21.8.2017 FINANCING IN CITYCON: IG CREDIT RATINGS AND UNSECURED DEBT WITH LONG MATURITIES SEB IG BOND SEMINAR 24 AUGUST 2017 BEN HELSING, GROUP TREASURER
LEADING OWNER, MANAGER AND DEVELOPER OF SHOPPING CENTRES IN THE NORDICS AND BALTICS – 50 shopping centres 1) – 200 million visitors p.a. – 13 managed/rented assets – Market cap EUR 2 billion – GLA 1.2 million sq.m. – Credit ratings: Baa1 & BBB FINLAND PORTFOLIO VALUE Estonia and 19 Denmark NORWAY SWEDEN 7% 2 9 Finland 19 Sweden 1) ESTONIA 36 % 28% 5 EUR billion DENMARK 1 Norway 29% 2 2 Key figures 30 June 2017 1) Including Kista Galleria Number of shopping centres
TRUE PAN-NORDIC LEADER 340 140 125 95 90 FINLAND IDEAPARK SPONDA ELO KEVA 300 260 210 #1 155 150 SWEDEN UNIBAIL- ATRIUM OLAV THON STEEN &STROM RODAMCO LJUNGBERG #3 970 #2 #2 340 205 140 95 NORWAY OLAV STEEN & STROM SALTO SCALA THON 145 100 80 ESTONIA ASTRI LINSTOW Source: Company reports, Pangea Property Partners analysis, as per April 2017 and Finnish Shopping Centres 2017. Includes only majority-owned Retail GLA (thousand sq.m.) 3 shopping centres. Includes some assumptions on retail proportion out of total GLA, where retail data not available.
PURE RETAIL PLAYER FOCUSING ON NECESSITY-BASED SHOPPING CENTRES IN GROWING URBAN AREAS OWN DEVELOP MANAGE Inhouse retail expertise Strong portfolio of everyday Improved commercial attractiveness and shopping centres throughout the shopping centre competitiveness Located in growing urban areas in Development investments of value chain 290 retail experts in 5 countries Nordic and Baltic cities MEUR 150-200 p.a. Pan-Nordic approach with a Long-term investor Conservative pipeline focused on Located where people live and work cross-border leasing team (re)developments and extensions, no and integrated with public greenfield sites transportation 50% pre-leasing hurdle Development investments <5% of total assets 4
90% OF CITYCON’S SHOPPING CENTRES ARE LOCATED IN CAPITAL OR MAIN CITIES ISO OMENA, KISTA GALLERIA, LILJEHOLMSTORGET KOSKIKESKUS, HERKULES, GALLERIA, STOCKHOLM HELSINKI AREA 1) STOCKHOLM 2) TAMPERE SKIEN GLA, sq.m. 92,500 101,000 40,500 33,100 49,300 Visitors, 9 19 10 6 3 million Sales, 195 204 158 111 121 MEUR Note: Figures are for 2016 1) GLA updated as per April 2017 5 2) Kista Galleria (100%)
FASHION FOOD & beverage Enriching Health URBAN & beauty Entertainment crosspoints & enjoyment GROCERY anchored Municipal Linked to services public transport
STRONG GROCERY-ANCHORING ‒ OVER 100 GROCERY STORES 1) 2% 1% 9% 24% 9% Home and leisure Fashion Rental income Groceries Services and offices 269 Health and beauty Cafés and restaurants 13% MEUR Specialty stores Department stores 24% 18% As per 31 December 2016 7 1) Including Kista Galleria (50%)
CITYCON’S TRANSFORMATION 2011-2016: IMPROVED PORTFOLIO QUALITY Estonia& – More balanced Nordic Denmark 7% portfolio, reduced Finnish Baltics 11% exposure Sweden 1) Finland 28% – Successful divestment of 49 37% 5 2.5 Finland assets (MEUR 350) Sweden 61% EUR billion 28% EUR billion – Improved occupancy to >96% and tenant diversification, e.g. Kesko 17%=>6.5% Norway – Acceleration of urban 28% developments c. MEUR 50 => AVERAGE RENT AVERAGE VALUE OF PROPERTY EUR/sq.m./mth MEUR 150 p.a. MEUR 84 22.8 19.7 32 Stronger property fundamentals 2011 2016 2011 2016 8 1) Including Kista Galleria 100%
CLEAR FOCUS, EXCEPTIONAL PLATFORM, STRONG CAPITAL BASE LEADING OPERATOR AND DEVELOPER OF – Retail experts with € 5bn portfolio of urban, grocery-anchored shopping centres close to transport links 1 NORDIC SHOPPING CENTRES and where people live and work CONSISTENTLY HIGH OCCUPANCY LEVELS – Consistently high occupancy levels around 96% with a 3.3 year average lease term and with top 5 tenants representing only 19.7% of rental income 2 FROM DIVERSIFIED TENANT BASE BRINGS A STABLE CASH FLOW – Track record of very low losses from tenant defaults – approximately € 1-1.5m per annum Strong pan-nordic asset portfolio brings stability and diversification FOCUS ON AFFLUENT AND STABLE NORDIC - 3 COUNTRIES High credit rating in all operating countries - EARNINGS GROWTH UNDERPINNED BY 4 – Only (re)developments and extensions, no greenfield sites CONSERVATIVE DEVELOPMENT PIPELINE ROBUST BALANCE SHEET, MODERATE LTV 5 – Committed to a LTV target of 40-45% AND ASSETS LARGELY UNENCUMBERED – Moody’s: Baa1 (negative) 6 STABLE INVESTMENT GRADE RATINGS – S&P: BBB (stable) – Shareholder base of globally recognized real estate investors: Gazit-Globe (43.9%) and CPPIB (15.0%) SUPPORTIVE SHAREHOLDERS AND ACCESS 7 TO CAPITAL MARKETS – Demonstrated access to equity markets with approx. € 1.3 billion in new equity raised since 2012 9
HIGHLIGHTS H1/2017 6.1% INCREASE IN EPRA EPS TO EUR 0.089 - Overall net rental income growth and lower administrative expenses - Completed (re)development projects support earnings growth (e.g. Iso Omena and Myyrmanni) POSITIVE LIKE-FOR-LIKE NET RENTAL INCOME - LFL NRI +1.6% including Kista Galleria (50%) - Strong performance in Sweden and Norway compensates for weaker Finland FURTHER PORTFOLIO QUALITY UPGRADE - Divestment of six properties including building rights for MEUR 118 slightly above IFRS fair value SUCCESSFUL SECOND PHASE OPENING IN ISO OMENA - Footfall +28% and turnover +24% MORE POSITIVE OUTLOOK, GUIDANCE SPECIFIED - EPRA EPS EUR 0.165-0.175 (prev. 0.155-0.175) 10
FINANCIAL HIGHLIGHTS MEUR Q1-Q4/2016 % 1) H1/2017 % 1) Net rental income 224.9 12.7 116.0 3.3 Direct operating profit 198.5 13.2 103.0 4.7 EPRA Earnings 151.1 15.5 79.2 6.1 EPRA EPS (basic) 0.170 -1.9 0.089 6.1 EPRA NAV per share 2.82 3.2 2.78 -0.6 Fair value change 25.9 2) 253.2 -8.4 - Loan to Value (LTV), % 46.6 - 47.3 4.1 Occupancy rate (economic), % 96.2 96.3 1) Change from previous year (Q1-Q4/2015) 11 2) Excludes Kista Galleria fair value change + 11 MEUR (100%)
STRONG LIKE-FOR-LIKE NRI GROWTH IN SWEDEN AND NORWAY COMPENSATES FOR WEAKER FINLAND LIKE-FOR-LIKE NET RENTAL INCOME GROWTH 1) – Strong shopping centres in the 8.8% Helsinki area (Iso Omena, Myyrmanni, Lippulaiva) all out of the like-for-like portfolio due to 4.9% (re)development projects 2.4% – Like-for-like portfolio in Finland 1.6% 1.5% represents 37% of the total value of the Finnish portfolio -0.1% -7.2% Finland Norway Sweden Estonia & Total Kista Galleria Adjusted Denmark total* The width of each column refers to the weight 1) Including Kista Galleria 50%. The adjusted total 12 of the business unit in Citycon's portfolio. including Kista Galleria 100% would be 1.7%.
…BUT NOW ALSO FINLAND FINALLY IS RECOVERING – Finnish economy shows strong recovery (GDP forecast 2017: 2.5-3%) – Blackstone transaction when buying Sponda triggers unlocked shareholder value 13
KEY TARGET AREAS 2017 AND ONWARDS FURTHER CAPITAL RECYCLING - Divestments of MEUR 400-500 within the coming three years, of which half within the coming 1.5 years. Mainly smaller, non-urban shopping centres in Finland and Norway. - MEUR 150-200 p.a. developments within the existing portfolio with an average YoC of 150 bps over yield requirement - Selective acquisitions LONG-TERM LFL NRI GROWTH OF 100 BPS ABOVE INFLATION - Following completion of divestment plan LOAN TO VALUE TARGET 40-45% - Recycling of capital - Selective joint venture opportunities 14
URBAN DEVELOPMENTS PROGRESSING – SECOND PHASE OF ISO OMENA SUCCESSFULLY OPENED ONGOING/COMPLETED PROJECTS Expected Cumulative Area before/ Yield on cost 1), Pre-leasing, Completion City investment, investment, after, sq.m. % % target MEUR MEUR 1 Mölndal Galleria Gothenburg - /24,000 60.0 (120.0) 34.9 ~6.5-7.0 70 Q3/2018 2 Lippulaiva Helsinki area 19,200/44,100 215.0 36.5 ~6.5 55 2021 Completed: 3 Iso Omena Helsinki area 63,300/101,000 270.0 269.5 ~6.0 Total SC: 98 Q2/2017 1) Expected stabilised yield (3 rd year after completion). Calculated on total development costs, also including financing and Citycon internal costs. 3 1 2 15
DEVELOPMENT PIPELINE – URBAN LOCATIONS IN CAPITAL CITIES Area before/ Expected Target – Development investments of City after, investment, initiation/ MEUR 150-200 p.a. sourced sq.m. MEUR completion through capital recycling COMMITTED Down Town Porsgrunn 38,000/46,000 75 2017/2020 PLANNED (UNCOMMITTED) Tumba Centrum Stockholm 23,400/32,000 50 2018/2020 Kista Galleria Stockholm 92,500/111,000 80 1) 2019/2021 Oasen Bergen 31,300/43,300 80 2019/2021 Liljeholmstorget Galleria Stockholm 40,500/63,000 120 2020/2022 Trekanten Oslo 23,900/45,000 110 2020/2022 1) Citycon’s share MEUR 40 (50%) 16
DOWN TOWN – SHOPPING CENTRE EXTENSION IN THE HEART OF THE CITY BY THE RIVERSIDE – Strong existing shopping centre of 24,000 sq.m. with an integrated bus terminal – (Re)development and extension of 9,000 sq.m. retail with more shopping, restaurants and cafés – Additional residential to be built – Total development investment of 75 MEUR 17
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