOOD LIQUIDITY POSITION
AVAILABLE LIQUIDITY MEUR 30 JUN 2020 31 MAR 2020 31 DEC 2019 Syndicated revolving credit facilities unutilized 402.5 376.1 530.4 Cash pool overdraft limits unutilized 24.3 23.4 24.9 Nonrestricted cash and cash equivalents 156.1 117.3 7.1 Available Liquidity 582.9 516.8 562.4 Commercial Paper 125.9 127.2 129.7 Bank loans maturing < 1 year 115.0 109.1 101.1 Bonds maturing < 1 year 32.1 105.9 75.5 Net Available Liquidity 309.9 174.6 357.1
▪ After the <12 month debt maturitites included above, there are no debt maturities until RCF 12/2021 and thereafter the next smaller debt maturity is 6/2022.
50 WHERE TO FIND MORE INFORMATION?
Laura Jauhiainen IR Director Tel. +358 40 823 9497 [email protected]
Result Annual Report, presentation Valtteri Piri Sustainability Report and Legal and IR Specialist Financial Statements Tel. +358 50 570 1022 [email protected]
Capital Markets Day Interim Report presentations
More information can be found on Citycon’s website at www.citycon.com/investors
51 citycon.com
THANK YOU. APPENDIX FINLAND & ESTONIA
KEY FIGURES Fair value of properties 1,868.9 MEUR Gross Leasable Area 404,390 sq.m. Retail GLA 338,800 sq.m. Economic occupancy rate 94.8% Average yield requirement 5.3% Average rent 25.8 EUR / sq.m.
RENTAL INCOME BY CATEGORY Groceries Fashion and Accessories Services and Offices Home and Sporting Goods Cafés and Restaurants Cosmetics and Pharmacies Wellness Department Stores Leisure Specialty stores 54 Residentials and hotels NORWAY
KEY FIGURES Fair value of properties 1,291.7 MEUR Gross Leasable Area 458,800 sq.m. Retail GLA 377,800 sq.m. Economic occupancy rate 94.1% Average yield requirement 5.5% Average market rent 21.8 EUR / sq.m.
RENTAL INCOME BY CATEGORY Home and Sporting Goods Fashion and Accessories Services and Offices Groceries Cosmetics and Pharmacies Cafés and Restaurants Wellness Specialty stores Leisure Residentials and hotels
55 Department Stores SWEDEN & DENMARK
KEY FIGURES Fair value of properties 1,126.2 MEUR Gross Leasable Area 316,300 sq.m. Retail GLA 218,200 sq.m. Economic occupancy rate 94.6% Average yield requirement 5.5% Average rent 21.9 EUR / sq.m.
RENTAL INCOME BY CATEGORY Fashion and Accessories Services and Offices Groceries Cafés and Restaurants Home and Sporting Goods Cosmetics and Pharmacies Wellness Residentials and hotels Specialty stores Leisure 56 Department Stores TENANT MIX – PEER GROUP COMPARISON
Overview of Top 10 Tenants
Citycon Peer 1 Peer 2 Peer 3 Peer 4 Kesko Group Grocery 5,0% Ahold Delhaize Grocery Inditex Fashion Apple Electronics Zara Fashion Varner Group Fashion 4,1% H&M Fashion H&M Fashion Fnac Electronics H&M Fashion S Group Grocery 3,9% C&A Fashion Fnac Electronics Foot Locker Fashion Sephora Beauty ICA Group Grocery 2,3% Blokker Group Home Carrefour Grocery H&M Fashion Berkhka Fashion H&M Fashion 2,2% A.S. Watson Group Beauty Gruppocoin Fashion Hollister Fashion Celio Fashion Coop Grocery 2,2% HEMA Variety Maxi ICA Grocery Mango Fashion Media World Electronics Gresvig Fashion 1,9% Carrefour Grocery Geant casino Grocery Printemps Department Primark Fashion Stockmann Group Fashion 1,7% Inditex Fashion Media Markt Electronics Sephora Fashion McDonald's F&B NorgesGruppen Grocery 1,7% Metro Group Wholesale Varner Fashion Victoria's Scret Fashion Fnac Electronics Clas Ohlson Home 1,7% E.LECLERC Grocery Coop Grocery Zara Fashion Foot Locker Fashion
Top 10 Tenants 26,7% Top 10 Tenants 20,9% Top 10 Tenants 21,1% Top 10 Tenants 10,4% Top 10 Tenants 11,8% Grocery in Top 10 15,1% Grocery in Top 10 6,7% Grocery in Top 10 6,1% Grocery in Top 10 0,0% Grocery in Top 10 0,0%
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