Citycon Oyj´s Interim Report for 1 January-30 September 2022: Continued NRI growth and reaffirming full year guidance

10 Nov 2022 08:00 CET

Citycon Oyj   Interim Report   10 November 2022 at 09:00 hrs

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.


Standing portfolio
key figures 1)
Q3/202 Q3/202 % Q1-Q3/2022 Q1-Q3/2021 %
2 1
Net rental income MEUR 50.6 48.1 5.3 151.1 140.3 7.8 %
%
Direct operating MEUR 43.6 41.5 5.1 128.8 121.9 5.7 %
profit  2) %

EPRA based key
figures 2)
EPRA Earnings MEUR 29.8 29.3 1.7 88.9 84.9 4.6 %
%
Adjusted EPRA MEUR 22.1 21.8 1.7 66.0 68.3 -3.3 %
Earnings 3) %
EPRA Earnings per EUR 0.177 0.165 7.7 0.529 0.477 10.8 %
share (basic) %
Adjusted EPRA EUR 0.132 0.122 7.7 0.393 0.384 2.5 %
Earnings per share %
(basic) 3)

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.

Key figures
Q3/2022 Q3/2021 % FX
Adjusted
% 1)
Net rental income MEUR 50.6 51.3 -1.3 -1.7 %
%
Like-for-like net % 3.4 0.4 - -
rental income
development
Direct operating MEUR 43.7 44.7 -2.4 -2.9 %
profit  2) %
IFRS Earnings per EUR 0.09 0.01 - -
share (basic) 3)
Fair value of MEUR 4094.3 4215.3 -2.9 -
investment properties %
Loan to Value (LTV) % 41.7 39.6 5.3 -
2) 4) 6) %

EPRA based key
figures 2)
EPRA Earnings MEUR 29.8 32.5 -8.3 -8.7 %
%
Adjusted EPRA MEUR 22.1 24.9 -11.3 -11.8 %
Earnings 3) %
EPRA Earnings per EUR 0.177 0.183 -2.8 -3.2 %
share (basic) %
Adjusted EPRA EUR 0.132 0.140 -6.0 -6.5 %
Earnings per share %
(basic) 3)
EPRA NRV per share 5) EUR 11.68 11.58 0.8 -
%

Q1 Q1 % FX Q1
-Q3/202 -Q3/202 Adjusted -Q4/202
2 1 % 1) 1
Net rental income MEUR 152.4 152.5 -0.1 -0.3 % 202.3
%
Like-for-like net % 5.2 -2.9 - - -1.5
rental income
development
Direct operating MEUR 130.1 133.7 -2.7 -3.0 % 176.1
profit  2) %
IFRS Earnings per EUR 0.35 0.32 8.8 8.1 % 0.55
share (basic) 3) %
Fair value of MEUR 4094.3 4215.3 -2.9 - 4189.2
investment properties %
Loan to Value (LTV) % 41.7 39.6 5.3 - 40.3
2) 4) 6) %

EPRA based key
figures 2)
EPRA Earnings MEUR 90.1 96.8 -6.9 -7.3 % 124.4
%
Adjusted EPRA MEUR 67.3 80.1 -16.0 -16.4 % 100.0
Earnings 3) %
EPRA Earnings per EUR 0.536 0.544 -1.4 -1.8 % 0.703
share (basic) %
Adjusted EPRA EUR 0.400 0.450 -11.0 -11.5 % 0.565
Earnings per share %
(basic) 3)
EPRA NRV per share 5) EUR 11.68 11.58 0.8 - 12.15
%

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%.
During the quarter, Citycon registered two assets worth approximately EUR 125
million as 'held for sale'.  These transactions are in due diligence and are
expected to close late in Q4/2022 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.  Net fair value gain of our investment properties was
EUR 0.9 million in Q3 and year-to- date EUR 23.1 million, on the strength of
indexation increases and building rights development, mainly at Trekanten where
zoning was approved in the third quarter.
These actions, combined with continued strong operating metrics, reduced capex
spend, and positive future growth driven by indexation, further stabilises
Citycon´s well-laddered maturity profile and credit metrics. We have no
significant maturities until October 2024, 95% of our consolidated debt is
fixed, 100% of our assets are unencumbered, and we have over EUR 500 million of
liquidity. As a result, Citycon is well positioned to continue to thrive despite
near term disruption in the credit market.
The business model of urban hubs containing necessity retail and residential
units in major markets attached to public transportation provides an attractive
value proposition for all stakeholders. As a result of the solid quarter and the
confidence we have in the business, we are reaffirming our guidance.
F. Scott Ball
Vice Chairman and Chief Executive Officer
OUTLOOK FOR THE YEAR 2022
Citycon reaffirms its prior full-year guidance at the levels noted in the table
below:

Current Previous (10 Midpoint Initial (17 Midpoint
outlook August 2022) change vs February change vs.
(10 previous 2022) initial
November
2022)
Direct MEUR 170-180 170-180 0 164-180 +3
operating
profit
EPRA EUR 0.68-0.72 0.68-0.72 0 0.62-0.72 +0.03
Earnings
per
share
(basic)
Adjusted EUR 0.50-0.58 0.50-0.58 0 0.48-0.58 +0.01
EPRA
Earnings
per share
(basic)

The outlook assumes that there are no major changes in macroeconomic factors and
that there will not be another wave of COVID-19 with restrictions resulting in
significant store closures and no major disruptions from the war in Ukraine.
 These estimates are 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.
AUDIOCAST
Citycon's investor, analyst and press conference call and live audiocast will be
arranged on Thursday 10 November 2022 at 10 am EET. The audiocast can be
participated by calling in and followed live on the following website:
https://citycon.videosync.fi/2022-q3
Questions for the management can be presented by phone. To ask questions, join
the teleconference by registering on the following link:
https://call.vsy.io/access-8157
After the registration you will be provided with phone numbers and a conference
ID to access the conference. To ask a question, press *5 on your telephone
keypad to enter the queue.
The audiocast will be recorded and it will be available afterwards on Citycon's
website.
CITYCON OYJ
For further information, please contact:
Bret McLeod
Chief Financial Officer
Tel. +46 73 326 8455
bret.mcleod@citycon.com
Sakari Järvelä
VP, Corporate Finance and Investor Relations
Telephone +358 50 387 8180
sakari.jarvela@citycon.com
Citycon is a leading owner, manager and developer of mixed-use real estate
featuring modern, necessity-based retail with residential, office and municipal
service spaces that enhance the communities in which they operate. Citycon is
committed to sustainable property management in the Nordic region with assets
that total approximately EUR 4.5 billion. Our centres are located in urban hubs
in the heart of vibrant communities with direct connections to public transport
and anchored by grocery, healthcare and other services that cater to the
everyday needs of customers.
Citycon has investment-grade credit ratings from Moody's (Baa3) and Standard &
Poor's (BBB-). Citycon's shares are listed on Nasdaq Helsinki Ltd.
www.citycon.com

More information:
Access the news on Oslo Bors NewsWeb site

575286_Citycon_Interim_Report_Q3_2022.pdf