Annual Report • Feb 22, 2011
Annual Report
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ANNUAL AND SUSTAINABILITY REPORT 2010
Forum
Jyväskylä Citycon's gross leasable area 16,500 sq.m. Anchor tenants Seppälä, Vero Moda, Tokmanni, K-supermarket, Top-Sport
Lappeenranta Citycon's gross leasable area 19,500 sq.m. Anchor tenants Anttila, K-market, Alko, Jim&Jill, Voglia
Trio
Seinäjoki
Citycon's gross leasable area 11,500 sq.m. Anchor tenants Aleksi 13, KappAhl, Lindex, Pentik, Top-Sport
Galleria Oulu Citycon's gross leasable area 3,500 sq.m. Anchor tenants Lindex, Top-Sport, Life
Finnkino, Mc Donald's, Elosen Konditoria, Seppälä
Tampere Citycon's gross leasable area 27,700 sq.m. Anchor tenants Intersport Megastore, Stadium, Lindex, Gina Tricot, Seppälä, Moda Aukia
can be found on page 32.
More information on Citycon's shopping centre classification
Heikintori Espoo, Tapiola Citycon's gross leasable area 5,800 sq.m. Anchor tenants KappAhl, Alko, Posti
Citycon's gross leasable area 14,800 sq.m. Anchor tenants H&M, Intersport, Muksumassi, Vero Moda, Only, Jack&Jones, Gina Tricot
Citycon's gross leasable area 13,700 sq.m. Anchor tenants Dressmann, Jack&Jones, MODA, Gina Tricot, Pentik, Vero Moda, Vila, Duetto
Espoo, Matinkylä Citycon's gross leasable area 60,500 sq.m. Anchor tenants K-citymarket, Prisma, Library, Finnkino, H&M
Shopping centre Iso Omena is not classified
Helsinki, Vuosaari Citycon's gross leasable area 20,900 sq.m. Anchor tenants K-citymarket, S-market, Lindex, Seppälä, Alko, Pharmacy
Vantaa, Myyrmäki Citycon's gross leasable area 40,500 sq.m. Anchor tenants K-citymarket, Anttila, Pharmacy, Alko, Veikon Kone, Suomalainen Kirjakauppa, Stadium
Vantaa, Tikkurila Citycon's gross leasable area 12,200 sq.m. Anchor tenants Valintatalo, Nordea, Dressmann, Aleksi 13, Seppälä
Valtari Kouvola Citycon's gross leasable area 7,600 sq.m. Anchor tenants Eurokangas,
Isomyyri
Citycon's gross leasable area 17,200 sq.m. Anchor tenants K-supermarket, Tarjoustalo, Posti
Lippulaiva
Citycon's gross leasable area 5,800 sq.m. Anchor tenants S-market, Alko, Vapaa Valinta, Seppälä
Nordea, Liikuntakeskus FunFit, Top-Sport
Citycon's gross leasable area 10,000 sq.m. Anchor tenants Eurokangas, Vapaa Valinta, Pharmacy
Tampere
Salo Citycon's gross leasable area 9,200 sq.m. Anchor tenants Pharmacy, Alko, Anttila, K-market, Posti
Espoo, Espoonlahti Citycon's gross leasable area 18,500 sq.m. Anchor tenants Alko, Anttila, Pharmacy, K-supermarket, Lidl, Posti, Skybowl
| Citycon in Brief | 2 |
|---|---|
| CEO's Review 2010 | 4 |
| Strategy | 6 |
| Business Environment | 9 |
| Definition of Materiality | 11 |
| Citycon's Stakeholders | 12 |
| Property Portfolio | 15 |
| Aiming at a Versatile and Efficiently Manageable Lease Portfolio |
17 |
| Citycon´s Versatile Expertise Supports Project Development | 21 |
| Business Units: Retail Expertise Citycon's Core Competence | 29 |
| Citycon in Finland | 30 |
| Citycon in Sweden | 33 |
| Citycon in Baltic Countries | 35 |
| Environmental Responsibility | 38 |
| Social Responsibility | 44 |
| Risks and Risk Management | 49 |
| Key Impacts, Risks and Opportunities Related to Sustainability |
51 |
| Profit Performance and Financial Position | 53 |
| Corporate Governance | 55 |
| Citycon as an Investment and Information for Shareholders | 61 |
| Comparison of the Report with the Guidelines of the Global Reporting Initiative |
64 |
| Independent Assurance Report | 67 |
| Glossary | 68 |
Some statements in this Annual and Sustainability Report are not historical facts and are "forward-looking". Words such as "believes", "expects", "estimates", "may", "intends", "will", "should", or "anticipates" and similar expressions or their negatives frequently identify forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance, achievements or industry results to be materially diff erent from those expressed or implied by those forward-looking statements.
This is Citycon's second combined Annual and Sustainability Report. The aim of this report is to pro- vide a comprehensive description of the business environment and the economic, social and environ- mental aspects of responsibility. Reporting covers all of Citycon's operations in all operating areas and countries.
The report has been prepared according to the recommendations issued by the Global Reporting Initiative (GRI) concerning content and reporting principles in Sustainability reporting. Coverage in terms of GRI's G3 reporting recommendations is presented on pages 64-66. The report has been assured by KPMG and corresponds to GRI Application Level B+. The Assurance Report can be found on page 67.
The report is published annually and the information presented in it corresponds to the company's fi nancial year i.e. 1 January–31 December. The next report will be published during the fi rst quarter of 2012. The key fi nancial fi gures presented are based on audited accounting records and approved annual accounts. The principles and calculation methods used in the calculation of social and environmental responsibility indicators are described in their respective sections.
| 201 0 |
200 9 |
||
|---|---|---|---|
| Tur EU R m illio nov er, n |
195 .9 |
186 .3 |
|
| Op fi t, ting EU R m illio era pro n |
157 .7 |
10. 3 |
|
| % o f tu rno ver |
80. 5 |
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102 .8 |
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|
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90. 4 |
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|
| Dir fi t, EU R m illio ting ect op era pro n |
105 .0 |
107 .7 |
|
| Fai ark alu e of EU R m illio et v inv est nt p ert ies, r m me rop n |
2, 367 .7 |
2, 147 .4 |
|
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he fi |
| P/ E (p / e s) r rice ing atio arn |
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*) T gur e incl ude s a p er |
| ( E), Ret RO % ity urn on equ |
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sha re d ivid end of |
| ( I), Ret RO % inve stm ent urn on |
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EUR 0.0 4 an d a |
| Equ % ity rat io, |
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f eq retu uity rn o from d un inv este |
| Gea % ring , |
153 .1 |
169 .5 |
d eq rest icte uity |
| t ( lue) Net st-b deb fair EU R m illio int ing ere ear va n , |
1, 38 6.0 |
1, 312 .2 |
fun d of EU R 0. 10 |
| Net tal ield % ren y , |
5.8 | 6.1 | sha per re. |
| Ave ield uire nt b nal rais % t y ter rag e ne req me y ex app er, |
6.4 | 6.6 | 1) In ord acc anc |
| e (e ic), Occ % rat upa ncy con om |
95. 1 |
95. 0 |
e with a ch e in ang |
| Ret ail s ale s in sho ing EU R b illio tre pp cen s, n |
1.9 | 1.7 | the EPR A's Bes t |
| Vis sho illio itor s in ing tre pp cen s, m n |
123 .3 |
115 .6 |
Prac tice Rec om |
| (av for ) Per nel the riod son era ge pe |
123 | 117 | dat ions men 201 0, C ityc on |
| Per nel he e nd o f th d at t erio son e p |
129 | 119 | has cha d ne t nge |
| h/v Ele kW ctr icit inte nsit isit y y, or |
0.8 5 |
0.9 3 |
(EP alue RA et v ass |
| Car bon foo tnC O2e int, tpr |
64, 129 |
5 6, 948 |
) ca NAV lcul atio ns hat fair val so t ue |
| / Car bon tnC O2e GLA int ity, ens |
0.0 6 |
0.0 6 |
of a ll fi n ial anc |
| Ave l/v or/ tion isit ate rag e w r co nsu mp yea r , |
3.9 | 4.0 | inst ents is rum |
| Ave ling % rat rag e re cyc e, |
77 .1 |
7 3.9 |
lude d fr the exc om |
Citycon Group's Corporate Governance establishes the principles of management system. General management system is defi ned and guided by vision, mission and strategy, general principles as well as Code of Conduct and organisational responsibility. The management related to sustainability is integrated in the company's general management system.
Citycon Code of Conduct lays the foundation for business operations, environmental issues, human rights and relations with our employees and stakeholders.
The key purpose of Citycon is to develop and maintain a fi nancially sound and prosperous business. Citycon assumes its responsibilities in its operational areas for all matt ers under its controlling interest. The fi nancial reporting and planning is based on Citycon Group's Corporate Governance, annual schedules and organisational responsibility areas.
HR management is based and guided by Citycon's HR Strategy. Employee performance reviews as well as personnel surveys are tools in managing target-oriented activity and employee skills in the company. Citycon gives high priority to promoting and maintaining equal opportunities in the working community. The practical implementation of HR management takes place in supervisory duties according to the organisational responsibility. Within its sphere of infl uence, Citycon respects and supports the principles of the United Nations Universal Declaration of Human Rights, which, in addition to equality, include civil and political rights, economic, social and cultural rights. Within its sphere of infl uence, Citycon respects and supports the ILO Declaration on Fundamental Principles and Rights at Work.
Environmental management is based and guided by the company's strategy, the long term objectives and the environmental policy. Annual targets and actions plans are set for the diff erent areas of the environmental responsibility. Green Shooping Centre Management programme and KPIs are tools for environmental management.
Citycon Group's Corporate Governance is presented on pages 55-60. The management approaches related to diff erent areas of responsibility are described more detailed in their respective sections. The risk management process is covered on pages 49-51.
Sales in Citycon shopping centres grew by 7%
Also footfall grew by 7%
Citycon's turnover and net rental income in- creased in 2010, in spite of the record cold winter, low infl ation and higher vacancy due to redevelopment projects. Growth in net rental income was slowed by increased property operating expenses resulted from the severe winter conditions. Direct result also decreased from the previous year, due mainly to higher administration and fi nancial expenses. However, our shopping centres' sales rose and occupancy rates for retail premises increased slightly.
2010 started signifi cantly more positively than 2009. The economy in Finland and Sweden trended upwards and Estonia, too, showed signs of recovery in spite of still record-high unemployment. In all of Citycon's operating countries, consumer confi dence and the retail sector improved. The availability of fi nancing improved signifi cantly, although loan margins for debt fi nancing remained relatively high. Citycon's long-term relationship with banks has been a key factor in fi nancing decisions. In 2010, Citycon took out four loans of EUR 50 million, each maturing in fi ve years. The company also raised more than EUR 63 million with its directed share issue in September. Citycon's fi nancial position remained good throughout the year.
The company enjoyed continued growth through the construction and renovation of shopping centres. Rocca al Mare in Tallinn and Liljeholmstorget Galleria in Stockholm, both opened in 2009, met their targets in terms of sales and footfall. Liljeholmstorget's fi rst operating year, however, remained notably below the yield target because of major changes in the shopping centre's tenant base.
In 2010, Espoontori, Myyrmanni and Forum redevelopments were opened in Finland and Åkersberga Centrum's extension in Sweden. Projects in progress include the construction of two small-scale shopping centres, Myllypuron Ostari in Helsinki and Martinlaakson Ostari in Vantaa, and the refurbishment of a number of smaller properties. The (re)development projects weakened the company's result, since many centres remained closed during construction. We are currently planning to renovate several other centres in order to upgrade their quality and profi tability, and maintain consumer interest.
Citycon's strong expertise in project development, and solid experience in shopping centre management, are central to our (re)development projects. For our tenants, we off er well-planned and managed shopping centres, where people shop. Citycon's shopping centres are managed by our own on-site personnel adhering to common principles, which generates effi ciency and guarantees knowledge of local markets. In this way we are able to meet the needs and expectations of our customers.
Recent retail growth fi gures give us reason to believe in business growth opportunities, higher occupancy rates and improving profi tability. For our key customers, sales have been excellent.
At the end of the year, Citycon owned 33 shopping centres and 49 other retail properties. Total sales of our shopping centres amounted to nearly EUR 1.9 billion. In Finland, our market share was 22.7 per cent (source: Entrecon).
Sustainable business means fi nancial effi ciency and eff ectiveness, fair practices and solutions which take into account the environment in all of Citycon's activities. The Code of Conduct was approved to lay the foundation for Citycon's business, environmental and human rights policies and relationships with employees and stakeholders. The foundation of responsibility is openness and transparency. In order to realise this, Citycon is now publishing its second integrated Annual and Sustainability Report. For the fi rst time, the Sustainability Report has been externally assured.
Citycon's objective is to include environmental responsibility measures in all of its operations and to integrate them into daily activities as a part of normal practice. Citycon's Green Shopping Centre Management programme is a tool for promoting sustainable development in all of its shopping centres. The programme's audit results are expressed using the Green Index, which improved by 26 per cent over the previous year.
The company defi ned its long-term objectives related to environmental responsibility in connection with its strategic planning in summer 2009. Citycon has set targets for its carbon footprint, energy consumption, water consumption, waste recycling rate, land use and sustainable construction. The exceptionally cold periods at the beginning and the end of the year increased heat consumption compared with the previous year. The annual 1–2 per cent reduction target set for energy consumption was met as regards electricity. The increased consumption of heating energy caused mainly the growth in the carbon footprint. As a result, the annual target for reducing the carbon footprint was not met. The annual target for lowering water consumption per visitor, however, was met. Both long-term targets for waste management have already been met, in the fi rst year of the company's environmental responsibility scheme.
The Rocca al Mare extension and redevelopment project received a silver LEED certifi cate, the fi rst LEED environmental certifi cation in the Baltic countries. The Liljeholmstorget Galleria development project in Stockholm, meanwhile, was the fi rst shopping centre in Europe to be awarded with a platinum LEED certifi cate.
In March, Marcel Kokkeel from the Netherlands will take up his position as Citycon's new CEO and I wish him the greatest success. For my part, I would like to take this opportunity to thank our shareholders and the company for the rewarding and profi table cooperation we have enjoyed over the past eight years and more.
On behalf of the company, I wish to thank our shareholders, customers and partners for the confi dence you have shown in our business. I would also like to express my special thanks to every Citycon employee for their contribution to our company and its continued success.
Helsinki, 10 February 2011
Petri Olkinuora
CEO
Citycon's shopping centres are att ractive retail properties off ering successful business locations for retail trade. Citycon combines solid shopping-centre expertise with strong property investment competence. Thanks to its versatility, Citycon is an appealing lease provider and an interesting investment target for investors, with sustainable shareholder value.
Citycon is a strong expert in shopping centre business, an active owner and long-term developer of its properties. Citycon develops its retail properties systematically and on a long-term basis, which increases their value. For the retail trade, Citycon's properties provide desired premises for lease. Citycon is an appreciated employer, and professionals from various sectors wish to join the company.
| Net Ren tal Inco by Seg nd P ortf olio ts a me men s |
Turn r by port ove foli os |
|||||
|---|---|---|---|---|---|---|
| EUR mil lion |
Fin land |
Swe den |
Balt ic Cou ntri es |
Oth er |
Tot al |
City con tota l |
| 20 08 |
90. 9 |
24. 1 |
6.8 | 0.0 | 121 .8 |
178 .3 |
| ( Re) dev elo jec ent ts pm pro |
1.0 | 1.0 | 3.3 | - | 5. 4 |
8.4 |
| Div est nts me |
0.2 - |
- | - | - | 0.2 - |
0.2 - |
| Lik e-fo r-lik e |
0.7 | 0.5 | 0.4 - |
- | 0.8 | 4.0 |
| er ( iff .) Oth inc l. ex ch. e d rat |
0.0 | 2.4 - |
0.1 | 0.0 | 2.3 - |
4.2 - |
| 20 09 |
92. 4 |
23. 2 |
9.8 | 0.0 | 125 .4 |
186 .3 |
| ( Re) dev elo jec ent ts pm pro |
4.6 - |
3.5 | 2.2 | - | 1.0 | 6.1 |
| Div est nts me |
0.3 - |
1.2 - |
- | - | 1.6 - |
2.3 - |
| Lik e-fo r-lik e |
0.6 - |
0.6 | 0.2 - |
- | 0.2 - |
1.3 |
| er ( iff .) Oth l. ex ch. e d inc rat |
0.0 | 2.6 | 0.0 | 0.0 | 2.5 | 4.5 |
| 20 10 |
86. 7 |
28. 7 |
11. 8 |
0.0 | 127 .2 |
195 .9 |
Targets 2011–2013: Detailed fi nancial targets will be specifi ed for each project. A (re)development project should achieve clearly higher return on investment (ROI) than the weighted average cost of capital (WACC), it should produce a positive development profi t and at completion the project should have a higher property market value than before/without project.
2. Strategic Objective: Optimisation of the Property Portfolio and Usage of Joint Ventures KPIs: To continue to divest non-core properties. There still is a residential portfolio in Sweden totalling approximately EUR 40 million. Minority shares of properties will be sold to selected partners and joint venture partners.
Targets 2011–2013: Raising the occupancy rate and market value of properties as well as increasing like-forlike net rental income.
4. Strategic Objective: More Effi cient Property Maintenance and Improved Maintenance Quality KPIs: Centralisation of property maintenance, cost control and att aining/maintaining Citycon Standard quality in all of Citycon's properties.
Targets 2011–2013: Citycon has concluded a centralised partner contract with ISS Palvelut Oy for property maintenance, security guard services and cleaning in Finland. Citycon also intends to enhance services purchasing in a similar way in Sweden. Continuing to raise quality to the Citycon Standard level.
5. Strategic Objective: Sustainability in Business Operations KPIs: Energy consumption, energy effi ciency, water consumption, recycling, environmental certifi cates, the Green Shopping Centre Management programme, an assured Sustainability Report according to GRI Guidelines.
Targets 2011–2013: Strategic objectives related to environmental responsibility are presented enclosed.
6. Strategic Objective: Active and Conservative Financing Policy KPIs: Long-term equity ratio of 40%, the debt portfolio's hedging ratio of 70–90%, fi nancing in local currencies, and stable dividend-payment performance: at least 50% of the profi t for the period aft er taxes (excluding changes in fair value).
– Reduction of greenhouse gas emissions by 20 per cent from the 2009 level by 2020.
– Reducing water consumption to an average level of less than 3.5 litres per visitor/year.
• Acquisitions • (Re)development investments • Other investments
The success of a shopping centre begins with an excellent location and wide range of stores and services that meet the customer demand. Citycon shopping centres off er versatile range of fashion. Finland's fi rst 7camicie store, selling high quality Italian shirts, was opened in Iso Omena Espoo.
In all of Citycon's operating countries, 2010 had a much brighter start than the previous one. The global economic recession still aff ected the Baltic countries most notably, but the Finnish and Swedish economies saw a clear upturn early in the year. During the spring and summer, the stock market fell due to the European credit crisis, but recovered signifi cantly later in the year. At the same time, household consumer confi dence strengthened across Citycon's operating countries, achieving record-high levels in Sweden and Finland. Unemployment saw a downturn in the Nordic countries during the summer, but remained high in Estonia and Lithuania throughout the year.
Retail sales strengthened markedly in Sweden and Finland. In Estonia, too, retail sales improved, turning upwards in September and remaining positive for the rest of the year. Lithuanian retail sales also turned positive in late 2010.
Grocery sales continued to grow in Sweden and Finland, and began to rise in Estonia late in the year. Infl ation remained relatively low during the course of the year, but began to rise towards the year end in all operating countries.¹⁾²⁾³⁾⁴⁾
Growth in retail sales and infl ation play a crucial role in Citycon's business. They also have a direct impact on rents. Almost all of the company's leases are tied to the cost-of-living index, and a signifi cant number of leases also include a link to turnover. In Finland and Sweden, consumer prices continued to rise during the year. In December, the annual infl ation rate was 2.9 per cent in Finland, 2.3 per cent in Sweden and 3.0 per cent in Estonia. ¹⁾³⁾⁴⁾
The uncertainty that has dominated the global fi nancial market during recent years continued to aff ect the cost and availability of fi nancing in 2010. Although the availability of fi nancing improved from the previous year, loan margins for debt fi -
nancing remained relatively high. Citycon's long-term relationship with banks has been a key factor in fi nancing decisions. Citycon's fi nancial position remained good throughout the year. More detailed information on Citycon's profi t performance and fi nancial position can be found on pages 53-54 of this Annual Report.
During the year, changes in real economy trends refl ected on retail trade. In 2010 in Finland, retail sales grew by 3.8 per cent and in Sweden 3.7 per cent. In Estonia, retail sales declined by 4.0 per cent and in Lithuania 2.9 per cent. ¹⁾³⁾⁴⁾⁵⁾
Among retailers in Finland, the S Group retained its more than 40 per cent share of the national grocery retail market. The Kesko Group ranked second, with a market share of some
In 2009, Citycon surveyed the means of transport used by customers of its shopping centres in Fin- land. From the survey data, the following three centres were selected for the calculation of the carbon footprint of shopping centre visits: Tikkuri in Vantaa, with the highest share of public transport users, and the two centres with the highest share of
customers using private cars – Iso Omena in Espoo and Sampokeskus in Rovaniemi. The carbon footprints arising from these shopping centres visits were compared with that of an imaginary shopping centre located outside of any densely populated area (the average one-way shopping journey being ten kilometres), which most people (75%) visit by car.
The location of the shopping centre and the means of transport used by customers has an impact on the carbon footprint of a shopping centre visit. Due to good public transport and light traffi c connections, the carbon footprint of visits to Citycon's shopping centres remains below average.
35 per cent and, among other retailers, Suomen Lähikauppa Oy's (previously Tradeka) market share was approximately 10 per cent. Other markets are split between several retailers. ⁴⁾⁶⁾
In Sweden, ICA is the grocery market leader with a market share of almost 45 per cent. COOP held some 20 per cent and Axfood some 17 per cent of the market.⁷⁾ In Estonia, the largest grocery retail ers include Rimi, owned by ICA; local co-operative ETK; Selver, the subsidiary of Tallinna Kaubamaja; the Lithuanian Maxima; and Prisma, part of the S Group. In Lithuania, the local Maxima has nearly 50 per cent of the market, while other larger retailers include Rimi and the local IKI.
In accordance with its strategy, Citycon focuses on shopping centres whose anchor tenants are usually grocery stores or retailers of daily neces sities. Grocery retailers represent 21 per cent of Citycon's shopping centre tenants.
The Swedish property market improved during the year and transaction volumes increased signifi cantly. The most active buyers were German and Norwegian investors. The main reasons underlying the improved liquidity in the Swedish market included the improved willingness of banks to fi nance transactions, the re-entrance of foreign banks to the market, stabilising rent levels and positive investor sentiment on the outlook for the Swedish economy.8)
In Finland, property transaction levels remained low since properties for sale did not include any prime assets att racting the most interest among international investors. The most active players in the market were equity investors such as domestic pension funds, and other local investors. However, buyers and sellers tended to have clearly divergent views on sale prices. Property values, which earlier had been declining, stabilised during the year. Indeed, the core market showed some signs of yield compression. Both the Finnish and Swedish property markets are expected to improve as the availability of fi nancing increases and prime property prices continue to recover.8)
In the three Baltic countries, trading volumes remained at record-low levels, with annual transaction volumes in euros totalling less than 30 million. Deals mainly took place between local institutions and/or private companies. While Finnish and Swedish investors have expressed interest in the Baltic property market, they have not made any signifi cant transactions yet. International interest is also expected to remain modest in the near future.9)
Construction costs in all of Citycon's operating countries remain at very modest levels compared to the historical trend, which supports Citycon's property development operations. However, construction costs did increase during the year in both Sweden and Finland. In the Baltic countries, the construction industry continued to suff er from the recession and few new projects were initiated. ¹⁾³⁾9)
1) Statistics Finland 2) The Finnish Grocery Trade Association 3) Statistics Sweden 4) Statistics Estonia 5) Statistics Lithuania 6) A.C. Nielsen 7) Fri köpenskap 8) Newsec Property Update, 2010 9) Baltic Property Market Report, Autumn, 2010 – Winter, 2011, Newsec, ReSolution
This integrated Annual and Sustainability Report includes selected topics from the ar- eas of economic, social and environmental responsibility which are material to Citycon's business and its stakeholders. The topics that are presented in the materiality matrix were discussed and selected by the extended Corporate Management Committ ee. The signifi cance of these topics may vary by stakeholder.
Consumer's expectations towards shopping centres diff er, not only by consumer segments but also depending on the prevailing economic cycle. According to surveys, consumers' environmental awareness has increased markedly. The environmental impacts of products and services, as well as their ethicality, are infl uencing purchasing decisions more and more frequently (source: Redera and Kuulas Milward Brown, Ilmastotalkoot 2009). While properties' ecological aspects have yet to be mentioned in consumer feedback to Citycon, campaigns to increase shopping centres' environmental awareness have been positively received. Citycon's goal is to maintain and develop its shopping centres, so that they will fulfi l consumers' needs.
Tenants primarily value a retail property's success, location and availability, as well as the cost-effi cient use of resources. Environmental awareness and the level and scope of tenants' own environmental programmes vary signifi cantly. Most tenants interviewed in Citycon's stakeholder survey considered Citycon's environmental programmes worthwhile. They also viewed them defi nitely as a future trend, for which preparations should be made. However, tenants do not believe that Citycon's programmes will, as yet, benefi t their own business image. In the short term, they hoped that the programmes would serve all parties, particularly by streamlining property maintenance costs. Citycon aims to develop long-term co-operation with its tenants, in order to enhance energy effi ciency and meet tenants' reporting needs.
Successful retail properties have excellent transport connections. All of Citycon's retail properties are located in built-up environments, well-served by public transport. By collaborating with the areas' authorities, Citycon is constantly seeking to improve transport solutions aff ecting its shopping centres' availability. This aspect was noted by municipalities in their stakeholder interviews. Indeed, they had acknowledged Citycon's activities, particularly as a developer of existing retail properties. Intensifying co-operation, for example in suburban projects, was considered a desirable future direction.
Shareholders' and lenders' primary expectations lie in profi tability and growth. During the year, investors have taken an increasing interest in responsibility.
Job satisfaction, competence development and, naturally, the company's success are employees' key expectations towards the company.
Effi cient supply chains play a key role, both in terms of daily shopping centre management and sustainable construction. Citycon aims to develope its methods of supply chain management and control.
| + + + rs e d ol h e |
Com nity mu dev elo ent pm |
Saf d h eal th i n sh ety ing tre an opp cen s Lan d us d zo ning e an Sus abl tain tion nst e co ruc Tra d re liab ility nsp ara ncy an |
Suc sfu l re tail loc atio ces ns Cos t eff of in d aily tive ec use res our ses ion rat ope s Pro fi ta bili nd g th ty a row Con de vel of tinu ent ties ous opm pro per |
|---|---|---|---|
| k a t s o t t s e r e t in f o el |
Tra ffi c |
Sta keh old ela tion er r s Sup ly c hai ent p n m ana gem Imp of loye ent ete ncie rov em em p e co mp s |
Sho rod the ing ter uct ets pp cen as a p me eed con sum er n s Acc abi lity of the ail p ret ert ies ess rop Cor ate por go ver nan ce Car foo bon int tpr Cod e of Co ndu ct |
| v e L + |
Cul al h erit tur age Bio div ity ers |
Pro of l aw tion iron nta mo env me are nes s |
Job isfa ctio sat n Clim cha ris ks ate nge |
| + | Sig ni f i c Cit 's bu e t anc o y con |
sin ++ + ess |
•Issues are reported / covered extensively • Issues are reported, focus on developing issues • Issues are reported This report contains all topics presented in the above table.
In (re)development projects, Citycon considers communities' needs and the cultural heritage of the area or building. Impacts on biodiversity are also assessed, during project-related zoning. Citycon particularly seeks new means of improving communication with communities, on (re)development projects.
For all stakeholders, safety and health in shopping centres are important. They are also a critical factor in daily shopping centre management.
Reliability, transparency and good corporate governance are important values to all stakeholder groups. This integrated Annual and Sustainability
Report aims to increase transparency with respect to economic, social and environmental responsibility.
The risks of sustainability are accounted for in both the short and long term in company's ERM process. In short-term evaluations, annual maintenance planning takes account of increases in the prices of energy, water and waste management, as well as changes in consumtion. Furthermore, at the project planning stage, opportunities are investigated of generating renewable energy sources in buildings.
Citycon aims to operate actively and inter- actively with its stakeholders and wishes to learn about stakeholders' values and interests, as well as their expectations towards the company.
Stakeholders' expectations towards the company have been assessed based on both experiences and feedback. A survey using in-depth interviews was initiated in the autumn of 2010. This survey assesses the views of various stakeholder groups' representatives, and their expectations towards Citycon, in more detail. In the short-term, the company's goal is to develop methodologies enabling easy assessment of the level of interaction with various stakeholder groups. Stakeholders' expectations, tools of interaction and key results from 2010 are presented on pages 12–14.
Citycon's tools of interaction include annual and interim reports, stock exchange and press releases, shareholders' meetings, websites, customer satisfaction surveys, events in shopping centres, market studies and consumer surveys, press conferences, employee performance reviews and personnel satisfaction surveys, and company representatives' appearances at diff erent events.
| Suc sfu l re tail loc atio ces ns eal of sale isat ion s ta ts • r rge Ren t le vel lev el p al t les ion ent ort • r rop o sa Rel atio nsh ip d fl ble • t t an exi ting ran spa ren op era tho ds me Effi cie hop ing nt s tre ent p cen ma nag em -eff of ost ect ive • c use res our ces alit leve l of iate • a ppr opr qu y op era tion s • G n to ics ree p |
• S ale d fo otf all i ed ll re s. O d in a ion vis itor s an ncr eas g n av era ge, an ail s ale s de vel ed ble e fi f ea ch b ret ent ain sta usi opm rem , se gur es o nes s n (r e) es 3 0, 32 and 34 . Ca ital ditu dev elo unit ent on pag p ex pen re o pm lled EU R 1 25. 3 m illio jec ts t ota pro n. • T he r lts f aile rs' s atis fac tion d fo ret r ta t esu rom sur vey s w ere use rge sho s' b lan sett ing in c ting ing tre usi rea pp cen nes s p s. • T he i of x ch ed los ely. Th -mi oni act ten ant tor mp ang es w as m mo re c e on f of in r he n tive de vel in t he n ber vis itor or t ent ma eas ega opm um s /or and il sa les the ifi c cha he t in r eta s ei ign ant in t nt m ix wa r a s nge ena n th e lo cal rke or i etit ion t or ma co mp he O CR • T dev elo s cl ly m oni ed by bra nch nd ent tor pm wa ose es a sho s. O CR bet en b che . Cit of ing tre ries n is pp cen we ran s va yco aw are abl nt l ls w ithi ch b ch. tain sus e re eve n ea ran • I f la de die ted h te via tion otia wit ts, n ca se o rge s re me s w ere neg nan e.g. in t he f of add itio nal rke ting inv est nt. orm ma me • I n th e B alti City d te reb unt ries nte ent ate s to c co con gra mp ora ry r , ts. W hile bat be d, t he s inu itua tion e te t re ont e to nte som nan ren es c gra d of had slig htly im ved by the the pro en yea r. • R lar nd d ith tac ts a iscu ssio ten ant egu con ns w s. • T nt f eed bac k ga ve b ack und d id for han ced CR M a ctiv i ena gro an eas en for fac ties ll as a la ale atis tion tom as we rge -sc cus er s sur vey • I n F inla nd, the be en C nd t lled Po l tra net twe ityc nts rta ex on a ena , so ca Pro ilot ed sho s. T he p of the jec t, w in c ert ain ing tre as p pp cen urp ose Por tal Pro ke t he d aily be nd jec t is uni ion to cat twe en t nt a ma co mm ena City sie con ea r. |
|---|---|
| Exp atio rds Cit ect ns t owa yco n |
Key ult s in 20 10 res |
|---|---|
| Sho duc ing tre t pp cen pro and lati hip co nsu me r re ons ht t nd s off rig nt m ix a ice erin • ena erv g cle nd s afe hop ing ty s tre • an a p cen Acc ibil ity ess blic tra ort atio • pu nsp n king ssib iliti • par po es Ab ility he c nity to ve t ser om mu dev elo of ent vic • pm ser es Gre en t ics op ' en al im ties viro ent ts • pro per nm pac ilab ility of log l pr odu ica cts • ava eco |
• C hop ell- kno ord ral ityc ing ing tre to s ent on s p cen s ar e w wn acc eve rec s. In Fin lan d, City sho ing the be st k tre sur vey con pp cen s ar e am ong now n he H els ink i M lita n A ord to T alo utk s: S hop in t etr ing ust imu opo rea acc Cen He lsin ki M lita n A 20 10 ing s in tre etr p opo rea - su rve y. n S Cit • I den , six n sh ing inc lud ed in t ind nd tre we yco opp cen s w ere wo epe ex ( I), the rs' s fac ind NK the ent urin atis tion sur vey s, o ne m eas g co nsu me ( n). oth he r iler s' s fac Cen mb The atis tion er t eta tru ter aro me co nsu me rs 1% I 58 (av Sw n 6 1). ind by NK ede to ex r ose era ge • R a al Ma s th e "m er f dly " sh re i ost tom rien ing tre in occ cus opp cen Est din ried t by Tal linn Tec hni cal Uni oni to a sity a ac cor g sur vey car ou ver den stu ts. • C has ted nal aile s sh ityc att int atio ret rs t o it ing on rac new ern opp lly fas hio n b ds. For le, t he fi O'N eill tre cia rst sto re i cen s, e spe ran exa mp n Bal ned in R a al Ma he fi Da nish Pie tic ies ntr re, t rst sto cou ope occ ces re in F inla nd in Is o O nd t he N ian Cub ill e r th e F inn ish nte me na a orw eg us w rke t by e of wh ich wil l be in M . Ov eni two sto nni ma op ng res , on yyr ma er all, add nal has lace d o tab lish rela shi ith itio is w ing tion em p as p n es ps w to C inte tion al r il ch ain d att ctin the m in ityc on' s sh ing eta rna s an ra g opp he M AP IC e d by de vel City 's w ebs tre ia t t an ing ites cen s, e .g. v ven op con the eds of aile to m eet ret ne rs. • T he i lem d d lop f th e sh clu atio ing ent nt o tre ste mp n an eve me opp cen r ch i n F ish sho as f her han ced . A n inn ing tre urt app roa pp cen s w en ew t fo all- le s hop s: "P day life " wa ing tre art in e con cep r sm sca p cen ner ver y s lau nch ed in F inla nd. • I n S den he c lust h w as i odu ced d a rke ting , t ntr we er a ppr oac an new ma del for lan d co ndu lem ed, lud ning ctin ctiv itie as i ent inc mo p an g a s w mp ark sib iliti es b d o n th ing nisi nica tion et c re-o rga ng m om mu res pon ase e clus ter str ate gy. • C lea nlin d co mfo udi ts h be en f her de vel d in Fin lan d. rt a urt ess an ave ope In S den the "M all W alk " sy alit ol o f cl line ste ntr we m, a qu y co ean ss, |
duced in all the shopping centres.
safety and commercial impression, was further developed and intro-
| Exp atio rds Cit ect ns t owa yco n |
Key ult s in 20 10 res |
|---|---|
| Sho ing duc tre t pp cen pro and lati hip co nsu me r re ons ht t nd s rig nt m ix a ice • ena erv off erin g cle nd s afe hop ing ty s tre • an a p cen Acc ibil ity ess blic atio tra ort • pu nsp n king ssib iliti • par po es Ab ility he c to ve t nity ser om mu dev elo of vic ent • pm ser es Gre ics en t op ' en al im ties viro ent ts • pro per nm pac ilab ility of log l pr odu ica cts • ava eco |
• A he S h C he C rdin dis er I nde ityc hop ing to t x, t cco g we ons um on s p cen (so s' s ths rkin ssib ility d se tre tre tion ity ng are pa g o p s, a cce an cur urc e: ). Cen mb n 2 010 CFI Gr Num ber of king tru ter aro me oup par sp ace s w as , sid d C on' th i n H els ink i M lita n A Sh ityc ing s st etr con ere ren g opo rea opp s ( Tal kim Sho ing Cen s in He lsin ki M lita tre tut tre etr cen ous us: pp opo n ). Are a 2 010 - su rve y • I n F inla nd, ed ber of info s sh blic an i ing tra ort ncr eas num scr een ow pu nsp ful, fre f-ch tim ble int rod d. T he s e sh le b eta utt s w ere uce ucc ess e-o arg us be en R a al Ma nd T alli nn h arb ued tion twe ntin con nec occ re a our co op er A n ula r bu Str ilen duc ed and Cit atin öm s in ute to tro g. ew reg s ro p wa yco n d/ afe bui lt a bu d co nie s st to e nt a ss t arra nge new op nsu re s an nve cce o the ntr ce e. • A ll C on' s sh e lo ed rba ith ityc ing tre cat in u viro ent opp cen s ar n en nm s w d p ubl ic t ion rtat goo ran spo Åke rsb a C 's e ed in O ber he r ede ent xte nsio cto , t • erg rum n w as o pen vel d E in N mb nd For in D mb er. S ral ont ori ope spo ove er a um ece eve ref urb ishm d fa cel ift p in F inla nd a nd S den roje ing ent cts an are on go we • T he fi r LE ED tifi ed in t he B alti ries rst cat ant unt eve cer e gr c co wa s rde d to the Ro al M sho Tal linn . Th ing tre jec t in awa cca are pp cen pro e Lilj eho lms t sh rde d th lati ing jec tor tre t w ge opp cen pro as a wa e p num ifi c t of tifi he fi LEE D c he h ig hes its kin d. T his ert ate , t cat as t rst cer e w lati -lev el c ifi c ard ed t sho in E ert ate ing tre p num aw o a pp cen uro pe. ts ( • T her n ad diti l fo atin rvic t e w as a ona cus on cre g se e co nce p e.g. res ks) rkin bicy cle in F ish sho inn ing tre roo ms , pa g, rac pp cen s. • V isib le c s fo al a nd s al r ibil re h eld ign viro ent oci ity am pa r en nm esp ons we sho llec No Pla Ba in m ing tre toy tion ign stic any pp cen s, e .g. co cam pa gs, , Ilm lko Ear th H d re ling ch a s R a al ign ast ota ot, our an cyc cam pa s su occ Ma re's Re ling Da Col bus ' an d Is oKa rhu 's R clin f W ast cyc y, um ecy g o e ( EE) Ele nd Ele Equ WE Ev d L ilje hol et's ctr ic a ctro nic ipm ent ent mst an org cle clot hing d lig ht b ulb ign to r cam pa ecy an s. |
| CO NT RA CT OR S A ND PA RT NE RS IN |
CO -OP ER AT ION |
| Exp rds Cit atio ect ns t owa yco n |
Key ult 20 10 s in res |
| Exp atio rds Cit ect ns t owa yco n |
Key ult s in 20 10 res |
|---|---|
| Pro ent cur em Par rsh tne ip Rep and rel iab ility tion uta Pro fes nal sio ent pro ces s m ana gem |
• P olic ly c hai ved he F ish ent in t inn ani y o n su pp n m ana gem wa s ap pro org sat ion • T he ISS hip ed and lem ed ard ign im ing rtn nt w ent pa ers ag ree me as s p reg inte ork lea ning d se ity in a ll Fi nni sh s hop ing tre ma nan ce w , c an cur p cen s. • I n S den bla nke odu ced for all alle t ag nt w as i ntr oje cts we , a ree me sm r pr A p shi ode l wa s de vel d in Se Cle nd Pro ity, ani art ty ner p m ope cur ng a per Ma inte ork nan ce w s. |
| Exp atio rds Cit ect ns t owa yco n |
Key ult s in 20 10 res |
|---|---|
| fi t Pro /m alu • i ing aint ain ing et v ncr eas ass e rofi tab le g th • p row r sh ing • e arn s pe are • d ivid end bilit nt c pay me apa y Gro wth th o f th 's n al et r ent • g row e co mp any inco me rtfo lio a nd m ark erty et • p rop po val th ue g row Tra and rel iab ility nsp are ncy eth ods and sch edu le rtin • r epo g m Ow ship str uct ner ure of • d tion hol din ura g har eho lde bilit to p art ici • s rs c apa y n sh te i iss pa are ues nd loca of the tion inv atu • n re a es tor s Inve lati sto r re ons |
• N al in d tu inc sed div ide nd a nd e ity et r ent ret com e an rno ver rea qu urn , ed he s e le vel for Ne l inc e fo ain at t s in t re nta rem am sev en y ear a r ow. om r like -fo r-lik dec sed by 0.3 % d ly to h her ert ies ain ig ty e p rop rea ue m pro per han he p ar. A ddi ally iling low ing in t iou tion rat es t ope exp ens rev s ye , pr eva infl Als atio sult ed in v low ind tion -ba sed tal incr he o, t n re ery exa ren eas es. 's d irec sult de d. t re com pan y cre ase (re ) • N dev elo lau nch ed lan ned ent jec ts w to incr t ew pm pro ere as p eas e ne tal d va lue of t he p foli inco ert ort ren me an rop y p o. • D ted sha Se ber ted irec re i e in s; it in o tem ssu p wa s a suc ces wa s ex ecu ne ning d w bsc ribe d. S ubs crip tion ice EU R 2 .87 he , t eve an as o ver -su pr was dis ed w ith the clo of t he p s da ht. nt c sing ice iou tig cou om par pr rev y w as v ery • N lys ted the rtly be f th erin ts s tar ew ana cov g co mp any , pa cau se o e co m 's t pan y ran spa ren cy. of rs ( ) • N ber dom ic s har eho lde iste red incr ed. est um =re g eas • T he l sha reh old er h as h ad t hei r ho ldin in C 20 04. est ityc ince arg g on s • I he ld a ft e ch q in F inla nd a nd a bro ad. sto eet ing ter nve r m s w ere r ea uar • T he 3 rd C ital Ma rke t's Day ised for 22 Se ber 20 10. tem ap wa s or gan p • C f th e fi i St ityc is o ies o th e H els ink ock rst to r rt t on ne o com pan epo Exc han in Q 3 2 010 the s th e fi rst to r rt. ge, co mp any wa epo |
| har eho lde rs' e s kn cta tion • s xpe ow n |
• I abi lity sed sto rs i nte t in tain inc nve res sus rea |
| dis n be har sio twe • o pen cus en s e hol der d th s an e co mp any |
• C ed t he E PRA Be st P Re nda Go ld L l ityc eiv tice tion on rec rac com me eve Aw for An d C RS in 2 009 ard the l an ort nua rep |
| Sus tain abi lity |
• C on's elat ofe nals d in al r ityc inv est ion ssio eive ter nat ion i or r s pr rec eco gn |
| ical l an d e cia nvir • e con om , so on l re nsib ility nta me spo |
the Th Re rs E l Su 20 10 Eer o S ihvo ted tion : in ute xte om son rve y nen wa s vo the ond be st C FO in F inla nd, and Ha Jaa kko la t he f th b IR est sec nna our pro fes nal. Cit d th d b lati in F inla nd. sio in i ote est sto yco n w as v e se con nve r re ons |
| Exp atio rds Cit ect ns t owa yco n |
Key ult s in 20 10 res |
|---|---|
| Job isfa sat ctio n hal leng and ile t ask ing sat • c ver s abi lity rk aint ain ing to • m wo Rem rati une on ala titi rati • c om pe ve s ry, r em une ons Com ce d lop ten nt pe eve me Ma ent tem nag em sys Sun rs ( nd) day eni hou in F inla op ng |
• T he p el s sed . Th e Jo b S fac Ind f th evi atis tion ers onn urv ey w as r ex o e pe rso n nel s 6 3.2 Lea der ship Ind ex 7 1.2 d E Ind ex 7 2.3 ent sur vey wa an nga gem , , h 1 00 bei the hig hes t. T he r f th as 8 8.2 %. wit te o ng esp ons e ra e su rve y w • C ityc red int o 2 9 n loy nte nt c ont ts. on e ew em p me rac • E loye lete d 3 .6 f ull- day loye e. In ad di tra inin ssio mp es c om p g se ns p er e mp her s sh wh ich tion , t ort er t rain ing nts sta tist ics e w ere nu me rou eve , on we re llec ted not co • 9 2.6 % o f em erf loye ond ed t he e loye vie uct t p es c mp e p orm anc e re w a lea hile 48 .4% ndu d th st o cte vie w t wic nce co e re e. , w • A bse te d o il lne as 1 .2% nte ue t e ra ss w • T he c ral HR re d lop ed f her d d d e the ent urt nte pro ces ses we eve an ocu me .g. ind ion d p uct pro ces s an rog ram me • S hop l ha d ta ilor de nd s afe ing tre cris is a ty tra inin p cen pe rso nne -ma g. • T he C Cod e of Co ndu d by the Bo ard of Dir ityc ct w ect on as a ppr ove ors |
| Exp atio rds Cit ect ns t owa yco n |
Key ult s in 20 10 res |
|---|---|
| e / Lan d us city lan ning p lea t en viro ent • p san nm lan • i tive ning nte rac p Com nity de vel ent mu opm Com and en d nica tion iscu ssio mu op n Com lian p ce Cor Go ate por ver nan ce |
All ing dev elo jec nsio nd red lop ent ts a xte nts on- go pm pro re e ns a eve me of e sho e. b n fi eld de vel nd a xist ing ing tre s, i. ent pp cen row opm s, a re loca ted rba in u viro ent n en nm s. • I n al l op h m alit ting ries tive ion wit uni cip ies tin unt rat era co , ac co- ope con ued in t he f of rk s hop lan ning etin etc orm wo s, p me gs, • C olla bor ith the Cit f H els ink ued ard the bur b atio i co ntin ing n w y o reg su t of Ea st H els ink hich ela ted the My llyp de vel jec i, w is r to ent pro uro opm jec t. pro • C ityc ork s in clo atio ith the Lä nsim roje etr ct c on w se c o-o per n w o p om pan y, sib le f he f sub lin nd t he l l co or t utu est unit res pon re w ern way e a oca mm y n. In for f th he ld w ith loca l oci atio tive etin roje ct w ass ma me gs o e p ere ide nts res |
| Exp atio rds Cit ect ns t owa yco n |
Key ult s in 20 10 res |
|---|---|
| Ope d re liab le c nica tion n an om mu Dev elo of the ind ent ust pm ry |
• M edi a hi fol low ed ally ts w tem atic ere sys • E f st ake hol der s' e as l che d. xte nsiv e in ter vie cta tion w s urv ey o xpe s w aun Hal f of the lan ned 20 s ha ve b ed. int iew cut p erv een exe so O • T he s oci al m edi ilot jec lau nch ed at I nd For ts w a p pro ere me na a um • R d m ber shi ith RA KLI EPR A, ICS C, NC SC, the nta tion epr ese s an em ps w , Fin nish Co il of Sh Cen SIP A a nd the ing tre in o iati unc opp s, r as soc ons • T he S dis h or fou nde r of the NC SC Gre en G isat ion is a in we gan co- rou p Sw ede n. S ( • C ityc lied for mb hip of FiB Fin nish Bu sin d S oci ety on a pp me ers ess an , SR) t of the Eu bu rk f or C sin net par rop ean ess wo • P Glo bal Re Init ve's Co d R eal Est icip atio n in ting iati tion art nst ate por ruc an Sec Su lem rkin tor ent pp wo g g rou p. • C ityc is a fou ndi ber of Gre en B uild ing Cou nci l Fin lan d. P i etr on ng m em Olk s el ed t o th e B d of FiG BC and 's re inu ect ta ora wa oar co mp any pre sen ork ed d m s of FiG BC. tive in c nica tion nt c mitt s w om mu an eas ure me om ee |
Citycon owns a total of 33 shopping centres, 22 being in Finland, eight in Sweden and two in Estonia and one in Lithuania. In addition to shopping centres, Citycon owns 49 other retail properties, 42 of them in Finland and seven in Sweden. In Finland, Citycon also owns one undeveloped lot.
In 2010, Citycon focused on the redevelopment and extension of its shopping centres. No new shopping centres were purchased or sold. Instead, the company continued divesting non-core apartments.
In Finland, Citycon divested the building rights for the apartments to be built in connection with the new Myllypuro shopping centre and the companies established for managing them, to three diff erent residential investors in January. In May, shares of the apartments to be built in connection with the new Martinlaakso shopping centre were sold to Skanska Talonrakennus Oy for a total of EUR 2.3 million.
In Sweden, Citycon sold 25 per cent of the apartments in the Jakobsbergs Centrum shopping centre for about SEK 120 million (approx. EUR 12 million). These apartments were sold to a newly-established owners' association, under an agreement according to which the association agreed to purchase 100 per cent of the shares in Citycon's Swedish subsidiary Tenrot Fastighets AB. The sale of the apartments at Liljeholmstorget agreed in the summer of 2009 was realised in April, Citycon selling them for SEK 176 million (approx. EUR 18.5 million) to Heba Fastighets AB. In July, apartments in Åkersberga Centrum were sold to Tegeltornet AB for SEK 181 million (approx. EUR 19 million).
In addition to the divestment of apartments, Citycon sold its nine per cent holding in Helsingin Autotalo Oy, Finland, for EUR 4.5 million.
In December, Citycon bought for approximately EUR 2 million all shares in MREC Kiinteistö Oy Asematie 3, Vantaa. The acquisition is connected to the planned (re)development project in shopping centre Tikkuri. In December, Citycon bought also some shares in As Oy Kassatalo, Vantaa for EUR 0.3 million. Also this acquisition is connected to the Tikkuri (re)development project.
In accordance with the International Accounting Standards (IAS) and the International Valuation Standards (IVS), an external professional appraiser conducts a valuation of Citycon's property portfolio on a property-by-property basis at least once a year. In recent years, this valuation has been conducted on a quarterly basis, due to changing market conditions. The most recent valuation statement as per yearend 2010 is available on page 60 in the enclosed Financial Statements. The valuation was conducted by Realia Management Oy, part of the international Realia Group and the preferred appraisal service supplier of CB Richard Ellis in Finland. The valuation statements include a description of the valuation process, factors contributing to the valuation as well as the valuation results and sensitivity analysis.
The valuation has principally been conducted using a cash-fl ow method for a period of ten years. For vacant lots and properties clearly involving amendments to land use plans, the market values have been determined according to the building rights available under the currently valid local detailed plan. Development properties have been appraised using a regular cash fl ow model or a specially designed project calculation model based on cash fl ow analysis. Further information on the valuation methods is also provided in said valuation statement.
Realia Management Oy evaluated the average yield requirement for Citycon's property portfolio at 6.4 per cent at year-end. The net yield requirement for properties in Finland, Sweden and the Baltic countries stood at 6.4 per cent, 6.1 per cent and 8.1 per cent, respectively.
Citycon recognises its investment property at fair value in accordance with IAS 40. Its properties' combined market value (fair value) at the closing date of the accounts is recorded in the statement of fi nancial position and any changes in their fair value are recognised in the statement of comprehensive income under net fair value losses/gains on investment property. Thus, the change in fair value also has a profi t impact, and this is reported as a separate item in the company's fi nancial reports, as part of the operating profi t and, consequently, the profi t for the period.
In addition to the property portfolio's total value, determined by the external appraiser, the fair value of the company's investment properties in the statement of fi nancial position includes capital expenditure on development projects that the external appraiser does not take into account in the valuation, transfer into investment properties held for sale, as well as the acquisition cost of new properties acquired during the last three months.
At year-end, the fair value of Citycon's property portfolio was EUR 2,367.7 million and it increased by a total of EUR 220.3 million from the previous year. The value increase was mainly due to advancing (re)development projects and commitment of investments to these properties, decreased yield requirements and strengthened Swedish krona. The average yield requirement decreased by 20bps to 6.4 per cent as a result of general market changes, such as economic recovery and revival of demand for prime properties, and of advancing (re)development projects.
Fair value change, i.e. change of market values excluding investments and foreign exchange rate differences, was EUR 50.8 million during the fi nancial year. Fair value gains recorded for the year totalled EUR 95.7 million for 39 properties, while fair value losses came to EUR 44.9 million for 39 properties. The aggregate net impact of the changes in the statement of comprehensive income was therefore EUR 50.8 million.
| Mar ket valu e, E UR mill ion |
Sha f to tal p ortf olio , % re o |
Num ber of ies pert pro |
|---|---|---|
| r 10 0 ove |
5 2% |
7 |
| 80- 100 |
- | - |
| 60- 80 |
15% | 5 |
| 40- 60 |
8% | 4 |
| 20- 40 |
% 7 |
6 |
| 10- 20 |
9% | 16 |
| 5-1 0 |
% 5 |
17 |
| 0-5 | 3% | 28 |
| of pro Num ber ies pert |
Cha in m arke nge |
r 20 10, lue, EUR t va yea |
mil lion |
Ave rket rage ma rent |
Ave rati ng exp rage ope es E |
Ave init |
Ave ersi |
|||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Tota l po rtfo lio |
Fair rket val ma 31 D 201 0 ec. |
EUR mil lion ue, 31 Dec . 20 09 |
Pos itiv e |
Neg ativ e |
Tot al |
Ave yie rage 31 Dec . 20 10 |
ld re quir nt, % eme 31 Dec . 20 09 |
, EU R, ./m h 31 D ont sq.m 201 0 ec. |
UR/ sq.m ens ./m h 31 D ont 201 0 ec. |
ial yie rage ) 31 D ld (% 201 0 ec. |
rage on- ary rev (% ) yie ld, 31 D 201 0 ec. |
|
| Fin lan d |
||||||||||||
| Hel ki M lita n A sin etr opo rea |
31 | 84 5.9 |
7 91. 6 |
45. 7 |
33. 2 - |
12. 5 |
6.1 | 6.3 | 25. 8 |
6.3 | 5. 8 |
6.4 |
| Oth Fin lan d s in er a rea |
34 | 687 .0 |
65 0.4 |
19. 9 |
8.0 - |
11. 9 |
6.8 | 6.8 | 21. 1 |
4.7 | 6.5 | 7. 4 |
| Fin lan d, t l ota |
65 | 1, 533 .0 |
1, 44 2.0 |
65. 6 |
41. 2 - |
24. 5 |
6.4 | 6.6 | 23. 6 |
5.5 | 6.1 | 6.9 |
| Sw ede n |
||||||||||||
| Sto ckh olm d U å are a an me |
9 | 5 84. 9 |
47 9.1 |
20. 2 |
0.0 | 20. 2 |
5. 9 |
6.3 | 25. 6 |
7. 3 |
5. 8 |
6.6 |
| Got hen bur g a rea |
6 | 83. 7 |
69. 7 |
0 5. |
2.4 - |
2.6 | 1 7. |
2 7. |
13. 4 |
4.8 | 2 7. |
8.3 |
| Sw ede l n, t ota |
15 | 668 .6 |
5 48. 8 |
25. 3 |
2.4 - |
22. 8 |
6.1 | 6.4 | 24. 1 |
7. 0 |
6.0 | 6.8 |
| Bal Cou tic ies ntr |
||||||||||||
| Est oni a |
2 | 156 .5 |
145 .9 |
4.8 | 0.1 - |
4.6 | 8.0 | 8.0 | 21. 7 |
4.3 | 7. 9 |
8.2 |
| Lith ia uan |
1 | 9.6 | 10. 7 |
0.0 | 1.1 - |
1.1 - |
9.5 | 9.3 | 17. 6 |
6.8 | 9.0 | 10. 7 |
| Bal tic Cou ies, al ntr tot |
3 | 166 .1 |
156 .6 |
4.8 | 1.2 - |
3.5 | 8.1 | 8.1 | 21. 4 |
4.4 | 7. 9 |
8.3 |
| Tot al p foli ort o |
83 | 2, 367 .7 |
2, 147 .4 |
95. 7 |
44. 9 - |
5 0.8 |
6.4 | 6.6 | 23. 6 |
5. 9 |
6.2 | 6.9 |
| Cha in m arke nge |
r 20 10, lue, EUR t va yea |
mil lion |
Ave rket rage ma rent , EU R, |
Ave rati ng exp rage ope es E ens |
Ave init |
Ave ersi rev |
||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Like -for -like ies pert pro |
of pro Num ber ies pert |
Fair rket val EUR mil lion ma ue, 31 D 201 0 31 Dec . 20 09 ec. |
Pos itiv e |
Neg ativ e |
Tot al |
Ave yie ld re quir nt, % rage eme 31 Dec . 20 10 31 Dec . 20 09 |
./m h 31 D ont sq.m 201 0 ec. |
UR/ sq.m ./m h 31 D ont 201 0 ec. |
ial yie rage ) 31 D ld (% 201 0 ec. |
rage on- ary (% ) yie ld, 31 D 201 0 ec. |
||
| Fin lan d |
||||||||||||
| Hel ki M lita n A sin etr opo rea |
25 | 612 .8 |
5 85. 5 |
29. 8 |
6.9 - |
22. 9 |
6.1 | 6.3 | 26. 1 |
6.4 | 6.0 | 6.3 |
| Oth Fin lan d s in er a rea |
30 | 458 .1 |
44 6.3 |
13. 9 |
-7. 9 |
6.0 | 7. 0 |
7. 1 |
19. 8 |
4.8 | 6.9 | 7.7 |
| Fin lan d, t l ota |
55 | 1, 070 .9 |
1, 03 1.8 |
43. 7 |
14. 8 - |
28. 9 |
6.5 | 6.6 | 23. 4 |
5.7 | 6.4 | 6.9 |
| Sw ede n |
||||||||||||
| Sto ckh olm are a |
7 | 27 1.0 |
23 3.6 |
13. 2 |
0.0 | 13. 2 |
6.3 | 6.5 | 15. 8 |
5.5 | 6.7 | 7. 2 |
| Got hen bur g a rea |
6 | 83. 7 |
69. 7 |
0 5. |
2.4 - |
2.6 | 1 7. |
2 7. |
13. 4 |
4.8 | 2 7. |
8.3 |
| Sw ede l n, t ota |
13 | 354 .7 |
303 .3 |
18. 3 |
2.4 - |
15. 8 |
6.5 | 6.6 | 15. 3 |
5. 3 |
6.8 | 7.5 |
| Bal Cou tic ies ntr |
||||||||||||
| Est d L ithu oni ani a an a |
2 | 21. 7 |
22. 9 |
0.0 | 1.2 - |
1.2 - |
9.4 | 9.2 | 15. 8 |
5.7 | 9.0 | 10. 4 |
| Lik e-fo r-lik al ies, ert tot e p rop |
7 0 |
1, 44 7.3 |
1, 358 .1 |
62. 0 |
18. 5 - |
43. 5 |
6.5 | 6.7 | 21. 3 |
5. 6 |
6.5 | 7. 1 |
Citycon aims to maintain its properties as at- tractive and dynamic centres for shopping, in the eyes of both customers and tenants. This calls for a diversifi ed and effi ciently manageable lease portfolio.
A new lease's type and duration depend on the type of premises to be leased and the tenant. With anchor tenants, the company typically concludes long-term leases of 10 or even 20 years whereas leases for smaller retail premises are chiefl y negotiated for a term of 3 to 5 years, in order to ensure active development of retail properties and optimisation of the tenant mix.
As a main rule, new leases are signed for a fi xed period. Main exception to this are apartment leases, which for legislative reasons are agreed until further notice, as well as leases for storage facilities and individual parking spaces.
Leases in eff ect until further notice represent about 14 per cent (17%) of Citycon's property portfolio, 83 per cent (81%) of these being concluded in Finland, 16 per cent (19%) in Sweden and one per cent (1%) in the Baltic Countries. The share of leases in eff ect until further notice in the portfolio has fallen, due to the divestment of apartments carried out in Sweden during the year gone by. In Finland, too, the number of leases in eff ect until further notice has reduced.
In Sweden, all retail property leases are signed for a fi xed term. Meanwhile, in the Baltic Countries, there are some single leases which will continue to be in eff ect until further notice aft er the fi rst fi xed-term period of a few years. In Finland, there is more variation in the lease portfolio, and leases in eff ect until further notice account for about 18 per cent (21%) of the total lease portfolio. The typical notice period for these leases extends from 3 to 12 months.
In spite of their short notice period, the actual duration of leases in eff ect until further notice can be very long. At year-end, more than 30 per cent of the current leases in eff ect until further notice were signed before 2000; the oldest ones were signed more than 30 years ago. Their relatively high share within Finnish Operations stems from the fact that such leases were once typical of the Finnish market.
In some cases, a lease in effect until further notice, or a lease signed for a short fixed term, is a rational solution. For example, for a property where a (re)development project is being planned, it may not be in Citycon's interest to have long-term lease agreements in place. About 16 per cent (10%) of all leases signed in Finland in 2010 are in effect until further notice. This is exactly due to the fact that, for many Finnish properties, there are (re)development projects either planned or ongoing.
In Finland, leases with anchor tenants are long term, even above ten years. With chain operators, Citycon mostly negotiates contracts spanning from 5 to 7 years. Fashion retailers, in particular, are willing to commit themselves to longer lease periods than before.
In Sweden, leases are typically signed for a term of 3 to 5 years, after which the lessor may terminate the lease or propose new lease terms. Requiring higher rent than the area's current market rate is not an option, because tenants can challenge a rent increase by appealing to a lease board (Hyresnämden). In the case of a dispute, the lessor must be able to prove, for example by presenting the board with recent leases, that market rents for similar premises in the area have increased.
In the Baltic Countries, major anchor tenants have lease terms of at least ten years; for smaller players they are approximately three years. The number of fi ve-year leases increased in 2010.
At the turn of the year, the average remaining length of lease portfolio was 3.2 years (3.1 years). The increase in the average remaining length was mostly due to the completion of (re)development projects and apartment divestments.
2011
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021+
0
| L E A S I N G A C T I V I T Y |
Num ber of leas e ent agr eem s |
City 's G LA, con sq.m |
Lea sed are a, sq.m |
Ave t, EUR rage ren /sq .m./ th mon |
De d We he Lea d t Hig he Pro ing at ert ma n r o r p y Ma int Ex en anc e p en ses |
|---|---|---|---|---|---|
| Fin lan d |
Loc l m Cit 's s hop in ing ent ntr a ana g em y con p ce |
||||
| Sta 1 J 20 10 tus an. |
1, 682 |
5 87, 650 |
5 09, 77 0 |
19. 7 |
han d les lat d r ks. Ma f t he te t-r is j ori ty nan e e o |
| Lea d : sta rte ses |
hav dut hei h ly les ant to ort t ont s e a y rep r m sa |
||||
| New end ed lea ext or ses |
368 | 65 0 |
94, 35 0 |
18. 5 |
he hop 's m I f t s t o t ing ntr ent ure s p ce e ana g em |
| Lea d d sta rte ue t ses o |
( 's a l re lat les Oc in r ion its ten ant nt to nnu a e sa |
||||
| dev elo ent jec ts pm pro |
61 | 1, 100 - |
13, 62 0 |
27. 6 |
) O C R lea ly di f f e fro t ra tio is c t m t anc cos r ren |
| Acq uis itio ns |
8 | 2, 660 |
1, 950 |
7. 1 |
p y , f ot her lar bus he |
| Lea ded ses en |
hop sim i ine s in t ave rag e o sse s p |
||||
| Exp ired fi xe d-t lea erm ses , |
185 | 42, 20 0 |
23. 8 |
f s les tre r i etr too cen , o a p er sq uar e m e a re |
|
| Ter min d, u ntil -fu rth otic e le ate er-n ase s |
186 | 5 8, 64 0 |
14. 8 |
l l ta ke dia In 2 0 wi imm ion ent te act ma nag em e |
|
| Lea d d min ter ate ue t ses o |
for li ke- for -li ke hop t ra tio ing occ up anc y cos s p ce |
||||
| dev elo ent jec ts pm pro |
64 | 3, 78 0 |
18, 34 0 |
19. 2 |
8. 4 p ies tre ert ent p rop wa s er c |
| Div est nts me |
23 | 6, 100 |
3, 500 |
13. 8 |
Cit kes det d e f f o han ine rts to y con m a erm en |
| Sta 31 De c. 2 010 tus |
1, 66 1 |
57 9, 980 |
49 7, 010 |
20. 3 |
lar ly bec int icu ert art ost p rop ma ena nce , p aus e c y |
| Sw ede n |
he tin e t inc t ten ant are c rea g p res sur o rea se |
||||
| Sta 1 J 20 10 tus an. |
2, 24 5 |
302 500 , |
28 1, 21 0 |
13. 3 |
|
| Lea d : sta rte ses |
|||||
| New end ed lea ext or ses |
29 3 |
30 0 |
37, 81 2 |
14. 2 |
|
| Lea d d sta rte ue t ses o |
|||||
| dev elo ent jec ts pm pro |
23 | 13, 000 |
9, 067 |
15. 0 |
|
| Lea ded ses en |
|||||
| Exp ired d te ed lea rmi nat an ses |
44 2 |
38, 97 1 |
13. 3 |
||
| Div est nts me |
33 5 |
24, 30 0 |
23, 613 |
9.6 | |
| Sta 31 De c. 2 010 tus |
1, 784 |
29 1, 500 |
26 5, 505 |
15. 9 |
|
| Bal Cou tic ies ntr |
|||||
| Sta 1 J 20 10 tus an. |
308 | 7 1, 000 |
7 0, 04 1 |
17. 1* |
|
| Lea d : sta rte ses |
|||||
| New end ed lea ext or ses |
44 | 5, 36 6 |
12. 9 |
||
| Lea ded ses en |
|||||
| Exp ired d te ed lea rmi nat an ses |
44 | 20 0 |
5, 22 5 |
13. 2 |
|
| Sta 31 De c. 2 010 tus |
308 | 7 0, 80 0 |
7 0, 182 |
17. 8 |
*) In 2010 in the Baltic Countries, maintenance fees have been split to maintenance and utility charges in order to make the practice comparable with the other business units. This change had also an eff ect on the average rent of 1.1.2010.
Local management in Citycon's shopping centres handles tenant-related risks. Majority of the tenants have a duty to report their monthly sales fi gures to the shopping centre's management. If the tenant's annual rent in relation to its sales (Occupancy cost ratio, OCR) is clearly diff erent from the average of other similar businesses in the shopping centre, or if sales per square metre are too low, management will take immediate action. In 2010, occupancy cost ratio for like-for-like shopping centre properties was 8.4 per cent.
Citycon makes determined eff orts to enhance property maintenance, particularly because costs are creating pressure to increase the tenants' maintenance fees. The exceptionally severe winter and hot summer of 2010 raised properties' operating expenses. In Sweden, transferring part of these higher costs into maintenance fees was possible, unlike in Finland where such a levelling mechanism is not associated with maintenance fees.
Citycon's gross rents are close to the market rent level. Leases oft en contain a turnover-linked component, but due to the level of the minimum base rent this is not a signifi cant source of additional rental income. At the end of the year, turnover-based lease agreements accounted for 43 per cent (36%) of Citycon's lease portfolio, while approximately one per cent (1%) of rental income came from the turnover-based part of leases.
At the year end, turnover-based lease agreements accounted for
43.0%
| O O O A A S S 3 1 C. 2 0 1 P R T F L I N L Y I D E |
0 | of Num ber |
Fair ma |
rket val ue, |
Occ e,% rat upa ncy |
|||
|---|---|---|---|---|---|---|---|---|
| Tota l po rtfo lio |
Loc atio n |
City 's G LA con |
leas e ent agr eem s |
EUR mil 31 Dec . 20 10 |
lion 31 Dec . 20 09 |
ic, e eco nom ur 31 Dec . 20 10 |
m² 31 Dec . 20 10 |
|
| Fin lan d |
||||||||
| Sho Hel ki M lita n A ing sin ntr etr pp ce es, opo rea |
||||||||
| Col bus um |
He lsin ki |
20, 90 0 |
7 2 |
7 6.7 |
7 4.1 |
99. 6 |
98. 7 |
|
| Esp i tor oon |
Esp oo |
17, 20 0 |
46 | 47. 7 |
29. 8 |
94. 8 |
93. 3 |
|
| Hei kint ori |
Esp oo |
5, 80 0 |
36 | 8.5 | 10. 5 |
90. 5 |
80. 8 |
|
| Iso i my yr |
Van taa |
10, 90 0 |
15 | 16. 6 |
17. 6 |
88. 8 |
7 9.4 |
|
| Iso Om ena |
Esp oo |
60, 500 |
196 | 322 .4 |
29 9.7 |
99. 3 |
98. 9 |
|
| Lip laiv pu a |
Esp oo |
18, 500 |
49 | 68. 7 |
63. 5 |
99. 7 |
99. 3 |
|
| My i yrm ann |
Van taa |
40, 500 |
106 | 150 .1 |
152 .3 |
93. 5 |
92. 5 |
|
| Tik kur i |
Van taa |
12, 23 0 |
5 4 |
30. 2 |
26. 0 |
94. 6 |
90. 6 |
|
| Sho Hel ki M lita n A tal ing sin ntr etr , to pp ce es, opo rea |
186 530 , |
57 4 |
7 21. 0 |
673 .6 |
97. 2 |
94. 8 |
||
| Sho oth Fin lan d ing s in ntr pp ce es, er a rea |
||||||||
| Duo | Tam per e |
13, 000 |
43 | 31. 8 |
29. 8 |
94. 3 |
92. 4 |
|
| Iso Kar hu |
Po ri |
14, 80 0 |
46 | 46. 7 |
43. 1 |
98. 9 |
95. 9 |
|
| Iso Kris tiin a |
Lap nta pee nra |
19, 500 |
61 | 35. 8 |
34. 8 |
95. 4 |
91. 0 |
|
| Jyv äsk esk us |
Jyv äsk lä y |
5, 80 0 |
63 | 14. 4 |
14. 5 |
93. 0 |
93. 3 |
|
| For um |
Jyv äsk lä y |
16, 500 |
77 | 7 4.0 |
55 .2 |
97. 1 |
94. 5 |
|
| Kos kika ra |
Val kea kos ki |
5, 80 0 |
36 | 5. 3 |
5. 3 |
96. 5 |
96. 1 |
|
| Kos kike sku s |
Tam per e |
27, 70 0 |
156 | 121 .8 |
113 .4 |
96. 8 |
94. 3 |
|
| Linj uri |
Sal o |
9, 20 0 |
11 | 15. 9 |
15. 1 |
94. 7 |
94. 0 |
|
| Gal leri a |
Oul u |
3, 500 |
30 | 8.2 | 8.2 | 95. 6 |
93. 2 |
|
| Sam kes kus po |
Ro iem i van |
13, 70 0 |
84 | 22. 8 |
23. 2 |
84. 3 |
9.7 7 |
|
| Tor ike sku s |
Sei oki näj |
11, 500 |
60 | 11. 7 |
11. 9 |
88. 8 |
84. 7 |
|
| Trio | Lah ti |
45, 70 0 |
160 | 150 .6 |
143 .2 |
92. 7 |
89. 6 |
|
| Tul lint ori |
Tam per e |
10, 000 |
42 | 7.7 | 8.4 | 88. 3 |
84. 5 |
|
| Val i tar |
Ko la uvo |
7, 60 0 |
20 | 4.6 | 4.8 | 83. 6 |
80. 5 |
|
| Sho ing oth s in Fin lan d, t l ntr ota pp ce es, er a rea |
204 30 0 , |
88 9 |
1.3 55 |
10. 8 5 |
94. 1 |
90. 4 |
||
| Sho ing Fin lan d, t l ntr ota pp ce es, |
39 0, 83 0 |
1, 46 3 |
1, 272 .3 |
1, 184 .3 |
95. 7 |
92. 5 |
||
| Oth il p ies eta ert er r rop |
189 150 , |
198 | 26 0.7 |
257 .7 |
87. 6 |
83. 8 |
||
| Fin lan d, t l ota |
57 9, 980 |
1, 66 1 |
1, 533 .0 |
1, 44 2.0 |
94. 0 |
89. 7 |
||
| Sw ede n |
||||||||
| Sho ing Sto ckh olm nd Um eå ntr pp ce es, are a a |
||||||||
| Fru en C äng ent rum |
Sto ckh olm |
14, 60 0 |
92 | 18. 8 |
13. 9 |
99. 0 |
98. 7 |
|
| Jak obs ber Cen tru gs m |
Jär fäll a |
60, 70 0 |
5 42 |
108 .5 |
99. 8 |
96. 8 |
96. 7 |
|
| Lilj eho lms tor t ge |
Sto ckh olm |
41, 000 |
142 | 23 9.6 |
20 5.3 |
96. 0 |
96. 6 |
|
| Str ilen öm p |
Um eå |
27, 000 |
32 | 47. 1 |
40. 4 |
98. 1 |
97. 5 |
|
| Tum ba C ent rum |
Sto ckh olm |
31, 40 0 |
33 9 |
62. 1 |
5 1.4 |
99. 7 |
99. 9 |
|
| Åke n C nta ent rmy rum |
Häs sel by |
8, 500 |
38 | 13. 1 |
10. 8 |
97. 7 |
97. 0 |
|
| Åke a C rsb ent erg rum |
Öst erå ker |
27, 500 |
127 | 4.3 7 |
40. 2 |
92. 4 |
89. 9 |
|
| Sho ing Sto ckh olm nd Um eå, al ntr tot pp ce es, are a a |
21 0, 70 0 |
1, 312 |
5 63. 6 |
46 1.7 |
96. 8 |
96. 5 |
||
| Sho ing Got hen bur ntr pp ce es, g a rea |
||||||||
| Ste Tor nun gs g |
Ste nd nun gsu |
36, 40 0 |
312 | 55 .5 |
43. 8 |
98. 4 |
97. 0 |
|
| Sho Sw ede l ing ntr n, t ota pp ce es, |
247 100 , |
1, 624 |
619 .1 |
5 05. 6 |
97. 0 |
96. 6 |
||
| Oth il p ies, al eta ert tot er r rop |
44, 40 0 |
160 | 49. 5 |
43. 2 |
91. 7 |
88. 4 |
||
| Sw ede l n, t ota |
29 1, 500 |
1, 784 |
668 .6 |
5 48. 8 |
96. 4 |
95. 3 |
||
| Bal Cou tic ies ntr |
||||||||
| Est oni a |
||||||||
| Roc l M ca a are |
Tal linn |
5 3, 30 0 |
194 | 144 .4 |
133 .7 |
99. 7 |
99. 4 |
|
| Ma al istr g |
Tal linn |
9, 500 |
57 | 12. 1 |
12. 2 |
99. 8 |
99. 6 |
|
| Lith ia uan |
||||||||
| Ma nda rina s |
Vil niu s |
8, 000 |
57 | 9.6 | 10. 7 |
100 .0 |
100 .0 |
|
| Cou Bal tic ies, al ntr tot |
0, 80 0 7 |
308 | 166 .1 |
156 .6 |
99. 7 |
99. 5 |
||
| Tot al p foli ort o |
942 28 0 , |
3, 75 3 |
2, 367 .7 |
2, 147 .4 |
95. 1 |
92. 2 |
| Fair rket ma |
val EUR mil lion ue, |
Occ e, % rat upa ncy |
|||||
|---|---|---|---|---|---|---|---|
| Like -for -like tfol io por |
City 's G LA, con sq. m. |
Num ber of le ase ent agr eem s |
31 D 201 0 ec. |
31 . 20 09 Dec |
ic, e eco nom ur 31 D 201 0 ec. |
m² 31 D 200 9 ec. |
|
| Fin lan d |
|||||||
| Hel ki M lita n A sin etr opo rea |
190 99 0 , |
5 13 |
612 .8 |
5 85. 5 |
96. 3 |
92. 2 |
|
| Oth er a rea s |
252 66 0 , |
7 38 |
458 .1 |
44 6.3 |
91. 9 |
86. 7 |
|
| Fin lan d, t l ota |
44 3, 650 |
1, 25 1 |
1, 070 .9 |
1, 03 1.8 |
94. 2 |
89. 1 |
|
| Sw ede n |
|||||||
| Sto ckh olm are a |
153 20 0 , |
1, 047 |
27 1.0 |
23 3.6 |
98. 2 |
97. 9 |
|
| Got hen bur g a rea |
69, 80 0 |
468 | 83. 7 |
69. 7 |
94. 2 |
91. 0 |
|
| Sw ede l n, t ota |
223 000 , |
1, 515 |
354 .7 |
303 .3 |
97. 1 |
95. 8 |
|
| Bal Cou tic ies ntr |
|||||||
| Tal linn d V ilni an us |
17, 500 |
114 | 21. 7 |
22. 9 |
99. 7 |
99. 8 |
|
| Lik e-fo r-lik foli l ort o, t ota e p |
684 150 , |
2, 88 0 |
1, 44 7.3 |
1, 358 .1 |
95. 1 |
91. 6 |
|
| Ave leng th o f aini rage rem ng leas ent e ag reem s, y ears 31 D 201 0 ec. |
Ave t, EUR rage ren /sq .m./ r 31 D yea 201 0 ec. |
Gro al in ent ss r e, EUR com lion Yea mil r 20 10 |
Net tal i ren nco me, EUR lion Yea mil r 20 10 |
Fair val ue, EUR lion Yea mil r 20 10 |
Net tal y , % Yea ield Occ ren r 20 10 |
e (e c), % Yea omi rat upa ncy con r 20 10 |
|
|---|---|---|---|---|---|---|---|
| Iso Om ena |
1.8 | 36 9 |
21. 8 |
16. 6 |
322 .4 |
5.5 | 99. 3 |
| Lilj eho lms tor t ge |
4.4 | 298 | 11. 1 |
6.1 | 23 9.6 |
2.7 | 96. 0 |
| My i yrm ann |
2.9 | 314 | 11. 2 |
8.1 | 150 .1 |
5.5 | 93. 5 |
| Roc l M ca a are |
5. 0 |
238 | 11. 5 |
9.9 | 144 .4 |
7. 3 |
99. 7 |
| Trio | 2.5 | 284 | 10. 5 |
8.0 | 150 .6 |
5. 6 |
92. 7 |
| Fiv e la ies, al st p ert tot rge rop |
3.2 | 303 | 66. 1 |
48. 8 |
1, 007 .2 |
5. 1 |
96. 8 |
| Tota l po rtfo lio |
Ave rage rem aini ng leng f lea th o se ent agr eem s, rs 31 D yea 201 0 ec. |
Ave t, EUR rage ren /sq .m./ r 31 D yea 201 0 ec. |
Gro al ent ss r inc ome , EUR mil lion Yea r 20 10 |
Net tal i ren nco me, EUR mil lion Yea r 20 10 |
Like -for -like tfol io por |
Ave aini rage ng leng rem th o f lea se ent agr eem ears 31 D s, y 201 0 ec. |
Ave t, EUR rage ren /sq .m./ r 31 D yea 201 0 ec. |
Gro al in ent ss r - e, E ion Yea UR mill com r 20 10 |
Net tal ren inc , EU R ome mill ion Yea r 20 10 |
|---|---|---|---|---|---|---|---|---|---|
| Fin lan d |
Fin lan d |
||||||||
| Sho Hel ki M lita n A ing tre sin etr pp cen s, opo rea |
2.8 | 308 | 5 2.4 |
37. 7 |
Hel sin ki M lita n A etr opo rea |
2.5 | 274 | 43. 4 |
31. 7 |
| Sho the in F inla nd ing tre pp cen s, o r ar eas |
2.9 | 252 | 45. 1 |
32. 1 |
Oth er a rea s |
3.3 | 197 | 49. 5 |
34. 3 |
| Oth il pr eta rtie er r ope s |
3.5 | 159 | 24. 6 |
17. 0 |
Fin lan d, t l ota |
2.9 | 23 1 |
93. 0 |
66. 0 |
| Fin lan d, t l ota |
3.0 | 243 | 122 .1 |
86. 7 |
Sw ede n |
||||
| Sw ede n |
Sto ckh olm are a |
2.2 | 175 | 25. 1 |
15. 1 |
||||
| Sho ing tre pp cen s |
3.1 | 20 1 |
44. 4 |
25. 8 |
Got hen bur g a rea |
2.7 | 144 | 9.2 | 5. 2 |
| Oth il pr rtie eta er r ope s |
3.0 | 133 | 5.5 | 3.0 | Sw ede l n, t ota |
2.3 | 166 | 34. 2 |
20. 3 |
| Sw ede l n, t ota |
3.1 | 191 | 49. 8 |
28. 7 |
Bal tic Cou ies ntr |
3.3 | 140 | 2.4 | 1.9 |
| Bal Cou al tic ies, ntr tot |
4.6 | 214 | 13. 9 |
11. 8 |
Lik e-fo r-lik foli l ort o, t ota e p |
2.7 | 207 | 129 .6 |
88. 2 |
| Tot al p foli ort o |
3.2 | 224 | 185 .9 |
127 .2 |
Citycon is an active owner and developer of shopping centres: most of its shopping cen- tres can be either (re)developed or extended. Citycon currently has several ongoing projects and many others in the (re)development pipeline. The planned projects are in advanced state of preparation and they can be rapidly initiated once the prerequisites for their launch are fulfi lled. Key prerequisites include the detailed fi nancial objectives such as return on investment compared with cost of employed capital and fi nancing of the project as well as the zoning situation and occupancy rate. Long-term preliminary plans have been made, even for properties whose (re)development involves uncertainties related to, for example, zoning or the property's ownership base.
In redeveloping its properties, Citycon takes simultaneous consideration of the construction technical aspects, urban landscape and commercial perspective. In order to support project planning, the commercial catchment area of each property, consumer demand potential in the surrounding area and competition are carefully assessed.
Citycon's strength lies in its versatile commercial competence and relationships with key retailers. This gives the company an opportunity to discuss planned projects, and their preliminary schedules, at a very early stage with key anchor tenants. This is important since the right tenant mix is essential to each centre's success.
Because all of Citycon's retail properties are managed by its own personnel, its leasing team negotiating new leases and property development team are well aware of the latest changes in the retail properties' daily operations, changes in consumer behaviour, the business performance of current tenants and each retail property's special features. Citycon harnesses its entire range of expertise in the planning, prioritisation and implementation of projects.
In 2010 in Finland, Citycon launched full-scale (re)development projects at Forum in Jyväskylä and at Espoontori in Espoo. In Kirkkonummi, an old supermarket property was transformed into a modernised small-scale shopping centre called Kirkkonummen Ostari. The building of these new shopping centres belonging to the Partners in Everyday Life cluster was initiated in Myllypuro, Helsinki, and Martinlaakso, Vantaa, in order to replace the old retail centres recently demolished.
The refurbishment of retail premises progressed at Myyrmanni in Vantaa, the Hansa section within Trio, Lahti, at Isolinnankatu and Asema-aukio in Pori. The refurbishment in Torikeskus Seinäjoki, Finland has halted fot the time being due to the leasing situation.
In Sweden, extension and (re)development project launched at Åkersberga Centrum in 2009 continued. The fi rst phase involved the construction of an extension, opened to customers in October 2010. This project will continue, with the refurbishment of the existing shopping centre, until April 2011. The Baltic Countries had no ongoing (re)development projects. More details on the (re)development projects that are completed, ongoing, under planning or potential can be found in the tables on pages 23-27.
During 2010, Citycon conducted a comprehensive modernisation of 10,000 square metres of Espoontori shopping centre and its parking facility in Finland. This shopping centre is lo- cated in Espoon keskus, Espoo Centre – the City of Espoo's administrative hub – right next to a busy railway station and surrounded by a major employment and residential area. The redevelopment project began in January and the fully modernised Espoontori was opened in phases for the beginning of November. Citycon invested a total of EUR 20.5 million in the project.
Espoontori can be further extended onto the adjacent lot. The possibility to link Espoontori with the opposite shopping centre of Entresse, by constructing a retail passage above the street, is currently under investigation. Together, these two centres and the extension would form a major commercial complex, ranking among Espoo's top retail locations in terms of att ractiveness and leasable area.
Since more apartments are continuously being built in Espoo Centre, and since it benefi ts from excellent transport connections and strong self-suffi ciency in jobs, it is an area of good purchasing power.
22 CITYCON OYJ | ANNUAL AND SUSTAINABILITY REPORT 2010
Citycon's largest ongoing extension and (re)development project, in euros, concerns Åkersberga Centrum located in the Österåker district of the Greater Stockholm area, Sweden. With an extension of some 13,000 square metres opened in October 2010, the project is now continuing with the renovation of the older section. The fi rst phase saw the opening of 20 stores, the large grocery shop ICA Kvantum being the anchor tenant. The existing section, to be refurbished and opened in April 2011, will host fashion retail in particular.
When complete, the Åkersberga Centrum will have 27,500 square metres and some 70 stores. The total investment for the project is about SEK 467 million (EUR 44 million) or some EUR 51.1 million. Owning 75 per cent of the property, Citycon is responsible for 75 per cent of the project's costs.
The Österåker area has strong purchasing power, which will be bett er channelled towards the Åkersberga Centrum following the extension and (re)development project.
During 2010, the Forum shopping centre, located in downtown Jyväskylä, underwent a thorough redevelopment. The shopping centre's interior was modernised and more escalators and lift s were added, enabling easy access to all of Forum's fl oors and its parking hall.
Forum's commercial concept was also freshened up, in order to bett er match demand in the centre's downtown location. A boost was given to its specialty retail off ering, particularly fashion. The shopping centre's range of cafés and restaurants was also diversifi ed. Following this, both Forum and Jyväskylä welcomed the ten or so new retailers establishing themselves in the region for the very fi rst time.
Although the renovation covered the entire shopping centre, it focused on a 12,000 square metre section. Citycon invested approximately EUR 16 million in this project. The renewed Forum opened its doors at the beginning of December, raising huge interest among Jyväskylä's inhabitants.
| Exp d ecte |
||||||||
|---|---|---|---|---|---|---|---|---|
| 2 0 0 9 A I N |
2 0 1 0 N D |
Mar ket |
Pos t |
Est ima ted l tota |
Act ual ulat ive cum CAP he end EX by t |
yie ld o n leti com p on whe n |
||
| Pro pert y |
val (31 Loc atio n |
MEU R ue, 10) Dec . 20 |
.¹⁾ Are a, s q.m |
dev elop t men area , sq .m. |
inve stm ent , R ²⁾ MEU |
of t he iod, ME UR per |
stab ilize d,% ³⁾ |
Add itio nal info tion rma |
| Roc l M ca a are |
Tal linn , Est oni a |
144 .4 |
28, 60 0 |
5 3, 30 0 |
5 3.8 |
5 3.8 |
9.9 | 199 8 b uilt sho is f ully reb uilt d su bst ially end ed. The tha n 1 70 d th cho ing t is tre ant ext sto r te pp cen an re a re m ore res an e an nan the lar t Pr a hy rke Es ia. O f Ci on' ilot n th ble de vel of d ism t in ton tyc jec ts i sta ina ent its ties ges per ma ne o s p pro e su opm pro per an rtifi R 6 8 m ed a si lver lev el L EED The ori ina l es tim d in EU illio n. T he e ntir roje ant te. ate tme nt w ct w wa s gr ce ca g ves as a ppr ox. e p as lete d in No ber 20 09 lan ned com p vem as p Anc hor s: P Ma rks &S New Yor ker Lin dex Res ed, Spo rtla nd rism ten ant a, pen cer erv , , , |
| Lilj eho lms tor t ge |
Sto ckh olm , Sw ede n |
23 9.6 |
20, 100 |
41, 000 incl . 27 ,60 0 il + 1 3,40 0 reta ces/ offi hea lth c are |
157 .8 |
157 .8 |
6.2 | Con of f St affi ion hop ing uth ock hol ity . Lil je hol n is ajo c hu b an d th hol str uct tre st o tre r tr a ne w s p cen so -we m c cen me a m e w e be red lop ed. The bui ldin lly r ede vel d a nd a sho s bu ilt i a is ing exi stin ing ctio it. as t ota tre n to are eve g g w ope new pp cen wa n co nne Und nd king . Th e of Cit n's ilot ble de vel of d w ted roje ct i jec ts i sta ina ent its ties erg rou par e p s on yco p pro n su opm pro per an as g ran a P lati LE ED tifi e. T he p roje lete d in Oc tob er 2 009 lan ned cat ct w num cer as c om p as p Anc hor s: IC A K Wil ly 's, H& M, Sys bol SAT S, Cla es O hlso MQ Lin dex ten ant tum tem t, van age n, , , |
| For um |
Jyv äsk lä, y Fin lan d |
74. 0 |
15, 100 |
15, 100 |
16. 0 |
16. 0 |
11. 2 |
es ( .m.) A y lon dev elo of sho 's in 12, 000 . Ac sib ility han ced by der d ent ing tre ter ior mis nise ear g re pm pp cen pre sq ces wa s en mo lift s ll fo ur fl f th hich be e sh ing d th ed king ha ll. F m´ ial c ate twe tre , w no w o per en a oo rs o opp cen an e re new par oru s co mm erc on efr esh ed and as d rsifi ed ially Fo ´s f ash d re ly w the ned mi ive ion t w ten ant sta nt s tre cep as r x w , es pec rum an ura upp as s ng Anc hor s: S älä Ver o M oda Tok K-s rke Top -Sp nni, t, ort ten ant epp ma upe rma , , |
| Esp i tor oon |
Esp oo, Fin lan d |
47. 7 |
16, 500 |
16, 40 0 |
25. 8 |
22. 2 |
6.9 | 20 10, Cit fur . 10 40 0 s . of fac . Sh In bis hed tho hly ail p ises d p ark ing ility ing is l ted ret tre yco n re rou g app rox q.m rem an opp cen oca , in E o's adm the id r ailw . It ´s l ted he h t of ide l an d b inis tive viv ion in t ing ntia usi tra ntr ext to tat spo ce e, n ay s oca ear a g row res nes s a. N e b bui lt in dia Som be fi na lize d in Sp 20 11. rtm ent ein its im te v icin ity. ises ing ring are ew apa s ar g me e p rem are Anc hor s: K rke Tar jou lo, Pos ti ten ant t, sta -su per ma |
1) Leasable area owned by Citycon before the project start. 2) New capital tied on the project. 3) Yield on completion, % = Expected stabilized (3rd year aft er completion) net rents incl. possible vacancy/total investment
| ( ) O N G O I N G R E |
D E V E L O |
P M E N T |
P R O J E C |
T S |
Tota l |
Act ual ulat ive cum CAP EX |
||||
|---|---|---|---|---|---|---|---|---|---|---|
| Pro pert y |
Loc atio n, Cou ntry |
Mar ket valu e, M EUR 31 D 201 0 ec. |
Are a, . ¹⁾ sq.m |
Pos t dev elop t men area , sq .m. |
esti ed mat inve stm ent , R²⁾ MEU |
by the end of the riod pe , MEU R |
Targ et yea r of leti com p on |
Pre leas ing ³⁾ rate |
Exp d yi eld ecte on leti hen com p on w stab d, % ⁴⁾ ilize |
info Add itio nal tion rma |
| Åke rsb a C ent erg rum |
Öst erå ker, Sw ede n |
74. 3 |
20 000 , |
27 500 , |
51 .1 ⁵ ⁾ |
44 .5 |
20 11 |
86 % |
7.3 | Ref urb ishm and of a hop he G Sto ckh olm hea f ent ext ion isti ing tre in t ter ort st o ens n ex ng s p cen rea are a, n d/e Sto ckh olm . Ve ood bic n. T he s hop bu ilt i n 1 985 and ref urb ishe nde d atio ing tra ort tre xte ry g pu nsp p cen was / ( ) in 1 995 199 6. M 25% loca l re al e ned by the lity. ino rity nici sta te c ow ner om pan y ow mu pa Anc s: IC A, Ahl H& Sys hor Kap Lin dex libr M, bol ten ant tem t p ary, age , , |
| My llyp uro |
He lsin ki, Fin land |
12. 6 |
7, 700 |
7, 300 |
21 .3 |
14. 3 |
20 12 |
53 % |
7.4 | Bui ldin f a n sho laci the old the My llyp sub . Un der und ing tre t to sta tion g o ew pp cen rep ng one nex uro way gro king fac ility wil l be bu ilt in the sh . Als d an d ri ht-o f-re side jun ctio n to ing tre nte rt par con opp cen o re g nce apa wil l be bu ilt, t hat Cit n ha ld. T he e d in eed for the wh ole tals 60 EU R stim jec nts ate tme nt n t to me yco s so ves pro ki ( ce), mil lion . An cho S-G Pha Sep älä, Cit f He lsin Me dia Spa HO K-r r te ts: est ant nan rou p, rma cy, p y o aur s |
| Ma rtin laak so |
Van taa , Fin land |
8.7 | 3, 800 |
7, 300 |
22 .9 |
7.2 | 20 11 |
73 % |
7.4 | Bui ldin f a ail c laci the old o th e M inla aks ilwa ion and bu rmi nal. ret ent xt t art tat s te g o new re r ep ng on e ne o ra y s Apa ill b e bu ilt i the sho City has sol d th side l bu ildi ht. rtm ent ctio n to ing tre ntia ig s w n co nne pp cen con e re ng r , Anc hor s: S rke Lid l, Sam Ban k, HO K-r ten ant t, est ant -ma po aur s |
| sa ( ) Han Trio |
Lah ti, Fin land |
150 .6 ⁶ ⁾ |
11 000 , |
11 000 , |
8.3 | 5.0 | 20 11 |
15 % |
6.6 | ( m.) The ref urb ishm of il pr 5, 700 in H loca ted Tri o. T he g oal ises is to ent reta rty t to em sq. ans a pr ope nex con t th bett and lly to T Alt of the lan ding allo w b uild of rcia rio. tion cit ing rty to nec e pr ope er mo re c om me era y p pen il pr ises the bri dge ting Tri d H the of Vap aud enk reta str eet atu em on con nec o an ans a, o ver i ( od) Anc hor s in d p ises : To km Rob inho Ma nha Ste akh ten ant tt an ren ewe rem ann ous e , |
| My i yrm ann |
Van taa , Fin land |
150 .1 |
8, 400 |
8, 400 |
4.8 | 4.2 | 20 10 |
75 % |
Ref urb ishm of the fi rs t fl o tha t be An tt ila ved ller Ten ent ises t as to ant or p rem cam e va can mo sma spa ce. rks wil l ta ke a t th th d fl imp tim ent rov em wo e sa me e on e gr oun oor Anc hor d p : St adi Vei kon kon Suo lain en K kau Antt ila Cub H& M s in ises irja ten ant ren ewe rem um e, ma ppa us, , , , |
|
| Kirk kon n lii ke um me ( ri) kes kus Ase n O sta ma |
ko- num Kirk mi, Fin land |
7.1 | 5, 000 |
5, 000 |
4.0 | 1.6 | 20 11 |
62 % |
Cit n is ting old ark et b uild ing into a P in E day Lif hop ing hat wil l art tre , t yco con ver an sup erm ner ver y e - s p cen off e r da ily s ices erv Anc hor s: P Offi Nor dea Huo tok esk Sep älä, Dre ost neis ten ant ce, us, p ssm ann , |
|
| Isol nka inna tu |
Por i, Fin land |
4.3 | 7, 600 |
7, 600 |
3.0 | 1.5 | 20 10 |
1. p has e 100 % |
Ref urb ishm of the ail p has the fi rs EUR 1.5 llion and 2, 500 has ises in t mi e is ent ret t, rem wo p es, sq. m., p com lete d an d fu lly let.T he l of t he s nd p has An cho K-s rke Alk ing e is ing. r te ts: t, p eas eco on- go nan upe rma o |
|
| Por ukio in a sem a-a ( ri) Ase n O sta ma |
Por i, Fin land |
14. 8 |
8, 000 |
8, 000 |
2.5 | 0.3 | 20 12 |
n.a | Ase n O ri h od loca Po ri's rail . Gr the r da ily s rel d to tion tion ices sta t to sta ate ma as a go nex way oce ry, o erv com eek ly n eed d 5 80 king . Le arly Anc hor : K- ark Pha asin in e sta ten ant et, mo n w s an par spa ces g ge. sup erm rma cy, Lou Fo nas rum |
|
| Tor ikes kus |
Sei ki, näjo Fin land |
11. 7 |
11 300 , |
11 500 , |
4.0 | 2.7 | 20 11 |
1. & 2. p has e 100 % |
Ref urb ishm of sho 's in The fi n al p has e of the ill b e la hed leas ing ior mis jec ent tre ter t w pp cen pre es. pro unc as s. A Ahl Ale 13, ing nch in t he r wed mis Kap ksi Lin dex or t nts pro gre sse ena ene pre es: p , |
1) Leasable area owned by Citycon 2) New capital tied on the project 3) Signed lease agreements, pre-leasing rate in euros 4) Yield on completion, % = Expected stabilized (3rd year aft er completion) net rents incl. possible vacancy/total investment 5) Estimated investment need of the entire project 6) Includes Trio
In Martinlaakso, Vantaa, and Myllypuro, Helsinki, Citycon decided to demolish the old retail cen- tres dating from the 1960s. Both buildings had severely deteriorated both in technical terms and in terms of their commercial concepts.
However, both also enjoyed an outstanding location at the heart of their respective districts, right next to either a metro or railway station. Consequently, Citycon began building new ones to replace them. The construction of the Myllypuron Ostari centre began in January and that of the Martinlaakson Ostari centre in May. Both shopping centres focus on grocery retail and local services. Each has approximately 7,300 square metres of leasable area and can provide parking facilities way in excess of what was previously possible.
Myllypuron Ostari will be completed in phases: during the summer of 2011 and the spring of 2012. Citycon intends to invest approximately EUR 21.3 million in this project. In addition, 255 rental and right-of-residence apartments, building rights of which Citycon has sold to three residential investors, will be built adjacent to the shopping centre.
The construction of Martinlaakson Ostari was initiated in May 2010, and it is due for completion in the autumn of 2011. Apartments will be built within Martinlaakson Ostari – their building rights have also been sold by Citycon. Citycon intends to invest EUR 22.9 million in the construction of Martinlaakson Ostari.
Citycon and NCC Property Development Oy have a reservation for land use concerning the construction of the Matinkylä Metro Centre, Espoo, Finland. This centre will be the terminal station in the fi rst phase of the construction of the western subway line. The reservation for land use covers the feeder bus terminal to be built in connection with it, as well as a signifi cant amount of new leasable area, which will consti-
able lead shopping centre in Espoo. tute an extension to the Iso Omena shopping centre. This development and extension project, if materialized, will more than double Iso Omena's leasable area. The metro station and the feeder terminal will render the Matinkylä area one of the busiest centres in the City of Espoo, since it will be a major commuting hub for local residents. Although the Metro Centre includes a reservation
for Matinkylä's new indoor swimming pool, the pool's construction is subject to a separate deci sion by the city. New residential construction in Matinkylä is also under planning.
The Matinkylä Metro Centre will diversify and broaden Iso Omena's off ering, while further in creasing its commercial appeal. This development is aimed at rendering Iso Omena the unquestion-
Construction of the Metro Centre and shopping centre is interlinked with the metro's construction schedules. The objective is to initiate construction work in 2012.
However, this is subject to an investment decision yet to be made by Citycon's Board of Directors. Forty per cent of the current Iso Omena is owned by GIC Real Estate, the property investment arm of Government of Singapore Investment Corporation.
Citycon's Board of Directors has not yet made a decision on the (re)development project, but it is under planning, an alteration of the city plan is pending or Citycon (or its partner) has a site reservation.
| Pro pert y |
Loc atio n |
Cou ntry |
Mar ket valu e, MEU R (31 Dec . 20 10) |
Proj ect area .m. ( 1 , sq |
Est ima ted inve stm ent d, M EUR ²⁾ nee |
of proj Targ et y ear laun ch ect |
of com Targ et y ear leti p on |
Add itio nal info tion rma |
|---|---|---|---|---|---|---|---|---|
| Lip laiv pu a |
Esp oo |
FIN | 68 .7 |
35 000 , |
60 -70 |
20 12 |
20 14 |
Ref urb ishm and of t he e sho . Th fur bish f in lete d. P lann of ent ext ion xist ing ing tre nt o ter ior mis ing ens pp cen e re me pre es c om p the ext ion jec t co ntin ens pro ues |
| Iso Om ena |
Esp oo |
FIN | 32 2.4 |
25 000 - , 30, 000 |
110 -13 0 |
20 12 ³⁾ |
20 14 |
Pla eth ith t he c NC C fo bwa wh ich will be bui ld o n th e fu nnin ion ctio vat tog tru ntre tur g re ser er w ons n co mp any r su y ce e Ma tink lä s ubw adj o th e sh . Th al is ubw hat bin llen ion ing tat nt t tre to ate ent re, t t y ay s ace opp cen e go cre a s ay c com es e xce fun fut rcia l se rvic nd w ell- ctio ning tion the sub and ark ing. Th sub line s to mut est com me es a con nec ure way com er p e w ern way , tha Hel sink i an d E o is lann ed t o be lete d in 20 15.T he fi ssib le p roje ct la h is in 2 012 ssib le t co cts rst nne spo p com p po unc , po del rdin l co lain the lan has be ake ote ntia ts a inst en t n in to a unt ay r ega g p mp ga p cco |
| 5, 000 ⁴⁾ |
15 | 20 12 |
20 13 |
Ext of t he s hop has es d ndi n th e fi nal clus he a bov ed s ubw ion ing in tw ion in t ion tre ent ent ens p cen o p epe ng o con e m ay c re jec t. pro |
||||
| My i yrm ann |
Van taa |
FIN | 15 0.1 |
⁴⁾ 20 000 , |
50 -60 |
³⁾ 20 12 |
20 14 |
Ext ion of t he s hop ing diff ide s of the . Th e C ity of V ted ite atio tre to t nt s tre ant ns t ens p cen wo ere cen aa g ran a s res erv o City and HO K-E lant o fo r th e fo r he alth 's a nd P aalu i's p lot. Pa rkin lann ed t o be nsf d un der ntre tor is p tra con rme car e ce g erre und . Pr a hy rke lann ed t o M nni' diat ism t is s im e vi cini ty. gro per ma p yyr ma me |
| Gal leri a |
Ou lu |
FIN | 8.2 | 17 000 , |
50 -55 |
20 12 ³⁾ |
20 14 |
Red lop f th e G alle blo ck i hop ith t he b lock 's a nd t he a dja t bl ock 's o the ria ing in c atio nt o nto tre eve me a s p cen o-o per n w cen r rs. T he o the tail e A . Th d in eed for the wh ole ain er i ativ rina tim jec ty o ate tme nt n t pro per wne r m own s re coo per e es ves pro als 130 -14 0 E UR mil lion . Cit f O ulu de a de cisi o in d bu ild a der und rkin fac ility . Th tot on t t an nst y o ma ves n un gro pa g e co ruc rk o f th rkin fac ility wil l sta 20 12. tion rt in wo e pa g |
| Kos kike sku s |
Tam per e |
FIN | 12 1.8 |
17 000 , |
25 | 20 11 |
20 12 |
Red lop f sh Lea sab le a slig htly nt o ing tre s in ter ior mis inc eve me opp cen pre es. rea rea ses |
| Hei kint ⁵⁾ ori |
Esp oo |
FIN | 8.5 | 6, 000 |
12 | 20 12 |
20 12 |
Re n of sho tal d E UR 17 mil lion . In add red lop nd e atio ing inve itio sive nsio tre , to stm ent ten nt a xte nov pp cen nee n, a n ex eve me n f th jec ll as the rel d zo ning has ded ord ing he e arli lans sin he s har eho lde e sh ing t as ate not to t ce t pro we pro cee acc er p rs o opp do n ot h der ndi n th oje tre sta ct. cen com pan y ave a c om mo n un ng o e pr |
| Laa alo n lii kek esk jas us |
He lsin ki |
FIN | 3.7 | 8, 000 |
25 -30 |
20 12³ ⁾ |
20 13 |
( ) Bui ldin ail c re. S the th K esk d H OK- Ela S-G ret ent ite atio n to r wi nto g a new res erv ge o an rou p |
| IsoK rist iina |
Lap nta pee nra |
FIN | 35 .8 |
25 000 , |
50 -60 |
20 12 |
20 14 |
Ref urb ishm and of t he e sho und lann Cit rch d th e ad lot for the ion xist ing ing ing. jac ent ext tre ent ens pp cen er p yco n pu ase p 200 9. C ion in F ebr rcia l co ll as the cit lan dy. ext t as ens uar y om me nce p we y p rea |
| Isom i yyr |
Van taa |
FIN | 16 .6 |
5, 000 |
5-7 | 20 12 |
20 13 |
Ref urb ishm of d by Cit n. C l co der lann ent mis rcia t un ing. pre es o wne yco om me nce p p |
| Lau tt as aar en liike kes kus ⁵⁾ |
Hel sink i |
FIN | 2.5 | 2, 600 |
10 -15 |
20 12³ ⁾ |
20 14 |
Ref urb ishm sib le d olit and n of the ail c re. F ubw f w ent ion stru ctio ret ent utu tat ion ent est or pos em new con re s ay s ran ce o ern (re ) on sub line ady in 2 015 the lot. Pla d by und 10, 000 f ap und nnin uire ning art nts way p g p roc ess req zo er w ay. sq. m. o me er lann Cit of the ing. n is ino rity ty. p yco a m ow ner pro per |
| Pro pert y |
Loc atio n |
Cou ntry |
Mar ket valu e, MEU R (31 10) Dec . 20 |
Proj ect area .m. ( 1 , sq |
Est ima ted inve stm ent ²⁾ d, M EUR nee |
of proj Targ et y ear laun ch ect |
Targ of com et y ear leti p on |
Add itio nal info tion rma |
|---|---|---|---|---|---|---|---|---|
| Kie loti en l iike kes kus ( alo) Van n S ääs töt taa |
Van taa |
FIN | 13 .4 |
9, 700 |
9-1 1 |
20 11 |
20 12 |
ref of Ind urb ishm the de ent tme nt s tor rty. oor par e pr ope |
| Tik kur i |
Van taa |
FIN | 30 .2 |
20 000 , |
45 -50 |
20 12³ ⁾ |
20 14 |
Ext und lann Cit n ha ired hbo and har e of adj "ka talo " in ord ion ing. nei urin erty nt p erty ens er p yco s ac qu g g p rop a s ace rop ssa er nab le t he e nsio to e xte n. |
| Ma istr al g |
Tal linn |
EST | 12 .1 |
10 000 , |
8-1 0 |
20 11 |
20 12 |
Ref of t urb ishm and ion he s hop ing ent ext tre ens p cen |
| ⁶⁾ Ste Tor nun gs g |
Ste nd nun gsu |
SW E |
55 .5 |
15 000 , |
33 -35 |
³⁾ 20 11 |
20 13 |
The ond has e of th dev elo and clud tly lay and d lo ent ext ion jec t, in ing out ter ior nize is sec p e re pm ens pro par new , ex reo rga g . Als rkin d d wil l re ed. New l co t. N d fo r bu ildi ht f ddi al tics rain rcia ing uire ig tion o pa g an age new com me nce p ew zon req ng r or a il sp and ide l un hich wil l be ed i has e III reta ntia its w cut ace res exe n a p |
| Str ilen ⁶⁾ öm p |
Um eå |
SW E |
47 .1 |
25 000 , |
53 -55 |
20 11 |
20 14 |
Ext of t he s hop has nd a l co der lann Ex incl ude s 4 5 ion ing in tw rcia ing. isti oni tre t un ens p cen o p es a new com me nce p p ng z ng 000 m. i w b uild ing rig hts s.q n ne |
| Län ken ⁶⁾ |
Um eå |
SW E |
14 .9 |
3, 350 |
4 | 20 11 |
20 12 |
Ext of e big box t. Z ted and bu ildi ed t o be d in Ma rch 20 11. Le ion xist ing uni oni it is ect nte asin ens ng g ran ng p erm exp gra g Po ssib le c leti on 7 nth aft d le otia tion ing. igne ent neg s on -go om p mo er s ase agr eem s. |
| Åke n C nta ent rmy rum |
Hä lby sse |
SW E |
13 .1 |
10 000 , |
7 | 20 11 ³⁾ |
20 12 |
Red lop nd e n of the sho has Imp ed t ix. S nd p has clud ible nsio ing in tw e in nt a xte tre nt m eve me pp cen o p es. rov ena eco es p oss f re bui ldin side ntia l un its a nd s ices g o erv |
| Bac ka |
Go the nbu rg |
SW E |
6.2 | 8, 400 |
8 | 20 11 ³⁾ |
20 12 |
Dev elo of 2, 900 m. f or h ealt h ca and red lop f 5 500 f re tail nclu ding ent ice nt o mis es i pm sq. re s erv use eve me sq. m. o pre new , and ssib ly a Zo and fut dev elo tial of the is b lyse d, n ten ant mix tor. ning ent ten ty eing po gro cer y op era ure pm po pro per ana ew Ma r Ci lan tly side red by the Cit f Go the nbu ste ty p cur ren con y o rg. |
| Fru en C äng ent rum |
Sto ckh olm |
SW E |
18 .8 |
15 000 , |
8 | 20 12 |
20 14 |
Ref urb ishm ved . Re fur bish lann ed t o be ried h ci jec t, im mix roje ct is in c tion wit ent ten ant nt p out ty pro pro me p car oop era hor itie s. N ide ntia l un its a djo inin the und evie aut tre ew res g cen er r w. |
| Lin dom e |
Go the nbu rg |
SW E |
7.5 | 1, 500 |
1-2 | 20 11 |
20 12 |
Ext r fa lift lann ed t o be ed d fi rs t ha lf o f 20 11. Ext of t he e nd a ddi al c erio cut urin ion xist ing ty a tion tion ce- p exe g ens pro per rea of r esid ial u nde lann eth ith Mu lity of Mö lnda l. ent nits is u ing tog nici r p er w pa |
| Tum ba C ent rum |
Bot kyr ka |
SW E |
62 .1 6 |
000 - 8 000 , , |
43 -45 |
20 13 |
20 14 |
Ext red lop f th e sh has In t he fi has e th fur bish ed a nd s lig htly ion, ing in tw nt o tre rst ntre ens eve me opp cen o p es. p e ce wa s re ex ( 6 m n). h 6, 000 -8, 000 ded EUR illio In t he s nd p has e's et i end the sho ing wit nd r esid ial ten targ s to ext tre ent eco pp cen sq. m. a unit s. N tiat ion oing wit h th unic ipa lity ard ing ing. ego are ong e m reg new zon |
1) The project area refers to the combination of the area of the existing premises under refurbishment owned by Citycon and the area of the extension. 2) The amount of investment needed will change and become more precise as the planning process proceeds. The fi gure is the best current estimate. 3) The schedule for the project completion and/or project launch and/or project area involves risks associated with city planning. 4) The project area refers only to the area of the planned extension. 5) The leasable area may be larger than indicated. 6) Partly-owned property.
Citycon is analysing opportunities for the development and/extension of for example the properties below. Neither an alteration of city plan has been applied for nor any other offi cial decisions made.
| Pro pert y |
Loc atio n |
Cou ntry |
Mar ket valu e, EUR mil lion (31 . 20 10) Dec |
Are a, sq.m |
info Add itio nal tion rma |
|---|---|---|---|---|---|
| Ult ima |
Van taa |
FIN | 4.4 | 0 | Vac lot of a ly 42, 000 ith 20, 000 tt ed ide l bu ildin ht. P ibili he p nsid l tra ant oxim ate m. i t pe rmi ntia ig ty to u se t erty tion in p ote ntia ctio p ppr sq. m. w sq. n cu rren res g r oss rop as a co era nsa ns. |
| Val i tar |
Kou vol a |
FIN | 4.6 | 7, 600 |
Op red lop the naly sed itie tun s to ty a por eve pro per re a |
| tu 3 3 Run ebe inka rg |
Por voo |
FIN | 11. 4 |
6, 300 |
Cit of a e th ird blo ck i n Po . Pr elim inar alys is o ial d lop ibil itie der o to tre nt p yco n ow n on rvo wn cen y an n co mm erc eve me oss s un wa y. |
| Col bus um |
He lsin ki |
FIN | 76 .7 |
20 400 , |
Op and the sho ed. tun itie s to ing tre iew por exp pp cen are rev |
| Sam kes kus po |
Rov anie mi |
FIN | 22 .8 |
13 600 , |
Op red lop the naly sed itie tun s to ty a por eve pro per re a |
| Kaa rina n lii ket alo |
Kaa rina |
FIN | 6.2 | 9, 400 |
f th of t The red lop isti il pr in li ith t he d lop lan he t is a naly zed nt o eta rty nt p tre eve me e ex ng r ope ne w eve me own cen |
| Tul lint ori |
Tam per e |
FIN | 7.7 | 10 300 , |
Ref urb ishm the nde nsid ent ty is u tion on pro per r co era |
| Hak lan Kes kus uni |
Van taa |
FIN | 4.5 | 3, 000 |
Op red lop the naly sed tun itie s to ty a por eve pro per re a |
| For um |
Jyv äsk lä y |
FIN | 74. 0 |
17 500 , |
Bett l co n of the adj ned by Osu ank ki is ed. rcia ctio iew nt p erty er com me nne ace rop ow usp rev |
| Lilje hol mst et org |
Sto ckh olm |
SW E |
23 9.6 |
20 000 , |
Ext ion of s hop ing r th bwa cks and lans bui ld r esid ial u nits in j oint ith City of Sto ckh olm and ible ide ntia l de velo tre tra to ent tur ens p cen ove e su y p ven e w a p oss res per |
| The f ne end val fro m C Adm Boa rd r rdin the lan d-u sta rt o oni is p ing ty inis trat ive ng on a n ap pro oun ega g se. w z |
|||||
| Jak obs ber Cen tru gs m |
Jär fäll a |
SW E |
10 8.5 |
12 000 , |
( ) p Ext red lop f th e sh 2nd and 3rd has e of dev elo lann ed t o be lau che d in 20 12- 20 14, ion, nt o ing tre ent ens eve me opp cen p pm |
| bui ldin hts for ad diti l re side l bu ildi und lann ig ntia ing. g r ona ngs er p |
Diff erent public and private services are an important part of the shopping centre off ering. For example bank or insurance services can be found in several shopping centres. The real estate agent chain Kiinteistömaailma has in total fi ve service points in Citycon shopping centres in Finland.
In Finland, Citycon is the market leader in the shopping centre business and the only prop- erty investment company specialising in retail premises. In Sweden, Citycon holds a solid position, particularly in the region of Stockholm, the country's capital. On the Baltic market, Citycon has gained a foothold, becoming the market leader in Tallinn, Estonia's capital city. It now commands a quarter of the city's shopping centre market.
Citycon´s strength lies in its versatile knowledge of retail business, as well as its shopping centre expertise. The company has long, broad experienceof shopping centre management and development expertise. Citycon's main product is shopping centres, its core business being shopping centre development and management. In line with Citycon's brand promise, the key business objective is the creation of successful retail premises for retail business. Business operations include the effi cient leasing, marketing and maintenance of retail premises. Each shopping centre also has its own local management, which has a detailed understanding of the structure of local consumer demand, the area's competition and other local characteristics.
In addition to shopping centres, Citycon owns other retail properties. These complement the range of off ered premises and form an important part of the property portfolio. Some of these are larger than smaller-sized shopping centres.
Shopping centre marketing and chain leasing are operated on a centralised basis in Citycon Finland. Leasing to key customers within each industry is centralised into a responsibility area managed by a designated individual in Citycon Finland.
By far the greatest share of Citycon's cash fl ow is based on rental income from retail properties. Among tenants, grocery and specialty chains are of particular importance. Other major tenant groups include cafes, restaurants, banks and fi nancial institutions and public administration.
In Finland, the largest tenants include the various Kesko chains, such as the K-citymarket hypermarkets, the K-market supermarkets and other specialty brands such as K-kenkä, Musta Pörssi and Intersport. These represent a total of 30.7 per cent (34.7% in 2009) of rental income. Lease agreements being shop-specifi c, Kesko and Citycon had a total of 70 leases involving 39 properties. In addition to Kesko, the S Group is also a key tenant.
Other large tenants in fashion and clothing include Lindex, KappAhl, Seppälä and H&M.
The Swedish tenant structure is highly similar. The largest grocery retail tenants include the big operators on the Swedish market: ICA, COOP and Axfood. During the autumn, ICA opened a large ICA Kvantum store at Åkersberga Centrum. The ICA Kvantum store, which opened a year ago at Liljeholmstorget Galleria, has proven a success.
Specialty retail tenants include many of the same clothing and fashion chains as in Finland. The Swedish tenant structure is diff erent from its Finnish equivalent, in that Swedish shopping centres more oft en include public administration's operations. Indeed, a key Swedish tenant is the Stockholm County Council (Stockholms Läns Landsting).
In the Baltic Countries, Rocca Al Mare focuses fi rmly on specialty retail, with several strong fashion brands as its tenants. Marks & Spencer, for example, is thriving, having already expanded its business during its fi rst year of operation. The largest single tenant, however, is the Prisma hypermarket, which forms part of the Finnish S Group. In the Baltic Countries' smaller-scale shopping centres, Magistral in Tallinn and Mandarinas in Vilnius, the key tenant is the RIMI grocery chain representing the Swedish ICA chain.
| EUR mil lion |
Tot al |
|
|---|---|---|
| Fin lan d |
n A He lsin ki M lita etr opo rea |
84 5.9 |
| Oth Fin lan d s in er a rea |
687 .0 |
|
| Sw ede n |
Sto ckh olm d U å are a an me |
84. 9 5 |
| Got hen bur g a rea |
83. 7 |
|
| Bal Cou tic ies ntr |
Est d L ithu oni ani a an a |
166 .1 |
| Tot al |
2, 367 .7 |
Based on market value of property portfolio on 31 Dec. 2010
| Pro ion of r al in e ba sed port ent com on vali d re oll a t 31 Dec . 20 10 nt r |
% |
|---|---|
| Kes ko |
19. 9% |
| S G rou p |
4.9 % |
| ICA | 3.6 % |
| Sto ckm ann |
3.3 % |
| Tok nni ma |
1.8 % |
| Top 5, al tot |
33. 5% |
| Finl and |
Swe den |
Bal tic C trie oun s |
Tot al |
|---|---|---|---|
| 57 9, 98 0 |
29 1, 500 |
7 0, 80 0 |
942 28 0 , |
| 122 .1 |
49. 8 |
13. 9 |
185 .9 |
| 86. 7 |
28. 7 |
11. 8 |
127 .2 |
| 6.0 | 4.8 | 7.5 | 5.8 |
| 6.5 | 6.4 | 8.7 | 6.5 |
| Finl and |
Swe den |
Bal tic C trie oun s |
Tot al |
|
|---|---|---|---|---|
| Num ber of lea d d the fi n ial y urin sta rte ses g anc ear |
42 9 |
31 6 |
44 | 78 9 |
| of Tot al a lea d, s sta rte rea ses q.m |
107 97 0 , |
46, 87 9 |
36 6 5, |
160 21 5 , |
| (ec ), Occ d of fi n ial y % rat e at mic upa ncy en anc ear ono |
94. 0 |
96. 4 |
99. 7 |
95. 1 |
| Ave f le rtfo inin leng th o lio a t th rag e re ma g ase po e |
||||
| end of fi na l ye ncia ar, y ear |
3.0 | 3.1 | 4.6 | 3.2 |
• Cafes and Restaurants 8% • Health and Beauty 8% • Other Specialty Stores 3% • Services and Offi ces 6% Clothes and Fashion 25% • Groceries 19% Department Stores 13% Leisure, Home Supplies 18%
| bas ed o lid r n va |
Pro ion of r al in port ent com e rol l at 31 D 201 0, % ent ec. |
|---|---|
| Kes ko |
30. 7% |
| S-G rou p |
5. 9% |
| / älä/ Sto ckm Sep Lin dex ann p |
3.6 % |
| Tok nni ma |
2.8 % |
| Nor dea |
2.0 % |
| Top 5, al tot |
45. 0% |
| 201 0 |
200 9 |
|
|---|---|---|
| Gro al in EU R m illio ent ss r com e, n |
122 .1 |
126 .5 |
| Tur EU R m illio nov er, n |
126 .5 |
131 .3 |
| Net tal EU R m illio inco ren me n , |
86. 7 |
92. 4 |
| ins/ Net fai lue loss r va ga es o n |
||
| EU R m illio inve stm ent ty, pro per n |
24. 5 |
65. 1 - |
| Op fi t, EU R m illio ting era pro n |
107 .5 |
21. 2 |
| re ( ss), Cap ital ditu EU R ex pen gro |
||
| mil lion |
6.3 7 |
24. 5 |
| Fai ark alu e of et v inv est nt r m me |
||
| EU R m illio ties pro per n , |
1, 533 .0 |
1, 44 2.0 |
| Net tal ield % ren y , |
6.0 | 6.5 |
| Net tal ield like -fo r-lik ren y e p rop er , |
||
| % ties , |
6.5 | 6.5 |
Citycon is the largest player in the Finnish shopping centre market with a market share of some 22.7 per cent (source: Entrecon). The company owns 22 shopping centres and 42 other retail properties in Finland. In addition to these, Citycon has begun the construction of two new Partners in Everyday Life: the shopping centres of Myllypuro and Martinlaakso. Last year, Citycon's shopping centres att racted 81.5 million customers. The footfall remained at the previous year's levels despite the several ongoing (re)development projects that has resulted in higher vacancy in properties that has been taken off -line.
All Citycon shopping centres are located in urban growth areas, either downtown in larger cities or in district centres easily accessible by public transport. Compared to its competitors, Citycon is a unique player in the Finnish market, since it is the only property investment company focusing solely in retail premises. Citycon develops and manages all of its shopping centres using its own, professional personnel.
In Finland, in addition to shopping centres, Citycon owns 42 other retail properties and one undeveloped lot near the Helsinki-Vantaa Airport. These properties host markets and shops of various sizes, from individual small grocery shops to hypermarkets.
Several international chains reactivated their expansion plans aft er the recession, with some publicly announcing their desire to establish themselves in the Finnish market.
Citycon's shopping centres are mostly driven by groceries and other daily necessities and services, and that is why they performed relatively well, even during the economic downturn of 2008–2009. The year 2010 was already close to normal and leasing activity improved. However, negotiations with large chain retailers are advancing slowly and lease decision-making remains protracted. Citycon has continuously enhanced its leasing operations and consolidated its leasing team, by recruiting more staff , for instance. It will continue such enhancement measures in 2011.
In terms of service types, shopping centre offerings have expanded in recent years. Alongside a variety of public services and various services related to well-being and beauty have increased in shopping centres. The range of restaurants and cafes has also diversifi ed. Citycon develops its properties in line with customers' feedback. In doing so, it seeks to create a versatile mix of shops and services, while ensuring that the centre remains commercially vibrant and att ractive.
Citycon has also increased its investments in specialty leasing operations. Citycon Media (www. cityconmedia.fi ), launched towards the end of 2009, began full operations in early 2010. Citycon Media provides an e-commerce and reservation site, enabling a centralised reservation in any of Citycon's 22 Finnish shopping centres. In this way, promotion space, sales points for periods under three months, sound advertising, video screens or special advertising spaces can be booked. Citycon's long-term objective is to raise the share of specialty leasing in shopping centres' rental income to fi ve per cent. Citycon's strength lies in market leader ship: it is the only shopping centre operator with a nationally extensive shopping centre network. This enables the implementation of large-scale campaigns in Citycon's centres, based on specialty leasing channels.
Total sales fi gures for retail and shopping cen tres are aff ected by the amendments to Finnish value added tax legislation, which entered into force on 1 July 2010. This raised the general VAT rate by one percentage point, to 23 per cent, while the VAT rate for restaurants and cafes (excluding alcohol sales) was reduced to 13 per cent – the same as for grocery shops. The amendment is ex pected to increase business and turnover in restau rants and cafes.
Another major legislative change that took place in Finland was a decree that came into eff ect on 1 December 2009, which increased Sunday opening hours for retail, allowing for completely new trad ing days. In Citycon's shopping centres, the options for Sunday opening are considered locally accord ing to the market and competition, which means that practices can be adapted to respond to local needs. As a principal, if a shopping centre is open on Sunday, then all the stores are open. Citycon's shopping centres have made exten-
sive use of the new Sunday opening hours. Most shopping centres were open on all the permitt ed Sundays in 2010. Most of the feedback received by shopping centre managers from their tenants was positive. It appears that the Sunday openings
have increased sales, with customers spending a litt le more on average than on weekdays.
In some shopping centres the number of Sunday shoppers rose slightly throughout the year, but in most cases the Sunday visitor numbers were fairly steady. Customers have learned to rely on the shopping centres being open every day. According to our research, the new Sunday opening hours did not aff ect the visitor numbers of any other shopping day.
In 2010, Citycon focused on retail property management, aiming to manifest its role as the market leader in the form of well-kept shopping centres. Our aim is to provide a thoroughly pleasant experience in all aspects of a customer's visit. Correspondingly, Citycon has started the conceptualisation of quality and service levels, for example, restrooms and parking halls.
In the management of its shopping centres, the company is aiming at a centralised model that sets a Citycon standard for shopping centre quality levels. This target includes the standardisation of property maintenance and management levels for Citycon's retail properties. Following a prolonged competitive tendering process, based on quality and price, Citycon concluded a partner contract with ISS Palvelut Oy. Under this contract, cleaning, security guard services, property technical services and operative waste management in Citycon's shopping centres have been concentrated with ISS
| Ent ire p erty rop |
|||||||||
|---|---|---|---|---|---|---|---|---|---|
| Gro ss l able |
Ret ises |
Sale s, E |
UR mill ion |
Num ber of v |
isito illio rs, m n |
Cat chm |
City 's g con ross leas able |
||
| Pro pert y |
Loc atio n |
eas al, s tot area q.m |
ail p rem l, sq tota .m. |
201 0 |
200 9 |
201 0 |
200 9 |
ent are a *) ulat ion pop |
are a, sq.m |
| n A Hel sin ki M lita etr opo rea |
|||||||||
| Col bus um |
He lsin ki |
20, 90 0 |
19, 20 0 |
96. 2 |
96. 1 |
7. 8 |
7.7 | 95, 80 0 |
20, 90 0 |
| Iso Om ena |
Esp oo |
60, 500 |
48, 500 |
23 6.8 |
224 .0 |
8.8 | 8.2 | 148 000 , |
60, 500 |
| Esp i¹⁾, ² ⁾ tor oon |
Esp oo |
23, 70 0 |
11, 90 0 |
12. 5 |
22. 7 |
*) 1.6 |
2.9 | 5 8, 000 |
17, 20 0 |
| Hei kint ori |
Esp oo |
9, 500 |
000 7, |
19. 8 |
20. 2 |
1.9 | 2.0 | 138 70 0 , |
80 0 5, |
| Lip laiv pu a |
Esp oo |
18, 500 |
16, 40 0 |
90. 4 |
7 2.4 |
4.2 | 3.7 | 45, 30 0 |
18, 500 |
| Iso i my yr |
Van taa |
14, 80 0 |
8, 80 0 |
22. 6 |
27. 7 |
2.0 | 2.2 | 5 4, 100 |
10, 90 0 |
| My i yrm ann |
Van taa |
42, 000 |
32, 000 |
155 .2 |
158 .5 |
7. 8 |
7. 1 |
97, 60 0 |
40, 500 |
| Tik kur i ³⁾ |
Van taa |
15, 20 0 |
8, 000 |
30. 8 |
30. 7 |
3.1 | 2.9 | 133 70 0 , |
10, 60 0 |
| Oth s in Fin lan d er a rea |
|||||||||
| Jyv äsk esk us |
Jyv äsk lä y |
12, 000 |
7, 60 0 |
21. 5 |
22. 1 |
4.4 | 4.2 | 141 70 0 , |
5, 80 0 |
| For ²⁾ um |
Jyv äsk lä y |
22, 000 |
19, 000 |
5 1.3 |
65. 2 |
6.0 | 6.9 | 142 20 0 , |
16, 500 |
| Trio | Lah ti |
48, 90 0 |
34, 60 0 |
77 .3 |
7 3.5 |
6.4 | 6.4 | 123 90 0 , |
45, 70 0 |
| Iso Kris tiin a |
Lap nta pee nra |
19, 80 0 |
14, 100 |
48. 4 |
46. 4 |
2.1 | 2.0 | 5 8, 000 |
19, 500 |
| Gal leri a |
Oul u |
4, 20 0 |
2, 60 0 |
6.8 | 7. 1 |
0.9 | 0.9 | 188 30 0 , |
3, 500 |
| Iso Kar hu |
Po ri |
14, 80 0 |
12, 30 0 |
35. 2 |
33. 9 |
3.3 | 3.2 | 111 000 , |
14, 80 0 |
| Kos kike sku s |
Tam per e |
30, 40 0 |
24, 90 0 |
115 .7 |
115 .6 |
5. 8 |
5.5 | 342 000 , |
27, 70 0 |
| Tul lint ori |
Tam per e |
23, 500 |
9, 000 |
15. 8 |
15. 9 |
2.3 | 2.8 | 133 000 , |
10, 000 |
| Duo ⁴⁾ |
Tam per e |
13, 500 |
11, 90 0 |
5 2.4 |
5 3.1 |
4.0 | 3.9 | 38, 500 |
13, 000 |
| Sam kes kus po |
Ro iem i van |
13, 70 0 |
7, 80 0 |
17. 1 |
17. 4 |
2.3 | 2.3 | 5 3, 90 0 |
13, 70 0 |
| Tor ike sku s |
Sei oki näj |
11, 500 |
7, 100 |
18. 4 |
17. 5 |
1.3 | 1.3 | 117 60 0 , |
11, 500 |
| Kos kika ra |
Val kea kos ki |
10, 40 0 |
10, 000 |
33. 7 |
34. 0 |
2.1 | 2.1 | 19, 90 0 |
80 0 5, |
| Val tar i |
Ko la uvo |
7, 60 0 |
6, 40 0 |
*) 4.4 |
*) 4.0 |
0.5 | 0.5 | 31, 30 0 |
7, 60 0 |
| Linj uri⁴ ⁾ |
Sal o |
10, 500 |
8, 100 |
35. 7 |
34. 8 |
3.0 | 2.7 | 40, 20 0 |
9, 20 0 |
| Tot al |
44 7, 900 |
327 20 0 , |
1, 197 .9 |
1, 192 .9 |
81. 5 |
81. 5 |
- | 38 9, 20 0 |
1) Gross leasable area includes Espoon Asemakuja and Asematori 2) Re-development project 3) Gross leasable area excludes Asematie 3 and Kassatalo 4) Sales reviewed for year 2009 *) Estimate
Palvelut. Previously, these tasks were carried out by 48 diff erent companies.
The goal of the partner contract with ISS is to improve and harmonise the level of these services in shopping centres. In place of individual tasks, Citycon orders an overall agreed quality level from ISS. A further objective is to generate cost savings. The partner contract model encourages effi ciency within ISS. For instance, they have trained multi-service staff who can fl exibly shift from one task type to another, based on the shopping centre's current needs.
The company will continue to make strong development eff orts in retail property management also in 2011. The company's goal is to strengthen its position as the market leader in Finland. Citycon seeks growth especially through (re)development and development of its existing shopping centres, but the company is also interested in acquiring new shopping centres or retail premises.
Shopping centres have diff erent roles in a consumer's life. On this basis Citycon has classifi ed its shopping centres and applies common marketing and management methods within these categories. This creates effi ciency and synergies. Now introduced in Finland, the operating model will be extended to the company's other business units in the near future. The shopping centre Iso Omena features many characteristics of Local Shop- ping Centres. However, its catchment area is wider and off ering more extensive than Citycon's other Local Shopping Centres.
| Me Po C Ce ing in in i t ts ty tre e n s |
Lo l S ho Ce ing tre ca p p n s |
Pa Ev da L fe Ce in i tn tre r er s er y y n s |
|
|---|---|---|---|
| Fo Ga l ler He k ia • i in i to rum • r Iso Ka hu Iso Kr Jy ke ku is i ina äs t r • v s s • Sa Ko k ke ku ke ku i s s s mp o s s To ke ku Tr i io r s s • |
Co lum bu Du Ko k ka i s • o • s ra L la My ip iva i p u • y rm an n T k ku Va l i i • tar i r |
Es Iso i • i nto p oo r my y r L Tu l l in j i • in i to ur r |
|
| Bra d 's r le n o fe in l i |
Be hea f t he f f e ati city rin rt o ng , o g b le s fac f s hop irre sis ti ati tio ing s n o p |
C los o it nit e t s c om mu y, fu l f i l ling l l bas fam ly ds. ic i a nee |
Eve day rvi tre ry se ce cen for bus le. y p eop |
| Pro ies ert p |
Ent ert ain ing O f f e dee rin is not g p, ari ly hat wi de. t nec ess Pe fec for "ha d ". ing t r ng ar oun |
O f f e de, rin is w i g i ly hat dee not t ne ces sar p. Pu b lic vic ser es. |
Co d "ea ". nie oin nt a nve n sy g g Fas Lim d a ite t. rtm ent sso "Co " si act mp ze. |
| Ter rito ry |
Lea ime e t sur So l in cia ter act ion |
Fam ly day d i eve ry an fes tiv itie s. |
Eve day uti ry ro nes |
| ME ET ING PO INT S I N C ITY CE NT RE S RE TA IL S AL ES AR EA BY BR AN CH ES 31 DE C. 2 010 |
LO CA L S HO PP ING CE NT RE S RE TA IL S AL ES AR EA BY BR AN CH ES 31 DE C. 2 010 |
PA RT NE RS IN EV ER YD AY LI FE CE NT RE S RE TA IL S AL ES AR EA BY BR AN CH ES 31 DE C. 2 010 |
|
| • C afe d R s 1 1% est ant s an aur • H eal th a nd Bea 9% uty • O the r Sp alty Sto 6% eci res • S d O f f i c es 6 % ices erv an • Clo the d F ash 35 % ion s an • G s 6 % erie roc • Dep nt S es 5 % art tor me • e S 22 % Lei Hom lies sur e, upp |
• C afe d R s 6 % est ant s an aur • H eal th a nd Bea 5% uty • O the r Sp alty Sto 2% eci res • S d O f f i c es 7 % ices erv an • Clo the d F ash 14 % ion s an • G s 2 7% erie roc • Dep nt S es 2 4% art tor me • e S 15 % Lei Hom lies sur e, upp |
• C afe d R s 5 % est ant s an aur • H eal th a nd Bea 7% uty • O the r Sp alty Sto 2% eci res • S d O f f i c es 1 5% ices erv an • Clo the d F ash 9% ion s an • G s 2 5% erie roc • Dep nt S es 1 9% art tor me • e S 18 % Lei Hom lies sur e, upp |
Citycon is strongly focused on the environs of the Swedish capital, Stockholm, and the Gothen- burg area. There, Citycon owns seven shopping centres and six other retail properties. The company also owns one shopping centre and a retail property in Umeå. Citycon is Sweden's ninth largest shopping centre operator (source: Fastighetsvärlden).
This year proved much livelier than the previous year: the lease market almost returned to normal and demand for premises was clearly higher than in the year before. A number of international brands are currently active the in the Swedish market. This introduces new and att ractive stores to the market and also increases the demand for new retail locations. However, in post-recession Sweden, lease negotiations are still taking more time than before. Tenants are very critical when it comes to deciding on the location and are confi dent of their bargaining position.
In a tight fi nancial market, seed fi nancing is thin on the ground. This is not only discouraging new entrepreneurs, but is also to some extent hindering the expansion plans of established businesses.
Citycon's main goal in Sweden was stabilisation of Liljeholmstorget Galleria, which opened in October 2009. This goal progressed: the shopping centre's sales and number of visitors grew even more than expected. In particular, commuters passing through the adjacent commuting hub have found their way to the centre.
Some changes had to be made in Liljeholmstorget's off ering during the fi rst year of operation. Important new tenants include the home electronics and DIY chain Clas Ohlson and the fashion chain Indiska, which opened year´s only new store in Sweden at Liljeholmstorget. The centre's food court was enhanced and there are now more tempting alternatives to choose from. Following these adjustments, Liljeholmstorget has att racted more lunchtime customers from the nearby Marievik business district.
The majority of Liljeholmstorget's current customers are nearby residents, and they have welcomed the centre with enthusiasm. Further growth potential lies in car-driving families living further away. Although Liljeholmstorget is continuing to in-
| Pro ion of r al in e ba sed port ent com on vali d re oll a t 31 Dec 20 10, % nt r |
|
|---|---|
| ICA | 11. 2% |
| Axf | 4.4 |
| ood | % |
| Coo | 3.3 |
| p | % |
Stockholms Läns Landsting 3.0% Systembolaget 2.5% Top 5, total 24.4%
| Ent ire p erty rop |
|||||||||
|---|---|---|---|---|---|---|---|---|---|
| Gro ss l able |
Ret ises |
Sale s, E |
UR mill ion |
Num ber of v |
isito illio rs, m n |
Cat Are chm ent |
|||
| Pro pert y |
Loc atio n |
eas al, s tot area q.m |
ail p rem l, sq tota .m. |
201 0 |
200 9 (** |
201 0 |
200 9 |
a Pop ulat ion (* |
City 's g lea con ross s- able are a, s q.m |
| St ock hol m a rea |
|||||||||
| Åke rsb a C ent erg rum |
Öst erå ker |
27, 500 |
23, 40 0 |
60. 5 |
5 6.3 |
4.4 | 4.1 | 37 000 |
27, 500 |
| Åke n C nta ent rmy rum |
Hä lby sse |
8, 500 |
6, 60 0 |
26. 9(* |
26. 1(* |
1.2 (* |
1.2 (* |
32 000 |
8, 500 |
| Jak obs ber Cen tru gs m |
Jär fäll a |
60, 70 0 |
27, 40 0 |
7 6.3 |
7 2.3 |
5. 3 |
5. 3 |
82, 80 0 |
60, 70 0 |
| en C Fru äng ent rum |
Sto ckh olm |
14, 60 0 |
6, 60 0 |
27. 6(* |
26. 6(* |
- | - | 33 40 0 |
14, 60 0 |
| Lilj eho lms tor t ge |
Sto ckh olm |
41, 000 |
27, 60 0 |
105 .8 |
22. 2 |
8.1 | 1.7 | 150 000 , |
41, 000 |
| Tum ba C ent rum |
Bo tky rka |
31, 40 0 |
13, 70 0 |
44. 6 |
42. 3 |
3.6 | 3.4 | 5 8, 60 0 |
31, 40 0 |
| Um eå |
|||||||||
| Str ilen öm p |
Um eå |
27, 000 |
23, 60 0 |
106 .8 |
105 .4 |
4.1 (* |
4.0 (* |
109 80 0 , |
27, 000 |
| Got hen bur g a rea |
|||||||||
| Ste Tor nun gs g |
Ste nd nun gsu |
36, 40 0 |
17, 60 0 |
5 9.9 |
57 .9 |
3.3 | 3.2 | 7 4, 000 |
36, 40 0 |
| Tot al |
247 100 , |
146 500 , |
5 08. 4 |
40 9.1 |
30. 0 |
23. 0 |
- | 247 100 , |
*) Estimate **) Sales reviewed for year 2009 and presented in 2010 exchange rate
| 201 0 |
200 9 |
|
|---|---|---|
| Gro al in EU R m illio ent ss r com e, n |
49. 8 |
39. 3 |
| Tur EU R m illio nov er, n |
5 2.8 |
41. 0 |
| Net tal inco EU R m illio ren me n , |
28. 7 |
23. 2 |
| ins/ Net fai lue loss n in t r va ga es o ves |
||
| EU R m illio nt p ert me rop y, n |
22. 8 |
19. 6 - |
| Op fi t, EU R m illio ting era pro n |
46. 7 |
0.3 |
| Cap re ( ss), ital ditu EU R m illio ex pen gro n |
0.6 5 |
95. 9 |
| Fai ark alu e of et v inv est nt p r m me rop er |
||
| EU R m illio ties n , |
668 .6 |
5 48. 8 |
| Net tal ield % ren y , |
4.8 | 4.7 |
| Net tal ield like -for -lik rtie % ren y e pr ope s, , |
6.4 | 6.5 |
vest heavily in marketing, the shopping centre has clearly established its position in the Stockholm market.
Another remarkable milestone in Sweden was the completion of the extension phase of Åkersberga Centrum's extension and redevelopment project in the Greater Stockholm Area. The centre's extension was opened in October, and the modernised old section will reopen its doors in the April of 2011 (for more details, see page 22). Anchor tenants in the fi rst phase include ICA Kvantum and the fashion chain KappAhl. In turn, the fashion-oriented second phase will host e.g. Esprit, MQ and H&M.
The Swedish Group structure was changed during the year and several subsidiaries were merged into each other. The purpose of this change was to simplify the Group structure. The change did not have any impact on personnel or profi t. The merged subsidiaries are specifi ed on page 42 in the Financial Statements.
The Swedish shopping centre market is expected to remain stable. Citycon's shopping centres have seen few tenant bankruptcies and rent reductions are practically never requested for reasons of poor profi tability. Our rent levels have held fi rm and demand for premises is stable.
Citycon divested more than 340 apartments in Sweden during the year. More apartments will be sold as suitable purchasers and divestment opportunities present themselves. Since demand in the Swedish residential market is high, it is worth while selling. Active divestment eff orts will particularly concern properties which are not undergoing any (re)development project.
Earth Hour is a global climate campaign organised by WWF, in which people and businesses all around the world turn off their lights for one hour on the same day. Earth Hour encourages people to take environmental action and sends a message to decision-makers that steps must be taken to prevent a climate crisis. Switching off the lights symbolises our shared concern over the acceleration of climate change.
Earth Hour 2010 was held on 27 March, and all of Citycon's 33 shopping centres in Finland, Sweden and the Baltic region took part. Citycon reduced the amount of lighting in its shopping centres during Earth Hour, for example by switching off neon signs. Diff erent actions were taken in diff erent shopping centres, while always maintaining public safety.
Citycon owns three shopping centres in the Baltic Countries. In Tallinn, Estonia, it holds the city's largest shopping centre, Rocca al Mare, and a smaller neighbourhood centre Magistral. In Vilnius, Lithuania, Citycon owns Mandarinas, a neighbourhood centre that off ers daily necessities. With a market share of around 25 per cent, Citycon is the market leader in Tallinn's shopping centre business. It is also the only property investment company in Estonia which specialises in retail properties.
Although all Baltic countries remain aff ected by the recession, the fi rst signs of recovery can already be seen, particularly in Estonia. In the autumn, Estonia's unemployment fi gures began to fall (source: Statistics Estonia). The country joined the Eurozone at the beginning of 2011, which is expected to give a major boost to the national economy, and increase consumer purchasing power.
Citycon opened Rocca al Mare's second phase in the spring of 2009 and its third phase at the end of the same year. Since the completion of the redevelopment and extension project, Rocca al Mare has established itself in Tallinn's shopping centre market. In February 2010, it was awarded the Baltic countries' fi rst LEED environmental certifi cate, with silver-level recognition. (See further details on page 43.)
Since its opening, Rocca al Mare has operated with almost all premises leased. While some tenant changes have taken place, the shopping centre's commercial concept has functioned admirably. Temporary rent reductions have been granted – mainly to good, local tenants whom we have wanted to help weather the recession. Rocca al Mare has also been marketed heavily, through both traditional marketing and various types of event marketing. The campaigns have been a clear success: in an independent survey conducted in the spring of 2010, Rocca al Mare was voted Tallinn's most customer-friendly shopping centre (Tallinn University of Technology, 2010).
The anchor tenant is the Finnish hypermarket chain Prisma. Several international chains have also chosen to open their fi rst Estonian shops in Rocca al Mare. Among these is Marks & Spencer, which has already expanded its business and introduced its deli concept. This year, Rocca al Mare saw the arrival of Mango, Lindex and Tallinn's largest store in the Euronics electronics chain. In addition, Rocca al Mare hosts Tallinn's fi rst food court inside a shopping centre. This has already proven a success with our customers. The shopping centre includes also a large shoe retail cluster.
Rocca al Mare has been cushioned from the temporary decline in local purchasing power, by the fl ow of Finnish tourists. The shopping centre has
| Pro of r al in ion port ent com |
e ba sed |
on |
|---|---|---|
| vali d re oll a t 31 Dec nt r |
20 10, |
% |
| Top 5, al tot |
30. 4% |
|---|---|
| Bal tma n |
2.4 % |
| Kau bam Gro aja up |
3.2 % |
| Sto ckm ann |
4.5 % |
| ( i) ICA Rim |
7. 2% |
| S G ( ) Pris rou p ma |
13. 1% |
| Ent ire p erty rop |
|||||||||
|---|---|---|---|---|---|---|---|---|---|
| Pro | Gro ss l able eas Loc atio al, s tot n area |
Ret ail p ises rem l, sq tota .m. |
Sale s, E 201 0 |
UR mill ion (** 200 9 |
Num ber of v isito illio rs, m n 201 0 200 9 |
City 's g lea con ross s- able |
|||
| pert y |
q.m | (* Pop ulat ion |
are a, s q.m |
||||||
| Est oni a |
|||||||||
| Roc l M ca a are |
Tal linn |
5 3, 30 0 |
5 2, 90 0 |
113 .3 |
92. 5 |
6.4 | 5. 4 |
34 0, 000 |
5 3, 30 0 |
| Ma al istr g |
Tal linn |
9, 500 |
9, 40 0 |
15. 9 |
17. 9 |
3.1 | 3.3 | 64, 000 |
9, 500 |
| Lith ia uan |
|||||||||
| Ma nda rina s |
Vil niu s |
8, 000 |
7, 90 0 |
17. 1 |
18. 4 |
2.3 | 2.4 | 5 0, 000 |
8, 000 |
| Tot al |
70, 80 0 |
7 0, 20 0 |
146 .3 |
128 .8 |
11. 8 |
11. 1 |
- | 7 0, 80 0 |
|
*) Estimate **) Including VAT
| 201 0 |
200 9 |
|
|---|---|---|
| Gro al in EU R m illio ent ss r com e, n |
13. 9 |
12. 0 |
| Tur EU R m illio nov er, n |
16. 7 |
14. 0 |
| Net tal inco EU R m illio ren me n , |
11. 8 |
9.8 |
| ins/ Net fai lue loss n in t r va ga es o ves |
||
| EU R m illio nt p ert me rop y, n |
3.5 | 12. 7 - |
| fi t/ Op loss EU R m illio ting era pro n , |
14. 1 |
3.8 - |
| Cap re ( ss), ital ditu EU R m illio ex pen gro n |
6.0 | 13. 9 |
| Fai ark alu e of et v inv est nt p r m me rop er |
||
| EU R m illio ties n , |
166 .1 |
156 .6 |
| Net tal ield % ren y , |
7.5 | 6.4 |
| Net tal ield like -for -lik rtie % ren y e pr ope s, , |
8.7 | 8.2 |
been marketed not only in Tallinn, but also in Finland, particularly to ferry passengers. Passengers can take a free bus to Rocca al Mare, directly from the ferry terminal. This service, and the shopping centre itself, have proven successful in att racting ferry passengers. Indeed, approximately one in every ten customers is Finnish. In addition, Finnish customers account for around 15 per cent of Rocca al Mare's sales.
The Baltic Countries' neighbourhood centres – Magistral in Tallinn and Mandarinas in Vilnius – both have a fi rm foothold as providers of local services. In both centres, the anchor tenant is the grocery shop Rimi. Both centres host a bank and post offi ce, the latt er being a highly important local service in the Baltic countries, since post offi ces are used for pension payment. Despite the recession, there is still demand for neighbourhood centres, since the decline in purchasing power does not aff ect everyday shopping as severely as specialty retail. Magistral and Mandarinas were strengthened this year, especially in terms of services: Magistral's range of cafes and restaurants has been diversifi ed and, in the case of Mandarinas, various services addressing customers' daily needs have replaced fashion shops.
It seems that, of the three Baltic countries, Estonia suff ered slightly less from the recession than Lithuania and Latvia. Accordingly, Estonia looks likely to recover faster. In all Baltic countries, however, the shopping centre development market is very slow. There is a clear oversupply of shopping centres, particularly in the Lithuanian market. Some large fashion-oriented centres that opened just before the recession now face major vacancy problems. In Tallinn, too, the shopping centre market is close to maturity – yet one more expansion, of the Kristine centre, opened in the autumn of 2010. No major new projects are therefore expected, even if the economic trend improves.
For the moment, however, no large-scale forced sales of shopping centre properties have occurred in the Baltic capitals – the strong banks involved have not wished to initiate such procedures. Centres off ered for sale have mainly comprised very high-risk properties.
The task of developing shopping centres and fi nding new tenants remains diffi cult. Baltic entrepreneurs are fi nding it diffi cult to obtain fi nancing for business start-ups, a problem which is especially holding back the establishing and growth of franchise chains in the market.
Citycon is still pursuing a growth strategy for the Baltic Countries, which can be realised either through acquiring new centres or expanding existing ones. The company is only interested in capital
cities, including the Latvian capital, Riga. Citycon is planning a 3,000 square metre extension of Magistral, to begin in the spring of 2011. Furthermore, the valid city plan allows the extension of Rocca al Mare by around 4,000 square metres. Citycon benefi ts from its in-depth knowledge of the Baltic shopping centre market. The company knows well all properties that may become available for sale as well as the competitive situation in the market in all three capitals.
In May, the Rocca al Mare shopping centre in Tallinn, Estonia, organised a Bat- tery Replacement Day. The aim was to encourage people to bring their used batt eries for disposal. This event proved a success, with some 10,000 used batt eries collected, ensuring the safe disposal of the batt eries. If incorrectly handled, old batt eries constitute hazardous waste.
The day was also popular with Rocca al Mare's tenants. Many local environmental authorities participated, providing recycling advice and an environmental recycling test, for instance. The shopping centre's shops joined the action by marketing various environmentally friendly products.
Health and well-being is a growing business. Today, for example gyms can be found in many shopping centres. Sats fi tness centre operate in Iso Omena Espoo and Liljeholmstorget, Stockholm.
STRATEGIC OBJECTIVES RELATED TO ENVIRONMENTAL RESPONSIBILITY
Targets in 2010 Results in 2010
| Clim ch ate ang e |
||
|---|---|---|
| of Red ion enh is uct gre ous e ga s em 20 ar 2 020 sio n by nt b pe r ce y ye fro he 2 009 lev el m t |
2% | ach ieve d not |
| Ene rgy |
||
| Red of uct ion tion ene rgy co nsu mp (e t) lect nd hea by 9 p rici ty a ent er c by 20 16 fro m 2 009 lev el |
1-2 % |
ele ctr icit y ach d, ieve hea t no t ach d ieve |
| Imp ffi c s in ien ent rov em en erg y e cy |
- | in p rog res s |
| ntif Ide ing sol utio hat uti lise ns t y ble ren ewa en erg y |
- | in p rog res s |
| Wa ter |
||
| Low erin ate tion to g w r co nsu mp an e le vel of l tha n 3 .5 l itre ave rag ess s vis itor per pe r ye ar |
l/v 3.9 isit or |
ach d ieve |
| Wa ste |
||
| Sho ing ling tre ste pp cen wa rec yc be rai sed at l t 7 5 p rat e to to eas er t by 20 15 cen |
70% | ach ieve d |
| Red of l and fi ll uct ion te t was o a of 2 5 p of al xim ent tot ma um er c te b 20 15 was y |
30% | ach d ieve |
| Lan dus nd tai nab le c ctio tru e a sus ons |
n | |
| All dev elo o b jec ent ts t pm pro e imp lem ed in a rda wit h ent cco nce ssifi iron l cla tion nta env me ca inci les pr p |
All jec ts pro lete d in com p 20 10 ed ass ess wit h L EED crit eria s |
ach d ieve |
| Dev elo re l ted ent jec ts a pm pro oca in b uilt thin iron nts , wi -up env me ch o f go od blic tra ort rea pu nsp tion con nec s |
100 % |
ach d ieve |
Properties generate approximately 30 per cent of all green- house gas emissions worldwide, which is why the property and construction business can signifi cantly contribute to the prevention and reduction of emissions (source: UNEP Common Carbon Metric). The best ways of cutt ing green-house gas emissions in the sector are to improve the energy effi ciency of buildings, to reduce energy consumption and to increase the use of renewable energy sources in the properties' energy production and procurement.
The built environment accounts for 40 per cent of energy consumption, 30 per cent of raw material consumption, 25 per cent of water consumption, 25 per cent of solid waste and 12 per cent of land use. The built environment also has an impact on ecosystems (source: UNEP Common Carbon Metric).
Citycon has made a strategic choice to pursue sustainable development. As a result of climate change and its consequences, stricter regulation is expected in legislation on energy and emissions as well as in taxation, and material costs are also expected to increase. Consumers are becoming increasingly ecoconscious, and both tenants and investors expect action in these matt ers. Furthermore, Citycon's strategic choices have been guided by the keen interest expressed by diff erent stakeholder groups and their demands for operational transparency. Employees' appreciation concerning environmental, health and safety issues is growing. The main motivations for promoting sustainable development include cost-effi ciency and competitive advantage.
Environmental management is based and guided by the company's strategy, the long term objectives and the environmental policy.
Citycon's management and personnel are committ ed to meeting the company's environmental objectives and targets. Citycon applies the following principles to its operations in order to achieve its environmental targets:
Comply with statutory rules and regulations, and prepares in ad-
vance for future legislative changes through active monitoring of transformations in society, Continuously develop the steering, management and reporting of environmental practices, Expect its partners to operate in a way that supports the fulfi lment of Citycon's environmental goals, Ensure that the company's environmental policies are available to all stakeholders, Guide its personnel towards sustainability in environmental issues through training and internal communications.
The company's objective is to include environmental responsibility measures in all of its operations and to integrate them into daily ac tivities as a part of normal practice. Citycon's development eff orts produced The Green Shopping Centre Management programme, which is a tool for promoting sustainable development in all of the company's shopping centres. Within the programme, shopping cen tre management is assessed annually with respect to the following areas: • Energy consumption and energy effi ciency
In 2010, during the Green Audit the environmental results of each shopping centre were discussed and an action plan for each shopping centre to fulfi l its environmental responsibility objectives was determined. A 'Green Index' was developed for making the audits of the Green Shopping Centre Management programme comparable. On average, the Green Index improved by 26 per cent from the previous year.
Citycon's carbon footprint¹⁾ totalled 64,129 tonnes of carbon dioxide equivalents, broken down as shown on the enclosed table.
Majority of emissions (98.6%) originated from properties' electricity and heat consumption. The calculations also take into account the emissions caused by waste logistics, water consumption and Citycon's other functions.
The carbon footprint grew by 12.6 per cent from
the previous year, so the annual target of reduction was not met, mainly due to the increase in heating consumption.
In addition to carbon dioxide emissions, relevant greenhouse gas emissions arise from sulphur and nitrogen oxides released in energy production, which, for example, cause acidifi cation of waters, hinder plant growth and corrode buildings. For energy purchased by Citycon, acidifying emissions are estimated to total 249,000 kilograms of sulphur dioxide equivalents. Since electricity traders are under no statutory obligation to disclose nitrogen oxide or sulphur dioxide emissions arising in production, emissions have been estimated based on country-specifi c production profi les. Acidifying emissions from traffi c due to Citycon's operations were excluded from the calculation. The production of nuclear electricity purchased by Citycon generated a total of 63 kilograms of radioactive waste.
Actions Citycon is taking to fi ght climate change: • The central locations of the shopping centres with their good public transport connections reduce harmful environmental impacts of cus-
• Specifying and implementing energy-saving
• Increasing tenant co-operation in generating en-
• Increasing the proportion of renewable energy
Scope 1, direct 0 0.0 0 0.0 Scope 2, indirect 63,255 98.6 56,269 98.8 Scope 3, indirect 874 1.4 679 1.2
2010 2009 tnCO2e % tnCO2e %
Climate Change
tomer traffi c
ergy savings
EMISSION SCOPES
measures for each property
in electricity procurement.
• Business travel • Paper consump- SCOPES OF GHG-PROTOCOL¹⁾
| 201 0 |
200 9 |
||
|---|---|---|---|
| tnC O2e |
% | tnC O2e |
% |
| 20, 191 |
31. | 20, 424 |
35. 9 |
| 43, 03 5 |
67. | 35, 84 5 |
62. 9 |
| 29 | 0.0 | 30 | 0.1 |
| 212 | 0.3 | 21 0 |
0.4 |
| 67 | 0.1 | 5 8 |
0.1 |
| 47 5 |
0.7 | 27 1 |
0.5 |
| 117 | 0.2 | 106 | 0.2 |
| 2 | 0.0 | 3 | 0.0 |
| 64, 129 |
100 .0 |
6, 948 5 |
100 .0 |
| 5 1 |
1) In calculating its carbon footprint, Citycon applies the Greenhouse Gas Protocol developed by the World Resources Institute and the World Business Council for Sustainable Development. *) Figures for 2009 reviewed
CITYCON OYJ | ANNUAL AND SUSTAINABILITY REPORT 2010 39
33% of Swedish portfolio
All energy consumption in Citycon's properties is indirect, i.e. there are no heating plants in the properties the fuels of which would be reported as direct energy consumption. In 2010, Citycon's electricity consumption totalled 104.7 gigawatt hours and heating 170.7 gigawatt hours. The primary sources of total energy consumption are illustrated in the enclosed graph. The total consumption of primary energy³⁾ used by Citycon was 1,430 terajoules.
In 2010, energy consumption fi gures were affected by extended Sunday opening hours in Finland, which led to an increase in property usage hours. According to a survey by Energiakolmio, the impact of the Sunday opening hour change was fairly low at approximately 1.5 per cent. It was a two-way eff ect, with a clear rise of 1.5-3.5 per cent in January-April and September-October, and conversely a decline in the summer months. Regardless of extended opening hours electricity consumption in Finnish shopping centres fell by four per cent, whereas in Sweden it rose by one per cent and in the Baltic Countries by four per cent.
The targeted 1-2 per cent annual energy saving in electricity consumption was fulfi lled. The exceptionally cold temperatures of the beginning and the end of the year caused a 21 per cent rise in heat consumption. Weather-normalised heat consumption increased only by four per cent to 121.9 gigawatt hours.
The reported energy consumption includes all Citycon-owned shopping centres and other retail properties in which Citycon has a holding of at least 50 per cent accounting for 96 per cent of Citycon's
ity meters.
total gross leasable area. Citycon limits the reported electricity consumption of properties to areas that it can directly infl uence. These include general lighting, ventilation, cooling, lift s and escalators and other building technical systems. Most of the tenant premises are fi tt ed with separate electric-
Increasing energy effi ciency can be a challenge in old buildings constructed using building techniques and according to historic regulations that are not equivalent to current standards and requirements. In the future, when building new
3) The primary energy fi gures are estimated by calculating the distribution of electricity use by primary energy source for those electricity providers that report this, which covers 94 per cent of the electricity purchased by Citycon. Since no environmental profi le for 2010 was available from electricity providers at the time of calculating in January 2011, each provider's environmental profi le for 2009 was used in the calculations. For the other Nordic countries, the energy source distribution is estimated based on Nord Pool market electricity. For the Baltic region, the source distribution calculation is based on country-specifi c energy statistics and data provided by the IEA. The latest available data referred to 2008. The primary energy sources of heating are estimated based on country-specifi c energy statistics from the IEA. The factors from the EU CHP Directive and the EN 15603 standard were used in calculating primary energy sources, applying the prudence principle. The reference factor for coal was used for fossil fuel-based electricity, and the natural gas factor was used for heating. With regard to renewable energy, the proportion of hydroelectric and wind power in the Nord Pool and Baltic regions was calculated based on IEA statistics. The remaining portion of renewable energy was assumed to derive from biomass, for which the factor for wood was used. These factors do not take into account the cogeneration of heat and electricity, so according to the prudence principle, the primary energy fi gure is a maximum. *) Figures for 2009 reviewed
properties and extensions or redeveloping existing ones, Citycon will specify objectives for energy consumption and monitor these during the design and building stage and during use.
Annual energy performance certifi cates are prepared for all Citycon properties in Finland. Swedish law requires the preparation of energy performance certifi cates every ten years or when a property is being sold. The energy performance certifi cate indicates the total energy consumption in the property, comprising heating energy, electricity and cooling energy. The total consumption per gross area indicates how energy-effi cient a property is. Energy-saving measures for each property are specifi ed on the basis of consumption data, energy audits and equipment life cycle analyses.
Countries
Refrigerants are used in grocery stores, properties' cooling and ventilation equipment, and in heat pumps. Most of the refrigeration units of grocery stores located on Citycon properties are the responsibility of the tenant.
It is forbidden in Finland to use CFC compounds in refrigeration equipment. The use of HCFC com-pounds, which currently replace CFCs, will be banned from early 2015. These are to be replaced by methods or substances that do not damage the ozone layer or further infl uence climate change.
Citycon has started maintaining a centralised refrigerant database, which will contain information on all the refrigeration equipment and refrigerants used in its properties. Ozonedepleting refrigerants will be abondoned by the statutory deadline at the latest.
In May, Citycon's shopping centre Columbus, located in Vuosaari, Helsinki, organised a campaign for the recycling of electrical and electronic equipment (WEEE), and waste metal.
During the two-day campaign, the shopping centre gathered a total of 2.5 sea containers of WEEE and waste metal. Free of charge, people were able to bring home appliances and other metal waste for recycling.
On both days, staff from Stena Technoworld was present to collect the gathered waste and give advice on recycling. Recycling campaign was carried out in accordance with the ISO 14001 environmental management system.
Another WEEE collection was simultaneously organised in Citycon's shopping centre IsoKarhu in Pori.
In Sweden, waste incineration is much more common than in Finland and the Baltic Countries, and much less sorting is necessary where incineration is used. Therefore the proportion of landfi ll waste is very small.
• Recycled • Composted • Incinerated • Landfi lled
In the Baltic region, recycling is signifi cantly less advanced than in the company's other countries of operation, but it is continuously developing.
Properties managed by Citycon generated 13,650 tonnes of waste, of which 12,979 tonnes were collected from shopping centres and 671 tonnes from other properties. The average recycling rate of waste materials for Citycon's shopping centres was 77.1 per cent, the proportion of landfi ll waste being 22.5 per cent. Both of Citycon's long-term objectives set for waste management were met already in the fi rst year. The recycling rate is calculated as the share of treated waste types, recycled, incinerated or reused, of total waste volume. Landfi ll waste is excluded from recycled items. For 2009, the recycling rate was calculated as the material recycling rate, which did not take into account the quantity of incinerated waste. The calculation method and related targets
The total water consumption was 569,021 cubic metres, including all Citycon-owned shopping centres and other retail properties in which Citycon has a holding of at least 50 per cent, which accounts for 96 per cent of Citycon's total gross leasable area. The reported amount includes water consumed by real estate companies and tenants. Tenant water consumption is highest for grocery stores, restaurants and cafés, hair salons, laundries and car wash facilities. An objective in Citycon's shopping centrespecifi c action plans is to install more water meters allowing monitoring of user-specifi c consumption. A property's water consumption includes water used in public facilities such as customer toilets, and water used for cleaning, property maintenance and watering plants.
The exceptionally warm summer caused a clear peak in water consumption between June and August, as the cooling capacity of air conditioning equipment and grocery store refrigerators was improved by sprinkling condensers. Consequently the annual water consumption increased by 6.8 per cent. The long-term water consumption target for Citycon is 3.5 litres per visitor per year. For 2010, the average water consumption per visitor in shopping centres was 3.9 litres. The annual water consumption reduction target was met.
The primary purpose of Finland's Waste Act is to prevent the generation of waste. Generated waste should primarily be recycled as materials and secondarily be utilised as energy. Non-recyclable materials must be disposed of safely. For waste sent to landfi ll, the originator must pay a waste tax, which will rise by EUR 10/tonne in 2011 and again in 2013. This will imply a 67 per cent tax rise over the rate of EUR 30/tonne in 2010. The increase in taxation is a further encouragement to recycle.
were changed to meet the general practice in the industry.
Citycon organises property waste management and sorting in accordance with country-specifi c waste legislation and local regulations. The re-
ported waste quantities include all Citycon-owned shopping centres and other retail properties in which Citycon has a holding of at least 50 per cent accounting for 89 per cent of Citycon's total gross leasable area. The properties where waste man agement is carried out by tenants are not included in the reporting as their waste quantities are not known. In its construction projects, Citycon calculates the total recycling rate from waste generated dur-
| 0 | 9*) 200 |
||
|---|---|---|---|
| tn | % | tn | % |
| 2, 917 .0 |
22. 5 |
2, 89 2.3 |
25. 7 |
| 3, 540 .2 |
27. 3 |
2, 597 .6 |
23. 0 |
| 1, 556 .5 |
12. 0 |
1, 35 6.7 |
12. 0 |
| 444 .5 |
3.4 | 44 5.8 |
4.0 |
| 3, 679 .2 |
28. 3 |
3, 303 .5 |
29. 3 |
| 44. 8 |
0.3 | 65. 5 |
0.6 |
| 378 .4 |
2.9 | 28 3.6 |
2.5 |
| 128 .4 |
1.0 | 123 .1 |
1.1 |
| 3.2 | 0.0 | 28. 5 |
0.3 |
| 23 6.5 |
1.8 | 124 .6 |
1.1 |
| 5 0.8 |
0.4 | 5 4.0 |
0.5 |
| 12, 979 .4 |
100 .0 |
11, 27 5.2 |
100 .0 |
| 201 |
*) Figures for 2009 reviewed
ing the construction process. Land Use and Sustainable Construction In implementation of property development projects, Environmental impacts can be signifi - cantly reduced by the means of design and con- struction. The adherence to the principles of envi- ronmental certifi cation systems in implementation of the projects promote sustainable development. The most widely recognised environmental certifi cation systems are LEED (Leadership in Energy and Environmental Design), originally developed in the United States, and BREEAM (Building Re search Establishment Environmental Assessment Method), which is widely used in Europe. All of Citycon's three LEED pilot projects have been awarded the LEED certifi cate. The redevelop-
ment of Trio shopping centre in Lahti was awarded the fi rst LEED certifi cate in the Nordic countries in June 2009. The extension and redevelopment project for Rocca al Mare shopping centre in Tallinn received a silver certifi cate in February 2010. The Liljeholmstorget shopping centre development project in Stockholm achieved the highest LEED level, platinum, in March 2010.
All Citycon's (re)development projects will be carried out in accordance with environmental classifi cation principles. Preliminary LEED assessment has been conducted by an external assessor in the Espoontori redevelopment project, the Forum redevelopment project, Aseman Ostari refurbishment project in Kirkkonummi, the Myllypuro shopping centre development and the Åkersberga Centrum's extension project. The Martinlaakso shopping centre's development project in Vantaa is registered for LEED application. The project is aiming for the gold certifi cate.
All land use and construction operations include a threat of loss of biodiversity and therefore Citycon aims to avoid construction projects in unbuilt areas where changes could have a negative impact on biodiversity and ecosystems. All Citycon's shopping centres are located in built environment.
In most cases, an environmental impact assessment, which also includes a biodiversity assessment, is conducted in connection with zoning and major projects. Where the environmental impact assessment is not required by law, Citycon evaluates the need for making its own assessment. The location of shopping centres in built-up environments and with excellent public transport connections reduces their impact on ecology and biodiversity.
Citycon's properties are not situated on protected land areas. Shopping centre Rocca al Mare is located adjacent to a protected area.
HR management at Citycon is based on its HR strategy. This strategy establishes the principles according to which personnel are managed and their successful performance at work is supported. The company aims to be an employer which is appreciated by professionals in the sector and is able to retain and motivate its employees and att ract new ones. As in previous years, Citycon was an active recruiter, and the number of its employees increased to 129 (from 119). At the end of the year, the company had 84 employees in Finland, 37 in Sweden, seven in Estonia and one in Lithuania.
One of the key elements of Citycon's HR strategy is to off er development opportunities for the company employees. The company has grown to a size at which it can off er in-house transfers from one post to another. In addition, open and new vacancies are always off ered fi rst for application by company employees. From out of the house, Citycon typically employs professionals with several years of work experience. During the past year, the company was also provided with a chance to recruit recent graduates taking fi rst steps in their career.
Most employment contracts at Citycon are full-time and permanent. In 2010, the number of fi xed-term contracts increased, mainly due to more temporary employees having to be recruited for parental leave cover. At year-end, there were 122 permanent employees and seven temporary employees. All of Citycon's employment contracts were full-time contracts.
During the year, Citycon entered into 29 new employment contracts, including short-term internships. Citycon maintains its reputation as an interesting employer in the sector, which is refl ected in large numbers of applications for vacancies, as well as a steady fl ow of open applications. During the year, 13 permanent employees left Citycon.
2006
• Employees in total
73
102
NUMBER OF EMPLOYEES
It is common for expert organisations like Citycon that employees are not essentially organised, although unionisation is totally acceptable by the employer. Most personnel belong to professional associations in line with their educational backgrounds and competence. In Finland, statutory negotiations between the employer and employees take place within a co-operation group that convenes when necessary, comprising six employee representatives and two employer representatives. Employee representatives are appointed
113
for two years at a time. The group discusses matt ers such as the equal opportunities scheme, human resources plans, training objectives, new guidelines, policies and processes, and any other issues required by the Finnish Act on Co-operation within Undertakings or concerning all personnel. Discussions on matt ers concerning one person or a specifi c group of employees are conducted between that person or group and the employer representatives. In the case of corporate reorganisations, Citycon complies with the local legislation in each country. In 2010, as in previous years, this mainly concerned internal organisational changes. Citycon did not conduct any negotiations related to reductions in personnel.
In its main country of operation, Finland, Citycon has an occupational safety committ ee, concerned with Finnish personnel and depending on the subject matt er, also personnel in other countries of operation. The occupational safety committ ee has Each individual is respected and treated fairly and equally regardless of gender, belief, age or similar factors. (Citycon Code of Conduct)
four employee representatives, one employer representative and an expert consultant in occupational health and safety. During the past year, the committ ee discussed matt ers concerning safety and fi rst aid, as well as the implementation of an early intervention model related to identifying problems in work ability. In the smaller countries of operation, guidelines and policies concerning occupational health and safety are issued by local management.
Most Citycon employees carry out physically light offi ce work, so the emphasis of occupational health care is on preventive actions, such as proper ergonomics. Citycon also off ers a wide range of other occupational health care services for its employees. During the year, there were 296 absent days due to illness, totalling 2.4 days per employee. The absentee rate was 1.2 per cent ¹⁾. There were three occupational accidents, two of them on the way to work and one on the actual workplace.
Citycon brings together skilled people from a variety of fi elds. Key competence areas include fi nancing and real estate transactions, retail property management and property development. Citycon aims to increase the skills base of its experts, particularly by supporting long-term self-development, for instance through further or advanced studies. In addition, the company has a positive attitude towards updating skills through courses and internal training.
Training programmes are planned for specifi c personnel groups as well. For example, in 2010 shopping centre personnel att ended specially tailored safety, security and crisis management training. Continuous training is also off ered to maintain language skills or to increase competence in using applications. In 2010, Citycon employees completed 437 full-day training sessions i.e. 3.6 days per employee ²⁾. In addition, there were numerous shorter training events, on which statistics were not collected.
Citycon Days, arranged twice a year, are an important tradition in the Citycon calendar. The spring development event is for all employees, re gardless of their country of operation, whereas the autumn event is held locally in each country. These events involve sharing information and experience internally and hearing presentations from external speakers on the sector or on topical issues. Posi tive feedback was again received on the events.
Employee performance review is an essential tool in managing target-oriented activity and em ployee skills at Citycon. In the review, feedback is given on the previous period, targets are set for the coming period and a personal short- and long- term development plan is tailored. In 2010, 92.6
per cent of employees conducted the review with their superiors at least once, while 48.4 per cent conducted the review twice.
Citycon develops its operations based on issues identifi ed in personnel surveys. In 2010, the service provider engaged to conduct the survey and the
schedule for the survey changed, and the survey in new format was carried out for the fi rst time in the spring. The results were discussed at the spring's Citycon Day, kicking off more detailed consideration of the survey outcomes. Superiors in Finland and Sweden received relevant training.
The response rate for the spring personnel survey was 88.2 per cent. The score for the overall job
• Mgmt committ ee 4.7% • Other directors 14.7%• Managers 51.9%
• more than 4 years 41.1%
1) Absentee rate = Total absent days due to illness (1.1.-31.12.) X100% Theoretical working days (1.1.-31.12.)
2) Number of training days per employee =
Total full-day training sessions (1.1.-31.12)
Employees average (1.1.-31.12.)
satisfaction index was 63.2, the management index was 71.2 and the employee commitment index was 72.3. These indicators are among those which will be followed up in coming years, as Citycon has chosen to use the same survey application in the future.
At Group-wide level, the best scores were awarded to Citycon's reliability as an employer and to confi dence in the company's future. The company employees also value their challenging and interesting tasks. Criticism was made of job-related tools, mainly in relation to the eff ectiveness of IT support functions in Sweden. In addition, performance appraisals and stressfulness of expert work were criticised. Respondents were also concerned about the fact that in expert positions, every person carries out specialised tasks, which makes it diffi cult to fi nd assistance or temporary cover. Naturally, there were signifi cant variations between the results from each country and each unit, so further consideration of the results took place locally. The Corporate Management Committ ee discussed the Group-level results and collated the outcomes of each unit's eff orts.
In order to prevent discrimination, the company has an equal opportunities scheme, covering the management, supervisors and other staff in all Citycon offi ces. The equal opportunities scheme contains actions and guidance for identifying and dealing with cases of discrimination. There are country-specifi c action plans, updated annually in co-operation with employee representatives. During the year, no discrimination cases were reported at Citycon.
Every other year, Citycon conducts a Groupwide equality assessment, collecting feedback on its work promoting equal opportunities. The assessment was fi rst carried out in 2009. The company's equal opportunities scheme is available on the intranet and all new employees are introduced to it as a part of their induction.
Personnel are free to take part in union activities. Citycon is an expert organisation and it does not belong to any employers' union. Citycon does not maintain records of the unionisation of personnel; unionisation is not considered a risk due to the educational backgrounds and diversity of roles of its employees.
In 2010, Citycon did not employ any employees aged under 18, even though this is allowed by law under certain conditions. In Finland, many companies give young people a chance to become acquainted with work as a part of the nationwide TET training scheme, which means that school pupils of certain age under 18 are provided with a period of training at work. Related to this scheme, Citycon's shopping centres provided some pupils with oneweek training sessions. Their tasks included, for example, writing blog entries for the shopping centres' websites. Citycon is opposed to the use of forced labour and makes statutory agreements and contracts with all of its employees.
In shopping centres, the safety and security of customers and personnel is ensured by trained safety and security guards by a security service provider. In all countries of operation, security guards must complete applicable training, which includes the handling of various risk situations and minority groups.
During the year, Citycon provided training on shopping centre safety and crisis communication for its own employees. The two-day training session was arranged for all of the company's shopping centre managers and property managers in Finland. The fi rst day focused on safety matt ers, including fi rst aid and fi re extinguishing exercises. On the second day, att endees practised crisis communication through interview and crisis simulations.
In Sweden, the company held two media training days, which also covered crisis communication. Security and safety instructions were also updated. The training sessions were att ended by all directors and shopping centre, marketing and property development managers in Citycon's Swedish organisation.
Similar crisis communication and safety training will be off ered in the Baltic organisation. Crisis training will continue with sessions for the Group management in 2011. In addition, crisis communication instructions for the whole Group will be updated.
Citycon wants to off er local communities comprehensive services, which is why the tenant mix in its shopping centres include many non-commercial operators. Public administration service points, libraries, health care centres, home care units and even chapels complement the shopping centre service portfolio.
Citycon's shopping centres are located within existing community structures, close to people and customer fl ows. Some shopping centres are in city centres, while some are located in local centres. Those situated in local centres are accessible by public transport, and all except two are situated on existing or planned railway lines.
Some of Citycon's shopping centres and their environments are valuable in terms of their cultural history or construction heritage. In Martinlaakso, Vantaa, Citycon documented with photographs the old retail centre's urban environment and interior prior to demolishing the old retail centre in order to construct a new shopping centre. In Sweden, a brochure was published showcasing the beautiful architecture and history of the shopping centre Strömpilen in Umeå.
The daily operations of Citycon's shopping centres take into account local partners and representatives, such as residents' associations and charities. Forms of local cooperation with them varies from centre to centre. Local partners and representatives are also included in the planning and implementation phases of development projects.
Citycon carried out a toy collection campaign in 17 shopping centres around Finland. The partner in this, the third such campaign, were the national and local organisations of the Mannerheim League for Child Welfare, which promotes welfare for children and young families. Through the campaign, Citycon wanted to get across the message that people should not throw away reusable goods: one person's rubbish may be another's treasure. More than 60,000 undamaged and safe toys were collected and donated to day-care centres, children's homes,
hospitals and low-income families. Some of the toys were sent overseas through a charity that carries out humanitarian work in the Eastern Europe.
In Sweden, the shopping centre Strömpilen collects teddy bears for Eastern European orphanages. Each year, around 4,000 teddy bears fi nd new owners this way.
Finland and Sweden are fourth and fi ft h in the list of the world's least corrupt countries. The risk of corruption is higher in the Baltic countries: Estonia was ranked 26th and Lithuania 46th. (Source: Global Corruption Barometer 2010, Transparency International) Citycon has detected no signs of corruption in its customer relations or partnerships, and has received no such reports from external parties. Therefore the company has not considered it necessary to cover corruption risk in its risk management programme.
Citycon has a zero-tolerance policy towards bribery and other forms of corruption. Travel and representation guideline is in place for all personnel, defi ning the rules for acceptable business travel and representation. All travel and representation expenses must be approved by a superior and recorded in the company's travel and expense accounting system. The travel and representation guideline is available on the intranet and all new employees are introduced to it as a part of their induction.
Citycon did not fund any political parties or participate in arrangement of any political election campaigns during the year. Citycon allows political election campaigning to take place in its shopping centres, for instance for local government, parliamentary, presidential and European elections, but the use of the premises is subject to the company's customary leasing terms.
Citycon carries out catchment area and visitor surveys in Finland approximately every two years, as part of its research programme. Catchment area surveys investigate local residents' awareness and image of each shopping centre. Visitor surveys, on the other hand, analyse the satisfaction of existing customers with the shopping centre. In 2010, a catchment area survey was carried out in the Trio shopping centre area. When respondents were asked spontaneously to name shopping centres, Trio received by far the most mentions. Trio was also the most visited shopping centre in the area by a signifi cant margin.
An independent external research organisation measured customer and tenant satisfaction in Swedish shopping centres, including fi ve Citycon centres. The Customer Satisfaction Index (CSI) measures overall visitor satisfaction with the shopping centre. The Tenant Satisfaction Index (TSI) measures tenant satisfaction. The survey involved 25 shopping centres in total. According to the results of the consumer survey, the strengths of the Citycon shopping centres included parking facilities, safety and accessibility. Suggested improvements related to the variety of restaurant
Welcoming Local Residents
Local residents were invited to the laying of the cornerstone for the Myllypuro shopping centre through advertising in a local paper. Around 300 residents att ended the ceremony. A local volunteer organisation, Myllypuron Martat, was chosen to provide the catering for the event.
Local residents were invited to an information and Q&A session regarding Matinkylä's new metro station in order to hear their wishes concerning the future metro and shopping centre complex.
and café services and the overall image of the shopping centres. According to the tenant survey (TSI), the strengths of the Citycon shopping centres were general safety and security, the availability of maintenance personnel, local presence, waste recycling and environmental issues. Suggested improvements concerned the centres' overall image, the eff ectiveness of marketing and cooperation with tenants.
All of Citycon's shopping centres have websites, which provide contact details for submitt ing customer feedback to management. The Finnish shopping centres' websites also provide an electronic feedback form. Messages are read regularly and the senders are contacted if so requested. For Citycon-level feedback there is a form available on the corporate website. Some of the shopping centres also have a presence on social media such as Facebook or Twitt er.
Iso Omena shopping centre recruited a tenperson customer panel from Facebook, which convened fi ve times during the year. The panel is managed by a research team from Aalto University. The purpose of the panel is to provide customeroriented insights into the shopping centre's service portfolio, functionality and other customer satisfaction issues. The panel will continue working in 2011, when Iso Omena will receive some of the group's development ideas. Another aim is to pilot new customer-driven technologies such as mobile
services. Iso Omena is testing the use of a digital info kiosk which provides customers with information on the shopping centre facilities and allows them to send feedback.
Citycon's marketing communications are carried out in accordance with the law and best practice. Citycon's marketing activities are directed at tenants and consumers.
According to a 2010 survey on shopping centres in the Helsinki Metropolitan Area conducted by Taloustutkimus Oy, Iso Omena was the third best shopping centre in the region in terms of characteristics.
Rocca al Mare in Tallinn was found to be Estonia's most customer-friendly shopping centre in a survey of 1,400 consumers by Tallinn University of Technology. Respondents were asked to name enterprises that they would recommend to their friends and family.
The ten-month refurbishment project and Happy Renovation campaign carried out at Forum shopping centre in Jyväskylä was voted the Marketing Campaign of the Year in Central Finland. In the competition organised by the Finnish Marketing Federa tion, Keskisuomalainen newspaper and Jykes Oy, the project received 40 per cent of the popular vote. Forum and Citycon were praised for their success ful branding of the project as an upbeat and positive event, and for drawing att ention to the shopping cen tre's modernisation rather than the inconvenience caused by the renovation. The refurbishment project was skilfully used in marketing, maintaining a posi tive customer image throughout the renovation. ropean real estate companies, acknowledging the best of them. In 2010, the gold award was given to eight companies with the best annual reports, including Citycon. R18 Campaign at Koskikeskus Koskikeskus, a Citycon shop- ping centre in Tampere, Fin- land, was among the fi rst to join the R18 campaign ('K18 kampanja' in Finnish), designed to protect under-age persons from harm related to alcohol and tobac- co. The campaign encourages shop staff to exercise greater vigilance in requesting and verifying IDs, and identifying illegal dealers. The R18 campaign was origi- nally launched in Iisalmi and is sup- ported by Finland's Slot Machine Association RAY. In the Pirkanmaa region, surrounding Tampere, the campaign has been boosted by local parents' associations. Entre- preneurs have also given it a warm welcome. In Koskikeskus, all shops selling alcohol or tobacco products par- ticipated.
Strömpilen shopping centre in Umeå, Sweden, was the fi rst shopping centre in the country to stop giving out free plastic bags to customers in all of its speci ality stores. The campaign has now been running for nearly three years, and has received plenty of posi tive feedback from customers and the media. In a customer satisfaction survey (Centrumbarometern 2010), Strömpilen received the best environmental friendliness score of all Swedish shopping centres.
EPRA cited Citycon's 2009 Annual and Corporate Social Responsibility Report as one of the best in the sector. Each year, EPRA evaluates the annual reports and fi nancial statements of 80 listed Eu-
For risk management purposes, Citycon has a holistic Enterprise Risk Management (ERM) programme in place. The aim of risk management is to ensure that the company meets its business targets. Successful risk management identifi es key risks, reliably analyses their impacts prior to their realisation and initiates preventive measures in order to lower the probability of an identifi ed risk being realised and to mitigate its impact. The latest risk analysis, carried out in 2010 and concerning the year 2011, included the assessment of risks associated with climate change and sustainable development which would aff ect Citycon's business. Risks associated with climate change are covered on page 51 of the Annual and Sustainability Report.
Citycon's ERM process takes account of the risk management objectives as well as Citycon's willingness to take risks. The ERM's purpose is to generate up-to-date and consistent information for the company's senior executives and Board of Directors on any risks threatening strategic and annual plan targets.
The following contains a description of the most important risks which, if realised, could jeopardise the att ainment of Citycon's targets. Risk management within Citycon is also discussed on pages 35- 37 of the att ached Financial Statements.
A number of factors contribute to the value of the company's retail properties, such as general and local economic developments, the level of interest rates, expected infl ation, developments in market rent levels, vacancy rates and property investors' yield requirements as well as competition.
Investment property value trends continue to be subject to unusual levels of uncertainty due to the challenging economic situation and prevailing uncertainty in the fi nancial market throughout the countries in which the company operates. In addition, unemployment rates have remained high in the Baltic countries, while unemployment has not remarkably declined in Finland or in Sweden. All in all, unemployment has still remained at higher levels than before the fi nancial crisis.
As investment property values declined due to the fi nancial crisis in 2008 and 2009, Citycon recognised fair value losses on its investment properties for those years. During 2009, trading activity in the property market remained at low levels. Although it picked up in 2010, trading activity remained relatively modest especially in Finland and Estonia. However, investment property values began to increase during 2010, and Citycon recognised a total of EUR 50.8 million in fair value gains. While changes in the fair value of investment properties have an eff ect on the company's profi t for the fi nancial year, they do not have an immediate impact on cash fl ow.
An investment property's fair value measurement is generally based on a ten-year cash-fl ow analysis. The key variables used in the measurement include yield requirements of property investors, rental income, vacancy rates and operating expenses. Sensitivity to changes in investment properties' fair value, or the risk associated with fair value, can be tested by altering the above key parameters. The sensitivity analysis below uses the investment properties' fair value of EUR 2,361.1 million defi ned by the external appraiser on 31 December 2010 as the starting value. Accordingly, various changes would alter the investment prop erties' fair value as follows:
| • Yield requirement | $+5\%$ $\rightarrow$ Fair value EUR 2,254.0 million |
|---|---|
| • Rental income | $+5\%$ $\rightarrow$ Fair value EUR 2,529.9 million |
| • Vacancy rates | $+5\%$ $\rightarrow$ Fair value EUR 2,344.3 million |
| • Operating expenses | $+5\%$ $\rightarrow$ Fair value EUR 2,312.7 million |
While the company cannot infl uence yield re quirements, it seeks to have an impact on the other fair value variables through active shopping centre management, a cornerstone of Citycon's business. Citycon aims to optimise the profi tability of its shopping centres by conducting the entire shop ping centre management process in-house with the help of its own employees.
Economic fl uctuations and trends have a signifi cant infl uence on demand for leasable premises, vacancy as well as rental levels. Failure in increas-
ing rental income and reducing vacancy constitute one of the key near-term risks for the company. Economic growth has decelerated distinctly in all of the company's operating areas since 2008. In 2010, the general economic trends were positive, but demand for retail premises did not yet increase signifi cantly. Consequently, the rental of premises continued to be challenging, market rents devel- oped modestly or, in certain locations, decreased. Prolonged economic uncertainty may reduce de- mand for retail premises, weaken tenants' ability to pay rent, limit opportunities for increasing rents and raise properties' vacancy rates. In 2010, vacancy rates in retail premises owned by Citycon remained stable, and rents for like-for-like properties reduced by only 0.3 per cent. If economic growth in the operating areas does not pick up, reducing or maintaining the current vacancy rates for existing proper- ties and increasing rental income from them may prove challenging. The company has had to contin- ue rental rebates it has granted to certain tenants. Rental rebates in 2010 totalled EUR 3.0 million. While prospects for increasing rental income are diffi cult, administrative expenses and property maintenance costs may keep rising, putt ing pres- sure on the profi tability of the company's busi- ness. Risks Associated with Leasing and Costs of Property Development Projects A key element in Citycon's strategy is the develop- ment of existing properties to meet tenant needs more eff ectively. The key short-term risks related to development projects include leasing new • Yield requirement +5% ¼ Fair value EUR 2,254.0 million • Rental income +5% ¼ Fair value EUR 2,529.9 million • Vacancy rates +5% ¼ Fair value EUR 2,344.3 million • Operating expenses +5% ¼ Fair value EUR 2,312.7 million
premises in the currently challenging economic environment, and investment costs.
Citycon has major development projects underway in Finland and Sweden and is preparing new (re)development projects throughout its countries of operation. Consequently, the leasable area within Citycon's properties is expected to increase signifi cantly in coming years. Successful implementation of new development projects is of primary importance to Citycon's fi nancial development and growth. The key risk involves demand for retail premises as well as market rent levels in an environment characterised by slower economic growth. For new projects, it may prove diffi cult to att ain an adequate pre-leasing rate at suffi cient rental levels, both of which would be required in order for a project to be considered viable and to be launched.
In 2009, construction costs declined, which supported the launch of new projects. In 2010, construction costs in Finland and Sweden began to rise. In the future, this could prevent Citycon from implementing all of its planned development projects or cause the profi tability of initiated development projects to be lower than expected. Another risk associated with development projects relates to the investment schedule. If a project's implementation exceeds the planned timeframe, this oft en has a negative eff ect on both rental income and costs.
In 2011, (re)development projects play an even more important role in the implementation of Citycon's growth strategy. A successful completion of (re)development projects will essentially infl uence the profi tability of the business in com ing years.
Risks associated with project leasing are mini mised by securing the allocation of suffi cient re sources to the leasing of new properties, investing in new shopping centres' marketing and concluding agreements with anchor tenants prior to a project's commencement or at its initial stage. The risks as sociated with project implementation are being managed through suffi cient resourcing. Responsi bility for projects is borne by experienced in-house Project Development Managers.
The refurbishment and redevelopment of retail properties and increasing rental income through acquisitions form the core of Citycon's business model. Implementation of this growth strategy re quires both equity and debt fi nancing.
Due to the fi nancial crisis, the fi nancial markets weakened markedly in 2008 and the situation remained challenging throughout 2009. Banks' willingness to lend money to property investment companies has not recovered to pre-crisis levels, although the availability, and pricing, of fi nanc ing markedly improved during 2010. The stricter regulations of banks in the future will maintain the abnormally high costs of bank fi nancing. In particu lar, the cost of long-term unsecured bank loans will probably be much higher in coming years than be-
fore the fi nancial crisis. The majority of Citycon's bank loan agreements concluded prior to the fi nan- cial crisis will mature between 2011 and 2014. Re- fi nancing these will most probably involve higher loan margins. Higher loan margins, together with the expected general rise in interest rates, will most probably lead to more expensive debt fi nanc- ing in coming years. Citycon's fi nancial position is good, and it was actively strengthened during 2010 by concluding new long-term loan agreements and by carrying out a share issue. At the end of the year, the company's available liquidity totalled EUR 245.0 million, con- sisting mainly of committ ed long-term credit facili- ties and cash and cash equivalents. Citycon is capa- ble of fi nancing its current projects in their entirety as planned. In order to fi nance new investments and growth in the future, the company will need new funding, the terms of which will depend on the prevailing market situation. Higher loan margins, together with stricter regulations for banks, will probably mean that in the future, Citycon will in- creasingly meet its fi nancing needs by using equity fi nancing instruments and relying more frequently on the public bond market. Citycon seeks to safeguard the availability and price of its fi nancing by applying a conservative but active fi nancing policy. It focuses on long-term fi - nancing and a solid statement of fi nancial position, showing an equity ratio of at least 40 per cent. In- terest-rate risk management is aimed at reducing or eliminating the adverse eff ect of higher market rates on the company's profi t, statement of fi nan- cial position and cash fl ow. Under the company's fi nancing policy, the interest position must be tied to fi xed interest rates at a minimum level of 70 per cent and at a maximum level of 90 per cent. At year-end, Citycon's hedging ratio was 80.3 per cent. Citycon is also considering the option of seeking an external credit rating, in order to improve its debt fi nancing terms and to enable an enhanced diversi- fi cation of its fi nancing sources. More information on fi nancial risks is provided on pages 36-37 of the att ached Financial State- ments.
Citycon is an active owner and long-term de- veloper of shopping centres, creating suc- cess for retailing. Its retail properties serve both consumers and retailers. As far as possible, the company aims to take account of environmental aspects and well-being in the areas surrounding its retail properties. Thus, Citycon has diverse impacts on stakeholders and society.
The impacts of sustainability on various stakeholder groups are also discussed under the assessment of materiality on page 11.
Citycon's operations have an economic impact on several stakeholders such as tenants, personnel, partners and authorities. The impacts of economic responsibility on various stakeholders are described in more detail on page 54.
The risks associated with climate change will aff ect Citycon's business environment in the long term. Diff erent sources and scenarios predict a rise of 2 to 6 degrees Celsius in average temperatures in Citycon's operating areas, over several decades. Global warming will increase the frequency of extreme weather conditions such as intense storms, fl oods and snowfalls. Extreme weather conditions will increase maintenance costs, which are taken into account in property maintenance annual plans.
Measures aimed at curbing climate change and related EU- and national level legislation are reviewed in the long term, i.e. by year 2020. In the short term, enhanced energy effi ciency in properties will increase competitiveness and improve each property's market position. Legislation con cerning energy effi ciency will be reformed in the EU and Finland during the next couple of years.
Within the sector, renewable energy sources have not actively been used in buildings in Citycon's operating areas. This could be att ributed to ex pensive investments, long repayment periods, and relatively new technological solutions for which experience-based feedback is not yet available. The cost of electricity in Citycon's operating areas has been relatively low compared with several Eu ropean countries, but a marked change occurred as electricity prices rose at the turn of 2010 and 2011. Energy prices will become a driving force towards using renewable alternatives.
No restrictions in water consumption or sup ply are expected in Citycon's operating areas. Water scarcity in some areas of EU may increase the price of water. The company should develop measurement of water consumption in such a way that user-specifi c measuring and reporting would lead to reduced consumption. At property-specifi c level, opportunities to recycle grey water could be investigated in order to achieve cost savings.
In waste management, waste taxes and landfi ll fees will increase substantially in the short term. Higher costs will encourage sorting and a reduc tion in waste amounts. In Citycon's operating ar-
eas, waste management varies highly by country. While the Baltic countries are only now initiating measures paving the way for recycling, in the EU Sweden is a model student, with its low share of landfi ll waste. Meanwhile, Finland is preparing and constructing several waste incineration plants, enabling more effi cient waste management. Land use and construction involve the threat of disrupting biodiversity. In most cases, an environ- mental impact assessment, which also includes a biodiversity assessment, is conducted in connec- tion with zoning and major projects. In the medium term, biodiversity may became a subject in both political debates and legislation. Through its environmental programme, Citycon aims to curb climate change, increase energy effi - ciency, cut water consumption and improve waste management. In addition, the company promotes sustainable construction and land use. Citycon's objectives related to environmental responsibility are presented on pages 38–43. Risks and Opportunities Related to Social Responsibility Current HR management themes include job sat- isfaction and employee well-being. In an expert organisation like Citycon, possibilities for training, career development, employee turnover and ab- sences are factors linked to the company's profi t- ability, competitiveness and att ractiveness as an employer. Solutions used in retail properties aff ect the nearby area's land use, urban image and structure, att ractiveness and liveliness. Retail properties also infl uence the development of private and pub- lic services, as well as that of the local community. Societal and social implications of retail properties include growth in the number of jobs and residents, and the positive development of the area's pur- chasing power. In the long term, as global warming proceeds, so called climate refugees from densely populated areas will be forced to relocate to other countries and continents. Some of these refugees will end up in host countries holding relatively low-skilled and low-wage jobs. Citycon's supply chain includes these kinds of positions, such as cleaning, assist- ant construction work and property maintenance. The hiring of people for these jobs may involve risk factors related to working conditions and hu- man rights. Citycon seeks to eliminate these risk factors by preparing codes of ethics for its supply chains and by requiring its subcontractors to act ethically and responsibly.
Small specialty stores, such as Leonidas specialized in Belgian chocolate, complement the shopping centre off ering splendidly. Sll
Citycon's income mainly derives from the rental income generated by its retail proper- ties. In 2010, gross rental income accounted for 94.9 per cent of turnover. Citycon's turnover increased by 5.2 per cent to EUR 195.9 million (2009: EUR 186.3 million).
Finnish business operations accounted for 68.2 per cent (73.7%) of net rental income, while Sweden accounted for 22.6 per cent (18.5%) and the Baltic Countries for 9.3 per cent (7.8%). Net rental income totalled EUR 127.2 million (EUR 125.4 million). The net rental yield on the property portfolio stood at 5.8 per cent (6.1 %). The net rental yield was 6.0 per cent (6.5%) in Finland, 4.8 per cent (4.7%) in Sweden and 7.5 per cent (6.4%) in the Baltic Countries.
Operating profi t for the fi nancial year came to EUR 157.7 million (EUR 10.3 million). The increase in operating profi t was mainly due to fair value gains on the property portfolio, totalling EUR 50.8 million (EUR -97.4 million). Operating profi t also rose due to the completion of (re)development projects and the additional net rental income generated by new and refurbished premises. Credit
losses remained modest at EUR 1.0 million. Temporary rental discounts amounted to EUR 3.0 million during the year, almost all of them in the Baltic Countries.
The direct result decreased by 7.2 per cent, to EUR 47.3 million. The decrease in the direct result came mainly from increased administration and fi nancial expenses. Administration expenses increased chiefl y due to certain one-off expenses. Financial expenses in 2010 increased due to higher interest expenses, the gain from the buybacks of convertible bonds recognised in 2009 and lower capitalisation of interest expenses than during the reference period.
Earnings per share were EUR 0.34 (EUR -0.16). Direct result per share, diluted, (diluted EPRA EPS) came to EUR 0.21 (EUR 0.23). Net cash from operating activities per share was EUR 0.09 (EUR 0.30).
The company's net asset value per share (NAV) was EUR 3.79 (EUR 3.64) and the triple net asset value per share (NNNAV) was EUR 3.49 (EUR 3.35).
At the end of 2010, Citycon owned 83 properties: 33 shopping centres, 49 other retail properties and one lot. The year-end fair value of the property portfolio totalled EUR 2,367.7 million, showing a total fair value gain of EUR 50.8 million.
Total assets at the end of the year stood at EUR 2,436.5 million (EUR 2,253.2 million). Liabilities totalled EUR 1,536.3 million (EUR 1,485.3 million), with short-term liabilities accounting for EUR 242.2 million (EUR 227.4 million). The company's fi nancial position remained good during the fi nancial year. opment projects, and to refi nance maturing loans. -200 -150
Citycon's total available liquidity at the end of the year was EUR 245.0 million, of which EUR 225.5 million consisted of undrawn, committ ed long-term credit facilities and EUR 19.5 million of cash and cash equivalents. On 31 December 2010, Citycon's liquidity, commercial papers and short-term credit facilities excluded, stood at EUR 233.1 million.
Year-on-year, reported interest-bearing debt increased by EUR 76.0 million to EUR 1,397.7 million (EUR 1,321.7 million). The fair value of the Group's interest-bearing debt stood at EUR 1,405.5 million (EUR 1,332.0 million).
The year-to-date weighted average interest rate was 4.04 per cent (4.16%). The average loan maturity, weighted according to the principal amount of the loans, stood at 3.1 years (3.6 years). The average interest-rate fi xing period was 3.6 years (3.2 years).
The weighted average interest rate, interestrate swaps included, was 3.91 per cent on 31 December 2010. The company's equity ratio was 37.1 per cent (34.2%). Period-end gearing stood at 153.1 per cent (169.5%).
Net fi nancial expenses totalled EUR 54.9 million (EUR 47.7 million). This increase was mainly att ributable to increased interest expenses as a result of lower capitalisation of interest expenses and higher amount of interest-bearing debt.
Citycon strengthened its fi nancial position by arranging a directed share issue in September.
Citycon prepares its Financial Statements in accordance with the IFRS and complies with EPRA's recommendations.
Waiving shareholders' pre-emptive subscription rights, the share issue was directed at Finnish and international institutional investors and was carried out in an accelerated book-building process on 21 September 2010. A total of 22 million new shares were off ered for subscription at a price of EUR 2.87 per share. Total proceeds from the share issue before commissions and expenses totalled EUR 63.1 million. The company intends to use the proceeds for repayment of its interest-bearing debt, for strengthening its capital structure and fi nancing (re)development projects and potential acquisitions in line with its investment strategy.
The aggregate share subscription price was recorded in the invested unrestricted equity fund. The new shares off ered accounted for approximately 9.9 per cent of the number of Citycon's shares prior to the share issue and for 9.0 per cent aft er the issue.
During the fi nancial year, Citycon entered into four loan agreements, each worth EUR 50 million and maturing in fi ve years. New loans strengthen the company's available liquidity and enable it to fi nance its growth on a long-term basis. The loans will be used to fi nance investments in line with the company's strategy, such as shopping centre (re)devel-
In July 2006, Citycon's Board of Directors decided to issue subordinated capital convertible bonds to institutional investors. The total amount of the bonds is EUR 110 million and their maturity is seven years. In the autumn of 2008, Citycon started to buy back the bonds because the market situation enabled the company to repurchase these bonds at a price signifi cantly below their face value. In addition, the buybacks enabled the company to strengthen its fi nancial position and reduce its net fi nancial expenses. During the fi nancial year, Citycon repurchased these bonds for an aggregate consideration of EUR 4.8 million (including accrued interest).
Including the buybacks in 2008 and 2009, Citycon has repurchased a total principal amount of EUR 38.75 million of the convertible bonds, corresponding to approximately 35 per cent of the aggregate amount of the convertible bonds. The weighted average repurchase price was 58.1 per cent of the face value of the bonds. The face value of the convertible bonds, originally EUR 110 million, totalled EUR 71.25 million at the end of the year.
Citycon's syndicated loans involve a commitment to maintain the Group's equity ratio above 32.5 per cent and the interest coverage ratio at a minimum of 1.8x. The equity ratio defi ned in the covenants diff ers from the standard presentation of equity ratio. The calculation methods for both covenants are shown on page 39 of the Financial Statements.
In terms of its equity ratio and the interest coverage ratio, Citycon has always, including in
2010, exceeded the levels required by the covenants. The company publishes loan covenant calculations in quarterly investor presentations.
Citycon's operations have an economic impact on a range of stakeholders such as tenants, personnel, suppliers and constructors. The economic impact on each stakeholder group is assessed below, based on cash fl ows between Citycon and the stakeholder in question.
Citycon's turnover consists of rental income, service income and utility charges. Turnover totalled EUR 195.9 million (EUR 186.3 million) in 2010. Citycon charges reasonable market-level rents. The average rent at the end of 2010 was EUR 18.7 per square metre (17.4), increasing by 7.2 per cent from the previous year.
Wages and salaries paid to Citycon employees totalled EUR 8.0 million (EUR 7.6 million), pension costs EUR 1.3 million (EUR 1.2 million) and other social charges EUR 1.1 million (EUR 1.2 million). Approximately 72 per cent (74%) of the wages and salaries were paid in Finland, 25 per cent (22%) in Sweden, 3 per cent (4%) in the Baltic Countries. Citycon spent approximately EUR 0.2 million (EUR 0.2 million) on personnel training.
Purchases related to property operations totalled EUR 58.8 million (EUR 53.4 million). The purchases related to property operations are made locally by each business unit. In Finland, Citycon concluded a centralised partner contract with ISS Palvelut Oy, involving property maintenance, security guard services and cleaning. Finland's share of purchases related to property operations was approximately 60 per cent. Citycon also aims to implement the partner model in service contracts related to property operations in Sweden. Sweden accounted for 32 per cent of the purchases related to property operations, while the Baltic Countries represented 8 per cent.
Of purchases, EUR 22.0 million (EUR 20.2 million) was paid to suppliers of electricity and heating and EUR 23.0 million (EUR 19.4 million) to maintenance service providers. EUR 6.5 million (EUR 6.9 million) was spent on property repairs. In addition,
marketing and property management services were purchased for EUR 7.3 million (EUR 6.9 million).
In each property development project, Citycon's business units call bids locally in line with the goals set to the project. Citycon's capital expenditure totalled EUR 133.7 million (EUR 134.6 million), with property development accounting for EUR 125.3 million (EUR 134.0 million), new property acquisitions and agreed purchase price adjustments related to property acquisitions concluded earlier for EUR 6.8 million (EUR 0.0 million), and other investments for EUR 1.7 million (EUR 0.6 million). Finland accounted for 57 per cent of Citycon's investments, Sweden 38 per cent and the Baltic Countries 4 per cent. Cash fl ow from operations and existing fi nancing arrangements were used to fi nance these investments.
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Citycon Group's corporate governance and decision-making are based on the Finnish Limited Liability Companies Act, Securities Market Act and the Articles of Association approved by the company's General Meeting.
As a company listed on NASDAQ OMX Helsinki Ltd (the Helsinki stock exchange), Citycon complies with the rules of the stock exchange and the Finnish Corporate Governance Code. The company makes no exceptions in observing the Corporate Governance Code. This Code is available on the Securities Market Association's website at www.cgfi nland.fi . In accordance with the Finnish Limited Liability Companies Act, Citycon's business operations and administration are under the responsibility of the following bodies: the General Meeting, the Board of Directors and the CEO. The General Meeting elects members to the Board of Directors, and the Board elects the CEO. In managing the company's business operations, the CEO is assisted by the Corporate Management Committ ee whose members are appointed, upon the CEO's proposal, by the Board
of Directors. The Board of Directors' work is facilitated by four Board committ ees. The work of the Board of Directors, its committ ees, the CEO and the Corporate Management Committ ee is steered by the Rules of Procedure for decision-making bodies and guidelines for the division of tasks between these bodies as well as for the arrangement of internal control and risk management, as approved by Citycon's Board of Directors.
The highest decision-making power in the company is exercised by the shareholders in the general meeting. The Annual General Meeting (AGM) takes place every year by the end of April, once the fi nancial statements have been prepared. Extraordinary General Meetings (EGM) are held whenever deemed necessary for decision-making purposes.
Citycon provides its shareholders with suffi cient information on the items to be discussed at the general meeting of shareholders. On its website, the company publishes the notice of a general meeting, including a proposal for the meeting's agenda, the documents to be presented to the general meeting and the resolution proposals by the Board of Directors and its committ ees, at least three weeks prior to the meeting. Upon request, the meeting material is sent to a shareholder by mail. By any reasonable means available to it, the company att empts to facilitate the participation of its international shareholders in general meetings and to arrange such meetings in a manner enabling shareholders' participation and exercising of their rights to vote, ask questions and speak in the meeting as extensively as possible.
Citycon's AGM 2010 was held on 11 March in Helsinki, Finland. A total of 282 shareholders attended the AGM either personally or through a representative. Of the company's share capital and voting rights, 67.1 per cent was represented at the AGM. The company also organised one EGM, held in Helsinki on 17 May 2010. The EGM was attended by 235 shareholders representing a total of 65.1 per cent of the company's share capital and voting rights.
Following a general meeting, the company publishes the decisions taken by the general meeting, without delay, as a stock exchange release and on its website. The minutes of the general meeting are made available on the corporate website within two weeks of the meeting. More information on general meetings and shareholders' rights is available on the corporate website at www.citycon.com/gm. This website section also contains summaries of the decisions taken by each general meeting since 2007 and minutes of the general meetings since 2009.
The Chairman of the Board of Directors and the CEO att end the general meeting of shareholders, and members of the Board of Directors att end the meeting to the extent deemed necessary. A fi rsttime nominee for the Board shall att end the general meeting that decides on his/her election unless there are cogent reasons for his/her absence. The chief auditor of the company is also present at the general meeting of shareholders.
| Aud it C itt e omm e |
Nom inat ion Com mitt ee |
Rem rati on C itt e une omm e |
Stra d In nt C itt e teg tme y an ves omm e |
|---|---|---|---|
| Bol ky Gid oto ws eon |
m ( ) Kat an C hai f 12 Oc t. 2 010 zm as o |
Bol ky Gid oto ws eon |
en ( ) Ash ken Ron Ch. azi |
| o ( ) Kor n R Ch. ine aim p |
o ( ) Läh des ki T Ch. mä uom |
m ( ) Kat an C hai f 12 Oc t. 2 010 zm as o |
Kor n R ine aim p o |
| We rnin k Th as W om |
Ott Cla oss on es |
o ( ) Läh des mä ki T Ch. uom |
Seg al D or J |
| We Pe r-H åka stin n |
We k Th as W rnin om |
We k Th as W rnin om |
We k Th as W rnin om |
| Zoc hov itzk Ari ella y |
We Pe r-H åka stin n |
Zoc hov itzk Ari ella y |
We Pe r-H åka stin n |
| (as Zoc hov itzk Ari ella of 11 Ma rch 20 y |
|||
| Six | Thr ee |
Six | Six |
| 100 | 100 | 88 | 90 |
| 10) |
Board of Directors
The general meeting of shareholders decides the number of members of the Board of Directors and elects them. Board members' term of offi ce ends at the close of the fi rst AGM following their election. According to the Articles of Association, the Board of Directors consists of a minimum of fi ve and a maximum of ten members. The Articles of Association do not contain other limitations concerning the election of Directors.
An eligible Director nominee must have the qualifi cations required for directorship and the possibility to use suffi cient time to manage his/ her Director duties. A majority of the Directors must be independent of the company. In addition, a minimum of two Directors belonging to this majority must be independent of the company's major shareholders. The Board of Directors annually assesses its members' independence. The members of the Board of Directors are obliged to provide the Board with suffi cient information for the evaluation of their qualifi cations and independence, and to notify the Board of any changes to this information.
At Citycon's AGM of 11 March 2010, shareholders decided to re-elect the following Directors: Ronen Ashkenazi, Gideon Bolotowsky, Raimo Korpinen, Tuomo Lähdesmäki, Claes Ott osson, Dor J. Segal, Thomas W. Wernink, Per-Håkan Westin and Ariella Zochovitzky. At the EGM held on 17 May 2010, Chaim Katzman was also elected to the Board. Personal details of the Directors and their shareholdings in the company are provided enclosed, while further details concerning their careers and key positions of trust are presented on the corporate website at www.citycon.com/Board.
The Board of Directors elects the Chairman and one or more Deputy Chairmen from among its members. In 2010, the Chairman of the Board of Directors was Thomas W. Wernink from 1 January–14 June 2010 and Chaim Katzman from 15 June–31 December 2010. Tuomo Lähdesmäki was
Deputy Chairman of the Board of Directors from 1 January–10 March 2010 and Ronen Ashkenazi from 11 March–31 December 2010.
In the view of the Board of Directors, all Directors are independent of the company, given that none have an employment contract, executive contract or contractual relationship with the company. Furthermore, the Board of Directors holds the view that Gideon Bolotowsky, Raimo Korpinen, Tuomo Lähdesmäki, Thomas W. Wernink and Per-Håkan Westin are independent of major shareholders. Since Ronen Ashkenazi, Chaim Katzman and Dor J. Segal are employed by Citycon's largest shareholder, Gazit-Globe Ltd. or its affi liated companies, they are not independent of major shareholders. Furthermore, Ariella Zochovitzky serves as Gazit-Globe Ltd.'s representative in U. Dori Group Ltd., in which Gazit-Globe Ltd. exercises control together with another shareholder, under a shareholder agreement. Thus, she is not independent of major shareholders. The Board of Directors also deems Claes Ott osson non-independent of major shareholders, as his sister is the spouse of Dor J. Segal.
The Finnish Limited Liability Companies Act, the Articles of Association and the Board of Directors' writt en Rules of Procedure determine the Board of Directors' duties and responsibilities. The essential content of the Rules of Procedure is explained on the corporate website at www.citycon.com/cg. For example, the Board of Directors is responsible for establishing Citycon Group's strategic policies and for the due organisation of its business operations and administration. The Board of Directors constitutes a quorum if more than half of its members are present.
In addition to duties provided under the applicable legislation and the company's Articles of Association, Citycon's Board of Directors shall:
Chairman of the BoardChaim Katzman Director as of 17 May 2010, Chairman as of 15 June 2010
LL.B.US and Israeli citizen, born 1949 Independent of the company Main occupation: Gazit Inc., founder, controlling shareholder and Chairman of the Board of Directors since 1991; Gazit-Globe Ltd., Executive Chairman of the Board of Directors since 1998
Deputy Chairman of the Board Ronen Ashkenazi Director since 2009, Deputy Chairman as of 11 March 2010
B.Sc. (Eng.) Israeli citizen, born 1962 Independent of the company Main occupation: CEO and minority shareholder of Gazit Globe Israel (Development) Ltd. since 2005
Gideon Bolotowsky Director since 2006
M.Sc. (Eng.) Finnish citizen, born 1947 Independent of the company and signifi cant shareholders Main occupation: OsakeTieto FSMI Oy, CEO and Chairman of the Board since 2003
Finnish citizen, born 1950
Independent of the company and signifi cant shareholders Main occupation: Governia Oy, Managing Director since 2009
The Board of Directors evaluates its performance and working methods once a year.
In 2010, Citycon's Board of Directors met 19 times. The average att endance rate was 91.1 per cent.
The Board of Directors' work is facilitated by the following four Board committ ees: Audit Committ ee, Nomination Committ ee, Remuneration Committ ee and Strategy and Investment Committ ee. In Board committ ees, member Directors are able to delve into matt ers in great detail prior to the discussion of those matt ers by the entire Board. The Rules of Procedure for the company's decision-making bodies are approved by the Board of Directors and establish the Board committ ees' main duties and working principles. These are presented on the corporate website at www.citycon.com/cg.
The Board of Directors elects the Board committees' chairmen and members from among the Directors. A Board committ ee always has at least three members. The committ ee's Chairman reports to the Board of Directors on issues discussed by the com mitt ee. In addition, minutes are prepared of all com mitt ee meetings and distributed to all Directors.
The table on the previous page contains informa tion on the Board committ ees' composition, number of meetings and att endance in 2010.
The AGM confi rms the remuneration of the members of the Board of Directors every year, in ad vance.
The AGM 2010 decided that the Board Chairman, Deputy Chairman and ordinary Directors be paid an annual remuneration of EUR 160,000, EUR 60,000 and EUR 40,000, respectively. It also de cided that the Board Chairman and the Chairman of each Board committ ee are paid a meeting fee of EUR 700 and other Board members and Board committ ee members EUR 500 for each meeting. These fees remained the same as in the two previ ous years.
| EUR | Annual fee |
Meeting fees |
Total |
|---|---|---|---|
| Ashkenazi Ronen | 60.000 | 11,900 | 71,900 |
| Bolotowsky Gideon | 40.000 | 14.500 | 54.500 |
| Katzman Chaim | 121.413 | 5.900 | 127,313 |
| Korpinen Raimo | 40,000 | 16,700 | 56,700 |
| Lähdesmäki Tuomo | 40.000 | 17.200 | 57.200 |
| Ottosson Claes | 40.000 | 11.000 | 51,000 |
| Segal Dor J. | 40.000 | 11.500 | 51.500 |
| Wernink Thomas W. | 71,304 | 18,300 | 89,604 |
| Westin Per-Håkan | 40,000 | 17.000 | 57,000 |
| Zochovitzky Ariella | 40,000 | 16.500 | 56,500 |
| Total | 532,717 | 140.500 | 673,217 |
Given that the EGM of 17 May 2010 decided to amend the company's Articles of Association to allow the Board of Directors to elect one or more Deputy Chairmen, instead of only one, from among its members, the EGM decided to amend the AGM's decision correspondingly on the remuneration of the members of the Board of Directors in respect of the annual fee payable to the Deputy Chairman, in such a manner that an annual fee of EUR 60,000 be paid to each of the one or several Deputy Chair- men. During the year, the Board of Directors did not have several Deputy Chairmen. The enclosed table shows the remunerations paid to Citycon's Board members in 2010. These remunerations were paid in cash. Meeting fees in- clude those paid for both the Board's and its com- mitt ees' meetings. Citycon's Board members are not involved in the company's share-based incen- tive schemes. The Board of Directors has issued a recommendation according to which each Director should, during his/her term of offi ce, own the com- pany's shares to a value corresponding at least to his/her remuneration for one year. Chief Executive Offi cer (CEO) The CEO is responsible for the day-to-day management and supervision of the company in accordance with the provisions of the Finnish Limited Liability Companies Act, the Rules of Procedure for the company's decision- making bodies as well as the guidelines and directions received from the Board of Directors. The CEO oversees compliance with the guide- lines, procedures and strategic plans established by the Board of Directors, and he or she must ensure that these guidelines, procedures and plans are submitt ed to the Board of Directors for update or review when necessary. The CEO att ends the Board of Directors' meetings and is responsible for ensur- ing that the relevant materials for consideration at Board meetings have been duly prepared. The CEO also ensures that, on a continuous basis, Directors receive the necessary information to monitor the company's fi nancial position, liquidity, fi nancing and development, and he or she informs the Board of Directors of any major events, decisions and future projects related to the company's business. Citycon's Board of Directors appoints the CEO and decides on the terms and conditions of his/her executive contract, in writing. Since 2002, Citycon Oyj's CEO has been Petri Olkinuora. As announced by the company in December 2010, Mr Olkinuora will leave his position following the company's AGM of 2011. The decision to leave the CEO position was mutual between Mr Olkinuora and the Board of Di- rectors of Citycon. In accordance with Mr Olkinuora's executive contract, he will be paid a lump-sum com- pensation equalling his 18-month salary, in addition to the salary payable for the notice period. The com- pany has taken out pension insurance to cover Mr Olkinuora's pension plan. The costs of this pension BOARD REMUNERATION 2010 Annual Meeting EUR fee fees Total Ashkenazi Ronen 60,000 11,900 71,900 Bolotowsky Gideon 40,000 14,500 54,500 Katzman Chaim 121,413 5,900 127,313 Korpinen Raimo 40,000 16,700 56,700 Lähdesmäki Tuomo 40,000 17,200 57,200 Ott osson Claes 40,000 11,000 51,000 Segal Dor J. 40,000 11,500 51,500 Wernink Thomas W. 71,304 18,300 89,604 Westin Per-Håkan 40,000 17,000 57,000 Zochovitzky Ariella 40,000 16,500 56,500 Total 532,717 140,500 673,217
Tuomo Lähdesmäki Director since 2004, Deputy Chairman 2006-2010
M.Sc. (Eng.), MBA Finnish citizen, born 1957 Independent of the company and signifi cant shareholders Main occupation: Professional nonexecutive director
Claes Ott ossonDirector since 2004
Electrical Engineer Swedish citizen, born 1961 Independent of the company Main occupation: ICA Kvantum Hovås, Managing Director since 1989
Dor J. Segal Director since 2004
High school US citizen, born 1962 Independent of the company Main occupation: Gazit-Globe Ltd., Executive Vice Chairman since 2008; First Capital Realty Inc., President and CEO and Board member since 2000
Thomas W. Wernink Director since 2005, Chairman 2006-2010, Deputy Chairman 2005-2006
M.A. (General Economics) Dutch citizen, born 1945 Independent of the company and signifi cant shareholders Main occupation: Non-executive director on a number of property and investment companies based in Europe
insurance for the company amounted to EUR 0.5 million for the fi nancial year 2010.
Mr Marcel Kokkeel has been appointed to be Citycon's new CEO. He will assume his duties on 24 March 2011.
Citycon has a Corporate Management Committee comprising at least three members. Upon the CEO's proposal, the Board of Directors is responsible for appointing members of the Corporate Management Committ ee. The CEO convenes the Corporate Management Committ ee whenever he or she deems necessary and chairs its meetings. In 2010, the Corporate Management Committ ee had eight meetings. Minutes are kept on the Corporate Management Committ ee's meetings.
The Rules of Procedure for the company's decision-making bodies, approved by the Board of Directors, establish the Corporate Management Committ ee's main duties and working principles. As an expert body, the Corporate Management Committ ee's main duty is to assist the CEO in the management of the company's operative business. It co-ordinates and develops the company's various operations in accordance with set goals, promotes communication and co-operation between diff erent parts of the organisation, monitors the profi tability of the company's business and promotes and maintains the best practices of the company. In addition, the Corporate Management Committ ee prepares resolution proposals pertaining to the company's strategy, business plan, budget and organisation for the Board's discussion, in accordance with the guidelines issued by the Board of Directors.
At the end of 2010, the Corporate Management Committ ee had fi ve members. In addition to the CEO, the Corporate Management Committ ee included the company's Chief Financial Offi cer and Executive Vice President; Head of Legal Aff airs; as well as the Vice Presidents of the company's geographical business units. During the year, the number of Corporate Management Committ ee members decreased by one, since Kaisa Vuorio, Vice President, Finnish Operations, left the company in October 2010. Thereaft er, Harri Holmström assumed the duties of Acting Vice President, Finnish Operations, in addition to his own duties as Vice President, Baltic Operations.
Michael Schönach has been appointed to be the new Executive Vice President of the Finnish Operations. He will assume his duties on 1 March 2011.
The personal details of the Corporate Management Committ ee members as well as information on their share and stock option holdings are presented enclosed. The members' career histories and any positions of trust are presented on the corporate website at www.citycon.com/management.
The Board of Directors confi rms the CEO's salary and other benefi ts and, upon the CEO's proposal, determines other senior executives' salaries and benefi ts.
M.Sc. (Civil Engineering) Swedish citizen, born 1946 Independent of the company and signifi cant shareholders Main occupation: Professional nonexecutive director
B.A. (Economics and Accounting), CPA (Israel), MBA Israeli citizen, born 1957 Independent of the company Main occupation: C.I.G. Consultants / Capital Investments Group Ltd., General Manager & Partner since 2001; U. Dori Group Ltd., Chairman since 2008
| 1 J AN .–3 1 D EC . 20 |
10 | Perf orm anc e bon us |
Inco me |
|||
|---|---|---|---|---|---|---|
| EUR | Ann ual sala ry |
Frin ge ben efi t s |
for yea r 200 9 |
Sha re-b d ase (1 inco me |
from ck sto (2 ions opt |
Tota l |
| CEO | 27 6, 317 .80 |
16, 49 0.1 4 |
110 40 0.0 0 , |
- | 45, 573 .27 |
448 78 1.2 1 , |
| Oth er C MC mb me ers |
73 9, 33 6.9 8 |
61, 529 .16 |
144 523 .36 , |
73, 728 .74 |
- | 1, 019 118 .24 , |
| Tot al |
1, 01 654 .78 5, |
78, 01 9.3 0 |
254 923 .36 , |
73, 728 .74 |
45, 573 .27 |
1, 46 89 9.4 7, 5 |
1) Share-based income refers to the cash component related to the company's long-term share-based incentive plan, paid in order to cover the taxes payable on the incentive shares granted to the plan's participants. A participant can also choose to receive shares instead of the cash component meant for paying the income tax.
2) During the year, CEO exercised a total of 100,000 stock options 2004B for subscription of Citycon's shares, subscribing for 121,270 shares at a subscription price of EUR 2.5908 per share. Regarding CEO, income from stock options refers to the taxable benefi t arising from this subscription.
Remuneration of the CEO and other members of the Corporate Management Committ ee consists of a fi xed monthly salary and fringe benefi ts as well as an annual performance bonus. In addition, the CEO and the other members of the Corporate Management Committ ee are included both in the long-term share-based incentive plan directed to the Group's key employees and in the stock-option scheme 2004 designed for the personnel. The CEO is also entitled to a supplementary pension. A broader description of the management's remuneration is presented in the Remuneration Statement available on the corporate website at www.citycon.com/cg.
The salaries, fringe benefi ts and performance bonuses paid to the CEO and the rest of the Corporate Management Committ ee in 2010, as well as income from stock options and from the company's long-term share-based incentive plan, are presented in the enclosed table. Based on the incentive periods 2007–2009 of the share-based incentive plan, the CEO was granted 39,680 shares, and the rest of the Corporate Management Committ ee 32,273 shares, during 2010.
The company complies with the Guidelines for Insiders issued by the Helsinki stock exchange and applies Citycon's own Insider Guidelines covering insiders' obligations, disclosure requirements and insider registers as well as specifying the company's insider administration procedures.
The company's statutory insiders include members of the Board of Directors, the CEO and the chief auditor. Statutory insiders also comprise Corporate Management Committ ee members, whom the Board of Directors has defi ned as other senior executives, as referred to in the Securities Market Act. Holdings in the company by statutory insiders and those closely associated with them are regarded as public information. The enclosed table shows changes in holdings in 2010. Up-to-date information on changes in holdings can be found on the corporate website at www.citycon.com/insiders.
In addition to statutory insiders, Citycon also has so-called permanent insiders entered in the company's company-specifi c insider register, based on their position or duties, or another contract they have concluded with the company. These company-specifi c insiders include the secretaries and assistants of the members of the Board of Directors, CEO or Corporate Management Committ ee members, and those in charge of corporate fi nances and fi nancial reporting, fi nancing, legal aff airs, investment and development activities, corporate communications, investor relations, IT functions, as well as internal and external audit. The company-specifi c insider register is not available for public review. Project-specifi c insider registers are kept when deemed necessary.
| 201 0 |
Sha res |
Sto ck o ptio ns 200 4B ¹ ⁾ |
Sto ck o ptio ns 200 4C |
Bon ds² ⁾ |
|
|---|---|---|---|---|---|
| Boa rd o f D irec tro s |
|||||
| Ash ken azi Ron en |
1.1 2. |
- | - | - | - |
| ( an) Dep Ch uty airm |
31. 12. |
- | - | - | - |
| Bol ky Gid oto ws eon |
1.1 | 4, 626 |
- | - | - |
| 31. 12. |
4, 626 |
- | - | - | |
| m ( an) Kat an C hai Cha irm zm |
17. 5. |
- | |||
| ( Dir s of 17 Ma ) ect or a y |
31. 12. |
- | |||
| Hol din f cl ly gs o ose |
17. 5. |
- | |||
| d p oci ate art ies ass |
31. 12. |
40, 000 |
|||
| Kor n R ine aim p o |
1.1 | 14 45 6 |
- | - | - |
| 31. 12. |
14 45 6 |
- | - | - | |
| Läh des ki T mä uom o |
1.1 | 52, 28 9 |
- | - | - |
| 31. 12. |
52, 28 9 |
- | - | - | |
| Ott Cla oss on es |
1.1 | 23, 33 6 |
- | - | - |
| 31. 12. |
23 33 6 |
- | - | - | |
| Seg al D or J |
1.1 | 7 1 74 |
- | - | - |
| 31. 12. |
7 1 74 |
- | - | - | |
| We k Th as W rnin om |
1.1 | 50, 000 |
- | - | - |
| 31. 12. |
000 55, |
- | - | - | |
| We stin Pe r-H åka n |
1.1 | 10, 000 |
- | - | - |
| 31. 12. |
10, 000 |
- | - | - | |
| Zoc hov itzk Ari ella y |
1.1 | - | - | - | 1 |
| 31. 12. |
- | - | - | 1 | |
| Cor Ma Co itt e ate ent por nag em mm e |
|||||
| Olk inu Pe tri ora |
1.1 | 149 88 5 , |
100 000 , |
140 00 0 |
- |
| CEO | 31. 12. |
31 0, 83 5 |
- | 140 000 , |
- |
| Att ebr Ulf ant |
1.1 | 1, 85 4 |
- | - | - |
| Vic e P ide Sw edi sh O nt, atio res per ns |
31. 12. |
6, 81 9 |
- | - | - |
| Hol Ha röm rri mst |
1.1 | 2, 35 0 |
- | 70 000 |
- |
| Vic e P ide Bal Op tic tion nt, res era s, |
|||||
| Act Op ing VP, Fin nish tion era s |
31. 12. |
31 7, 5 |
- | 70, 000 |
- |
| Rae kivi Ou ti |
1.1 | 2, 35 0 |
- | 70 000 |
- |
| Hea d of Le l Aff Boa rd s air eta ga s, ecr ry |
31. 12. |
7, 31 5 |
- | 70, 000 |
- |
| Sih en E von ero |
1.1 | 8, 33 5 |
- | 70 000 |
- |
| CFO Exe VP ive cut , |
31. 12. |
22, 248 |
- | 70, 000 |
- |
| Vuo Kai rio sa |
1.1 | 5, 222 |
- | 70 000 |
- |
| Op Vic e P ide Fin nish tion nt, res era s |
|||||
| (un ct.) til 1 9 O |
19. 10. |
10, 187 |
- | 70, 000 |
- |
| Chi ef a udi tor |
|||||
| Kor lain en T uija pe |
1.1 | - | - | - | - |
| 31. 12. |
- | - | - | - |
1) Share subscription period with stock options 2004B expired on 31 March 2010.
2) Bonds refer to the convertible capital bonds issued by the company on 2 August 2006. The nominal value of each bond is EUR 50,000.
The company's public insider register is available on the corporate website and at Euroclear Finland Ltd's customer-service outlet, Urho Kekkosen katu 5 C, Helsinki, Finland.
Citycon maintains its insider register of statutory and company-specifi c insiders within the Euroclear Finland Ltd.'s SIRE extranet system. The company verifi es the data on its statutory insiders by asking its insiders to check the accuracy of the information on the extracts from the insider register twice a year, and regularly supervises its insiders' trading on the basis of the transaction data registered by Euroclear Finland Ltd. It also supervises its insiders' trading on a case-by-case basis, if necessary.
As stipulated by Citycon's Insider Guidelines, the company's statutory and permanent insiders may not trade in Citycon shares or instruments entitling to Citycon shares, for 21 days prior to the release of the company's annual accounts or interim reports. Insiders are also obliged to ask the company's Compliance Offi cer for an opinion on the legality and permissibility of any securities transaction in which they plan to engage. The Compliance Offi cer records each contact made.
The supervision and control of Citycon's business operations are primarily based on the governance and management system described above. The principles of the company's internal control and risk management are established in the guidelines for the arrangement of internal control and risk management, approved by the Board of Directors. The effi ciency of internal control and risk management is evaluated by internal audit.
Citycon's internal control includes fi nancial and other control. Internal control is carried out not only by the Board of Directors, the CEO and the Corporate Management Committ ee but also by the rest of the personnel. Citycon seeks to foster such corporate culture which accepts internal control as a normal and necessary part of day-to-day business.
Internal control is intended to ensure the achievement of any goals and objectives set, the economical and effi cient use of available resources, the suffi cient management of risks associated with business and safeguarding the company's operations, information and assets. Internal control of fi nancial reporting, in addition, seeks to guarantee the reliability and accuracy of fi nancial and other management information. Internal control also aims to ensure that the company complies with Finnish law, agreed internal procedures and guidelines and that the company has suffi cient and appropriate data systems and work processes supporting operations.
The company's Board of Directors is responsible for arranging and maintaining adequate and eff ective internal control. It is the CEO's duty to att end to the implementation of practical actions vis-à-vis internal control. The CEO must maintain an organisational structure in which responsibilities, authorisations and reporting relationships are clearly and comprehensively defi ned in writing.
The CEO and the members of the company's Corporate Management Committ ee are responsible for
Petri OlkinuoraCEO (until 23 March 2011) M.Sc. (Eng.), MBA Finnish citizen, born 1957 CMC member since 2002
Eero SihvonenCFO, Executive VP
M.Sc. (Econ.) Finnish citizen, born 1957 CMC member since 2005
ensuring that laws and regulations in force as well as the company's business principles and the decisions of the Board of Directors are complied with in the company's day-to-day business operations.
The company has appropriate and reliable accounting and other data systems in place to monitor business activities and supervise treasury operations. The att ainment of set targets is monitored through a planning and reporting system in use throughout the Group, this system monitoring the actual performance and forecasts in a rolling manner. It also permits long-term planning and serves as a tool for budgeting.
Risk management forms part of the company's internal control and its purpose is to ensure that the company meets its business targets. The Board of Directors has approved the company's guidelines for risk management, specifying the principles of the company's risk management and the risk management process. The company's risk management process includes the recognition, assessment, measurement, limitation and monitoring of risks arising from business operations and those closely related thereto. The guidelines also defi ne the monitoring of such a process and the risk management organisation.
The company's risk management process is constantly evaluated and developed. The risk management process is examined annually at the company, by updating the company's risk map and its annual action plan to correspond with the targets of the annual plan and by presenting the same to the Board of Directors at the budget meeting in December. The risk map is also updated as part of the business strategy process during the fi rst half of the year.
The arrangement of the company's fi nancial risk management is documented in the company's treasury policy and key fi nancial risks are reported quarterly to the Board's Audit Committ ee. Furthermore, the company's Board of Directors regularly monitors the company's business risks and uncertainties and reports on them in the report by the Board of Directors as well as in the company's interim reports, as required in applicable laws as well as regulations and guidelines issued by the Financial Supervisory Authority.
More extensive information on the company's risk management process and risks associated with the company's business operations can be found on pages 49-50 of this Report, on pages 35-37 of the appended Financial Statements, as well as on the corporate website at www.citycon.com/riskmanagement.
Internal audit aims to independently and systematically evaluate and improve the company's internal control and risk management. The Audit Committee approves an annual audit plan, which forms the basis for the performance of the audit. An internal audit charter has been prepared for internal audit operations. Internal auditors shall report internal audit results to the CEO and the Audit Committee, which must without delay initiate any actions necessitated by audit fi ndings made. The internal audit 2010 was outsourced to KPMG Oy Ab. The audit conducted by Citycon's auditor also involves auditing the company's administration, on which the auditor reports to the Audit Committ ee and the CEO.
Under the audit plan 2010, the internal audit focused on the company's processes related to procurement, HR management and (re)development projects and on shopping centre management in the Baltic Countries.
For the auditing of the administration and accounts, the General Meeting annually elects one auditor, which must be an audit fi rm approved by the Central Chamber of Commerce of Finland. In connection with the company's annual fi nancial statements, the auditor provides the company's shareholders with a statutory auditor's report. The main function of the statutory auditor's report is to verify that the consolidated fi nancial statements, the parent company's fi nancial statements and the report by the Board of Directors give a true and fair view of the Group's and the company's fi nancial performance and fi nancial position for each fi nancial year.
The chief auditor of the company att ends the Audit Committ ee's annual fi nancial statements meeting in order to report the audit fi ndings made.
In addition, upon the Audit Committ ee's invitation, the auditor may att end the committ ee meetings as an expert when deemed necessary.
The AGM 2010 re-elected Ernst & Young Oy (a fi rm of authorised public accountants) the company's auditor, with Tuija Korpelainen (Authorised Public Accountant) acting as the chief auditor appointed by the fi rm. Ernst & Young Oy has served as the company's auditor since 2006. Tuija Korpelainen has functioned as Citycon's chief auditor since the same year and, prior to that, as one of the company's two auditors for the fi nancial year 2005.
In 2010, Citycon paid EUR 0.2 million in remuneration to its auditor, related to its general audit. In addition, Citycon purchased advisory services related to IFRS, property transactions and taxation for a total of EUR 0.1 million.
The purpose of Citycon's corporate communications is to inform the company's stakeholders of company-related matt ers, with the aim of providing all of the relevant parties with correct, suffi cient and topical information regularly, impartially and simultaneously. The company's key IR communication channel is the corporate website, which includes fi nancial reports and releases issued by the company as well as other investor information required in the Finnish Corporate Governance Code.
Outi RaekiviHead of Legal Aff airs LL.M., Certifi ed Property Manager Finnish citizen, born 1968 CMC member since 2002
Ulf Att ebrantVice President, Swedish Operations Swedish citizen, born 1963 CMC member since 2007
Harri Holmström Vice President, Baltic Operations; Acting Vice President, Finnish Operations (as of 20 Oct. 2010)
M.Sc. (Surveying), Authorised Property Appraiser Finnish citizen, born 1956 CMC member since 2005
Kaisa VuorioVice President, Finnish Operations (until 19 Oct. 2010)
M.Sc. (Surveying), Authorised Property Appraiser Finnish citizen, born 1967 CMC member 2003-2010
Investment in Citycon is an investment in a real estate company listed on the NASDAQ OMX Helsinki Ltd (Helsinki stock echange), which combines property investment with shopping centre business. The company specialises in retail industry properties, i.e. shopping centres, hypermarkets and retail centres in Finland, Sweden and the Baltic countries.
Citycon is a proactive owner and long-term developer of its retail properties. The company's strategy is to achieve growth through development projects and shopping centre acquisitions in the Nordic and Baltic regions. The purpose of its operations is to lay the foundations for successful retail business. In line with today's requirements, Citycon takes account of environmental aspects and the well-being of the areas surrounding its retail properties, providing a solid basis for the company's future success and growth.
In terms of its share price, 2010 was a relatively stable year for Citycon. Interest in Citycon shares remained strong, as indicated by the completion of a directed share off ering in just a few hours in September. Citycon's market capitalisation at the end of 2010 was EUR 753.3 million, compared to EUR 649.9 million at year-end 2009. Citycon remained one of the companies with the most international ownership base on the Helsinki stock exchange. At year-end, international investors accounted for 87.1% of the company's shareholders. However, the number of domestic shareholders increased, from 3,733 at the end of 2009 to 4,409 one year later.
Citycon is included in international real estate indices. For example, the FTSE EPRA/NAREIT Global Real Estate Index serves as a benchmarking index for international investors, tracking shareprice performance and total return. Citycon is also represented in the GPR 250 Property Securities Index, which consists of the 250 most liquid real estate companies worldwide. In 2010, 115.0 million (149.3 million) Citycon shares were traded on the Helsinki stock exchange for a total value of EUR 326.4 million (EUR 296.1 million).
The Board of Directors has set the following fi nancial targets for the company:
The profi t distribution for 2009 totalled EUR 0.14 per share, consisting of a dividend of EUR 0.04 per share and an equity return of EUR 0.10 per share from the invested unrestricted equity fund.
The equity ratio at year-end 2010 stood at 37.1 per cent.
The Board of Directors proposes that a dividend of EUR 0.04 per share be paid for the year 2010, and that EUR 0.10 be returned from the invested unrestricted equity fund.
The primary objective of Citycon's investor relations is to increase interest in the company's shares as an investment target. The company aims to increase shareholder value by providing more transparent investor information and strengthening the company's business profi le. Its investor communications focus on long-term value creation rather than short-term returns.
The principle behind Citycon's investor communications is continuously to provide the market with accurate, consistent, transparent and up-to-date information on the company. Adhering to the principle of objectivity and simultaneousness in its investor communications, Citycon publishes all releases and other material on its website in English and in Finnish.
In 2010, the company was internationally recognised for its excellent investor relations. Eero Sihvonen was rated the second-best CFO in Finland, while Hanna Jaakkola was the fourth-best investor relations professional in the highly regarded Thompson Reuters Extel Survey 2010. Voting was by a large number of investors, analysts, bankers and other professionals in the investment world. Furthermore, at its annual conference, EPRA cited Citycon's 2009 Annual and Corporate Social Responsibility Report as one of the best in the sector. Each year, EPRA evaluates the annual reports and fi nancial statements of 80 listed European real estate companies, acknowledging the best of them. This year, the gold award was given to eight companies with the best annual reports, including Citycon.
Citycon actively meets with investors both in and outside of Finland. In 2010, the company executives gave presentations on Citycon as an investment target at approximately 50 events, and met with some 130 institutional investors in either one-on-one or small-group meetings. In addition, the company's representatives meet investors at seminars arranged by various associations and banks, at broader public events and during asset tours in the company's shopping centres.
In September, Citycon organised a Capital Markets Day for investors and analysts in Tallinn. At the event, Board Chairman Chaim Katzman gave a presentation via satellite from his offi ce in Miami. The presentation was followed by lively discussion and questions. The topics for the day were the company's growth strategy, the economic climate in the Baltic region and particularly Estonia, ongoing development projects and leasing operations. All presentations could be followed online in real time, and webcasts are still available on the corporate website. Prior to the presentations, att endees were given a tour of Citycon's shopping centres in Tallinn: Magistral and the LEED® silver-certifi ed Rocca al Mare.
The Capital Markets Day has become an important part of the company's investor relations and Citycon aims to make it an annual event.
The company's IR contacts are the CFO and Executive Vice President, and Vice President, IR and Communications.
The company's register of shareholders is available for public review at Euroclear Finland Ltd's customer service outlet, Urho Kekkosen katu 5 C, Helsinki, Finland.
Shareholders are requested to notify their bookentry account manager of any changes in their
| Fin ial r lts rele Fin ial S Rep by tat ent ort anc esu ase anc em s, , of Co Go ce S the Bo ard Dir and ect rate tat ors rpo ver nan e nt f he fi l ye ar 1 Jan 31 Dec ber 20 10 or t ncia me na uar em y– |
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The key channel for Citycon's investor communications is the corporate website, where all stock exchange releases and press releases, fi nancial statements, interim reports, annual reports and notices of general meetings are published. Also available on the website are the executive presentations on the fi nancial results, webcast recordings of these events, as well as the presentation material for regular investor meetings. Web access to the company's fi nancial results presentation events and Capital Markets Day is enabled. Investor information material published by Citycon can be ordered from the corporate website at www.citycon.com/materialrequest, by e-mail from [email protected] or by phone at +358 20 7664 400.
name or address. This will automatically update information in the company's shareholders' register maintained by Euroclear Finland Ltd.
CFO and Executive Vice President Mr Eero SihvonenTel. +358 20 766 4459 or +358 50 557 9137 [email protected]
Vice President, IR and Communications Ms Hanna Jaakkola Tel. +358 20 766 4421 or +358 40 566 6070 [email protected]
Vice President, Sustainability Ms Kirsi Borg Tel. +358 20 766 4408 or +358 40 557 [email protected]
Analysts from the following banks, brokerage and other fi rms monitor Citycon Oyj and its performance, based on the information received by the company. The list may not include all providers of such investment analysis. Analysts monitor Citycon on their own initiative and can choose to cease doing so whenever they wish. Recommendations issued by analysts are available on Citycon's website under "Consensus estimates". Citycon is not responsible for analysts' comments and statements.
ABG Sundal CollierTel. +46 8 566 294 78Box 7269SE-103 89 StockholmSweden
Tel. +31 20 383 7728Gustav Mahlerlaan 10 NL-1082 PP AmsterdamThe Netherlands
Tel. +33 1 53 89 53 7515-17 rue Vivienne F-75002 ParisFrance
Tel. +358 10 236 4867Hiililaiturinkuja 2 FI-00180 HelsinkiFinland
Tel. +46 8 463 55 15Stureplan 4A, 4th floor P.O. Box 5781SE-114 87 StockholmSweden
DnB NORTel. +47 22 94 88 45 Stranden Aker Brygge NO-0021 OsloNorway
Edge Capital Tel. +47 22 01 01 08St Olavsgate 12 NO-0130 Oslo Norway
Evli Pankki Oyj Tel. +358 9 476 690 Aleksanterinkatu 19 A, 3rd floor FI-00101 HelsinkiFinland
FIMTel. +358 9 613 4600 Pohjoisesplanadi 33 A FI-00100 HelsinkiFinland
Tel. +44 207 552 5986Peterborough Court 133 Fleet Street London EC4A 2BB United Kingdom
Tel. +46 8 701 80 16Blasieholmstorg 11 SE-106 70 StockholmSweden
Inderes Oy Independent Equity Research Tel. +358 50 3738027Itälahdenkatu 21FI-00210 HelsinkiFinland
Kempen & Co N.V. Tel. +31 20 348 8000Beethovenstraat 300NL-1070 AR AmsterdamThe Netherlands
Nordea Pankki Oyj Tel. +358 9 1651
Aleksis Kiven katu 9, Helsinki FI-00020 NordeaFinland
Pohjola Pankki Oyj
Tel. +358 10 252 7390Teollisuuskatu 1b, PL 362 FI-00101 HelsinkiFinland
Tel. +31 20 460 4747Amstelplein 1 NL-1096 HA AmsterdamThe Netherlands
Tel. +31 20 383 6786 Gustav Mahlerlaan 10 NL-1000 EA AmsterdamThe Netherlands
Tel. +358 9 616 28726Unioninkatu 30 FI-00101 HelsinkiFinland
Tel. +358 20 746 9158Mannerheimintie 14 BFI-00101 HelsinkiFinland
Tel. +44 20 7568 44151 Finsbury Avenue London EC2M 2PPUnited Kingdom
| Cod e |
Con ten t |
Pag e |
Com ts men |
Cod e |
Con ten t |
Pag e |
Com ts men |
||
|---|---|---|---|---|---|---|---|---|---|
| Str and ate gy |
An aly sis |
Eco ic P nom |
erf e In dic ato orm anc rs |
||||||
| 1.1 -1.2 |
CEO 's s key im risk d tat ent ts, em pac s an , |
2-3 4, 6-7 , |
Fur the r in for tion be fou nd in ma can |
Eco ic P nom |
erf orm anc e |
||||
| unit ies ort opp |
√ | , 49- 51 |
Fin ial S tat ent anc em s. |
EC1 | Eco alu d a nd d ibu ted ic v ate istr nom e ge ner |
√ | 2, 54 |
Fut her inf n be fou nd atio in orm n ca |
|
| Org ani ion zat |
al P rofi le |
Fin ial S tat ent anc em s. |
|||||||
| 2.1 -2.9 |
Org al p rofi le ani zat ion |
1-4 15- 37, , |
EC2 | Fin ial i lica d ot her ks a nd tion ris anc mp s an |
√ | 49, 51 |
|||
| √ | 55- 63 |
due clim cha ort unit ies to ate opp nge |
|||||||
| 2.1 0 |
Aw ard ed he r d ceiv in t rtin erio s re epo g p |
√ | 12- 13, 48 62 , |
EC3 | Cov of t he o 's d efi n ed niza tion era ge rga |
√ | The ord ith s in act co mp any acc anc e w |
||
| Rep ing Pa ort |
etr ram es |
ben efi t lan obl iga tion p s |
leg isla ted ly. tion t re ate , no por se par |
||||||
| 3.1 -3. 11 |
Rep fi le d b dar ort pro , sc ope an oun y |
1, 11- 14, 38 |
EC4 | Sig nifi t fi n ial a ssis ived tan can anc ce r ece |
√ | 54 | City ha ceiv ed fi n ial t re con s no any anc |
||
| √ | - 48, 63 67 , |
fro ent m g ove rnm |
fro ista ent ass nce m g ove rnm |
||||||
| 3.1 2 |
GR I Co nt I nde nte x |
√ | 64- 66 |
Ma rke t Pr |
ese nce |
||||
| 3.1 3 |
Ass licy d p tice ura nce po an rac |
√ | 67 | EC5 | Ran of r s of nda rd e lev el atio sta ntry ge |
||||
| d to loc al m inim at wag e co mp are um wa ge |
— | ||||||||
| Gov ern anc |
Com mit d E nts ent e, me an nga gem |
sig nifi t lo ion s of tion cat can op era |
|||||||
| Gov ern anc e |
EC6 | Pol and of nd icy, ctic tion pra es, pro por spe |
√ | 54 | |||||
| 4.1 -4. 10 |
Gov ern anc e |
√ | 6-7 55- 60 , |
The bo ard tain abi lity ov ers ees sus |
loca lly- bas ed lier ing on sup p s |
||||
| f ov ll st issu rt o rat es a s pa era egy |
EC7 | Pro ced s fo r lo cal hiri nd tion ure ng a pro por |
54 | ||||||
| Com mit me |
Ext al I nit iati nts to ern ves |
of s hir ed f the loc al eni ent or m ana gem rom |
√ | ||||||
| 4.1 1 |
Exp lan n of wh eth nd how the atio er a |
49- 51 |
nity com mu |
||||||
| ach le is tion inci pre cau ary ap pro or pr p |
√ | Ind irec t Ec |
mic Im ts ono pac |
||||||
| add sed res |
EC8 | Infr e in d se rvic ast tur tme nts ruc ves an es |
— | ||||||
| 4.1 2 |
Ext ally de vel d ch les, inci art ern ope ers , pr p |
√ | 3 | Cod e of Co ndu ct |
vid ed rily for blic be nefi ima t pro pr pu |
||||
| the r in itia tive or o s |
/ Sus abi lity ityc tain ww w.c on. com |
EC9 | Sig nifi dire t in ct e ic im ts, can con om pac |
— | |||||
| 4.1 3 |
nd/ Me mb hip s in oci atio ers ass ns a or |
14 | of inc lud ing the imp ext ent act s |
||||||
| al/ al a dvo nat ion inte tion niza rna cac y o rga |
√ | ||||||||
| tion s |
Env iron me |
rfo l Pe Ind icat nta rma nce ors |
|||||||
| Sta keh old |
er E ent nga gem |
Ma ials ter |
|||||||
| 4.1 4-4 .17 |
List of keh old bas is f sta er g rou ps, or |
11- 14 |
EN 1-E N2 |
Ma ials d by ht o lum d ter ig use we r vo e an |
— | Not ial t o C ter ityc ma on. |
|||
| ide ntifi ach ake hol der tion es t o st ca , ap pro |
√ | led rial inp ut m ate rec yc s |
|||||||
| key ed thr h ics rais nt, top eng age me oug |
Ene rgy |
||||||||
| keh old sta ent er e nga gem |
3-E N4 EN |
Dir d in dire tion by ect ct e an ner gy c ons um p |
√ | 40- 41 |
All d in Cit n's ene rgy co nsu me yco |
||||
| 5 | Dis clo n M Ap ach ent sur es o ana gem pro es |
ima pr ry e ner gy s our ce |
ndi ties is i t. pro per rec |
||||||
| Eco ibil ic r ity nom esp ons |
√ | 3, 6-7 55- 60 , |
EN 5 |
Ene ed due d to vat ion rgy sav con ser an |
— | ||||
| Env l re nsib ility iron nta me spo |
√ | 3, 7, 38- 39 |
effi cie im ent ncy pro vem s |
||||||
| Soc ial r ibil ity esp ons |
√ | 3, 44- 48 |
| Com EN 6 Init iati vid ffi c ien lian to t or ves pro e en erg y-e p ce ble bas ed duc nd EN 28 No lian ith l law iron nta ts a ren ewa en erg y pro n-c om p ce w env me s — and red vic uct ion s in ire ser es, en erg y re qu Tra sult of the nts se i niti ativ ort me as a re es. nsp EN 7 Init red ind 38- 39, 43 EN 29 Sig nifi al im f tr iati irec t en viro ent ts o to t en can nm pac ans ves uce erg y co n ○ d re duc hiev ed. tion tion sum p an s ac Wa Ove rall ter EN 30 Tot al e l pr di EN 8 Tot al w ithd al b √ 42 nvi ctio ate nta ote ron me n ex pen r w raw y so urc e. — EN 9 Wa ifi c ly a ff e d by Not ial t o C nd s by ign ityc tur inve stm ent typ ter ant cte ter wat so urc es s ma on, er c om es es a e. √ Soc for hdr l of fro al w rks ial Per Ind icat wit ter uni cip ate ma nce ors awa wa m m rwo 10 e of o C EN Per d to tal vol Not ial t ityc Em loy tag ter ter wat nt cen e an um wa ma on, er c om es p me √ led d re d. fro al w rks LA1 -LA 2 Tot al w ork for ce b loy 44- 45 uni cip nt t ate rec yc an use m m rwo y e mp me ype , em Bio div ity loy nd mb nd nt c ont t, a ion ers p me rac reg , nu er a √ EN 11 Loc d si f la nd o ed, lea sed 43 e of atio loye by rat e tu n an ze o wn em p rno ver age gro up, , √ ed r ad ted der d re in, o jac ent to, tec ion ma nag pro are as gen , an g EN 12 Sig nifi f ac bio di 43, 51 t im tivi ties LA3 Ben efi t ovi ded full -tim loye ts o to can pac on s pr e em p es ○ ed tha ded sity in p rot ect ovi t ar t pr to tem t ver are as e no or |
|
|---|---|
| por ary par — 13 EN Hab itat d o red loye by m ote cte sto tim ajo tion s pr r re e em p es, r op era s. — |
|
| EN 14 Str nd f 43, 51 LA4 e of 44 ate ies, t ac tion utu Per loye red by col tag g cur ren s, a re cen em es c ove |
|
| p ○ √ lan s fo ing imp bio div ity. lect bar act ive inin nts r m ana s on ers ree me |
|
| p g ga g ag EN 15 Num ber of IUC N R ed List nd (s ) re eci LA5 Min riod din ifi - imu otic es a |
|
| ign sp m n e pe gar g s al c n lis ith nat ion atio eci tion al c han lud wh eth √ |
|
| t sp , inc ing t op ons erv es w can era ges er — ff e hab itat s in tion cifi ed i llec cte |
|
| d by by it is tive nts are as a op era s, spe n co ag ree me leve l of k. |
|
| inct ion ris LA6 Tot al w ork for d in for l jo int 44 ext nte ce r epr ese ma |
|
| Em iss ion Effl and Wa rke r he alth d sa fet √ ts, ste ent s, uen ma nag em -wo an y |
|
| EN 16- EN 17 Tot al d d in dire nho 39 irec t an ct g mitt ree use ga s com ee s √ |
|
| by ht LA7 f in 44 issi ig Rat jury atio nal dis lost em ons we es o , oc cup eas es, |
|
| EN 18 Init red enh 39 iati is day nd a bse nd ber of √ to eis nte ves uce gre ous e ga s em s, a m, a num √ |
|
| nd red hiev ed sio uct ion rk-r ela ted fat alit by r ies ion ns a s ac wo eg |
|
| 19 of 41 EN Em issi dep leti ubs LA8 Edu sell tan ion, inin ing, tion cat tra ons ozo ne- ng s ces g, c oun pre ven ○ , |
|
| by w ht eig and k-c rol lace ris in p ist ont to pro gra ms ass — |
|
| EN 20 NO SO nd o the nifi 39 r sig t ai is rkfo mb hei r fa mil , t ies, x, x, a can r em wo rce me ers or com √ |
|
| ns b d w ht sio eig typ nity mb ard ing iou s di y e an mu me ers reg ser sea ses |
|
| EN 21 Tot al w r di sch e by alit d Wa d ra led ate ste ter in w ate r is to LA9 Hea lth and saf d in for l ety top ics arg qu y an wa an cov ere ma √ — |
|
| des tina tion nici l se ste ith de ent tra uni mu pa we r sy m. agr eem s w ons |
|
| EN 22 Tot al w ht o f w e by d d l 42- 43 eig ast typ isp LA1 0 Ave e ho of 14, 44 -45 inin tra e an osa rag urs g p er y ear pe r √ √ |
|
| tho d loye e by loye teg me em p em p e ca ory |
|
| EN 23 Tot al n ber d vo lum e of nifi No h ca in 2 010 sig LA1 1 Pro for ski lls m d lif t ent um an can suc ses gra ms ana gem an e √ |
|
| ills lon lea tha he c ed rnin inu t su rt t ont sp g g ppo — |
|
| Pro duc nd Ser vic ts a loya bili f em loye nd a ty o ssis t es em p p es a |
|
| EN 26 Init l im 7, 38- 43 iati to mit iga te e nvi nta the m in ing din ves ron me ma nag car eer en gs. |
|
| f pr ○ odu d se rvic and ts o cts ext ent LA1 2 Em loye lar for ivin pac an es, p es r ece g re gu per ma nce |
|
| of i mi tiga tion act mp |
|
| EN 27 Re cla d p rod d p ack Not ial t o C ime uct ing ter ityc LA1 3 Com n of ce b odi nd 44- 45, 55 -58 itio s an ag ma on. pos go ver nan es a — |
|
| ials ter bre akd n of loye ate ma ow em p es p er c gor y √ |
| Com lian p ce |
||||
|---|---|---|---|---|
| 28 EN |
No lian ith iron l law nta n-c om p ce w env me s and ulat ion reg s |
√ | 20 10. No mis duc ts d urin con g |
|
| Tra ort nsp |
||||
| EN 29 |
Sig nifi al im f tr viro t en ent ts o can nm pac ans |
39 | City CO 2 e f mis sio ort con rep s on ns o |
|
| duc ials and rkfo ting ts, ter por pro ma wo rce |
√ | bus el a nd c ine ss t ting rav om mu |
||
| Ove rall |
||||
| EN 30 |
Tot al e l pr di nvi nta ote ctio ron me n ex pen |
|||
| nd inve s by tur stm ent typ es a e. |
— | |||
| Soc ial Per for |
Ind icat ma nce ors |
|||
| Em loy p me |
nt | |||
| LA1 -LA 2 |
for Tot al w ork ce b loy nt t y e mp me ype , em |
44- 45 |
||
| loy nd mb nd ion nt c ont t, a p me rac reg , nu er a |
√ | |||
| e of loye by rat e tu em p rno ver age gro up, |
||||
| der d re ion gen , an g |
||||
| LA3 | Ben efi t ded full loye ovi -tim to s pr e em p es |
Not ial t o C ityc ter ma on. |
||
| tha ded t ar t pr ovi to tem t e no por ary or par |
— | |||
| tim loye by m ajo tion e em p es, r op era s. |
||||
| LA4 | Per e of loye red by col tag cen em p es c ove lect bar |
√ | 44 | |
| LA5 | ive inin nts ga g ag ree me (s ) re Min riod din ifi - imu otic |
44 | lies h lo cal isla wit tion |
|
| ign m n e pe gar g s al c han lud wh eth tion , inc |
√ | City leg con co mp and ulat ion |
||
| t op ing can era ges er it is cifi ed i llec tive nts n co ree me |
reg s. |
|||
| LA6 | spe ag Tot al w ork for d in for l jo int nte ce r epr ese ma |
44 | ||
| rke r he alth d sa fet ent ma nag em -wo an y |
√ | |||
| mitt com ee s |
||||
| LA7 | Rat f in nal dis lost jury atio es o , oc cup eas es, |
44 | ||
| day nd a bse nd ber of nte eis s, a m, a num |
√ | |||
| fat rk-r ela ted alit ies by r ion wo eg |
||||
| LA8 | Edu sell cat ion, tra inin ing, tion g, c oun pre ven , |
Not ial t o C ter ityc ma on. |
||
| and ris k-c rol in p lace ist ont to pro gra ms ass |
||||
| rkfo mb hei r fa mil ies, , t wo rce me ers or com |
— | |||
| mb ard s di nity ing iou mu me ers reg ser sea ses |
||||
| LA9 | saf for Hea lth and ics d in l ety top cov ere ma |
— | o C Not ial t ityc ter ma on. |
|
| ith de uni ent tra agr eem s w ons |
||||
| LA1 0 |
Ave e ho of tra inin rag urs g p er y ear pe r |
√ | 14, 44 -45 |
|
| loye e by loye teg em p em p e ca ory |
||||
| LA1 1 |
Pro for ski lls m d lif ent gra ms ana gem an e |
|||
| lon lea rnin tha he c inu ed t su rt t ont g g ppo |
— | |||
| loya bili f em loye nd a ssis ty o t em p p es a |
||||
| the din m in ing ma nag car eer en gs. |
||||
| LA1 2 |
for Em loye ivin lar p es r ece g re gu per ma nce |
√ | 45 | Com olic Eac h em loye e ha pan y p y: p s |
| and de vel iew ent car eer opm rev s |
ual for iew ann per ma nce rev s. |
|||
| LA1 3 |
Com n of ce b odi nd itio pos go ver nan es a |
44- 45, 55 -58 |
||
| bre akd n of loye ate ow em p es p er c gor y ord end |
√ | |||
| ing ino rity to g acc er, a ge g rou p, m |
||||
| mb hip gro up me ers |
| Cod e |
Con ten t |
Pag e |
Com ts men |
Cod e |
Con Com Pag ten t ts e men |
||
|---|---|---|---|---|---|---|---|
| LA1 4 |
Rat f ba sala f m en b io o sic en t ry o o w om y |
— | Pro duc t R |
ibil ity esp ons |
|||
| loye teg em p e ca ory |
PR 1 |
Life le s hich he alth d sa fet es i tag cyc n w an y |
|||||
| Hum Rig an |
hts | s of duc nd s imp act ts a ices pro erv are as — |
|||||
| HR 1-H R2 |
Inve d p ctic stm ent nt an roc ure me pra es |
○ | City Co de of C ond uct con |
sed for im ent ses pro vem |
|||
| rela hum hts ting ig to an r |
PR2 | Tot al n ber of den f no li No h ca in 2 inci ts o um n-c om p suc ses |
010 | ||||
| 3 HR |
Tot al h s of loye ain ing of h e tr our em p um an |
ith ulat d vo lunt des ion anc e w reg s an ary co |
|||||
| hts rig |
— | √ ning he alth d sa fet imp s of act con cer an y |
|||||
| HR 4 |
Tot al n ber of den f di inci ts o imi nat ion um scr |
46 | No h ca in 2 010 suc ses |
duc nd s ices ts a pro erv |
|||
| and ion ken act s ta |
√ | PR3 | Typ e of duc d se for t an rvic e in tion pro ma |
||||
| HR 5 |
Ope ide ntifi ed hich the ht t rati in w rig ons o |
46 | e of uire d by ced nd tag req pro ure s, a per cen |
||||
| rcis e fr eed of oci atio d co llec exe om ass n an |
— nifi odu d se ubj sig rvic t pr cts ect can an es s |
||||||
| ba be a ifi c k, tive inin t si ris ant rga g m ay gn |
√ | uch inf to s atio irem ent orm n re qu s. |
|||||
| and ken t th hts ion rig act s ta to sup por ese |
PR4 | Tot al n ber of den f no li No h ca in 2 inci ts o um n-c om p suc ses |
010 | ||||
| 6 HR |
Op ifi e nifi tion s id d as hav ing sig ent t era can |
City Co of C de ond ityc uct con , ww w.c on. |
ith ulat d vo lunt des ion anc e w reg s an ary co |
||||
| risk for ide of chi ld la bor d m inc nts , an eas |
/ Sus abi lity tain com |
√ duc d se for ning t an rvic e in con cer pro ma |
|||||
| ken trib the eli s ta to ute to min atio ure con n |
√ | tion d la bel ing an |
|||||
| of c hild lab or. |
PR 5 |
Pra ela ted fac √ 12- 14, 46 -47 ctic to tom atis tion es r cus er s |
|||||
| HR 7 |
Op s id ifi e d as hav nifi tion ing sig ent t era can |
City Co de of C ond ityc uct con , ww w.c on. |
PR6 | for 48 Pro ad her law e to gra ms enc s, |
|||
| risk for ide of for ced lso inc nts or com pu ry |
/ Sus abi lity tain com |
nda rds d vo lunt des rel d to √ sta ate , an ary co |
|||||
| lab nd trib the to ute to or, a me asu res con |
√ | rke ting uni cat ion ma co mm s. |
|||||
| elim of for ced lso lab inat ion or com pu ry or. |
PR7 | Tot al n ber of den f no li No h ca in 2 inci ts o um n-c om p suc ses |
010 | ||||
| HR 8 |
Per e of l tra ined tag urit cen sec y pe rso nne |
46 | City do loy dire ctly ot e con es n mp |
ith ulat d vo lunt des √ ion anc e w reg s an ary co |
|||
| in t he o niza tion 's p olic ies edu rga or p roc res |
○ | urit el. sec y p ers onn |
rke ning ting uni cat ion con cer ma co mm s. |
||||
| rel of h hts ning ig nt a cts con cer eva spe um an r |
PR8 | Tot al n ber of sub ted lain No h ca in 2 ntia sta ts um co mp suc ses |
010 | ||||
| HR 9 |
Vio lati olv hts of ind inv ing rig ige ons nou s |
City 's o ea d atio t con per n ar oes no |
ard bre ach f cu √ ing sto ivac reg es o me r pr y |
||||
| le a nd a ctio ake ns t peo p n |
— | s of ch t he a ind ige nio le. rea rea us p eop |
and los of er d tom ata ses cus |
||||
| Soc iety |
PR9 | Sig nifi t fi n es f lian ith No h ca in 2 can or n on- com p ce w suc ses |
010 | ||||
| SO 1 |
Imp s of tion unit ies, act op era s on co mm |
46- 47 |
law d re lati the √ rnin vi s an gu ons co nce g pro |
||||
| lud nd e inc ing erin atin xiti ent g, o per g, a ng |
√ | sio d us e of duc nd s ices ts a n an pro erv |
|||||
| SO 2 |
of Per tal ber bus ines tag t to cen e an num s |
47 | |||||
| alyz ed f isks rel d to unit tion ate s an or r cor rup |
√ | ||||||
| SO 3 |
Per e of loye ed tag es t rain cen em p |
47 | |||||
| aniz atio n's i-co tion licie d ant org rrup po s an |
√ | PO RE RT |
AP ICA TIO S PL N L EV EL |
||||
| ced pro ure s |
|||||||
| SO 4 |
Act ion ken in r inc ide of s ta e to nts esp ons |
No h ca in 2 010 suc ses |
C C B B A A + + + |
||||
| tion cor rup |
√ | ||||||
| SO 5 |
Pub lic p olic d p osit ion art icip atio n in y p s an |
47 | y or |
||||
| blic licy de vel d lo bby ing ent pu po opm an |
√ | at d |
√ Sel f d d d |
||||
| SO 6 |
Tot al v alu e of fi n ial a nd in-k ind ntr i anc co |
47 | Dec n a M |
lare d e e e ur ur ur |
|||
| but litic al p litic nd ion s to art ies, ian po po s, a |
√ | ss ss ss A A A |
|||||
| rela ted ins titu tion s by unt co ry. |
y y y Thi rd ll ll ll na na na |
||||||
| SO 7 |
Tot al n ber of leg al a ns f ctio nti- um or a com |
No h ca in 2 010 suc ses |
l Che |
√ Par ty er er er cke d |
|||
| titi ve b eha vio ti-t nd oly t, a pe r, an rus mo nop |
√ | na io |
xt xt xt E E E t t t |
||||
| nd t hei ctic tco pra es a r ou me s. |
pt O |
or or or p p p |
|||||
| SO 8 |
Mo lue of s ifi c fi n nd t net ign ant ary va es a o |
No h ca in 2 010 suc ses |
e e e GR I R R R |
||||
| of ns f tal ber ctio net num non -mo ary san or |
√ | Che | cke d |
||||
| lian ith law d re lati non -co mp ce w s an gu ons |
Translation of the Finnish original report
We have been engaged by Citycon Oyj (hereaft er: Citycon) to provide limited assurance on Citycon's Sustainability information from the reporting period 1.1.–31.12.2010 presented in connection with the printed Citycon Annual and Sustainability Report 2010 (hereaft er: the Report).
The Sustainability Information subject to the limited assurance engagement includes the data and assertions presented in the following sections in the Report: Achievements in Sustainable Development (on page 3), Citycon's Management System (on page 3), Defi nition of Materiality (page 11), Citycon's Stakeholders (pages 12-14), Environmental Responsibility (pages 38-43), Social Responsibility (pages 44-48), Key Impacts, Risks and Opportunities Related to Sustainability (page 51), Economic Responsibility (on page 54), Comparison of the Report with the Guidelines of the Global Reporting Initiative (pages 64-66).
The Management of Citycon is responsible for the presented Sustainability Information as well as for preparing and presenting the Sustainability Information in accordance with the Global Reporting Initiative (GRI) Sustainability Reporting Guidelines 3.0 (G3). The Management of Citycon has approved the presented Sustainability Information.
Our responsibility is to carry out a limited assurance engagement and to express conclusion on the Sustainability Information subject to the assurance based on the work performed. We have conducted the engagement in accordance with the International Standard on Assurance Engagements (ISAE 3000): Assurance engagements other than audits or review of historical fi nancial information, issued by the International Auditing and Assurance Standards Board. Amongst others, this standard requires that the assuring party possesses the specifi c knowledge, skills and professional competence needed to understand and review the information to be assured, and that the assuring party complies with the requirements of the IFAC Code of Ethics for Professional Accountants to ensure their independence.
The evaluation criteria used for our assurance are the Global Reporting Initiative (GRI) Sustainability Reporting Guidelines 3.0 (G3).
Sustainability related data and information are subject to inherent limitations applying to data accuracy and completeness, which are to be taken into account when reading our assurance report. The presented Sustainability Information is to be considered in connection with the explanatory information on data collection, consolidation and assessments provided by Citycon. Our assurance report is not intended for use in evaluating Citycon's performance in executing the sustainability principles Citycon has defi ned. To assess the fi nancial state and performance of Citycon, the Citycon audited Financial Statement for the year ended 31 December 2010 is to be consulted.
Our assurance procedures are designed to obtain limited assurance on whether the information subject to the assurance engagement is presented in accordance with the Sustainability Reporting Guidelines of the Global Reporting Initiative 3.0 (G3) in all material respects. A limited assurance engagement consists of making inquiries, prima rily of persons responsible for the preparation of the sustainability information presented, and applying analytical and other evidence gathering procedures, as appropriate. The evidence gather ing procedures mentioned above are more limited than for a reasonable assurance engagement, and therefore less assurance is obtained than in a reamation, including the performance data and assertions, subject to the engagement, and an assessment of information quality and report- ing boundary defi nitions; • Testing of data accuracy and completeness through samples from the Group's information systems and original numerical information re- ceived from Citycon's subsidiaries and business units; • Comparing the consistency of the reported in- formation with external information such as the Annual Report 2010 • Visits to three Citycon sites selected on the basis of a risk analysis taking into account both qualitative and quantitative information. Conclusions Based on the assurance procedures performed, nothing has come to our att ention that causes us to believe that the information subject to the assur- ance engagement is not presented in accordance with the Sustainability Reporting Guidelines of the Global Reporting Initiative 3.0 (G3) in all material respects. Helsinki, 10 February 2011 KPMG OY AB Jan Montell Niina Turri Partner Corporate Responsibility Advisor
sonable assurance engagement. In our engagement we have performed the follow ing procedures: • Interviews with fi ve members of senior man-
| ontell | Niina Turri |
|---|---|
| ٩r | Corporate |
| Responsibility Advi |
Gross rental income: Gross rents, capital rents, maintenance charges and other possible rental income.
Net initial yield: The annualized net rent from a property, at the balance sheet date, divided by the market value of the property.
Net rental income: Gross rental income added by service charge income less property operating expenses from leasing operarions.
Net (rental) yield: net Net rental income in proportion to the property's market value. Net rental yield is calculated over the past 12 months period by constructing an index from the monthly rental income and computational monthly market value fi gures. Annual return is calculated by compounding the indexes.
NAV: Based on the Best Practices Policy Recommendations by EPRA, a company's net assets on a per-share basis. Formula is available in the fi nancial statements on page 53.
Net yield requirement: For market value calculation, the net yield requirement comprises risk-free interest as well as property-specifi c and market risk. Net yield requirement is the lowest internal rate of the return of the total investment period, at which a company is willing to invest.
NNNAV: Based on the Best Practices Policy Recommendations by EPRA, a company's adjusted per-share NAV. Formula is available in the fi nancial statements on page 53.
Reversionary yield: The estimated rental value (market rent) of the property less property operating expenses, expressed as a percentage of the market value of the property.
Anchor tenant: A major tenant with a strong fi nancial standing, usually a chain store, occupying a large area in a shopping or retail centre. Anchor tenants typically have a long-term lease.
Catchment area: An estimate of a shopping centre's geographic market area in Finland, based on a visitor and travel time survey by Taloustutkimus Oy and Citycon's interviews. In Sweden and Lithuania, similar data are based on estimates. In Estonia, the population within a catchment area is defi ned as those living within 10 minutes' travel time to the shopping centre.
Economic occupancy rate: Rental income based on existing leases divided by vacant premises' estimated market rents, to which rental income based on existing leases is added.
Gross leasable area: An area which can be reasonably expected to be available for lease and for which the lessee in ready to pay a rent.
Investments / (Gross) Capital expenditure: refers to gross investments in the balance sheet. Capital expenditure includes the investments on investment properties and property, plant and equipment as well as on intangible assets. The acquisition cost of investment properties consists of a debt-free purchase price and transaction costs such as consultancy fees and transfer taxes. Gross investments on development projects, refurbishments and changes in leased premises are also considered as capital expenditure.
Like-for-like property: A property owned by the company for the whole the current and previous fi nancial year (24 months), excluding properties under development and expansion as well as lots.
Occupancy cost ratio (OCR): calculated as the share of annual gross rent paid by a tenant to Citycon, of the tenant´s annual sales, excluding VAT. The VAT percentage is an estimate. Expresses tenant´s ability to pay rent.
Occupancy rate (sq.m): The ratio of leased premises to leasable premises.
Operating expenses, or the costs of operations: Costs resulting from the management and maintenance of a property, such as heating, electricity, security guard services and cleaning services for common areas.
Turnover-based rent or turnover-linked rent: Rent divided into turnover-linked capital rent and maintenance fee. A minimum rent tied to the cost-of-living index also pertains to the turnover-linked capital rent. If the minimum rent is lower than the rent based on the actual turnover, the lessee will pay the resulting excess. The portion tied to turnover is determined by the lessee's fi eld of industry and estimated sales.
Brownfi eld site: An abandoned or underused former industrial facility, not necessarily a polluted land area; opposite of "greenfi eld".
Carbon dioxide, CO2: A greenhouse gas produced during the combustion of organic matt er (e.g. power plants using fossil fuels, car engines etc.). Carbon dioxide substantially contributes to climate warming, since its level in the atmosphere is over a hundred times that of other greenhouse gases in total.
Carbon footprint: Carbon footprint refers to the eff ect on climate warming of an individual person, organisation, event or product. Nearly all human activities have a carbon footprint that gives the amount of greenhouse gas emissions each activity produces. Presented by mass (g, kg, t).
Climate change: The increase in the average temperature of the Earth, its sea level rise and the decrease in its ice and snow cover. Eff ects also include changes in rainfall. Global warming is most probably primarily due to the acceleration in the planet's greenhouse effect. The greenhouse eff ect has gained momentum because human activities have increased the amount of carbon dioxide and other greenhouse gases in the atmosphere.
CHP Directive: Directive 2004/8/EC on the promotion of cogeneration based on a useful heat demand in the internal energy market.
CO2e: Carbon dioxide equivalent. A common measure for greenhouse gases, allowing the calculation of the eff ect of diff erent greenhouse gas emissions on the acceleration of the greenhouse eff ect. This calculation converts the eff ects of all greenhouse gases, in order to obtain an equivalent to the eff ect of carbon dioxide on the climate.
Energy certifi cate: An energy certifi cate gives the total energy consumption of a property, comprising the consumption of heating energy, electricity and cooling energy. Proportioning total consumption to gross area gives the building's energy-effi ciency rating.
Ecosystem: The term ecosystem refers to the combined physical and biological components of an environment.
EN 15603 –standard: A standard related to Energy Performance of Buildings Directive (2002/91/EC). The purpose of the standard in to present general principles of the overall energy use of buildings and defi nitions of energy ratings.
Environmental impact: Any change in the environment that entirely or partly results from an organisation's activities, products or services. Such a change may be hazardous or benefi cial.
G3 guidelines: A reporting guideline update related to GRI reporting, published in 2006.
GHG: Greenhouse gas (cf. Greenhouse gases).
GHG protocol: Greenhouse gas protocol; an accounting tool for calculating the size of carbon footprints, developed by the World Resources Institute (WRI) and World Business Council for Sustainable Development (WBCSD).
Greenfi eld site: An undeveloped land area. The opposite to brownfi eld land.
Greenhouse gases: Gases appearing in the atmosphere that warm the Earth in a manner similar to glass panes in a greenhouse. Greenhouse gases allow short-wave solar light radiation to pass through the atmosphere while absorbing long-wave heat radiation emitt ed by the Earth's surface. The most important gases in the atmosphere, which maintain and strengthen the greenhouse eff ect, are carbon dioxide, methane, ozone, nitrous oxide ("laughing gas") and the Freons.
Hazardous waste: Hazardous waste, as defi ned in the Finnish Waste Act, means any waste which may pose a particular hazard or harm to health or the environment due to its chemical or some other properties. Examples of waste classifi ed as hazardous waste include solvents, paints and coatings, batt eries containing heavy metals, fl uorescent tubes, cooling appliances, TV sets and computer displays as well as waste oil.
Primary energy: Primary energy is energy found in nature that has not been converted. It is divided into renewable (e.g. wind power) and non-renewable (e.g. oil) energy.
Secondary energy: Energy produced from primary energy, e.g. electricity or district heating. Part of the original (primary) energy is lost in the conversion process.
Sustainable development: Sustainable development is continuous, guided societal change, with the aim of safeguarding the possibilities for a good life of present and future generations. Sustainable development can be divided into four dimensions: economic, ecological, social and cultural.
EPRA: The European Public Real Estate Association, a common interest group which publishes 'best practice' in accounting, fi nancial reporting and corporate governance for European listed real estate companies.
ICSC: The International Council of Shopping Centers.
IEA: The International Energy Agency.
NCSC: The Nordic Council of Shopping Centers.
NGO : Non-governmental organization.
RAKLI ry: The Finnish Association of Building Owners and Construction Clients.
SIPA: Scandinavian International Property Association.
UNEP: United Nations Environment Programme. The programme monitors the global environment and co-ordinates activities to prevent environmental threats and alleviate or eliminate any hazards.
UNEP SBCI: The UNEP Sustainable Buildings and Climate Initiative.
WBCSD: World Business Council for Sustainable Development.
WRI: World Resources Institute.
MWh = megawatt hour
MJ = megajoule
TJ = terajoule
t = tonne
m= cubic metre
Jakobsbergs Centrum
Stenungs Torg Stenungsund
36,400 sq.m.
Järfälla Citycon's gross leasable area 60,700 sq.m. Anchor tenants Coop, H&M, Lindex, Systembolaget
Citycon's gross leasable area
Anchor tenants KappAhl, Hemtex, Systembolaget,Coop
Citycon's gross leasable area 41,000 sq.m. Anchor tenants ICA Kvantum, Willy's, H&M, Systembolaget, SATS, Clas Ohlson, MQ, Lindex
Umeå Citycon's gross leasable area 27,000 sq.m. Anchor tenants ICA Maxi, Elgiganten, Lindex, H&M
Citycon's gross leasable area 27,500 sq.m. Anchor tenants ICA, KappAhl, Lindex, Library, Systembolaget
Citycon's gross leasable area 53,300 sq.m. Anchor tenants Prisma, Marks&Spencer, NewYorker, Lindex, Reserved, Sportland
Citycon's gross leasable area 9,500 sq.m. Anchor tenants Rimi, Koduextra, Rademar, Tiimari, Seppälä
Tumba Centrum
Stockholm Citycon's gross leasable area 14,600 sq.m. Anchor tenants Library, Systembolaget, Läkerhuset, Sabis
Hässelby Citycon's gross leasable area 8,500 sq.m. Anchor tenants ICA, Apoteket, Lidl, library
Citycon's gross leasable area 8,000 sq.m. Anchor tenants Rimi, Hansapank, Farma
Tallinn, Estonia
Pohjoisesplanadi 35 AB FI-00100 HelsinkI, FINLAND TEL. +358 (0)207 664 400 [email protected] www.citycon.COM
| Report by the Board of Directors | 3 | ||
|---|---|---|---|
| EPRA performance measures 14 |
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| CITYCON OYJ'S CONSOLIDATED | |||
| FINANCIAL STATEMENTS | |||
| FOR 1 JANUARY – 31 DECEMBER 2010 17 |
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| Consolidated statement of comprehensive | |||
| income, IFRS 17 |
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| Consolidated statement of | |||
| financial position, IFRS 18 |
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| Consolidated cash flow statement, IFRS 19 |
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| Consolidated statement of changes | |||
| in shareholders' equity, IFRS 20 |
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| Notes to the consolidated | |||
| financial statements, IFRS 21 |
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| 1. | Basic company data21 | ||
| 2. | Basis of preparation21 | ||
| 3. | Changes in IFRS and accounting policies 21 |
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| 4. | Summary of significant | ||
| accounting policies 21 |
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| 5. | Key estimates and assumptions, and | ||
| accounting policies requiring judgment24 | |||
| 6. | Gross rental income 26 |
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| 7. | Segment information 26 | ||
| 8. | Property operating expenses28 | ||
| 9. | Other expenses from leasing operations 28 | ||
| 10. | Administrative expenses28 | ||
| 11. | Personnel expenses 28 | ||
| 12. | Depreciation and amortisation 28 | ||
| 13. | Other operating income and expenses 28 | ||
| 14. | Net financial income and expenses 28 | ||
| 15. | Income taxes 29 |
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| 16. | Earnings per share29 | ||
| 17. | Investment properties29 | ||
| 18. | Property, plant and equipment 31 | ||
| 19. | Intangible assets 31 | ||
| 20. | Deferred tax assets and liabilities 31 | ||
| 21. | Classification of financial instruments 32 |
| 22. | Derivative financial instruments 32 |
|
|---|---|---|
| 23. | Investment properties held for sale33 | |
| 24. | Trade and other receivables 33 | |
| 25. | Cash and cash equivalents 33 | |
| 26. | Shareholders' equity 33 | |
| 27. | Loans34 | |
| 28. | Trade and other payables 37 | |
| 29. | Employee benefits 37 | |
| 30. | Cash generated from operations39 | |
| 31. | Commitments and contingent liabilities 39 | |
| 32. | Related party transactions40 | |
| 33. | Changes in group structure in 201042 | |
| 34. | Post balance sheet events 42 | |
| Key figures 43 |
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| 1. | Consolidated key figures and | |
| ratios for five years 43 | ||
| 2. | Quarterly segment information 44 |
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| Parent company balance sheet, FAS 46 | ||
| Parent company cash flow statement, FAS | 47 | |
| Notes to the parent company's | ||
| financial statements, FAS 48 |
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| 1. | Accounting policies48 | |
| 2. | Turnover 48 | |
| 3. | Other expenses from leasing operations 48 | |
| 4. | Personnel expenses 48 | |
| 5. | Depreciation and amortisation | |
| and impairments 48 |
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| 6. | Other operating income and expenses 48 | |
| 7. | Net financial income and expenses 48 | |
| 8. | Income tax expense48 | |
| 9. | Intangible assets 48 | |
| 10. | Tangible assets 49 | |
| 11. | Shares in subsidiaries 49 | |
| 12. | Shares in associated companies 49 | |
| 13. | Other investments 49 |
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| 14. | Subsidiaries and associated companies49 | |
| 15. | Short-term receivables 49 | |
| 16. | Shareholders' equity 49 | |
| 17. 18. |
Liabilities 49 Contingent liabilities 50 |
| Shareholders and shares 51 |
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|---|---|
| Formulas for key figures and ratios 53 |
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| Signatures to the financial statements 54 |
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| Auditors' report 55 |
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| Property list56 | |
| Valuation statement 60 |
compensated by lower direct income taxes.
| Key Figures | ||||||
|---|---|---|---|---|---|---|
| Q4/2010 | Q4/2009 | Q 3/2010 | 2010 | 2009 Change-% ¹⁾ | ||
| Turnover, EUR million | 49.9 | 48.9 | 48.0 | 195.9 | 186.3 | 5.2% |
| Net rental income, EUR million | 31.8 | 31.6 | 33.0 | 127.2 | 125.4 | 1.4% |
| Operating profit, EUR million | 35.4 | -12.4 | 42.8 | 157.7 | 10.3 | - |
| % of turnover | 70.9% | - | 89.2% | 80.5% | 5.5% | - |
| Profit/loss before taxes, EUR million | 22.0 | -24.4 | 28.8 | 102.8 | -37.5 | - |
| Profit/ loss attributable to parent | ||||||
| company shareholders, EUR million | 14.4 | -23.8 | 22.5 | 78.3 | -34.3 | - |
| Direct operating profit, EUR million | 24.3 | 26.3 | 28.0 | 105.0 | 107.7 | -2.5% |
| % of turnover | 48.8% | 53.9% | 58.4% | 53.6% | 57.8% | -7.3% |
| Direct result, EUR million | 13.5 | 12.5 | 12.3 | 47.3 | 50.9 | -7.2% |
| Indirect result, EUR million | 0.9 | -36.3 | 10.2 | 31.1 | -85.2 | - |
| Earnings per share (basic), EUR | 0.06 | -0.11 | 0.10 | 0.34 | -0.16 | - |
| Earnings per share (diluted), EUR | 0.06 | -0.11 | 0.10 | 0.34 | -0.16 | - |
| Direct result per share (diluted), | ||||||
| (diluted EPRA EPS), EUR | 0.06 | 0.06 | 0.06 | 0.21 | 0.23 | -9.2% |
| Net cash from operating activities per share, EUR 0.00 | 0.06 | 0.04 | 0.09 | 0.30 | -71.2% | |
| Fair value of investment properties, EUR million | 2,299.9 | 2,367.7 | 2,147.4 | 10.3% | ||
| Equity per share, EUR | 3.36 | 3.47 | 3.31 | 5.0% | ||
| Net asset value (EPRA NAV) per share, EUR ²⁾ | 3.71 | 3.79 | 3.64 | 4.3% | ||
| EPRA NNNAV per share, EUR | 3.37 | 3.49 | 3.35 | 4.1% | ||
| Equity ratio, % | 35.9 | 37.1 | 34.2 | 8.6% | ||
| Gearing, % | 153.4 | 153.1 | 169.5 | -9.7% | ||
| Net interest-bearing debt (fair value), EUR million | 1,343.1 | 1,386.0 | 1,312.2 | 5.6% | ||
| Net rental yield, % | 5.9 | 5.8 | 6.1 | - | ||
| Net rental yield, like-for-like properties, % | 6.5 | 6.5 | 6.6 | - | ||
| Occupancy rate (economic), % | 94.5 | 95.1 | 95.0 | 0.1% | ||
| Personnel (at the end of the period) | 123 | 129 | 119 | 8.4% | ||
| Dividend per share, EUR | 0.04 ³⁾ | 0.04 | ||||
| Return from invested unrestricted | ||||||
| equity fund per share, EUR | 0.10 ³⁾ | 0.10 | ||||
| Dividend and return from invested | ||||||
| unrestricted equity fund per share total, EUR | 0.14 ³⁾ | 0.14 |
1) Change-% is calculated from exact figures and refers to the change between 2010 and 2009.
2 In accordance with a change in the EPRA's Best Practice Recommendations 2010, Citycon has changed net asset value (EPRA NAV) calculations so that the fair value of all financial instruments is excluded from the net asset value.
3) Proposal by the Board of Directors.
Five-year key figures are available on page 43 in the Financial Statements.
The Corporate Governance Statement of the Citycon Group for the financial year 2010 has been published simultaneously with the Financial Statements and the Report by the Board of Directors and is available on the corporate website at www.citycon.com.
"In 2010, we did not reach our expectations regarding operational performance due to costs and slower than expected stabilisation of completed (re)development projects. The ongoing redevelopment projects and repositioning of existing properties reduced temporarily the company's leasable area by some 30,000 square metres during the year, which affected net rental income.
The largest ongoing (re)development projects include the redevelopment and extension of Åkersberga Centrum, located in Österåker, Sweden, and new shopping centres being built in Myllypuro, Helsinki and Martinlaakso, Vantaa in Finland. All of them are due for completion during 2011 and 2012. Åkersberga Centrum's extension opened in October 2010 and refurbishment of the existing part is currently underway. The fully redeveloped shopping centre will be completed in April 2011.
The refurbishment projects at Forum, Jyväskylä and Espoontori, Espoo, both in Finland, were completed in November and December, and were opened almost fully leased.
In 2010, the company continued to divest its non-core residential properties. The aggregate value of these disposals totalled EUR 49.5 million. Following the realised transactions, the value of the company's remaining residential portfolio in Sweden is approximately EUR 40 million.
The financial position of the company is stable. The directed share issue arranged by the company in September was completed successfully. In addition, the long-term loan agreements concluded during the year enhanced liquidity. At period end, available liquidity totalled EUR 245.0 million.
As my more than eight-year term as the company's CEO comes to an end at the Annual General Meeting in the spring, I would like to thank the Citycon team for their unwavering commitment to the company's development over recent years. The company is now a true shopping centre specialist and an experienced developer, ready for continued growth."
Retail sales have been trending upwards both in Finland and Sweden. In December, retail sales increased by 4.4 per cent in Finland and by 3.2 per cent in Sweden. During the year, retail sales increased by 3.8 per cent in Finland and 3.7 per cent in Sweden. In the Baltic countries, the decline in retail sales levelled off during the year. In 2010, retail sales declined by 4.0 per cent in Estonia, but increased in December by 5.0 per cent. (Source: Statistics Finland, Statistics Sweden, Statistics Estonia)
Household consumer confidence improved in Sweden and Finland. Unemployment has remained at higher levels than before the financial crisis: 7.9 per cent in Finland and 7.4 per cent in Sweden at the end of the year. In Estonia, consumer confidence improved markedly during the year, in spite of the high unemployment of more than 15 per cent. The adoption of the euro is forecast to boost growth in the Estonian economy. (Source: ibid)
In Finland and Sweden, consumer prices continued to rise during the last quarter. The annual inflation rate was 2.9 per cent in Finland, 2.3 per cent in Sweden and 3.0 per cent in Estonia. Interest rates continued to be low. (Source: ibid)
Availability of financing improved markedly during 2010 compared with previous years. While the property market showed signs of revival, the number of actual property transactions remained low. Shopping centre occupancy rates continue to be high. (Source: Catella)
Citycon focuses on the shopping centre business in the Nordic and Baltic countries. The company's shopping centres are actively managed and developed by the company's professional personnel, working locally. In the Nordic countries, the company is a pioneer in its adherence to the principles of sustainable development in its shopping centre business. Citycon strives to enhance the commercial appeal of its properties, taking into account the specific characteristics of each property's catchment area such as purchasing power, competition and consumer demand. The ultimate goal is to create rental premises generating added value to tenants and customers.
At the end of 2010, Citycon owned 33 (33) shopping centres and 50 (51) other properties. Of the shopping centres, 22 (22) were located in Finland, eight (8) in Sweden and three (3) in the Baltic countries. The market value of the company's property portfolio totalled EUR 2.367,7 million (EUR 2.147,4 million) with Finnish properties accounting for 64.7 per cent (67.2%), Swedish properties for 28.2 per cent (25.6%) and Baltic properties for 7.0 per cent (7.3%). The gross leasable area at the end of the period totalled 942,280 square metres.
In accordance with the International Accounting Standards (IAS) and the International Valuation Standards (IVS), an external professional appraiser valuates Citycon's property portfolio on a property-by-property basis at least once a year. In recent years, the valuation has been conducted on a quarterly basis, due to changing market conditions. A Property Valuation Statement for the end of December 2010 is available on the corporate website.
The valuation was conducted by Realia Management Oy, part of the international Realia Group and the preferred appraisal service supplier of CB Richard Ellis in Finland. The valuation statement includes a description of the valuation process and the factors contributing to the valuation, as well as the results of the valuation and a sensitivity analysis.
The valuation was primarily carried out as a cash flow analysis of the net operating income for a period of ten years. In the case of undeveloped lots and properties subject to significant alterations in the city plan, the market value has been determined based on the building volume permitted by the valid zoning plan. The aforementioned valuation statement also contains more details on valuation methods.
The average net yield requirement defined by Realia Management Oy for Citycon's entire property portfolio came to 6.4 per cent on 31 December 2010. The average net yield requirement for Citycon's properties in Finland, Sweden and the Baltic countries stood at 6.4 per cent, 6.1 per cent and 8.1 per cent, respectively.
As required by IAS 40, Citycon recognises its investment property at fair value. The combined market value of its properties on the balance sheet date is reported in the statement of financial position, while any changes in the fair value through net fair value gains or losses on investment property are detailed in the statement of comprehensive income. Thus, the change in fair value also has a profit impact, and this is reported in the company's financial statements as a separate item under operating profit, and, consequently, the profit for the period.
The fair value of the company's investment property in the statement of financial position equals the property portfolio's total value determined by the external appraiser, capital expenditure on (re) development projects which the external appraiser does not take into account when determining fair value, and the acquisition cost of new properties acquired during the last three months.
During the reporting period, the fair value of Citycon's property portfolio rose, mainly due to property development. The company recorded a total value increase of EUR 95.7 million (EUR 5.5 million) and a total value decrease of EUR 44.9 million (EUR 102.9 million). The net effect of these changes on the company's profit was EUR 50.8 million (EUR -97.4 million).
Citycon aims to have a versatile and efficiently managed lease portfolio. The company favours fixed-term leases. In general, all new leases for retail premises are agreed for a fixed term in all countries. Exceptions to this policy concern mainly the leasing of apartments, storage areas and individual parking spaces.
At the end of the reporting period, Citycon had a total of 3,753 (4,235) leases. The number of leases decreased due mainly to the disposal of apartments in Sweden. The average remaining length of the lease agreements was 3.2 (3.1) years.
The net rental yield of Citycon's property portfolio was 5.8 per cent (6.1%) and the economic occupancy rate was 95.1 per cent (95.0%).
Citycon's net rental income increased by 1.4 per cent to EUR 127.2 million. The leasable area decreased by 2.0 per cent to 942,280 square metres. Net rental income from like-for-like properties decreased by 0.3 per cent.
Like-for-like properties are properties held by Citycon throughout the 24-month reference period, excluding properties under redevelopment or extension as well as undeveloped lots. 74.0 per cent of like-for-like properties are located in Finland. The calculation method for net yield and standing (like-for-like) investments is based on guidelines issued by the KTI Institute for Real Estate Economics and the Investment Property Databank (IPD). The following presents like-for-like net rental income growth by segment.
During the last 12 months, the rolling twelvemonth occupancy cost ratio for like-for-like shopping centre properties was 8.4 per cent. The occupancy cost ratio is calculated as the shareof gross rent paid by a tenant to Citycon, of the tenant's sales, excluding VAT. The VAT percentage is an estimate.
Citycon continues to focus on the development and redevelopment of the company's retail properties, and actively participates in the shopping centre market across its operating area. No major new property acquisitions took place during the year. Several apartments were sold during 2010, as apartments are not part of the company's core business.
In early January, Citycon divested the building rights for the apartments to be built in connection with the Myllypuro shopping centre and the three companies Citycon had established for managing them, to three different residential investors. The residential investors will each be responsible for the construction and leasing of their own apartments. Citycon recorded a gain on sale of EUR 1.7 million following this transaction, tax effects included.
In March, Citycon sold approximately 25 per cent of the apartments in the Jakobsbergs Centrum shopping centre for approximately SEK 120 million (approx. EUR 12 million). These apartments were sold to a newly-established owners' association under an agreement according to which the association agreed to purchase 100 per cent of the shares in Citycon's Swedish subsidiary Tenrot Fastighets AB. The total area of the apartments sold is approximately 8,000 square metres. Citycon
| Net rental income by segments and portfolios | Turnover by portfolios |
|||||
|---|---|---|---|---|---|---|
| EUR million | Finland | Sweden | Baltic Countries |
Other | Total | Citycon total |
| 2008 | 90.9 | 24.1 | 6.8 | 0.0 | 121.8 | 178.3 |
| (Re)development projects | 1.0 | 1.0 | 3.3 | - | 5.4 | 8.4 |
| Divestments | -0.2 | - | - | - | -0.2 | -0.2 |
| Like-for-like | 0.7 | 0.5 | -0.4 | - | 0.8 | 4.0 |
| Other (incl. exch. rate diff.) | 0.0 | -2.4 | 0.1 | 0.0 | -2.3 | -4.2 |
| 2009 | 92.4 | 23.2 | 9.8 | 0.0 | 125.4 | 186.3 |
| (Re)development projects | -4.6 | 3.5 | 2.2 | - | 1.0 | 6.1 |
| Divestments | -0.3 | -1.2 | - | - | -1.6 | -2.3 |
| Like-for-like | -0.6 | 0.6 | -0.2 | - | -0.2 | 1.3 |
| Other (incl. exch. rate diff.) | 0.0 | 2.6 | 0.0 | 0.0 | 2.5 | 4.5 |
| 2010 | 86.7 | 28.7 | 11.8 | 0.0 | 127.2 | 195.9 |
| Q4/2010 | Q4/2009 | Q3/2010 | 2010 | 2009 | Change-% | |
|---|---|---|---|---|---|---|
| Number of leases started during the period | 245 | 386 | 184 | 789 | 873 | -9.6 |
| Total area of leases started, sq.m. ¹⁾ | 47,621 | 69,262 | 33,341 | 160,215 | 141,628 | 13.1 |
| Average rent of leases started (EUR/sq.m.) ¹⁾²⁾ | 18.3 | 24.5 | 17.5 | 17.9 | 22.7 | -21.1 |
| Number of leases ended during the period | 294 | 184 | 408 | 1,279 | 781 | 63.8 |
| Total area of leases ended, sq.m. ¹⁾ | 25,114 | 28,213 | 42,107 | 190,489 | 127,730 | 49.1 |
| Average rent of leases ended (EUR/sq.m.) ¹⁾ ²⁾ | 20.0 | 19.3 | 14.1 | 16.2 | 17.5 | -7.4 |
| Average rent (EUR/sq.m.) ²⁾ | 18.5 | 18.7 ³⁾ | 17.4 | 7.2 | ||
| Occupancy rate at end of the period (economic), % | 94.5 | 95.1 | 95.0 | 0.1 | ||
| Average remaining length of lease portfolio | ||||||
| at the end of the period, year | 3.2 | 3.2 | 3.1 | 3.2 |
1) Leases started and ended don't necessarily refer to the same premises.
2) In 2010 in the Baltic Countries, maintenance fees have been split to maintenance and utility charges in order to make the practice comparable with the other business units. This change had also an effect on the figures of the reference periods. 3) Group average rent corrected from previously disclosed.
recorded a gain on sale of EUR 1.2 million following this transaction, tax effects included.
The sale of the apartments at Liljeholmstorget, agreed in the summer of 2009, was finalised in April. The apartments built within the Liljeholmstorget shopping centre were sold for a price of SEK 176 million (approx. EUR 18.5 million) to Heba Fastighets AB. The transaction had no effect on reported profits.
In April, Citycon sold its nine per cent holding in Helsingin Autotalo Oy for EUR 4.5 million. The transaction had no effect on reported profits.
In May, Citycon sold the building rights for apartments to be built in connection with the new Martinlaakso shopping centre, and 100 per cent of the shares in the company Citycon had established for managing the apartments, to Skanska Talonrakennus Oy for a total of EUR 2.3 million. The transaction had no effect on reported profits.
The sale of apartments located in Åkersberga Centrum in Österåker, Sweden, took place in July. The sale price amounted to SEK 181 million (approx. EUR 19 million). The company recognised a loss on sale of EUR 0.8 million following the transaction.
Towards the end of the year, Citycon purchased all shares in the company Kiinteistö Oy Asematie 3, for approximately EUR 2.1 million. This company owns a commercial building located in Tikkurila, Vantaa, Finland. This transaction was conducted in view of the planned extension of the Tikkuri shopping centre, owned by Citycon.
Changes in the Group structure during the year 2010 are presented in greater detail on page 42 in the Financial Statements.
Citycon is pursuing a long-term increase in the footfall, cash flow and efficiency of, as well as the return from, its retail properties. The purpose of the company's development activities is to maintain the competitiveness of its shopping centres for both customers and tenants.
In the short term, redevelopment projects weaken returns from some properties, as some retail premises may have to be temporarily vacated for refurbishment, which affects rental income. In order to ensure continuous cash flow Citycon aims to carry out redevelopment projects phase by phase.
Completed (Re)development Projects
During 2010, Citycon thoroughly redeveloped Forum shopping centre in Jyväskylä, Finland. The project involved a full renovation of the shopping centre build-
ing, its commercial concept and almost all shops. Although the redevelopment project covered the entire shopping centre, it focused on a 12,000 square metre area. Citycon invested approximately EUR 16 million in this project. The redeveloped Forum shopping centre opened its doors in December.
The modernised Forum has more than 60 stores, about ten of which are newcomers to Forum and Jyväskylä. In order to better address demand in the heart of Jyväskylä, the centre's commercial concept was developed by expanding the fashion offering, as well as that of restaurants & cafes. The more versatile new offering now covers children's supplies and interior decoration.
The refurbishment of the Espoontori shopping centre in Espoo Centre, Finland, was completed in November. The shopping centre's premises of 10,400 square metres and its parking facilities underwent major renovation and refurbishment in order to meet current customer needs. Citycon invested EUR 20.5 million in this project. The planned total investment in the refurbishment, EUR 18 million, was exceeded by EUR 2.5 million due mainly to works conducted outside of the investment area, partly as a requirement of the authorities. These works should have been done in any case, since they are necessitated by the planned extension of the shopping centre. The original investment decision also includes costs related to the planned extension of Espoontori to the adjacent Asemakuja property, such as zoning and land use payments, totalling approximately EUR 5.3 million. Citycon plans to further expand Espoontori in the future.
Espoontori is situated in the administrative hub of Espoo, adjacent to the railway station. In addition, a significant number of new apartments are being built in the immediate vicinity of Espoontori. The refurbishment of Espoontori will substantially improve its commercial competitiveness, while improving the attractiveness of the Espoo Centre district.
Liljeholmstorget Galleria was the largest development project in Citycon's history and the first ground-up shopping centre development project. In the autumn of 2006, Citycon acquired a shopping centre project located in Liljeholmen, Stockholm for approximately EUR 62 million. The project included an existing office and retail building as well as the building rights for a new shopping centre. The construction project started in spring 2007. Citycon completely refurbished the existing building, built a three-storey shopping centre extension and excavated a parking garage for 900 cars under the adjacent apartment buildings. Liljeholmstorget has 41,000 square metres of leasable area and hosts approximately 90 shops. 72 apartment units were also built on top of the shopping centre and sold to a residential investor.
In 2010, one of Citycon's main goals in Sweden was the stabilisation of Liljeholmstorget Galleria, which opened in October 2009. As a result of improvements made to the offering and tenant mix during its first year of operation, Liljeholmstorget's sales and footfall reached expected levels towards the end of 2010, while net rental income remained lower than targeted.
Citycon redeveloped and expanded the shopping centre Rocca al Mare in Tallinn in an extensive three phase project. Rocca al Mare was Citycon's first acquisition in Estonia in 2005. Citycon launched the redevelopment project two years later in 2007. The last phase of the project was completed in November 2009. Rocca al Mare now has 53,300 square metres of leasable area and, with over 160 shops, is the largest shopping centre in Tallinn.
Rocca al Mare has been almost fully let since the opening. However, due to the difficult economic situation in the Baltic countries, Citycon has granted temporary rental rebates to some tenants. While rental rebates continue to be granted, the situation is slightly improving.
Both projects completed in 2009 reflect Citycon's commitment to environmental responsibility. The Rocca al Mare development project was awarded a silver level LEED certificate in January and Liljeholmstorget development project became the first European shopping centre project to be awarded a platinum level LEED certificate in March.
The redevelopment and extension of the Åkersberga Centrum, located in the Österåker district of Greater Stockholm area, is the largest of Citycon's ongoing (re)development projects. The extension of the shopping centre was opened in October, and the refurbishment of the existing part is due for completion in April 2011.
The total budget for the construction project is approximately SEK 467 million (EUR 51 million), of which Citycon's share is 75 per cent. The leasable area of the shopping centre will grow by approximately 13,000 square metres. In addition to the refurbishment of the existing premises, additional parking facilities will be built for 350 vehicles. The shopping centre will remain open throughout the project. As is common in Swedish shopping centres, Åkersberga Centrum offers many municipal services. The new library, opened in modern premises within the new extension, improves the local offering of cultural activities and offers a setting for various types of cultural events.
Citycon is building a new shopping centre in the Martinlaakso district of Vantaa, Finland, to replace the previous retail centre. The project was initiated with the demolition of the existing old retail centre in May. The new shopping centre will enjoy an excellent location in the immediate vicinity of railway and bus stations. The company will invest EUR 22.9 million, excluding the residential building rights, in the shopping centre, which will have a gross leasable area of 7,300 square metres and parking facilities for 475 cars. The project includes construction of apartments, and Citycon has sold the related building rights for EUR 2.3 million. In addition, Citycon will receive a one-time compensation of EUR 1.1 million from the City of Vantaa for the commuter parking facility investment. The project is due for completion in 2011.
| Location | Estimated total project investment (EUR million) |
Actual gross capital investments by 31 Dec. 2010 (EUR million) |
Estimated final year of completion |
|
|---|---|---|---|---|
| Liljeholmstorget | Stockholm, Sweden | 157.8²⁾ | 157.8 | completed |
| Rocca al Mare | Tallinn, Estonia | 53.8³⁾ | 53.8 | completed |
| Forum | Jyväskylä, Finland | 16.0 | 16.0 | completed |
| Espoontori | Espoo, Finland | 25.8⁴⁾ | 22.2 | completed |
| Åkersberga Centrum | Österåker, Sweden | 51.1²⁾ | 44.5 | 2011 |
| Martinlaakso | Vantaa, Finland | 22.9 | 7.2 | 2011 |
| Myllypuro | Helsinki, Finland | 21.3 | 14.3 | 2012 |
| Hansa (Trio) | Lahti, Finland | 8.0 | 5.0 | 2011⁵⁾ |
| Isolinnankatu | Pori, Finland | 3.0 | 1.5 | 2011 |
| Asema-aukio | Pori, Finland | 2.5 | 0.3 | 2012 |
| Myyrmanni | Vantaa, Finland | 4.8 | 4.2 | 2011 |
| Kirkkonummen liikekeskus | Kirkkonummi, Finland | 4.0 | 1.6 | 2011 |
2) Estimated total investment in SEK has not changed from year end 2009.
3) The original estimated total investment in Rocca al Mare development project amounted to approximately EUR 68 million.
4) The estimated total investment of the refurbishment, EUR 18 million, has been exceeded by EUR 2.5 million. In addition, the estimated total project investment includes costs related to the planned extension of Espoontori to adjacent Asemakuja property, such as zoning and land use payments.
5) The completion of the project has been postponed due to slower than expected leasing.
Citycon has a similar development project underway in the Myllypuro district in Helsinki, where the company is building a new shopping centre and an underground car park for 270 vehicles. The shopping centre has an excellent location, adjacent to the Myllypuro metro station. The leasable area of the new shopping centre will be approximately 7,300 square metres, and its service offering will include grocery retailers and other daily services. The shopping centre will be completed in stages, with the first part due to open in early summer 2011 and the second a year later in 2012. The total cost of the Myllypuro project will exceed EUR 60 million, with Citycon's share of the future shopping centre and car park accounting for EUR 20 million.
The shopping centres in Martinlaakso and Myllypuro are Citycon's first ground-up shopping centre projects in Finland.
The Hansa property, which is close to the recently redeveloped Trio shopping centre in Lahti, Finland, will be provided with a better commercial link to Trio. An area of 8,000 square metres will be redeveloped in the Hansa property and the project is due for completion in the spring of 2011. In addition, an alteration to the city plan is pending, to allow for the construction of retail premises on the bridge connecting Trio and Hansa above Vapaudenkatu street.
At the Myyrmanni shopping centre in Vantaa, Finland, major tenant improvement works are in progress. Over one quarter of the shopping centre's leasable retail area is being altered. In addition, the retail premises on Isolinnankatu and Asema-aukioin Pori, Finland, will be redeveloped. Citycon is also refurbishing a retail property in the centre of Kirkkonummi, west of Helsinki. The refurbishment of Torikeskus in Seinäjoki, Finland, has halted for the time being due to the leasing situation.
All of the above-mentioned projects fulfil Citycon's strategy of redeveloping its retail properties which are in excellent locations. These projects are also in line with Citycon's strategy of sustainable development, which emphasises the redevelopment of retail properties located in key locations in city and district centres. This will also help strengthen existing urban structures and improve the areas' service offering.
Capital expenditure during 2010 on all (re)development projects amounted to EUR 69.5 (EUR 24.2 million) million in Finland, EUR 49.4 (EUR 95.9 million) million in Sweden and EUR 6.0 (EUR 13.9 million) million in the Baltic countries.
(Re)development Projects under Planning The largest of the planned (re)development
projects is the Iso Omena extension project, in which the Matinkylä station on the western metro line will be connected to the shopping centre by building retail premises on top of the station. The estimated investment amounts to EUR 100–130 million. Citycon has an exclusive planning reservation for the development of the metro station and for the use of the related land areas together with NCC Property Development Oy. The aim is to develop a metro centre which provides excellent commercial services along direct access from the metro train to its feeder terminal. The western metro line connecting Helsinki and Espoo is due for completion at the end of 2015.
More information on planned projects can be found on Citycon's website.
Citycon's business operations are divided into three business units: Finland, Sweden and the Baltic Countries. The latter two are sub-divided into two business areas: Retail Properties and Property Development. The Finnish unit is sub-divided into four business areas: Retail Property Management (operative management of shopping centres), Asset Management (property management, investments and divestments), Leasing and Marketing, and Property Development.
Citycon is the market leader in the Finnish shopping centre business. In 2010, Citycon's market share was approximately 23 per cent of the Finnish shopping centre market (source: Entrecon). The company's net rental income from Finnish operations during the reporting period was EUR 86.7 million (EUR 92.4 million). The business unit accounted for 68.2 per cent of Citycon's total net rental income.
The key figures of the Finnish property portfolio are presented below. (Re)development projects and changes in the property portfolio have been addressed previously in this document.
Sweden
Citycon has eight shopping centres and seven other retail properties in Sweden, located in the Greater Stockholm and Greater Gothenburg areas and in Umeå. The company has strengthened its position in the Swedish shopping centre market following the completion of the Liljeholmstorget shopping centre in 2009 and the extension of the Åkersberga
| Q4/2010 | Q4/2009 | Q3/2010 | 2010 | 2009 | Change-% | |
|---|---|---|---|---|---|---|
| Number of leases started during the period | 133 | 84 | 94 | 429 | 295 | 45.4 |
| Total area of leases started, sq.m. ¹⁾ | 27,790 | 18,420 | 22,140 | 107,970 | 57,220 | 88.7 |
| Average rent of leases started (EUR/sq.m.) ¹⁾ | 19.2 | 21.0 | 20.4 | 19.6 | 22.5 | -12.9 |
| Number of leases ended during the period | 82 | 90 | 76 | 458 | 408 | 12.3 |
| Total area of leases ended, sq.m. ¹⁾ | 13,790 | 19,240 | 12,170 | 122,680 | 81,480 | 50.6 |
| Average rent of leases ended (EUR/sq.m.) ¹⁾ | 21.0 | 18.5 | 22.6 | 18.2 | 19.8 | -8.1 |
| Average rent (EUR/sq.m.) | 20.4 | 20.3 | 19.7 | 3.0 | ||
| Occupancy rate at end of the period (economic), % | 93.7 | 94.0 | 94.6 | -0.6 | ||
| Average remaining length of lease portfolio | ||||||
| at the end of the period, year | 3.1 | 3.0 | 2.8 | 7.1 |
1) Leases started and ended don't necessarily refer to the same premises.
| Q4/2010 | Q4/2009 | Q3/2010 | 2010 | 2009 | Change-% | |
|---|---|---|---|---|---|---|
| Number of properties | 65 | 65 | 66 | -1.5 | ||
| Gross leasable area, sq.m. | 581,780 | 579,980 | 587,650 | -1.3 | ||
| Annualised potential rental value, EUR million ¹⁾ | 135.2 | 135.5 | 135.3 | 0.1 | ||
| Gross rental income, EUR million | 30.9 | 31.5 | 29.7 | 122.1 | 126.5 | -3.5 |
| Turnover, EUR million | 32.0 | 32.7 | 30.8 | 126.5 | 131.3 | -3.7 |
| Net rental income, EUR million | 22.0 | 23.0 | 22.0 | 86.7 | 92.4 | -6.1 |
| Net fair value gains/losses on investment | ||||||
| property, EUR million | 6.1 | -14.6 | 10.0 | 24.5 | -65.1 | - |
| Operating profit/loss, EUR million | 26.2 | 6.8 | 30.4 | 107.5 | 21.2 | - |
| Capital expenditure, EUR million | 31.9 | 15.3 | 21.3 | 76.3 | 24.5 | 211.7 |
| Fair value of investment properties, EUR million | 1,496.7 | 1,533.0 | 1,442.0 | 6.3 | ||
| Net rental yield, % ²⁾ | 6.2 | 6.0 | 6.5 | |||
| Net rental yield, like-for-like properties, % | 6.5 | 6.5 | 6.5 |
1) Annualised potential rental value for the portfolio includes annualised gross rent based on valid rent roll at the end of the period, market rent of vacant premises and rental income from turnover based contracts (estimate) and possible other rental income.
2) Includes the lots for development projects.
Centrum shopping centre in 2010. The company's net rental income from Swedish operations increased by 23.5 per cent to EUR 28.7 million (EUR 23.2 million). Excluding the impact of the strengthened Swedish krona, net rental income from Swedish operations increased by 10.9 per cent from the previous year. The business unit accounted for 22.6 per cent of Citycon's total net rental income.
The key figures for the Swedish property portfolio are presented below. (Re)development projects and changes in the property portfolio have been addressed previously in this document.
Citycon owns three shopping centres in the Baltic countries: Rocca al Mare and Magistral in Tallinn, Estonia, and Mandarinas in Vilnius, Lithuania. The difficult economic situation in the Baltic countries has affected the sales of Citycon's shopping centres and temporary rental rebates and credit losses have increased. However, the Baltic vacancy rate has not increased substantially during the financial year. Towards the end of 2010, the Baltic market began to recover slowly. Net rental income from the Baltic operations amounted to EUR 11.8 million (EUR 9.8 million). The business
| Q4/2010 | Q4/2009 | Q3/2010 | 2010 | 2009 | Change-% | |
|---|---|---|---|---|---|---|
| Number of leases started during the period | 85 | 245 | 79 | 316 | 449 | -29.6 |
| Total area of leases started, sq.m. ¹⁾ | 17,069 | 42,163 | 9,858 | 46,879 | 59,351 | -21.0 |
| Average rent of leases started (EUR/sq.m.) ¹⁾ | 17.8 | 27.9 | 12.0 | 14.3 | 23.6 | -39.4 |
| Number of leases ended during the period | 184 | 93 | 323 | 777 | 318 | 144.3 |
| Total area of leases ended, sq.m. ¹⁾ | 8,508 | 8,943 | 28,589 | 62,584 | 37,420 | 67.2 |
| Average rent of leases ended (EUR/sq.m.) ¹⁾ | 21.7 | 20.6 | 10.4 | 11.9 | 12.8 | -7.0 |
| Average rent (EUR/sq.m.) | 15.7 | 15.9 | 13.3 | 19.5 | ||
| Occupancy rate at end of the period (economic), % | 95.0 | 96.4 | 94.7 | 1.8 | ||
| Average remaining length of lease portfolio | ||||||
| at the end of the period, year | 2.9 | 3.1 | 3.0 | 3.3 |
| Q4/2010 | Q4/2009 | Q3/2010 | 2010 | 2009 | Change-% | |
|---|---|---|---|---|---|---|
| Number of leases started during the period | 27 | 57 | 11 | 44 | 129 | -65.9 |
| Total area of leases started, sq.m. ¹⁾ | 2,762 | 8,679 | 1,343 | 5,366 | 25,057 | -78.6 |
| Average rent of leases started (EUR/sq.m.) ¹⁾²⁾ | 12.5 | 24.6 | 10.3 | 12.9 | 24.3 | -46.9 |
| Number of leases ended during the period | 28 | 1 | 9 | 44 | 55 | -20.0 |
| Total area of leases ended, sq.m. ¹⁾ | 2,816 | 30 | 1,348 | 5,225 | 8,830 | -40.8 |
| Average rent of leases ended (EUR/sq.m.) ¹⁾ ²⁾ | 9.5 | 45.0 | 18.1 | 13.2 | 16.0 | -17.5 |
| Average rent (EUR/sq.m.) ²⁾ | 16.4 | 17.8 | 17.1 | 4.1 | ||
| Occupancy rate at end of the period (economic), % | 99.8 | 99.7 | 99.4 | 0.3 | ||
| Average remaining length of lease portfolio | ||||||
| at the end of the period, year | 4.8 | 4.6 | 5.2 | -11.5 |
1) Leases started and ended don't necessarily refer to the same premises.
2) In 2010 in the Baltic Countries, maintenance fees have been split to maintenance and utility charges in order to make the practice comparable with the other business units. This change had also an effect on the figures of the reference periods.
Q4/2010 Q4/2009 Q3/2010 2010 2009 Change-% Number of properties 3 3 3 - Gross leasable area, sq.m. 71,000 70,800 71,000 -0.3 Annualised potential rental value, EUR million ¹⁾ 13.8 15.0 14.5 3.4
Gross rental income, EUR million 3.5 2.3 3.4 13.9 12.0 16.2 Turnover, EUR million 4.1 3.8 4.0 16.7 14.0 19.3 Net rental income, EUR million 3.1 2.5 2.9 11.8 9.8 20.1
property, EUR million 2.6 -7.1 0.4 3.5 -12.7 - Operating profit/loss, EUR million 5.2 -4.9 3.0 14.1 -3.8 - Capital expenditure, EUR million 0.2 1.7 0.1 6.0 13.9 -57.0
Fair value of investment properties, EUR million 163.3 166.1 156.6 6.1
Net rental yield, % ²⁾ 7.1 7.5 6.4 Net rental yield, like-for-like properties, % 8.4 8.7 8.2
Net fair value gains/losses on investment
| 1) Leases started and ended don't necessarily refer to the same premises. | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| -- | -- | --------------------------------------------------------------------------- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- |
| Q4/2010 | Q4/2009 | Q3/2010 | 2010 | 2009 | Change-% | |
|---|---|---|---|---|---|---|
| Number of properties | 15 | 15 | 15 | - | ||
| Gross leasable area, sq.m. | 278,700 | 291,500 | 302,500 | -3.6 | ||
| Annualised potential rental value, EUR million ¹⁾ | 52.1 | 54.7 | 48.8 | 12.1 | ||
| Gross rental income, EUR million | 12.9 | 11.4 | 12.2 | 49.8 | 39.3 | 26.8 |
| Turnover, EUR million | 13.8 | 12.4 | 13.1 | 52.8 | 41.0 | 28.6 |
| Net rental income, EUR million | 6.6 | 6.1 | 8.1 | 28.7 | 23.2 | 23.5 |
| Net fair value gains/losses on investment | ||||||
| property, EUR million | 2.6 | -17.0 | 5.4 | 22.8 | -19.6 | - |
| Operating profit/loss, EUR million | 7.8 | -12.0 | 11.5 | 46.7 | 0.3 | - |
| Capital expenditure, EUR million | 15.0 | 33.4 | 10.0 | 50.6 | 95.9 | -47.2 |
| Fair value of investment properties, EUR million | 639.9 | 668.6 | 548.8 | 21.8 | ||
| Net rental yield, % ²⁾ | 4.8 | 4.8 | 4.7 | |||
| Net rental yield, like-for-like properties, % | 6.4 | 6.4 | 6.5 | |||
1) Annualised potential rental value for the portfolio includes annualised gross rent based on valid rent roll at the end of the period, market rent of vacant premises and rental income from turnover based contracts (estimate) and possible other rental income.
2) Includes the lots for development projects.
1) Annualised potential rental value for the portfolio includes annualised gross rent based on valid rent roll at the end of the period, market rent of vacant premises and rental income from turnover based contracts (estimate) and possible other rental income. In 2010 in the Baltic Countries, maintenance fees have been split to maintenance and utility charges in order to make the practice comparable with the other business units. This change had also an effect on the figures of the reference periods.
2) Includes the lots for development projects.
unit accounted for 9.3 per cent of Citycon's total net rental income.
The key figures for the Baltic property portfolio are presented below. No changes took place in the Baltic property portfolio during the period nor were there any development projects underway in the Baltic countries.
Citycon Group's turnover for the financial year came to EUR 195.9 million (EUR 186.3 million), principally derived from the rental income generated by Citycon's retail premises. Gross rental income accounted for 94.9 per cent (95.5%) of turnover.
Operating profit came to EUR 157.7 million (EUR 10.3 million). Profit before taxes was EUR 102.8 million (EUR -37.5 million) and profit after taxes attributable to the parent company's shareholders was EUR 78.3 million (EUR -34.3 million). The increase in operating profit was mainly due to the fair value changes of the property portfolio. Operating profit also rose due to the completion of (re)development projects and the additional net rental income generated by new and refurbished premises. Credit losses were EUR 1.0 million (EUR 0.6 million). Temporary rental rebates totalled EUR 3.0 million during the period (EUR 1.6 million).
The effect of changes in the fair value of the property portfolio, of gains on sale and of other indirect items on the profit attributable to the parent company's shareholders was EUR 31.1 million (EUR -85.2 million), tax effects included. Taking this into account, the direct result after taxes was EUR 3.6 million below that of the previous year (cf. EPRA Performance Measures, Table 1, Direct result). The decrease in the direct result resulted mainly from increased administration and financial expenses offset by lower direct income taxes. Lower direct income taxes were mainly due to lower profit before tax, and depreciations that were started also in properties where the company's ownership is less than 100 per cent. Administration expenses increased due to some oneoff expenses. Financial expenses in 2010 increased due to higher interest expenses, gains from the buybacks of convertible bonds recognised in 2009 and lower capitalisation of interest expenses than during the reference period.
Earnings per share were EUR 0.34 (EUR -0.16). Direct result per share, diluted, (diluted EPRA EPS) came to EUR 0.21 (EUR 0.23). Net cash from operating activities per share was EUR 0.09 (EUR 0.30).
At the end of the year, Citycon Group employed a total of 129 (119) persons, of whom 84 were employed in Finland, 37 in Sweden and 8 in the Baltic countries. Administrative expenses increased to EUR 23.3 million (EUR 17.8 million), including EUR 0.7 million (EUR 0.4 million) of expenses related to employee stock options and the company's sharebased incentive scheme.
Citycon Group paid a total of EUR 8.7 million (EUR 8.2 million) in salaries and other remuneration, of which the share of the Group's managing directors' salaries and other remuneration was EUR 0.4 million (EUR 0.4 million) and the share of the Board of Directors EUR 0.7 million (EUR 0.6 million). The parent company paid a total of EUR 7.4 million (EUR 6.4 million) in salaries and other remuneration, of which the share of the CEO's salary and remuneration was EUR 0.4 million (EUR 0.4 million) and the share of the Board of Directors EUR 0.7 million (EUR 0.6 million).
| 2010 | 2009 | 2008 | |
|---|---|---|---|
| Average number | |||
| of personnel | 123 | 117 | 109 |
| Salaries and other | |||
| remuneration, EUR million | 8.7 | 8.2 | 7.6 |
Citycon's reported gross capital expenditure during the year totalled EUR 133.7 million (EUR 134.6 million). Of this, property acquisitions accounted for EUR 4.2 million (EUR 0.0 million), agreed purchase price adjustments related to property acquisitions concluded earlier for EUR 2.6 million (EUR 0.0 million), property development for EUR 125.3 million (EUR 134.0 million) and other investments for EUR 1.7 million (EUR 0.6 million). These investments were financed through cash flow from operations, gains from divestments of investment properties and existing financing arrangements.
During the year, the company divested non-core properties in Finland and Sweden for a total of approximately EUR 67.9 million and recorded a total of EUR 2.1 million gains and losses on sales, including tax effects. These divestments have been addressed in more detail above, under "Acquisitions and Divestments".
Total assets at the end of the period stood at EUR 2,436.5 million (EUR 2,253.2 million). Liabilities totalled EUR 1,536.3 million (EUR 1,485.3 million), with short-term liabilities accounting for EUR 242.2 million (EUR 227.4 million). Citycon's financial position was strengthened by the directed share issue and the signing of four new loan agreements. At the end of the accounting period, Citycon's liquidity was EUR 245.0 million, of which EUR 225.5 million consisted of undrawn, committed credit facilities and EUR 19.5 million of cash and cash equivalents. At the end of the period, Citycon's liquidity, excluding commercial papers, stood at EUR 233.1 million (31 December 2009: EUR 172.9 million).
For the purpose of short-term liquidity management, the company uses a EUR 100 million noncommitted Finnish commercial paper programme and a non-committed Swedish commercial paper programme in the amount of SEK one billion. At the end of the year, Citycon had issued EUR 11.9 million in commercial papers. Citycon's financing is mainly arranged on a long-term basis, with shortterm interest-bearing debt constituting approximately 13 per cent of the company's total interestbearing debt at the end of the year.
Year-over-year, interest-bearing debt increased by 76.0 million to EUR 1,397.7 million (EUR 1,321.7 million). The fair value of the interestbearing debt stood at EUR 1,405.5 million (EUR 1,332.0 million) at year end.
Cash and cash equivalents totalled EUR 19.5 million (EUR 19.8 million). The fair value of the interest-bearing net debt stood at EUR 1,386.0 million (EUR 1,312.2 million) at year end.
The year-to-date weighted average interest rate decreased compared to the previous year and was 4.04 per cent (4.16%). Towards the year-end, the market interest rates increased which also increased the weighted average interest rate. The average loan maturity, weighted according to the principal amount of the loans, stood at 3.1 years (3.6 years). The average interest-rate fixing period was 3.6 years (3.2 years) and increased because interest rate hedges were extended during the last quarter.
Citycon's interest coverage ratio declined from the previous quarter due to lower operative operating profit and stood at 2.0x (Q3/2010: 2.1x). The company's equity ratio, as defined in the loan agreement covenants, increased to 39.4 per cent (Q3/2010: 38.9%) due to the share issue and fair value gains on investment property.
The weighted average interest rate, including interest-rate swaps, was 3.91 per cent on 31 December 2010 taking into account the expenses for 2011 relating to interest rate swaps unwound during 2010.
At the end of the year, Citycon's equity ratio was 37.1 per cent (34.2%). Gearing stood at 153.1 per cent (169.5%).
At the end of the year, Citycon's interest-bearing debt included 81.6 per cent (75.1%) of floatingrate loans, of which 75.8 per cent (73.7%) had been converted to fixed-rate loans by means of interestrate swaps. Fixed-rate debt accounted for 80.3 per cent (80.2%) of the period-end interest-bearing debt, interest-rate swaps included. The debt portfolio's hedging ratio is in line with the company's financing policy.
Citycon applies hedge accounting, whereby changes in the fair value of interest-rate swaps
subject to hedge accounting are recognised under other comprehensive income. The period-end nominal amount of interest-rate swaps totalled EUR 869.8 million (EUR 737.6 million), with hedge accounting applied to all interest-rate swaps (EUR 713.2 million).
On 31 December 2010, the nominal amount of all of the company's derivative contracts totalled EUR 869.8 million (EUR 759.7 million) and their fair value was EUR -18.1 million (EUR -29.2 million). Citycon renewed and extended the maturity of several interest rate swaps during 2010 by unwinding the existing agreements and entering into new ones due to continued low interest rates. This increased the fair value of derivatives compared to 2009 but decreased the net cash from operating activities in 2010. The negative fair value paid for derivatives under hedge accounting will be expensed during the next six years under financial expenses in the statement of comprehensive income. Hedge accounting is applied to all interest rate derivatives as at 31 December 2010, meaning that any changes in their fair value are recognised under other comprehensive income. Thereby, the fair value loss for these derivatives does not affect the profit for the period or the earnings per share, but rather the total comprehensive income. During the financial year, the fair value gain recognised under other comprehensive income, including the tax effect, totalled EUR 3.8 million (loss of EUR -5.0 million).
Net financial expenses totalled EUR 54.9 million (EUR 47.7 million). The increase was mainly attributable to increased interest expenses as a result of lower capitalisation of interest expenses and a higher amount of interest-bearing debt. In addition, the net financial expenses in the statement of comprehensive income include EUR 1.5 million (EUR 1.4 million) of non-cash expenses related to the option component of the convertible bonds.
Citycon strengthened its financial position by arranging a directed share issue in September. The issue was based upon the authorisation granted by Citycon's Annual General Meeting of 13 March 2007. Waiving the shareholders' pre-emptive subscription rights, the share issue was directed to Finnish and international institutional investors and was carried out in an accelerated book-building process on 21 September 2010. Based on the bids submitted during the book-building process, the company's Board of Directors decided to issue a total of 22 million new shares at a per-share price of EUR 2.87. The aggregate share subscription price was recorded in the invested unrestricted equity fund. The new shares were registered in the Trade Register on 24 September 2010 and trading in them began on the same day on the NASDAQ OMX Helsinki Ltd. The new shares entitle their holders to a dividend for the financial year beginning on 1 January 2010. Following the issue, the number of the company's shares increased to 244,564,972. The new shares accounted for approximately 9.9 per cent of the number of Citycon's shares outstanding prior to the share issue and for 9.0 per cent of shares outstanding after the issue.
Total proceeds from the share issue before commissions and expenses totalled EUR 63.1 million. The company intends to use the proceeds for repayments of its interest-bearing debt, for strengthening its capital structure and financing (re)development projects and for potential acquisitions in line with its investment strategy.
During the financial year, Citycon entered into four loan agreements, each in the amount of EUR 50 million and maturing in five years. New loans strengthen the company's available liquidity and enable it to finance its growth on a long-term basis. The loans will be used to finance investments complying with the company's strategy, such as shopping centre (re)development projects, and to refinance maturing loans.
During the financial year, Citycon repurchased its subordinated convertible capital bonds issued on 2 August 2006 for an aggregate consideration of EUR 4.8 million (including accrued interest). The repurchased principal amount of EUR 5.25 million corresponded to a total of 105 bonds with a face value of EUR 50,000, representing some 5 per cent of the aggregate amount of the convertible bonds maturing in 2013. The repurchased bonds have been cancelled. Following the cancellations, the number of shares available for subscription under the convertible bonds decreased to 16,964,285 and the maximum increase allowed in Citycon's share capital decreased to EUR 22,901,784.75.
Including the 2008 and 2009 buybacks, Citycon has repurchased a total principal amount of EUR 38.75 million of the convertible bonds, corresponding to approximately 35 per cent of the aggregate amount of the convertible bonds. The weighted average repurchase price is 58.1 per cent of the face value of the bonds. The face value of the convertible bonds, originally EUR 110 million, totalled EUR 71.25 million at the end of the year.
The repurchases of the bonds were executed in accordance with term 7 (f) of the convertible bonds' terms and conditions, on the open market. These repurchases were conducted because the market situation allowed the company to repurchase the bonds at a price below their face value and because the repurchases enable the company to strengthen its financial position and reduce its net financial expenses.
The terms and conditions of the convertible bonds in more detail are presented on page 35 in the Financial Statements.
For risk management purposes, Citycon has a holistic Enterprise Risk Management (ERM) programme in place. The aim of risk management is to ensure that the company meets its business targets. The ERM's purpose is to generate updated and consistent information for the company's senior executives and Board of Directors on any risks threatening the targets set in the strategic and annual plans. More details regarding the company's risk management and risk management principles are available on the corporate website at www.citycon. com/riskmanagement and on pages 35-37 in the Financial Statements.
Citycon's Board of Directors estimates that major short-term risks and uncertainties are associated with economic developments in the company's operating regions – which affects demand for retail premises, rents and vacancy rate – as well as with the cost-efficiency of debt financing, changes in the fair value of investment properties and the execution of redevelopment projects.
Economic fluctuations and trends have a significant influence on demand for leasable premises, vacancy as well as rental levels. Failure in increasing rental income and reducing vacancy constitute one of the key near-term risks for the company. Economic growth has decelerated distinctly in all of the company's operating areas since 2008. In 2010, the general economic trends were more positive, but demand for retail premises did not yet increase significantly. Consequently, the rental of premises continued to be challenging, market rents developed modestly or, in certain locations, decreased. In 2010, real economic growth was positive in all of Citycon's operating countries, in addition to which unemployment remained at above normal levels while inflation remained low (sources: Eurostat, Nordea). Prolonged economic uncertainty may reduce demand for retail premises, weaken tenants' ability to pay rent, limit opportunities for increasing rents and raise properties' vacancy rates.
The refurbishment and redevelopment of retail properties is an integral part of Citycon's growth strategy. Implementation of this strategy requires both equity and debt financing. Due to the financial crisis, the financial market weakened markedly in 2008 and the situation remained challenging throughout 2009. Banks' willingness to lend money to property investment companies has not recovered to pre-crisis levels, although the availability, and pricing, of financing markedly improved during 2010. The stricter regulations of banks in the future will maintain the abnormally high costs of bank financing. In particular, the cost of long-term unsecured bank loans will probably be much higher in coming years than before the financial crisis. The majority of Citycon's bank loan agreements concluded prior to the financial crisis will mature between 2011 and 2014. Refinancing these will most probably involve higher loan margins. Higher loan margins, together with the expected general rise in interest rates, will most probably lead to more expensive debt financing in coming years.
Citycon's financial position is good. At the end of the year, the company's available liquidity totalled EUR 245 million, consisting mainly of committed long-term credit facilities and cash and cash equivalents. Citycon is capable of financing its current projects in their entirety as planned.
A number of factors contribute to the value of the company's retail properties, such as general and local economic developments, the level of interest rates, expected inflation, developments in market rent levels, vacancy rates and property investors' yield requirements as well as competition. Investment property value trends continue to be subject to unusual levels of uncertainty due to the challenging economic situation and prevailing uncertainty in the financial markets throughout the countries in which the company operates. In addition, unemployment rates have remained high in the Baltic countries, while unemployment has not remarkably declined in Finland or in Sweden. All in all, unemployment has still remained at higher levels than before the financial crisis.
As investment property values declined due to the financial crisis in 2008 and 2009, Citycon recognised fair value losses on its investment properties for those years. During 2009, trading activity in the property market remained at low levels. Although it picked up in 2010, trading activity remained relatively modest especially in Finland and Estonia. However, investment property values began to increase during 2010, and Citycon recognised a total of EUR 50.8 million in fair value gains. While changes in the fair value of investment properties have an effect on the company's profit for the financial year, they do not have an immediate impact on cash flow.
A key element in Citycon's strategy is the development of existing properties to meet tenant needs more effectively. The most central short-term risks related to development projects include leasing new premises in the currently challenging economic environment and investment costs. Citycon has major development projects underway in Finland and Sweden and is preparing new (re)development projects throughout its countries of operation. Consequently, the leasable area within Citycon's properties is expected to increase significantly in coming years. Successful implementation of new development projects is of primary importance to Citycon's financial development and growth. The key risk involves demand for retail premises as well as market rent levels in an environment characterised by slower economic growth. For new projects, it may prove difficult to attain an adequate pre-leasing rate at sufficient rental levels, both of which would be required in order for a project to be considered viable and to be launched. In 2010, construction costs in Finland and Sweden began to rise. In the future, this could prevent Citycon from implementing all of its planned development projects or cause the profitability of initiated development projects to be lower than expected. Another risk associated with development projects relates to the investment schedule. If a project's implementation exceeds the planned timeframe, this often has a negative effect on both rental income and costs.
Citycon's goal is to be the forerunner in the responsible shopping centre business and to promote sustainable development within the shopping centre operations. The location of Citycon's shopping centres in city centres, local centres or generally adjacent to major traffic flows, combined with excellent public transport connections, make them well positioned to face the demands of sustainable development.
Citycon's objective is to include environmental responsibility measures in all of its operations and to integrate them into daily activities as a part of normal practice. In 2009, the company initiated the Green Shopping Centre Management programme to foster sustainable development in all shopping centres owned by the company. All Citycon's shopping centres were evaluated under the programme during the second quarter of the year. According to this evaluation, almost all shopping centres showed improvement with respect to the various elements of sustainable development from the previous year. The average Green Index illustrating the 2010 evaluation results rose in all Citycon properties by 26 per cent from the previous year.
The company defined its long-term objectives related to environmental responsibility in connection with its strategic planning in summer 2009. Citycon has set targets for its carbon footprint, energy consumption, water consumption, waste recycling rate, land use and sustainable construction. The results of environmental responsibility are presented in more detail in the Annual and Sustainability Report 2010.
Citycon's total energy consumption covers shopping centres owned by Citycon and other properties where Citycon's share of ownership is at least 50 per cent. Cases where the energy purchase agreement for the entire property is under a tenant's responsibility have been excluded from reporting. Citycon has limited the reported electricity consumption to such areas that it can directly influence. These include general lighting, ventilation, general cooling level, lifts and escalators, and other building technical systems, excluding electricity consumption used by tenants. In 2010, electricity consumption decreased by 2 per cent from the previous year, to 104.7 gigawatt hours (107.0 GWh). Based on a study conducted by an external party, the impact from the change in permitted Sunday opening hours was minor, the growth in consumption was some 1.5 per cent (source: Energiakolmio). Heating energy consumption came to 170.7 gigawatt hours (140.9 GWh). The exceptionally cold periods at the beginning and the end of the year raised heat consumption by 21 per cent from the previous year. Weather-normalised heat consumption increased only by 4 per cent, to 121.9 gigawatt hours (117.7 GWh). The annual 1–2 per cent reduction target set for energy consumption was met as regards electricity consumption.
Energy consumption by properties constitutes 98.6 per cent (98.8%) of the carbon footprint. Consequently, the increase in the carbon footprint was mainly caused by the higher consumption of heating energy. In 2010, the carbon footprint totalled 64,129 tonnes of CO2 equivalent (56,948 tnCO₂e). The annual target for reducing the carbon footprint was not attained.
The total water consumption in Citycon-owned retail properties in 2010 was 569,021 cubic metres (532,651 cubic metres), including water consumed by the real estate companies and tenants. The exceptionally warm summer caused a distinct peak in water consumption during June–August, as the cooling capacity of air conditioning equipment and grocery store refrigerators was improved by sprinkling condensers. Accordingly, annual consumption rose by 6.8 per cent. Within the framework of environmental responsibility, our long-term water consumption target was set at 3.5 litres per visitor per year. In 2010, shopping centres' average water consumption per visitor totalled 3.9 litres (4.0 l). Hence, the reduction target set for water consumption by visitor in 2010 was achieved.
Total waste volume in Citycon's shopping centres amounted to 12,979 tonnes (11,275 tonnes), landfill waste accounting for 2,917 tonnes (2,892 tonnes) or 22.5 per cent (25.7%). The recycling rate in our shopping centres was 77.1 per cent
(73.9%). Both long-term targets for waste management have already been attained during the first year of the company's environmental responsibility scheme.
In late March, the Liljeholmstorget construction project was awarded the platinum LEED® (Leadership in Energy and Environmental Design) environmental certificate, the highest of its kind. Liljeholmstorget's certificate is the first platinum certificate awarded to a shopping centre in Europe. The Rocca al Mare redevelopment project, in turn, was awarded a silver LEED environmental certificate in January, the first of its kind in the Baltic countries. The Trio shopping centre's redevelopment project received its certificate in June 2009, being the first to do so in the Nordic countries. All three projects were Citycon's pilot projects in sustainable construction. Environmental certification forms an essential element of Citycon's efforts towards sustainable development. The company's shopping centre project underway in the Martinlaakso district in Vantaa has been registered to apply for LEED classification.
Claims have been submitted to the company relating to Citycon's business operations which may possibly lead to legal proceedings. In the company's view, it is improbable that the aforementioned claims or associated liabilities will have any significant impact on the Group's financial position or financial results.
Citycon Oyj's Annual General Meeting (AGM) was held in Helsinki on 11 March 2010. The AGM adopted the company's financial statements and discharged the members of the Board of Directors and the Chief Executive Officer from liability for the financial year 2009. The AGM decided on a dividend of EUR 0.04 per share for the financial year 2009 and, in addition, on an equity return of EUR 0.10 per share from the invested unrestricted equity fund. The record date for the dividend payout and equity return was 16 March 2010, and the dividend and equity return were paid on 7 April 2010.
Citycon Oyj's Extraordinary General Meeting (EGM) took place in Helsinki on 17 May 2010. The EGM decided that the number of Board members should be ten and elected Chaim Katzman to the company's Board of Directors for a term expiring at the end of the next Annual General Meeting.
Other decisions made by the General Meetings of shareholders are reported on the corporate website at www.citycon.com/gm.
Under the Articles of Association, the Board of Directors consists of a minimum of five and a maximum of ten members (Directors) who are elected by the Annual General Meeting for a term of one year at a time. A Director may only be dismissed upon a decision by the General Meeting of shareholders. Amendments to the Articles of Association may be adopted only by the General Meeting of shareholders and require a 2/3 majority vote.
In 2010, Citycon's Board of Directors included Ronen Ashkenazi, Gideon Bolotowsky, Raimo Korpinen, Tuomo Lähdesmäki, Claes Ottosson, Dor J. Segal, Thomas W. Wernink, Per-Håkan Westin and Ariella Zochovitzky. At the Extraordinary General Meeting held on 17 May 2010, Chaim Katzman was also elected to the Board. The Chairman of the Board of Directors was Thomas W. Wernink from 1 January–14 June 2010 and Chaim Katzman from 15 June–31 December 2010. Tuomo Lähdesmäki was Deputy Chairman of the Board of Directors from 1 January–10 March 2010 and Ronen Ashkenazi from 11 March–31 December 2010.
Since 2006, the company's auditor has been Ernst & Young Oy, a firm of authorised public accountants, which has designated Authorised Public Accountant Tuija Korpelainen to act as the chief auditor of Citycon, also from 2006.
Shareholders, Share Capital and Shares
Citycon's shares have been listed on the Helsinki stock exchange (NASDAQ OMX Helsinki Ltd) since 1988. Citycon is a Mid Cap Company in the Financials sector, sub-industry Real Estate Operating Companies. Its trading code is CTY1S and its shares are traded in euros. The ISIN code used in international securities clearing is FI0009002471.
In 2010, the number of Citycon shares traded on the NASDAQ OMX Helsinki totalled 115.0 million (149.3 million) for a total value of EUR 326.4 million (EUR 296.1 million). The highest quotation during the year was EUR 3.31 (EUR 3.16), and the lowest EUR 2.29 (EUR 1.30). The reported tradeweighted average price was EUR 2.84 (EUR 1.99), and the share closed at EUR 3.08 (EUR 2.94). The company's year-end market capitalisation totalled EUR 753.3 million (EUR 649.9 million).
The number of Citycon's Finnish shareholders continued to increase during the year. On 31 December 2010, Citycon had a total of 4,409 (3,733) registered shareholders, of which nine were account managers of nominee-registered shares. Nomineeregistered and other international shareholders held 209.6 million (198.7 million) shares, or 85.7 per cent (89.9%) of the company's share capital and voting rights. Information on the company's major shareholders and on the breakdown of shareholdings as well as on the notifications of changes in shareholdings received during the year can be found on page 51 of the Financial Statements.
At the beginning of the financial year, the company's registered share capital totalled EUR 259,570,510.20 and the number of shares was 221,059,735. During the year, there were no changes in the company's share capital. The number of shares, however, grew by 1,301,217 as a result of share subscriptions made by exercising option rights and by 204,020 shares which the company issued through directed, free share issues in May as part of its long-term, share-based incentive plan. In addition, the company arranged a directed share issue of 22,000,000 new shares. This share issue is discussed in more detail above. In total, the number of the company's shares increased by 23,505,237 shares. At the end of the year, the company's registered share capital totalled EUR 259,570,510.20, and the number of shares amounted to 244,564,972. The company has a single series of shares, and each share entitle a shareholder to one vote at General Meetings of shareholders. The shares have no nominal value.
Pursuant to a share issue authorisation granted by the AGM of 2007, the Board of Directors can still decide on a maximum of 50,033,412 shares to be issued or treasury shares to be conveyed. Based on this authorisation, the Board may also decide on the grant of stock options and other special rights. This authorisation is valid until 13 March 2012.
The AGM of 2010 authorised the Board of Directors to decide on the acquisition of 20 million of the company's own shares. This acquisition authorisation will be valid until the next Annual General Meeting. The company had no treasury shares at the end of the financial year.
At year-end, the Board of Directors had no other authorisations.
The Annual General Meeting held on 15 March 2004 authorised the issue of a maximum of 3,900,000 A/B/C stock options to the personnel of Citycon Group. The stock options C are listed on the NASDAQ OMX Helsinki.
The subscription period for Citycon's stock options 2004B expired at the end of March. A total of 1,301,217 shares were subscribed under these options, all of them in the period of January–March. The subscription price received by the company for these shares, a total of EUR 3.3 million, was
recorded in the invested unrestricted equity fund, in accordance with the terms and conditions of the stock options. The number of unexercised outstanding stock options 2004B totalled 17,002. These stock options were deleted as worthless from their holders' book-entry accounts.
The table below includes information on the remaining stock options 2004. The full terms and conditions of the stock option plan are available on the corporate website at www.citycon.com/options.
| 2004C | |
|---|---|
| No. of options granted | 1,050,000 |
| No. held by Veniamo-Invest Oy ¹⁾ | 250,000 |
| Subscription ratio, option/shares | 1:1.2127 |
| Subscription price per share, EUR ²⁾ | 4.2213 |
| Subscription period began | 1 Sept. 2008 |
| Subscription period ends | 31 March 2011 |
| No. of options exercised | - |
| No. of shares subscribed with options | - |
| No. of options available for share subscription 1,050,000 | |
| No. of shares that can be subscribed | 1,273,335 |
1) Veniamo-Invest Oy, a wholly-owned subsidiary of Citycon Oyj, cannot subscribe for its parent company's shares.
2) Following the dividend payment and equity return in 2010. The share subscription price is reduced by half of the per-share dividends paid and per-share equity returned.
The members of the Board of Directors of Citycon, its CEO, the other Corporate Management Committee members and related parties held a total of 561,413 company shares on 31 December 2010. These shareholdings represent 0.2 per cent of the company's total shares and total voting rights.
At year end 2010, the CEO of Citycon held a total of 140,000 stock options 2004C. Other members of the Corporate Management Committee jointly held a total of 210,000 stock options 2004C. The maximum number of shares that can be subscribed through exercise of these outstanding stock options amounts to 424,445 new shares. Members of the Board of Directors do not participate in the company's share-based incentive plans.
Updated information of the share and stock option holdings of the members of the Board of Directors and the members of the Corporate Management Committee are available on the corporate website at www.citycon.com/insiders.
Information on the company's CEO's executive contract and its terms and conditions can be found on page 41 in the Financial Statements.
On 13 January 2011, Marcel Kokkeel was appointed to be the company's new Chief Executive Officer, effective 24 March 2011. Mr Kokkeel is 52 (b. 1958) and holds a degree in law from the University of Amsterdam, the Netherlands, which is his home country.
Also on 13 January 2011, Michael Schönach was appointed Executive Vice President, Finnish Operations and a member of the Corporate Management Committee, effective 1 March 2011.
After the end of the financial year, the number of Citycon's properties decreased by two following divestments of non-core properties for a total of approximately EUR 2.5 million. The sold properties were the mutual real estate company Kiinteistö Oy Naantalin Tullikatu 16 and the commercial building owned by it, located in Naantali, as well as a real estate called Hakarinne in Tapiola, Espoo, both in Finland.
The parent company's retained earnings amount to EUR 13.6 million, including the loss for the period, EUR -5.0 million. On 31 December 2010, the funds in the parent company's invested unrestricted equity fund amounted to a total of EUR 201.5 million.
The Board of Directors proposes to the Annual General Meeting of 23 March 2011 that a per-share dividend of EUR 0.04 be paid out for the financial year ending on 31 December 2010, and that a return of equity of EUR 0.10 per share be returned from the invested unrestricted equity fund. The Board of Directors proposes that the record date for dividend payment and equity return be 28 March 2011 and that the dividend and equity return be paid on 8 April 2011.
Moreover, the Board of Directors proposes that the loss for the period is recognised in retained earnings.
In the view of the Board of Directors, the proposed distribution of profits and the return of equity do not pose a risk to the company's solvency.
Citycon continues to focus on increasing its net cash from operating activities and direct operating profit. In order to implement this strategy, the company will pursue value-added activities while monitoring the market for potential acquisitions.
The initiation of planned projects will be carefully evaluated against strict pre-leasing criteria. Citycon intends to continue the divestment of its non-core properties to improve the property portfolio and strengthen the company's financial position. The company is also considering alternative property financing sources.
In 2011, Citycon expects its turnover and direct operating profit to grow compared with the previous year, based on the existing property portfolio. The company also expects its direct result to increase from the previous year. This estimate is based on already completed (re)development projects and those completed in the future, as well as on the prevailing inflation and euro-Swedish krona exchange rate level. Properties taken offline for planned (re)development projects will reduce net rental income during the year. In addition, properties taken offline for planned (re)development projects will reduce net rental income during the year.
The company will specify the growth estimates when publishing Q1 results at the latest, when the operational performance can be estimated more precisely.
Helsinki, 8 February 2011
Citycon Oyj Board of Directors
| 2010 | 2009 | |
|---|---|---|
| Direct result (EPRA Earnings), EUR million | 47.3 | 50.9 |
| Direct result per share, diluted (Diluted EPRA EPS), EUR | 0.21 | 0.23 |
| EPRA NAV, EUR ¹⁾ | 3.79 | 3.64 |
| EPRA NNNAV, EUR | 3.49 | 3.35 |
| EPRA Net Initial Yield (NIY) (%) | 6.3 | 6.9 |
| EPRA "topped-up" NIY (%) | 6.4 | 7.1 |
| EPRA vacancy rate (%) | 4.9 | 5.0 |
1) In accordance with a change in the EPRA's Best Practice Recommendations 2010, Citycon has changed EPRA NAV calculations.
The following tables, numbers 1 - 5, present how EPRA Performance Measures are calculated. Tables 6 - 8 present the EPRA Key Performance Measures for the last 5 years and direct result on a quarterly basis.
| EUR million | 2010 | 2009 |
|---|---|---|
| DIRECT RESULT | ||
| Net rental income | 127.2 | 125.4 |
| Direct administrative expenses | -22.5 | -17.7 |
| Direct other operating income and expenses | 0.3 | 0.0 |
| Direct operating profit | 105.0 | 107.7 |
| Direct net financial income and expenses | -55.1 | -47.7 |
| Direct current taxes | -0.6 | -6.2 |
| Change in direct deferred taxes | -0.3 | -0.2 |
| Direct non-controlling interest | -1.8 | -2.8 |
| Total | 47.3 | 50.9 |
| 2) DIRECT RESULT PER SHARE | ||
|---|---|---|
| EUR million | 2010 | 2009 |
|---|---|---|
| Direct result per share, diluted (Diluted EPRA EPS) | ||
| Direct result (EUR million) (Table 1) | 47.3 | 50.9 |
| Expenses from convertible capital loan, the tax effect deducted (EUR million) | 4.1 | 4.2 |
| Profit used in the calculation of diluted direct result per share (EUR million) | 51.4 | 55.1 |
| Average number of shares, million | 228,148.2 | 221,035.1 |
| Convertible capital loan impact, million | 17,519.6 | 18,466.5 |
| Adjustments for stock options, million | 1.8 | - |
| Adjustments for long-term share-based incentive plan, million | 136.8 | 0.5 |
| Diluted average number of shares, million | 245,806.3 | 239,502.1 |
| Direct result per share, diluted (Diluted EPRA EPS), EUR | 0.21 | 0.23 |
¹⁾ Calculation of the number of shares is presented in Note 16. Earnings per share.
| Profit/loss for the period attributable to parent company shareholders | 78.3 | -34.3 |
|---|---|---|
| Total | 31.1 | -85.2 |
| Indirect non-controlling interest | -10.3 | 5.3 |
| Change in indirect deferred taxes | -11.6 | 7.3 |
| Indirect current taxes | - | -0.3 |
| Movement in fair value of financial instruments | 0.2 | -0.1 |
| Indirect administrative expenses | -0.8 | -0.1 |
| Profit/loss on disposal of investment property | 2.6 | 0.1 |
| Net fair value gains/losses on investment property | 50.8 | -97.4 |
| INDIRECT RESULT |
| 3) EPRA NAV AND EPRA NNNAV | |||
|---|---|---|---|
| Number of shares on | |||
| EUR million | the balance sheet date (1,000) |
per share, EUR |
|
| 2010 | |||
| Equity attributable to parent company shareholders | 849.5 | 244,565.0 | 3.47 |
| Deferred taxes from the difference between the fair value | |||
| and fiscal value of investment properties | 59.7 | 244,565.0 | 0.24 |
| Fair value of financial instruments ¹⁾ | 18.8 | 244,565.0 | 0.08 |
| Net asset value (EPRA NAV) | 928.1 | 244,565.0 | 3.79 |
| Deferred taxes from the difference between the fair value | |||
| and fiscal value of investment properties | -59.7 | 244,565.0 | -0.24 |
| Difference between the secondary market price and fair value | |||
| of bonds and capital loans ²⁾ | 3.6 | 244,565.0 | 0.01 |
| Fair value of financial instruments ¹⁾ | -18.8 | 244,565.0 | -0.08 |
| EPRA NNNAV | 853.1 | 244,565.0 | 3.49 |
| Number of shares on the balance sheet date EUR million |
per share, EUR |
||
|---|---|---|---|
| 2009 | (1,000) | ||
| Equity attributable to parent company shareholders | 731.1 | 221,059.7 | 3.31 |
| Deferred taxes from the difference between the fair value | |||
| and fiscal value of investment properties | 48.7 | 221,059.7 | 0.22 |
| Fair value of financial instruments ¹⁾ | 24.8 | 221,059.7 | 0.11 |
| Net asset value (EPRA NAV) | 804.6 | 221,059.7 | 3.64 |
| Deferred taxes from the difference between the fair value | |||
| and fiscal value of investment properties | -48.7 | 221,059.7 | -0.22 |
| Difference between the secondary market price and fair value | |||
| of bonds and capital loans ²⁾ | 9.5 | 221,059.7 | 0.04 |
| Fair value of financial instruments ¹⁾ | -24.8 | 221,059.7 | -0.11 |
| EPRA NNNAV | 740.6 | 221,059.7 | 3.35 |
In accordance with a change in the EPRA's Best Practice Recommendations 2010, Citycon has changed EPRA NAV calculations. Fair value of financial instruments include all financial instruments. Previously fair value of financial instruments included only fair value of instruments outside the scope of hedge accounting.
When calculating the EPRA NNNAV in accordance with EPRA's recommendations, the shareholders' equity is adjusted using EPRA's guidelines so that bonds and capital loans are valued based on secondary market prices. In accordance with Citycon's accounting policies, the carrying amount and fair value of bonds and capital loans are different from this secondary market price. Due to this, in the calculation of this key figure subordinated capital loan 1/2005, convertible capital loan 1/2006 and bond 1/2009 have been in valued using the price derived secondary market on the balance sheet date. The secondary market price for convertible capital loan 1/2006 was 95.50 per cent (87.50%) and for Bond 1/2009 99.00 per cent (100.00%) as of 31 December 2010. The secondary market price for subordinated capital loan 1/2005 was 100.08 per cent as of 31 December 2009. The difference between the secondary market price and the fair value of the bonds and capital loans was EUR 3.6 million (EUR 9.5 million) as of 31 December 2010.
4) EPRA NET INITIAL YIELD (NIY) (%) AND EPRA "TOPPED-UP" NIY (%)
| EUR million | 2010 | 2009 |
|---|---|---|
| Fair value of investment properties determined by the external appraiser | 2,361.1 | 2,162.4 |
| Less (re)development properties, lots, unused building rights and properties, | ||
| the valuation of which is based on the value of the building right | -487.4 | -463.3 |
| Completed property portfolio | 1,873.7 | 1,699.1 |
| Plus the estimated purchasers' transaction costs | 37.1 | 32.9 |
| Gross value of completed property portfolio (A) | 1,910.8 | 1,732.0 |
| Annualised gross rents for completed property portfolio | 170.8 | 163.3 |
| Property portfolio's operating expenses | -50.2 | -43.8 |
| Annualised net rents (B) | 120.6 | 119.5 |
| Plus the notional rent expiration of rent free periods or other lease incentives | 2.4 | 2.9 |
| Topped-up annualised net rents (C) | 123.0 | 122.4 |
| EPRA Net Initial Yield (NIY) (%) (B/A) | 6.3 | 6.9 |
| EPRA "topped-up" NIY (%) (C/A) | 6.4 | 7.1 |
EPRA NIY is calculated as the annualised rental income based on the valid rent roll on the balance sheet date, divided by the gross market value of the completed property portfolio (including estimated transaction costs and excluding properties under development, lots, unused building right and properties, the valuation of which is based on the value of the building right). Net rental yield instead is calculated over the past 12 month period, by constructing an index from the monthly net rental income and computational monthly market value figures. Net rental yield includes the total property portfolio and excludes estimated transaction costs.
EPRA vacancy rate is calculated using the same principles as economic occupancy rate.
| EUR million | 2010 | 2009 |
|---|---|---|
| Annualised potential rental value of vacant premises | 9.6 | 9.5 |
| ./. Annualised potential rental value for the whole portfolio | 196.5 | 190.1 |
| EPRA vacancy rate (%) | 4.9 | 5.0 |
| 6) EPRA PERFORMANCE MEASURES FOR FIVE YEARS | |||||
|---|---|---|---|---|---|
| 2010 | 2009 | 2008 | 2007 | 2006 | |
| Direct result (EPRA Earnings), EUR million | 47.3 | 50.9 | 43.8 | 38.3 | 30.4 |
| Direct result per share, diluted (Diluted EPRA EPS), EUR | 0.21 | 0.23 | 0.20 | 0.19 | 0.19 |
| EPRA NAV, EUR | 3.79 | 3.64 | 3.96 | 4.80 | 3.54 |
| EPRA NNNAV, EUR | 3.49 | 3.35 | 3.80 | 4.42 | 3.14 |
| EPRA Net Initial Yield (NIY) (%) | 6.3 | 6.9 | N/A | N/A | N/A |
| EPRA "topped-up" NIY (%) | 6.4 | 7.1 | N/A | N/A | N/A |
| EPRA vacancy rate (%) | 4.9 | 5.0 | 4.0 | 4.3 | 2.9 |
| 7) DIRECT AND INDIRECT RESULT FOR FIVE YEARS | |||||
|---|---|---|---|---|---|
| EUR million | 2010 | 2009 | 2008 | 2007 | 2006 |
| Direct result | |||||
| Net rental income | 127.2 | 125.4 | 121.8 | 103.4 | 82.8 |
| Direct administrative expenses | -22.5 | -17.7 | -16.5 | -16.5 | -12.3 |
| Direct other operating income and expenses | 0.3 | 0.0 | 0.1 | 0.5 | 0.6 |
| Direct operating profit | 105.0 | 107.7 | 105.3 | 87.4 | 71.1 |
| Direct net financial income and expenses | -55.1 | -47.7 | -54.2 | -44.7 | -32.0 |
| Direct current taxes | -0.6 | -6.2 | -4.8 | -3.4 | -5.5 |
| Change in direct deferred taxes | -0.3 | -0.2 | 0.2 | -0.2 | -3.0 |
| Direct non-controlling interest | -1.8 | -2.8 | -2.8 | -0.9 | -0.3 |
| Total | 47.3 | 50.9 | 43.8 | 38.3 | 30.4 |
| Direct result per share (diluted), (diluted EPRA EPS), EUR | 0.21 | 0.23 | 0.20 | 0.19 | 0.19 |
| Indirect result | |||||
| Net fair value gains/losses on investment property | 50.8 | -97.4 | -216.1 | 211.4 | 120.1 |
| Profit/loss on disposal of investment property | 2.6 | 0.1 | 0.1 | -0.1 | 5.9 |
| Indirect administrative expenses | -0.8 | -0.1 | -0.4 | 0.0 | -0.6 |
| Indirect other operating income and expenses | - | - | 6.0 | 0.0 | - |
| Indirect one-off financial income and expenses (net) | - | - | - | - | -0.9 |
| Movement in fair value of financial instruments | 0.2 | -0.1 | -3.1 | -0.6 | 2.0 |
| Indirect current taxes | - | -0.3 | -1.8 | 0.0 | -1.9 |
| Change in indirect deferred taxes | -11.6 | 7.3 | 29.7 | -46.0 | -28.8 |
| Indirect non-controlling interest | -10.3 | 5.3 | 17.6 | -2.7 | -1.3 |
| Total | 31.1 | -85.2 | -167.9 | 162.1 | 94.5 |
| Indirect result per share, diluted, EUR | 0.13 | -0.39 | -0.76 | 0.71 | 0.54 |
| Profit/loss for the period attributable to | |||||
| parent company shareholders | 78.3 | -34.3 | -124.1 | 200.3 | 124.9 |
| EUR million | Q4/2010 | Q3/2010 | Q2/2010 | Q1/2010 |
|---|---|---|---|---|
| Indirect result | ||||
| Net fair value gains/losses on investment property | 11.3 | 15.8 | 22.9 | 0.8 |
| Losses/profit on disposal of investment property | -0.1 | -0.8 | 0.3 | 3.3 |
| Indirect administrative expenses | -0.2 | -0.2 | -0.3 | -0.2 |
| Movement in fair value of financial instruments | 0.7 | 0.0 | -0.3 | -0.2 |
| Indirect current taxes | 1.2 | - | -0.6 | -0.6 |
| Change in indirect deferred taxes | -9.2 | -1.8 | 0.0 | -0.6 |
| Indirect non-controlling interest | -2.8 | -2.7 | -3.8 | -0.9 |
| Total | 0.9 | 10.2 | 18.3 | 1.6 |
| Indirect result per share, diluted, EUR | 0.00 | 0.04 | 0.08 | 0.01 |
| Profit/loss for the period attributable | ||||
| to parent company shareholders | 14.4 | 22.5 | 28.4 | 13.0 |
| EUR million | Q4/2009 | Q3/2009 | Q2/2009 | Q1/2009 |
| Direct result | ||||
| Net rental income | 31.6 | 32.5 | 31.0 | 30.3 |
| Direct administrative expenses | -5.3 | -3.9 | -3.9 | -4.6 |
| Direct other operating income and expenses | 0.0 | 0.0 | 0.0 | 0.0 |
| Direct operating profit | 26.3 | 28.6 | 27.1 | 25.7 |
| Direct net financial income and expenses | -11.9 | -11.7 | -12.1 | -12.0 |
| Direct current taxes | -1.2 | -2.0 | -1.5 | -1.4 |
| Change in direct deferred taxes | -0.1 | 0.1 | -0.2 | 0.0 |
| Direct non-controlling interest | -0.6 | -0.7 | -0.7 | -0.7 |
| Total | 12.5 | 14.2 | 12.6 | 11.6 |
| Direct result per share (diluted), (diluted EPRA EPS), EUR | 0.06 | 0.06 | 0.06 | 0.05 |
| Indirect result | ||||
| Net fair value gains/losses on investment property | -38.6 | -1.2 | -26.0 | -31.6 |
| Losses/profit on disposal of investment property | - | - | - | 0.1 |
| Indirect administrative expenses | -0.1 | - | - | - |
| Movement in fair value of financial instruments | -0.1 | 0.0 | 0.3 | -0.3 |
| Indirect current taxes | - | - | - | -0.3 |
| Change in indirect deferred taxes | 1.4 | -0.4 | 4.7 | 1.5 |
| Indirect non-controlling interest | 1.1 | 0.7 | 1.4 | 2.2 |
| Total | -36.3 | -0.9 | -19.5 | -28.4 |
| Indirect result per share, diluted, EUR | -0.16 | 0.00 | -0.09 | -0.13 |
| Profit/loss for the period attributable to | ||||
| parent company shareholders | -23.8 | 13.3 | -7.0 | -16.8 |
| EUR million | Q4/2010 | Q3/2010 | Q2/2010 | Q1/2010 |
|---|---|---|---|---|
| Direct result | ||||
| Net rental income | 31.8 | 33.0 | 31.8 | 30.6 |
| Direct administrative expenses | -7.6 | -5.0 | -5.5 | -4.3 |
| Direct other operating income and expenses | 0.2 | 0.1 | 0.0 | 0.1 |
| Direct operating profit | 24.3 | 28.0 | 26.3 | 26.4 |
| Direct net financial income and expenses | -14.1 | -14.0 | -14.2 | -12.9 |
| Direct current taxes | 4.1 | -1.5 | -1.4 | -1.8 |
| Change in direct deferred taxes | -0.4 | 0.1 | -0.1 | 0.1 |
| Direct non-controlling interest | -0.5 | -0.3 | -0.6 | -0.4 |
| Total | 13.5 | 12.3 | 10.1 | 11.4 |
| Direct result per share (diluted), (diluted EPRA EPS), EUR | 0.06 | 0.06 | 0.05 | 0.05 |
| EUR million | Note 1 Jan.-31 Dec. 2010 1 Jan.-31 Dec. 2009 | ||
|---|---|---|---|
| Gross rental income | 6 | 185.9 | 177.8 |
| Service charge income | 10.0 | 8.5 | |
| Turnover | 7 | 195.9 | 186.3 |
| Property operating expenses | 8, 11 | 67.4 | 60.2 |
| Other expenses from leasing operations | 9 | 1.3 | 0.7 |
| Net rental income | 127.2 | 125.4 | |
| Administrative expenses | 10, 11, 12 | 23.3 | 17.8 |
| Other operating income and expenses | 13 | 0.3 | 0.0 |
| Net fair value gains/losses on investment property | 17 | 50.8 | -97.4 |
| Profit/losses on disposal of investment property | 17, 23 | 2.6 | 0.1 |
| Operating profit/loss | 157.7 | 10.3 | |
| Financial income | 73.7 | 50.8 | |
| Financial expenses | -128.6 | -98.5 | |
| Net financial income and expenses | 14 | -54.9 | -47.7 |
| Profit/loss before taxes | 102.8 | -37.5 | |
| Current taxes | -0.6 | -6.5 | |
| Change in deferred taxes | -11.8 | 7.0 | |
| Income taxes | 15, 20 | -12.5 | 0.6 |
| Profit/ loss for the period | 90.4 | -36.9 | |
| Profit/loss attributable to | |||
| Parent company shareholders | 78.3 | -34.3 | |
| Non-controlling interest | 12.0 | -2.6 | |
| Earnings per share attributable to parent company shareholders: | |||
| Earnings per share (basic), EUR | 16 | 0.34 | -0.16 |
| Earnings per share (diluted), EUR | 16 | 0.34 | -0.16 |
| Other comprehensive income/expenses | |||
| Net gains/losses on cash flow hedges | 14 | 5.1 | -6.7 |
| Income taxes relating to cash flow hedges | 15, 20 | -1.3 | 1.8 |
| Exchange gains/losses on translating foreign operations | 3.1 | 2.0 | |
| Other comprehensive income/expenses for the period, net of tax | 6.9 | -3.0 | |
| Total comprehensive profit/loss for the period | 97.3 | -39.9 | |
| Total comprehensive profit/loss attributable to | |||
| Parent company shareholders | 83.4 | -38.4 | |
| Non-controlling interest | 13.9 | -1.4 |
| EUR million | Note | 31 Dec. 2010 | 31 Dec. 2009 | |
|---|---|---|---|---|
| ASSETS | ||||
| Non-current assets | ||||
| Investment properties | 17 | 2,367.7 | 2,147.4 | |
| Property, plant and equipment | 18 | 1.0 | 0.7 | |
| Intangible assets | 19 | 1.5 | 0.9 | |
| Deferred tax assets | 20 | 5.6 | 8.6 | |
| Derivative financial instruments and other non-current assets | 21, 22 | 2.3 | 3.8 | |
| Total non-current assets | 2,378.1 | 2,161.4 | ||
| Investment properties held for sale | 23 | 1.5 | 26.0 | |
| Current assets | ||||
| Trade and other receivables | 21, 24 | 37.4 | 46.1 | |
| Cash and cash equivalents | 21, 25 | 19.5 | 19.8 | |
| Total current assets | 56.9 | 65.9 | ||
| Total assets | 2,436.5 | 2,253.2 |
| EUR million | Note | 31 Dec. 2010 | 31 Dec. 2009 |
|---|---|---|---|
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||
| Equity attributable to parent company shareholders | 26 | ||
| Share capital | 259.6 | 259.6 | |
| Share premium fund | 131.1 | 131.1 | |
| Fair value reserve | -18.8 | -22.7 | |
| Invested unrestricted equity fund | 198.8 | 155.2 | |
| Translation reserve | -8.2 | -9.5 | |
| Retained earnings | 287.0 | 217.3 | |
| Total equity attributable to parent company shareholders | 849.5 | 731.1 | |
| Non-controlling interest | 50.7 | 36.8 | |
| Total shareholders' equity | 900.2 | 767.9 | |
| LIABILITIES | |||
| Long-term liabilities | |||
| Loans | 21, 27 | 1,212.4 | 1,175.4 |
| Derivative financial instruments | 21, 22 | 18.7 | 29.4 |
| Financial liabilities at fair value through profit and loss | 21, 22 | - | 2.2 |
| Deferred tax liabilities | 20 | 62.6 | 50.0 |
| Other liabilities | 21 | 0.5 | 1.0 |
| Total long-term liabilities | 1,294.2 | 1,257.9 | |
| Short-term liabilities | |||
| Loans | 21, 27 | 185.3 | 146.3 |
| Derivative financial instruments | 21, 22 | 1.6 | 1.5 |
| Trade and other payables | 21, 28 | 55.3 | 79.7 |
| Total short-term liabilities | 242.2 | 227.4 | |
| Total liabilities | 1,536.3 | 1,485.3 | |
| Total liabilities and shareholders' equity | 2,436.5 | 2,253.2 |
| EUR million | Note 1 Jan. -31 Dec. 2010 1 Jan. - 31 Dec. 2009 | ||
|---|---|---|---|
| Cash flow from operating activities | |||
| Profit/loss before taxes | 102.8 | -37.5 | |
| Adjustments: | |||
| Depreciation and amortisation | 12, 30 | 0.8 | 0.7 |
| Net fair value gains/losses on investment property | 17, 30 | -50.8 | 97.4 |
| Profit/losses on disposal of investment property | 17, 23, 30 | -2.6 | -0.1 |
| Financial income | 14, 30 | -73.7 | -50.8 |
| Financial expenses | 14, 30 | 128.6 | 98.5 |
| Other adjustments | 0.0 | 0.0 | |
| Cash flow before change in working capital | 105.1 | 108.3 | |
| Change in working capital | 30 | 2.9 | 10.7 |
| Cash generated from operations | 108.0 | 119.0 | |
| Interest expenses and other financial expenses paid | -68.0 | -54.4 | |
| Interest income and other financial income received | 0.5 | 0.3 | |
| Realised exchange rate losses and gains | -10.6 | 11.8 | |
| Taxes paid | -9.9 | -10.4 | |
| Net cash from operating activities | 20.0 | 66.2 | |
| Cash flow from investing activities | |||
| Capital expenditure on investment properties | 17 | -132.7 | -130.5 |
| Capital expenditure on PP&E and intangible assets | 18, 19 | -1.0 | -0.4 |
| Sale of investment properties | 17, 23 | 66.3 | 3.1 |
| Net cash used in investing activities | -67.5 | -127.9 | |
| Cash flow from financing activities | |||
| Sale of treasury shares | 26 | 0.2 | - |
| Proceeds from share issue | 26 | 62.2 | - |
| Share subscriptions based on stock options | 26 | 3.3 | - |
| Proceeds from short-term loans | 27 | 109.0 | 149.7 |
| Repayments of short-term loans | 27 | -192.6 | -77.1 |
| Proceeds from long-term loans | 27 | 346.5 | 295.1 |
| Repayments of long-term loans | 27 | -252.2 | -273.0 |
| Dividends and return from the invested unrestricted equity fund | 26 | -31.2 | -30.9 |
| Net cash from financing activities | 45.2 | 63.8 | |
| Net change in cash and cash equivalents | -2.3 | 2.1 | |
| Cash and cash equivalents at period-start | 25 | 19.8 | 16.7 |
| Effects of exchange rate changes | 2.0 | 1.0 | |
| Cash and cash equivalents at period-end | 25 | 19.5 | 19.8 |
| Equity attributable to parent company shareholders | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| EUR million | Share capital |
Share premium fund |
Fair | Invested value unrestricted Translation reserve equity fund |
reserve | Retained earnings |
Total | controlling interest |
Non- Total share- holders' equity |
| Balance at 31 Dec. 2008 | 259.6 | 131.1 | -17.7 | 177.3 | -10.3 | 259.1 | 799.1 | 38.2 | 837.3 |
| Loss for the period | -34.3 | -34.3 | -2.6 | -36.9 | |||||
| Net losses/gains on cash flow hedges, net of tax (Notes 14, 15 and 20) | -5.0 | -5.0 | -5.0 | ||||||
| Exchange gains/losses on translating foreign operations | 0.8 | 0.8 | 1.2 | 2.0 | |||||
| Total other comprehensive expenses/income for the period, net of tax | -5.0 | 0.8 | -4.1 | 1.2 | -3.0 | ||||
| Total comprehensive loss/profit for the period | -5.0 | 0.8 | -34.3 | -38.4 | -1.4 | -39.9 | |||
| Recognised gain in the equity | |||||||||
| arising from convertible bond buybacks (Note 27) | 1.1 | 1.1 | 1.1 | ||||||
| Sale of treasury shares (Note 26) | 0.0 | 0.0 | 0.0 | ||||||
| Dividends and return from the invested unrestricted equity fund (Note 26) | -22.1 | -8.8 | -30.9 | -30.9 | |||||
| Share-based payments (Notes 26 and 29) | 0.2 | 0.2 | 0.2 | ||||||
| Acquisition of non-controlling interests | 0.0 | 0.0 | |||||||
| Balance at 31 Dec. 2009 | 259.6 | 131.1 | -22.7 | 155.2 | -9.5 | 217.3 | 731.1 | 36.8 | 767.9 |
| Profit for the period | 78.3 | 78.3 | 12.0 | 90.4 | |||||
| Net gains/losses on cash flow hedges, net of tax (Notes 14, 15 and 20) | 3.8 | 3.8 | 3.8 | ||||||
| Exchange gains/losses on translating foreign operations | 1.2 | 1.2 | 1.9 | 3.1 | |||||
| Total other comprehensive income/expenses for the period, net of tax | 3.8 | 1.2 | 5.0 | 1.9 | 6.9 | ||||
| Total comprehensive profit/loss for the period | 3.8 | 1.2 | 78.3 | 83.4 | 13.9 | 97.3 | |||
| Share issue (Note 26) | 62.2 | 62.2 | 62.2 | ||||||
| Share subscriptions based on stock options (Notes 26 and 29) | 3.3 | 3.3 | 3.3 | ||||||
| Recognised gain in the equity | |||||||||
| arising from convertible bond buybacks (Note 27) | 0.0 | 0.0 | 0.0 | ||||||
| Sale of treasury shares (Note 26) | 0.2 | 0.2 | 0.2 | ||||||
| Dividends and return from the invested unrestricted equity fund (Note 26) | -22.1 | -8.8 | -30.9 | -30.9 | |||||
| Share-based payments (Notes 26 and 29) | 0.3 | 0.3 | 0.3 | ||||||
| Balance at 31 Dec. 2010 | 259.6 | 131.1 | -18.8 | 198.8 | -8.2 | 287.0 | 849.5 | 50.7 | 900.2 |
As a real estate investment company specialising in retail properties, Citycon operates largely in the Helsinki Metropolitan Area and Finland's major regional centres as well as in Sweden and the Baltic Countries. Citycon is a Finnish, public limited liability company established under Finnish law and domiciled in Helsinki, the address of its registered office being Pohjoisesplanadi 35 AB, FI-00100 Helsinki. The Board of Directors has approved the financial statements on 8 February 2011. In accordance with Finnish Company Law, annual general meeting has the right to not approve the financial statements approved by the Board of Directors and return the financial statements back to the Board of Directors for a correction.
A copy of Citycon's Consolidated Financial Statements is available on the corporate website at www. citycon.fi and from the Group's headquarters at the address Pohjoisesplanadi 35 AB, FI-00100 Helsinki, Finland.
Citycon has prepared its consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS) and applied the IFRS/IAS standards, effective as of 31 December 2010, which refer to the approved applicable standards and their interpretations under European Union Regulation No. 1606/2002. Notes to the consolidated financial statements are also in compliance with Finnish accounting legislation and Community legislation. In addition, the best practices policy recommendations of the European Public Real Estate Association (EPRA) have been applied in preparing Citycon's financial statements. EPRA is the representative body of the publicly traded real estate sector in Europe, publishing recommendations on the presentation of financial information for the sector.
Citycon has used IFRS as the primary basis of its financial statements preparation from the beginning of 2005. Available-for-sale financial assets, derivative contracts and investment properties, are measured at fair value following their initial recognition. In other respects, the consolidated financial statements are prepared at historical cost. The financial statements are shown in millions of euros and rounded in thousands of euros.
Preparing the financial statements under IFRS requires that the company's management make certain accounting estimates and assumptions, which have an effect on the application of the accounting policies and the reported amounts of assets, liabilities, income and expenses, as well as notes to the accounts. These estimates and associated assumptions are based on historical experience and various other factors deemed reasonable under the circumstances, the results of which form the basis of management judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised for the period in which the estimate is revised if the revision affects only that period, or in the current and future periods if the revision affects both current and future periods. The section 'Management's judgement in applying the most significant accounting policies and other key assumptions about future risks and uncertainties' below provides a more detailed description of the factors underlying judgements and assumptions.
3.1 New standards as well as interpretations and changes applied in 2010
The following new standards as well as amendments and interpretations to the existing standards have been adopted in the financial statements 2010:
IAS 27 (amended) Consolidated and separate financial statements (effective from 1 July 2009). The amended standard requires the effects of changes in ownership interests in subsidiaries to be recognised directly in equity, if there is no change in control. The standard also specifies accounting when control is lost. In such a case, any remaining interest in the entity is re-measured to fair value, and a gain or loss is recognised in profit or loss.
IFRS 3 (revised) Business combinations (effective from 1 July 2009). The revised standard continues to apply the acquisition method to business combinations, but with some significant changes compared to the earlier version of IFRS 3. For example, all payments to purchase a business are recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured to fair value through the statement of comprehensive income. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net assets. The revised standard requires that all acquisition-related costs be expensed.
3.2 Interpretations effective in 2010 but not relevant to the Group
The following new standards and changes have been published and they are mandatory for accounting periods beginning on or after 1 January 2010 but did not have impact on Citycon in 2010:
In addition, as a result of the Annual Improvements process of the International Accounting Standards Board (IASB), several minor amendments entered into effect. These Improvements to IFRS had no major effect on Citycon's Financial Statements 2010.
3.3 Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group: The following standards and amendments to existing standards have been published and are mandatory for the group's accounting periods beginning on or after 1 January 2011 or later periods, but the group has not early adopted them. These are not relevant to Citycon, because according to the company's current view, they will not significantly change its accounting policies.
The consolidated financial statements include Citycon Oyj and its subsidiaries, as well as holdings in its associated and joint-venture companies.
Subsidiaries refer to companies in which the Group holds a controlling interest. This controlling interest implies that the Group has the power to govern the entity's financial and operating policies for the purpose of profiting from its operations. The consolidated financial statements have been prepared in accordance with the historical cost convention, under which the historical cost of subsidiary shares in the parent company's non-current assets has been eliminated against the shareholders' equity of the subsidiary on the date of the subsidiary's acquisition. The portion of the acquired company's net assets exceeding their carrying amounts on the acquisition date has primarily been allocated to land and buildings up to their fair value. Subsidiaries are consolidated from the date on which control is transferred to the Group, until the date on which said control ceases.
Intra-Group transactions and profit allocation are eliminated in the consolidated financial statements.
Mutual real estate companies refer to jointly controlled assets included in the consolidated financial statements using proportionate consolidation, as required by IAS 31 Interests in Joint Ventures, whereby the Group's share of assets, liabilities, income and expenses are included in the consolidated financial statements. The proportionate consolidation method applies to all joint ventures of this kind, regardless of the Group's holding in the joint venture.
Citycon has no associated companies as referred to in IFRS, since all mutual real estate companies are stated as jointly controlled assets, as described above.
Property acquisition is treated as such when the Group actually acquires a holding in a property. This acquisition does not generate goodwill, but the entire acquisition cost is allocated to land, buildings and other assets and liabilities.
If the property is included in the acquired business, IFRS 3 Business Combinations will apply, whereby the acquisition cost is allocated to the acquired assets and liabilities at their fair value. Goodwill is the residual stemming from the fair value of the acquired net assets exceeding that of the consideration given.
Transactions denominated in foreign currencies are measured at the exchange rate quoted on the transaction date. Any exchange rate differences resulting from currency translation are entered under financial expenses and income in the income statement.
Monetary receivables and payables denominated in foreign currencies on the balance sheet date are measured at the exchange rate quoted on the balance sheet date. Non-monetary items denominated in foreign currencies and measured at fair value are translated into euros using the exchange rates quoted on the valuation date, while other non-monetary items are measured at the exchange rate quoted on the transaction date.
Foreign subsidiaries' income statements have been translated into euros using average exchange rates quoted for the financial period and balance sheets using the exchange rate quoted on the balance sheet date. Any resulting exchange rate difference is recognised as a translation difference under shareholders' equity. Translation differences resulting from the elimination of the historical cost of foreign subsidiaries and from items included in shareholders' equity following their acquisition, are recognised under shareholders' equity.
Investment property refers to land or a building, or part of a building, held to earn rental income or capital appreciation, or both. Under IAS 40, investment property is measured at fair value, with gains and losses arising from changes in fair values being included in the income statement.
The investment properties are measured initially at cost, including transaction costs such as consultant fees and transfer taxes. After their initial measurement investment properties are subject to a fair value model valuation, which is conducted by an external appraiser for the first time at the end of the quarter following the acquisition.
Fair value is defined as the amount for which an asset could be exchanged between knowledgeable, willing parties in an arms' length transaction. An investment property's fair value reflects the actual market position and circumstances on the balance-sheet date, best manifested in prices paid for properties on the active market on the review date, and the location and condition of these properties corresponding to those of the property under review while applying similar lease or other contracts.
Using International Valuation Standards (IVS), an external professional appraiser conducts the valuation of the company's property at least once a year, or at more regular intervals due to any major changes in the market. During 2010 and 2009, Citycon had its properties valued by an external appraiser on a quarterly basis.
A ten-year cash flow analysis based on the net rental income is used to determine the fair value of investment properties. The basic cash flow is determined by the company's lease agreements valid at the valuation date. Upon the lease's expiry, the market rent assessed by an external appraiser is used to replace the contract rent. Gross rental income less operating expenses and investments equals cash flow, which is then discounted at the property-specific yield requirements. Yield requirements are determined for each property in view of property-specific and market risks. The total value of the property portfolio is calculated as the sum of the individual properties based on the cash- flow method.
Citycon redevelops its investment properties. When Citycon begins to redevelop its existing investment property, the property remains as an investment property, which is measured based on a fair value model in accordance with IAS 40.
The fair value of (re)development projects i.e. investment properties under construction (IPUC) is determined under IAS 40 and Citycon uses a normal cash flow analysis or a special project model to measure the fair value of its (re)development projects, depending on the nature of the project. Both models take account of capital expenditure on the (re)development project and the property's future cash flows according to the (re)development project's schedule. Citycon takes into account the (re)development projects in its fair value evaluation, as soon as the Board of Directors has made a positive investment decision on the project and the external appraiser considers that sufficient information is available for a reliable valuation. In the fair value evaluation on 31 December 2010, Citycon valued 7 properties (4 properties on 31 December 2009) as (re)development projects.
All potential development projects have been left out of the valuation conducted by the external appraiser. The valuation of properties with potential development projects is based on the situation and the estimated rental value on the valuation date. All undeveloped lots, or those under development, are evaluated based on their zoning on the valuation date. The value in each case was set based on market observations.
The fair value of Citycon's investment properties in the balance sheet equals the property portfolio's total value determined by the external appraiser, capital expenditure on development projects that have not been taken into account by the external appraiser, as well as the value of new properties acquired during the reporting quarter.
Gains and losses resulting from fair-value changes for investment properties are stated as separate items in the income statement.
An investment property is derecognised from the statement of financial position on disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposal. As a main rule, investment properties not under construction or development for the purpose of a sale are measured at fair value in accordance with IAS 40 and presented under 'Investment properties' in the statement of financial position. However, if the sale of an operative investment property is deemed probable, such a property is transferred to 'Investment properties held for sale' in the statement of financial position. A sale is deemed highly probable when
the property is actively marketed,
the sale is expected to realise within one year. However, investment properties held for sale are still recognised at fair value in accordance with IAS 40. Investment properties held for sale totalled EUR 1.5 million on 31 December 2010 (EUR 26.0 million on 31 December 2009).
Under IAS 40, a property must be reclassified under inventories in the event of a change in the use of the property, evidenced by development starting with a view to a sale. If an investment property is being built/ developed with a view to a sale, it will be treated in accordance with IAS 2 Inventories: it is recognised either at cost or below at net realisable value. If the property was acquired with a view to a sale, it will also be treated in accordance with IAS 2 Inventories. When a property is treated in accordance with IAS 2 Inventories, the property's value is presented under 'Inventory properties' in the statement of financial position. Citycon had no inventory properties on 31 December 2010 or 31 December 2009.
Property, plant and equipment (PPE) are measured at historical cost less straight-line depreciation and any impairment losses. These assets consist mainly of office machinery and equipment and other tangible assets such as artworks. Machines and equipment leased under finance leases are also recognised within property, plant and equipment.
PPEs are depreciated on a straight-line basis over the asset's expected useful economic life. The asset's useful economic life and estimated residual values are reviewed on an annual basis. If any major differences occur between the values, the depreciation plan is revised to correspond to these new values. The following depreciation periods apply:
Capital gains or losses on the sale of PPEs are recognised in the income statement.
An intangible asset is recognised in the balance sheet, provided its historical cost can be measured reliably and it is probable that its expected economic benefits will flow to the company.
Intangible assets are measured at cost less amortisation and any impairment losses.
These assets include mainly computer software. They are amortised over their useful life on a straightline basis over five years.
4.8 Impairment of tangible and intangible assets On each balance-sheet date, property, plant and equipment and intangible assets are assessed to determine whether there is any indication of impairment. If any indication of an impaired asset exists, the asset's recoverable amount must be calculated. Should the asset's carrying amount exceed its recoverable amount, it is impaired, and the resulting impairment loss is recognised in the income statement.
4.9 Financial assets and liabilities
As required by IAS 39, financial assets are classified into the following categories for measurement purposes:
The classification of a financial asset is determined by the purpose for which the asset is purchased at the time of its purchase.
Loans and other receivables not held for trading include financial assets which the company has created by providing money, goods or services directly to the debtor. Initially recognised at cost, these assets under current and non-current assets are carried at amortised cost. Their balance sheet value is impaired by the amount of any credit loss. In the company's consolidated statements of financial position as at 31 December 2010 and 31 December 2009, loans and other receivables include the items 'Other non-current assets', 'Trade and other receivables' and 'Cash and cash equivalents'.
Available-for-sale financial assets are non-derivative assets carried at fair value. Changes in their fair value are recognised in the fair value reserve under shareholders' equity and in the income statement when the asset is disposed of or it has lost its value to the extent that an impairment loss must be recognised for the asset. Available-for-sale financial assets are intended to be held for an indefinite period and can be sold at a time deemed appropriate. On 31 December 2010 or 31 December 2009, Citycon had no availablefor-sale financial assets.
Citycon concludes derivative contracts for hedging purposes only. Derivative contracts not fulfilling the criteria set for hedge accounting, or for which Citycon has decided not to apply hedge accounting, are classified as financial assets or liabilities at fair value through profit or loss. On 31 December 2010 and 31 December 2009, Citycon didn't have any derivative contracts classified as financial assets at fair value through profit or loss.
Financial liabilities are classified as
Financial liabilities are initially recognised at fair value. Afterwards, financial liabilities excluding derivative debt are recognised at amortised cost using the effective interest method. In the company's consolidated statement of financial position, on 31 December 2010 and 31 December 2009, financial liabilities at amortised cost include the items 'Loans', 'Other liabilities' and 'Trade payables and other payables'. On 31 December 2009 Citycon had derivative contracts classified as financial liabilities at fair value through profit or loss of EUR 2.2 million. On 31 December 2010 Citycon had no such derivative contracts.
Financial assets and liabilities are recognised in the balance sheet on the basis of the settlement date.
Derivatives are initially measured at cost (if available) and re-measured at fair value on each balance sheet date.
Citycon uses interest rate swaps to hedge the interest rate cash flow risk. These interest rate swaps hedge against volatility in future interest payment cash flows (cash flow hedging) resulting from interest rate fluctuations, and the resulting profit fluctuations. Citycon applies hedge accounting to the majority of its interest rate swaps, under IAS 39, according to which the amount of financial instruments' fair value change stemming from effective hedging is recognised under other comprehensive income, whereas the amount stemming from ineffective hedging is recognised in the statement of comprehensive income under financial income and expenses. The amount in the fair value reserve is recognised in the statement of comprehensive income during the period when the cash flow from the hedged item is realised and affects earnings. If the criteria for hedge accounting are not met, changes in fair value are recognised in full through profit or loss.
Interest payments based on interest rate swaps are included in interest expenses. Changes in "fair value through profit or loss" are recognised as financial expenses or income, as hedge accounting is not applied. The fair value of interest rate swaps is shown in current or non-current receivables or short-term or long-term liabilities in the statement of financial position. The fair value of interest rate swaps is based on the present value of estimated future cash flows.
The company uses foreign exchange derivatives to hedge against exchange rate risk relating to financial assets and liabilities denominated in foreign currency. Fair value changes related to foreign exchange derivatives are recognised in the statement of comprehensive income, since fair value changes related to financial assets and liabilities denominated in foreign currencies are also recognised therein.
Under IAS 39, an embedded derivative – a derivative instrument included in another contract, or a host contract, whose financial characteristics are not closely related to those of its host contract – must be separated from the host contract under certain circumstances, accounted for at fair value and changes in its fair value must be recognised in the statement of comprehensive income. The Group has no embedded derivatives.
A financial asset is impaired if its carrying amount exceeds its estimated recoverable amount. If there is objective evidence that a financial asset measured at amortised cost is impaired, the resulting impairment loss must be recognised in the statement of comprehensive income. If the amount of impairment loss decreases during a subsequent financial period and this fall can be regarded as relating to an event after the date of impairment recognition, the asset's impairment will be reversed.
Cash and cash equivalents consist of cash, bank deposits withdrawable on call, and other short-term, highly liquid investments. A maximum maturity of three months from the date of acquisition applies to cash and cash equivalents.
Ordinary shares are classified as equity. The company has a single series of shares, with each share entitling to one vote at general meetings of shareholders. The shares have no nominal value, and there is no maximum amount to share capital.
Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds. Where any group company purchases the company's equity
share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the company's equity holders until the shares are reissued. Where such ordinary shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the company's equity holders.
Provisions are recognised when Citycon has a present legal or constructive obligation as a result of past events, when it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount of this obligation can be made.
Long-term provisions shown in the financial statements are based on net present values.
Leases based on Citycon as a lessor renting out investment properties are classified under operating leases, since Citycon retains a significant share of risks and rewards of ownership. Rental income from operating leases is spread evenly over the lease term.
Citycon also has leases including rent-free periods or rental discounts and which have been agreed in the original lease. Such lease incentives are treated according to SIC Interpretation 15 Operating Leases – Incentives and are recognised on a straight-line basis over the lease term, although rent payments are not received on the same basis. Citycon has also allowed rental discounts which have not been agreed in the original lease. In such cases, the leaseholder has requested a rental discount due to the market situation or the property's (re)development project. Such temporary rental discounts are recognised in the income statement during the period for which rent reductions have been granted.
On behalf of the lessee, Citycon may perform alteration work on premises rented by the lessee and charge the lessee for the resulting costs, in the form of a rent increase. The Group recognises the alterationrelated rent increase as rental income over the lease term. Rent increase and the expense arising from the alteration work are taken into account when measuring the fair value of investment property.
Service charges are recognized in the period in which the expense it relates to is expensed. Service charges are included gross of the related costs in turnover as Citycon considers to act as principal in this respect. Deeming itself the principal is based on the fact that Citycon selects the maintenance service providers for its properties, concludes agreements with property
maintenance suppliers and bears the credit risk associated with maintenance. Service income, such as marketing income, is rec-
ognised for the period during which the services are provided.
A property is deemed as sold when the significant risks and rewards of ownership have been transferred to the buyer.
When property is under (re)development and agreement has been made to sell such property when construction is complete, Citycon considers whether it was agreed to construct a property or to sell a completed property. If agreed to sell the completed property, the property is regarded as sold when the significant risks and rewards of ownership have been transferred to the buyer. If agreed to construct a property, the revenue from disposal is recognised using the percentage of completion method as construction progresses, if the risks and rewards of the work in progress are transferred to the buyer as construction progresses.
Interest income is recognised according to the time that has elapsed, using the effective interest method.
Dividend income is recognised when the right to receive a dividend is established.
Borrowing costs are usually expensed as incurred. However, borrowing costs, such as interest expenses and arrangement fees, directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset. A qualifying asset is an asset that necessarily takes a substantial period of time to be ready for its intended use or sale. Capitalisation commences when the refurbishment of a property, or the construction of a new building or extension, begins and ceases once the building is ready for lease. Capitalisable borrowing costs include costs of funds borrowed for a construction project or costs attributable to a construction project multiplied by the capitalisation rate. The capitalisation rate is the weighted average cost of Citycon's borrowings for the financial year. Borrowing costs arising from the purchase cost of land are also capitalised on the development project, but only when activities necessary to preparing the asset for development are in progress on the purchased land.
Loan-related transaction expenses clearly associated with a specific loan are included in the loan's cost on an accrual basis and recognised as interest expenses, using the effective interest method.
Income taxes include taxes based on the taxable income of Group companies for the financial period, adjustments for previous periods' taxes and changes in deferred taxes. Tax based on taxable income for the period is calculated in accordance with the tax legislation enacted in each country.
Deferred tax assets and liabilities are calculated on temporary differences arising between the tax bases of assets and liabilities, and their carrying amounts. A major temporary difference may arise between the fair value and taxable value of investment properties. In such a case, taxes are calculated on the difference between the property's fair value and the debt-free acquisition cost of shares in the mutual real estate company in question, or the non-depreciated residual value of the directly owned property.
It is the company's policy to realise its shareholding in property companies by selling the shares it holds. For properties owned abroad, such deferred taxes are not recognised because, due to the ownership structure, property disposal does not lead to tax implications.
No deferred tax on subsidiaries' retained earnings is recognised, to the extent that the difference is unlikely to be discharged in the foreseeable future.
Deferred tax assets are recognised to the extent that it appears probable that future taxable profit will be available, against which the temporary differences can be utilised.
If the recognition of deferred taxes is attributable to an item recognised in shareholders' equity, such as a change in the fair value of a derivative instrument used for hedging purposes, deferred taxes will also be recognised in shareholders' equity.
The tax rate enacted by the balance sheet date is used to determine deferred tax.
Leases, for which Citycon acts as a lessee, are classified as finance leases and recognised as assets and liabilities if the risks and rewards related to the property have been passed on to the company. Leases are classified at their inception and recognised at the lower of the present value of the minimum lease payments, and the fair value of the asset under PPE and financial liabilities. PPE is depreciated over its useful economic life or during the lease term. Lease payments in the income statement are recognised as interest or the repayment of financial liabilities.
Leases are classified as operating leases if substantially all of the risks and rewards inherent in holding such leased assets have not been transferred to the lessee.
The Group's employee pension cover is based on statutory pension insurance. Pension schemes are classified into two categories: defined contribution plans and defined benefit plans. Where contributions under defined contribution plans are recognised in the income statement for the period during which such contributions are made, defined benefit pension plans are based on actuarial calculations.
Defined benefit schemes' assets are measured at fair value, their obligations at discounted present value and any net surplus or deficit is recognised in the balance sheet. Actuarial gains and losses are charged or credited to equity through other comprehensive income in the period in which they arise. Service cost is spread systematically over the working life. Professional actuaries perform these calculations using the projected credit method.
Citycon has applied IFRS 2 Share-based Payment to its stock options granted after 7 November 2002 and not vested before 1 January 2005, and to the long-term share-based incentive plan decided by the Board of Directors on 26 April 2007. Such stock options and share-based incentive plans are measured at fair value on the grant date and expensed over their vesting period. Stock options granted before the above date have not been expensed.
Citycon uses the Black & Scholes option-pricing model to measure the fair value of stock options.
Dividends to the company's shareholders is recognised as a liability in the consolidated statement of financial position, for the period during which the Annual General Meeting of shareholders approves the dividends.
The preparation of financial statements in accordance with IFRS requires the use of estimates and assumptions. Judgment is also required in the application of certain accounting policies. These may affect the reported assets and liabilities, recognition of income and expenses for the period, and other information such as the presentation of contingent liabilities. Although these estimates are based on the best knowledge and current information available, the actual results may differ from the estimates.
Estimates and assumptions bearing a significant risk concerning a material change in the carrying amounts of assets or liabilities are presented in the following.
Measuring the fair value of investment property is a key aspect of accounting policy and involves the management's judgement and assumptions about future uncertainties. Market rents, occupancy rate, operating expenses and yield requirement form the key variables used in the investment property's fair-value measurement. The evaluation of these variables involves the management's judgement and assumptions. assumptions. On 31 December 2010, the fair value of investment properties totalled EUR 2,367.7 million (EUR 2,147.4 million). An analysis of investment properties' sensitivity to key variables is presented under Note 17. Investment Properties.
Citycon uses a net rental income based cash flow analysis to measure the fair value of its investment properties. Net rental income and the yield requirement of each property must be defined for the cash flow analysis. Net rental income equals gross rental income less operating expenses. The yield requirement is used for discounting the yearly net rental income less investments, to which the discounted residual value and other assets, such as unused building rights and lots, are added to obtain the fair value of investment property. The key parameters of the cash flow analysis are the following items:
Other variables involving estimates and assumptions are the current leases' extension probability, the duration of vacant areas, investments, the inflation rate and rental growth assumptions.
Citycon uses a normal cash-flow analysis or a special project model to measure the fair value of its (re) development projects depending on the nature of the project. Although the project model applies principles similar to those used in the cash flow analysis measuring the investment property's fair value, it is better suited to modelling changes, in many cases significant ones, in premises and contracts during the development project. Based on the project model, the property can be divided into different parts and the current leases, future leases, project schedules and capital expenditure can be defined for each of these parts, which may comprise the various floors, areas or a larger space within the building. In addition, risks associated with the development project and the property's future use can be defined for the yield requirement for development projects. Following this, each part is subject to the cash flow analysis and the parts' combined cash flow constitutes the development project's fair value.
When evaluating the fair value of (re)development projects, either with a normal cash flow analysis or with the use of a special project model, the judgement or assumptions about future investments, rental agreements and the project's timetable must be made.
Citycon is subject to income taxation in several countries. Estimating the total amount of income taxes at Group level requires judgment. Furthermore, the complexity of tax legislation, as well as constant changes in it and in the operating environment, require Citycon to use estimates and assumptions when preparing its tax calculations. Future taxable income is uncertain, and the final amount of taxes may deviate from the originally recorded amount. If final tax deviates from originally recorded amounts, such differences may affect the period's taxable profit, tax receivables or liabilities as well as deferred tax assets or liabilities. Citycon's current taxes in 2010 amounted to EUR 0.6 million (EUR 6.3 million).
Deferred tax assets and liabilities are calculated on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts.
The major temporary difference arise between the fair value and taxable value of investment properties. Under the policy adopted by Citycon, deferred tax describes the tax payable on potential gains on sale in the case of a property being sold. This means that Citycon needs to estimate the future realisation of its property sales. In the main, Citycon realises its properties' sales by selling shares representing ownership in the property and by reporting deferred tax according to this rule. Deferred tax liability recognised from the difference between the fair value and taxable value of investment properties was EUR 59.7 million on 31 December 2010 (EUR 48.7 million on 31 December 2009).
Other main temporary differences relate to unused tax losses and financial instruments. When tax receivables are recognised for tax losses that have been confirmed in taxation, the company must evaluate whether it is probable that such tax losses can be used against a taxable profit arising in the future. Deferred tax asset from tax losses amounted to EUR 1.3 million million on 31 December 2010 (EUR 0.0 million on 31 December 2009).
No deferred tax is recognised on subsidiaries' retained earnings, to the extent that it is considered unlikely that such a difference will be discharged in the future. On 31 December 2010, Citycon had confirmed losses for which tax assets of EUR 16.6 million (EUR 13 million in 2009) were not recognised.
Deferred taxes are calculated on the balance sheet day using valid tax rates.
5.2 Accounting policies requiring judgment Citycon must use judgement when appling the following accounting policies.
Citycon uses judgment when classifying its properties into investment properties, inventory properties or investment properties held for sale, according to the following policies:
Citycon purchases investment properties through asset acquisitions and business acquisitions. It applies IAS 40 Investment Property to the accounting treatment of asset acquisitions and IFRS 3 Business Combinations to the accounting treatment of business
acquisitions. Citycon exercises judgement in assessing whether the purchase of an investment property or an investment property portfolio is classified as an asset acquisition or business acquisition. Criteria for business acquisitions identified by Citycon include acquired access to new market areas, a new business line, new personnel and/or management, brand or another intangible asset related to customer relationships etc. However, this is not an exhaustive list, since Citycon assesses each investment property purchase on a case-by-case basis. Citycon didn't have any business acquisitions in 2010 and 2009.
When investment properties are sold, Citycon exercises judgement in estimating whether the sale is classified as a real estate sale or sale of a business. For Citycon, characteristics of a sale of a business include, for example, the sale of a major line of business or geographical area of operations that also involves the transfer of staff and/or management essential to the business.
In the case of real estate sale, IAS 40 Investment Property or IAS 2 Inventory based accounting treatment is applied. Policies concerning the sale of individual investment properties or properties are described in 4.4 Investment properties held for sale and 4.5 Inventory properties.
In the case of sale of a business, IFRS 5, Non-current Assets Held for Sale and Discontinued Operations based accounting treatment is applied. Non-current assets (or disposal groups) are classified as assets held for sale when their carrying amount is to be recovered, principally through a sale transaction, and a sale is considered highly probable. A sale is considered highly probable based on the policies presented under 4.4 Investment properties held for sale. Profit for the period from non-current assets held for sale must be stated as a separate item in the consolidated statement of comprehensive income, while non-current assets classified as held for sale must be presented in the statement of financial position, separately from other assets. In addition, liabilities under the disposal group of non-current assets held for sale must be presented in the statement of financial position, separately from other liabilities. Citycon had no noncurrent assets held for sale on 31 December 2010 or 31 December 2009.
A) Breakdown of gross rental income
| EUR million | 2010 | 2009 |
|---|---|---|
| Straight-lining of lease incentives | 0.6 | 1.0 |
| Temporary rental discounts | -3.0 | -1.6 |
| Additional rent from turnover based | ||
| rental agreements | 2.4 | 1.5 |
| Gross rental income | ||
| (excl. items above) | 185.9 | 177.0 |
| Total | 185.9 | 177.8 |
B) General description of Citycon's lease agreements In accordance with the table presented below, Citycon had 3,753 lease agreements on 31 December 2010 (4,235 agreements on 31 December 2009). The decrease in number of lease agreement was a consequence of residential disposals in Sweden. In the majority, i.e. in 89 per cent (85 per cent on 31 Dec. 2009), of Citycon's leases the rent is divided into base rent, tied to the cost-of-living index, and the maintenance charge. The maintenance charge, charged separately from the lessee, covers operating expenses incurred by the property owner due to property maintenance, while enabling the provision of any additional services requested by the lessee.
Part of Citycon's lease agreements also contain a turnover-linked component in addition to a cost-of-living -link. Turnover based rent agreements accounted for roughly 43 per cent (36 per cent on 31 December 2009) of Citycon's lease portfolio on 31 December 2010. In Note 6. A) Breakdown of gross rental income, the additional rent received from turnover based rental agreements is presented.
Thus, Citycon's leases are chiefly leases with contingent rent payments in accordance with IAS 17.4, because the entire portfolio is tied to the cost-of-living index, a predetermined minimum rent increase and/or the lessee's turnover.
| 31 Dec. 2010 |
31 Dec. 2009 |
|---|---|
| 1,661 | 1,682 |
| 1,784 | 2,245 |
| 308 | 308 |
| 3,753 | 4,235 |
In accordance with the table presented below, the average remaining length of Citycon's lease portfolio was 3.2 years on 31 December 2010 (3.1 years on 31 December 2009). Citycon mainly seeks to prepare mainly fixed-term contracts. As a main rule, new leases are signed for a fixed period in all countries. Alongside storage facilities and individual parking spaces, apartments form the main exception to this. Fixed-term agreements represented about 75 per cent of Citycon's property portfolio on 31 December 2010 (70 percent on 31 December 2009) and initially fixed-term contracts 11 per cent on 31 December 2010 (13 per cent on 31 December 2009). The rest of the agreements are leases in effect until further notice (14 percent out of all leases on 31 December 2010 and 17 percent on 31 December 2009)
A new lease's duration depends on the type of premises to be leased and the tenant. With an anchor tenant, the company typically concludes long-term leases of 10 or even 20 years. Leases for smaller retail premises, however, are chiefly negotiated for a term of 3–5 years.
| Average remaining length of lease portfolio at the end of financial year, year |
31 Dec. 2010 |
31 Dec. 2009 |
|---|---|---|
| Finland | 3.0 | 2.8 |
| Sweden | 3.1 | 3.0 |
| Baltic Countries | 4.6 | 5.2 |
| Average | 3.2 | 3.1 |
C) Future minimum lease payments receivable under non-cancellable leases
Non-cancellable leases include fixed-term and initially fixed-term leases until the end of their terms. Leases in effect until further notice are assumed as non-cancellable leases for the equivalent of their notice period.
| EUR million | 31 Dec. 2010 |
31 Dec. 2009 |
|---|---|---|
| Not later than 1 year | 54.8 | 54.4 |
| 1-5 years | 109.7 | 104.5 |
| Over 5 years | 24.8 | 24.6 |
| Total | 189.3 | 183.4 |
The presentation of segment information is based on the Group's geographical business units. In turn, these units are based on the Group's organisational structure and internal financial reporting. Furthermore, the Group's profit is reported to the Board of Directors by the geographical business units. Citycon's management and Board of Directors assess the business units' performance on the basis of net rental income and direct operating profit. Fair value changes are also reported to Citycon's management and Board of Directors, by business unit. In addition to geographical business units, Citycon's management and Board of Directors monitor property-specific net rental income.
Segment assets and liabilities consist of operating items which the segment uses in its operations or which, can be allocated to the segment on a reasonable basis. Unallocated items include tax and financial items, as well as corporate items. No internal sales take place between segments.
Capital expenditure includes additions to the investment properties, property, plant and equipment and intangible assets in the statement of financial position.
Citycon's turnover mainly consists of rental income. Rental income arises mainly from retail premises from two different property types: shopping centres, and supermarkets and shops. Citycon presents its gross rental income broken down by property type.
Principal customers include the five biggest tenants, one of whose share of gross rental income exceeds 10 per cent. The proportion of gross rental income and the segment is specified for each of these tenants. The proportion of gross rental income is based on the rent roll at 31 Dec. 2010 and at 31 Dec. 2009.
The geographical segments are Finland, Sweden and the Baltic countries. The segment Other mainly includes the administrative expenses arising from the Group's headquarter.
Citycon is Finland's largest company in the shoppingcentre. It owns 22 shopping centres, in addition to 43 other retail properties. 31 of the Finnish properties are located in the Helsinki Metropolitan Area and 34 elsewhere in Finland.
Citycon has eight shopping centres and seven other retail properties in Sweden. Seven of the properties in Sweden are located in the Greater Stockholm Area, six in the Greater Gothenburg Area and two in Umeå.
Citycon owns three shopping centres in the Baltic region, two in Estonia and one in Lithuania.
| EUR million 1 JAN.-31 DEC. 2010 | Finland | Sweden | Baltic Countries |
Other | Total |
|---|---|---|---|---|---|
| Gross rental income | 122.1 | 49.8 | 13.9 | - | 185.9 |
| Service charge income | 4.3 | 2.9 | 2.7 | - | 10.0 |
| Turnover | 126.5 | 52.8 | 16.7 | - | 195.9 |
| Property operating expenses | 39.3 | 23.3 | 4.8 | 0.0 | 67.4 |
| Other expenses from leasing operations | 0.4 | 0.7 | 0.1 | 0.0 | 1.3 |
| Net rental income | 86.7 | 28.7 | 11.8 | 0.0 | 127.2 |
| Administrative expenses | 6.2 | 4.6 | 1.2 | 10.5 | 22.5 |
| Other operating income and expenses | 0.3 | - | 0.0 | - | 0.3 |
| Direct operating profit | 80.9 | 24.1 | 10.6 | -10.5 | 105.0 |
| Indirect administrative expenses | 0.0 | 0.7 | - | - | 0.8 |
| Net fair value gains/losses on investment property | 24.5 | 22.8 | 3.5 | - | 50.8 |
| Profit on disposal of investment property | 2.2 | 0.5 | 0.0 | - | 2.6 |
| Operating profit/loss | 107.5 | 46.7 | 14.1 | -10.5 | 157.7 |
| Net financial income and expenses | -54.9 | -54.9 | |||
| Income tax expense | -12.5 | -12.5 | |||
| Profit for the period | 90.3 |
| EUR million 1 JAN.-31 DEC. 2009 | Finland | Sweden | Baltic Countries |
Other | Total |
|---|---|---|---|---|---|
| Gross rental income | 126.5 | 39.3 | 12.0 | - | 177.8 |
| Service charge income | 4.7 | 1.8 | 2.0 | - | 8.5 |
| Turnover | 131.3 | 41.0 | 14.0 | - | 186.3 |
| Property operating expenses | 38.6 | 17.5 | 4.1 | 0.0 | 60.2 |
| Other expenses from leasing operations | 0.3 | 0.3 | 0.1 | 0.0 | 0.7 |
| Net rental income | 92.4 | 23.2 | 9.8 | 0.0 | 125.4 |
| Administrative expenses | 6.1 | 3.2 | 1.0 | 7.4 | 17.7 |
| Other operating income and expenses | 0.0 | - | 0.0 | 0.0 | 0.0 |
| Direct operating profit | 86.3 | 20.0 | 8.8 | -7.4 | 107.7 |
| Indirect administrative expenses | - | 0.1 | - | - | 0.1 |
| Net fair value losses/gains on investment property | -65.1 | -19.6 | -12.7 | 0.0 | -97.4 |
| Profit on disposal of investment property | 0.1 | - | - | - | 0.1 |
| Operating profit/loss | 21.2 | 0.3 | -3.8 | -7.4 | 10.3 |
| Net financial income and expenses | -47.7 | -47.7 | |||
| Income tax expense | 0.6 | 0.6 | |||
| Loss for the period | -36.9 |
| Allocated assets | |||||
|---|---|---|---|---|---|
| Investment properties | 1,533.0 | 668.6 | 166.1 | - | 2,367.7 |
| Investment properties held for sale | 1.5 | - | - | - | 1.5 |
| Other allocated assets | 6.2 | 20.1 | 0.7 | 32.4 | 59.4 |
| Unallocated assets | |||||
| Deferred tax assets | 5.6 | 5.6 | |||
| Derivative financial instruments | 2.2 | 2.2 | |||
| Assets | 1,540.6 | 688.8 | 166.8 | 40.3 | 2,436.5 |
| Allocated liabilities | |||||
|---|---|---|---|---|---|
| Trade and other payables | 18.3 | 19.9 | 2.3 | 14.8 | 55.3 |
| Unallocated liabilities | |||||
| Interest-bearing liabilities | 1,397.7 | 1,397.7 | |||
| Deferred tax liabilities | 62.6 | 62.6 | |||
| Derivative financial instruments | 20.3 | 20.3 | |||
| Other unallocated liabilities | 0.5 | 0.5 | |||
| Liabilities | 18.3 | 19.9 | 2.3 | 1,495.9 | 1,536.3 |
| Capital expenditure | 76.3 | 50.6 | 6.0 | 0.8 | 133.7 |
| Allocated assets | |||||
|---|---|---|---|---|---|
| Investment properties | 1,442.0 | 548.8 | 156.6 | - | 2,147.4 |
| Investment properties held for sale | 8.3 | 17.7 | - | - | 26.0 |
| Other allocated assets | 5.2 | 39.3 | 1.0 | 22.0 | 67.5 |
| Unallocated assets | |||||
| Deferred tax assets | 8.6 | 8.6 | |||
| Derivative financial instruments | 3.7 | 3.7 | |||
| Assets | 1,455.5 | 605.7 | 157.6 | 34.3 | 2,253.2 |
| Allocated liabilities | |||||
| Trade and other payables | 13.3 | 11.9 | 1.8 | 52.6 | 79.7 |
| Unallocated liabilities | |||||
| Interest-bearing liabilities | 1,321.7 | 1,321.7 | |||
| Deferred tax liabilities | 50.0 | 50.0 | |||
| Financial liabilities at fair value through profit and loss | 2.2 | 2.2 | |||
| Derivative financial instruments | 30.8 | 30.8 | |||
| Other unallocated liabilities | 1.0 | 1.0 | |||
| Liabilities | 13.3 | 11.9 | 1.8 | 1,458.3 | 1,485.3 |
| Capital expenditure | 24.5 | 95.9 | 13.9 | 0.3 | 134.6 |
| 2010 | 2009 | |
|---|---|---|
| Shopping centres | 171.2 | 155.4 |
| Supermarkets and shops | 24.7 | 30.9 |
| Total | 195.9 | 186.3 |
| P 2010 |
roportion of gross rental income, % |
Segment |
|---|---|---|
| Kesko | 19.9 | Finland |
| S Group | 4.9 Finland and the Baltic Countries | |
| ICA AB | 3.6 Sweden and the Baltic Countries | |
| Stockmann | 3.3 | Finland, Sweden |
| and the Baltic Countries | ||
| Tokmanni | 1.8 | Finland |
| Total | 33.5 |
Proportion of gross rental income is based on the rent roll at 31 Dec. 2010.
| P 2009 |
roportion of gross rental income, % |
Segment |
|---|---|---|
| Kesko | 23.2 | Finland |
| S Group | 4.8 Finland and the Baltic Countries | |
| ICA AB | 3.2 Sweden and the Baltic Countries | |
| Stockmann | 2.9 | Finland, Sweden |
| and the Baltic Countries | ||
| H & M | ||
| Hennes & Mauritz 1.5 | Finland and Sweden | |
| Total | 35.6 |
Proportion of gross rental income is based on the rent roll at 31 Dec. 2009.
| EUR million | 2010 | 2009 |
|---|---|---|
| Heating and electricity | 22.0 | 20.2 |
| Maintenance expenses | 23.0 | 19.4 |
| Land lease fees and other rents | 1.3 | 0.8 |
| Property personnel expenses | 0.6 | 0.5 |
| Administrative and management fees | 2.3 | 2.5 |
| Marketing expenses | 5.0 | 4.4 |
| Property insurances | 0.5 | 0.7 |
| Property taxes | 6.3 | 4.7 |
| Repair expenses | 6.5 | 6.9 |
| Other property operating expenses | 0.0 | 0.1 |
| Total | 67.4 | 60.2 |
Two properties had no income during the years 2010 and 2009, but they generated expenses of EUR 0.1 million (EUR 0.7 million).
| 9. OTHER EXPENSES FROM LEASING OPERATIONS | ||
|---|---|---|
| EUR million | 2010 | 2009 |
| Total | 1.3 | 0.7 |
|---|---|---|
| Credit losses | 1.0 | 0.6 |
| expenses and commissions | 0.3 | 0.1 |
| Tenant improvement |
Significant tenant improvements are recognised as investments.
Credit losses include credit loss provisions of EUR 1.0 million (EUR 0.3 million) recognised in the income statement. Credit loss provisions in the statement of financial position are presented in Note 24. Trade and other receivables.
| EUR million | 2010 | 2009 |
|---|---|---|
| Personnel expenses | 11.0 | 10.5 |
| Non-recurring personnel expenses | ||
| arising from employment terminations | 1.3 | - |
| Consultancy and advisory fees | ||
| as well as external services | 5.6 | 2.1 |
| Office and other administrative expenses 4.4 | 4.5 | |
| Depreciation and amortisation | 0.8 | 0.7 |
| Total | 23.3 | 17.8 |
Non-recurring personnel expenses arising from employment terminations include one-off compensations (incl. pension and social charges) payable to CEO Petri Olkinuora and Vice President of the company's Finnish operations, due to the termination of their employment contracts.
Consulting and advisory fees included in the administration expenses and administrative and management fees included in the property operating expenses, include the following audit fees and services from audit firm Ernst & Young Oy:
| EUR million | 2010 | 2009 |
|---|---|---|
| Audit fees | 0.2 | 0.2 |
| Other advisory services | 0.2 | 0.1 |
| Total | 0.4 | 0.3 |
| 11. PERSONNEL EXPENSES | ||
|---|---|---|
| EUR million | 2010 | 2009 |
| Wages and salaries of management | ||
| CEO | 0.4 | 0.4 |
| Management committee | 1.0 | 0.9 |
| Board | 0.7 | 0.6 |
| Total | 11.6 | 11.1 |
|---|---|---|
| Expense of share based payments | 0.6 | 0.4 |
| Social charges | 1.1 | 1.2 |
| Pension charges: defined benefit plans | 0.0 | 0.1 |
| defined contribution plans | 1.2 | 1.1 |
| Pension charges: | ||
| Other wages and salaries | 6.6 | 6.3 |
Personnel expenses of EUR 0.6 million (EUR 0.5 million) are included in property operating expenses and EUR 11.0 million (EUR 10.5 million) in administrative expenses.
Defined benefit plans and the share-based payment plans are described in Note 29. Employee benefits.
Information on management benefits is presented in Note 32. Related party transactions.
| 2010 | 2009 | |
|---|---|---|
| Finland | 81 | 77 |
| Sweden | 34 | 32 |
| The Baltic Countries | 8 | 8 |
| Total | 123 | 117 |
Depreciation and amortisation of EUR 0.8 million (EUR 0.7 million) on machinery and equipment as well as on intangible assets is included in administrative expenses.
| EUR million | 2010 | 2009 |
|---|---|---|
| Other operating income | 0.3 | 0.0 |
| Other operating expenses | - | 0.0 |
| Total | 0.3 | 0.0 |
A) Recognised in the income statement
| EUR million | 2010 | 2009 |
|---|---|---|
| Interest income | 0.5 | 0.3 |
| Foreign exchange gains | 73.0 | 50.0 |
| Fair value gain from derivatives | 0.2 | - |
| Other financial income | 0.1 | 0.6 |
| Financial income, total | 73.7 | 50.8 |
| Interest expenses | 55.4 | 52.8 |
| Foreign exchange losses | 72.8 | 49.9 |
| Fair value loss from derivatives | - | 0.1 |
| Development interest capitalised | -3.3 | -7.7 |
| Other financial expenses | 3.8 | 3.4 |
| Financial expenses, total | 128.6 | 98.5 |
| Net financial income and expenses | 54.9 | 47.7 |
| Net financial income and expenses | 54.9 | 47.7 |
|---|---|---|
| Other liabilities and receivables | 0.1 | 0.3 |
| Derivative financial instruments | 34.2 | 13.8 |
| Finance lease liabilities | 0.0 | 0.0 |
| Interest-bearing loans and receivables 20.6 | 33.6 | |
| financial instrument categories: |
In 2010, foreign exchange losses of EUR -8.9 million (loss of EUR -0.7 million) were recognised in the statement of comprehensive income from foreign exchange derivative agreements.
Interest on development expenditure is capitalised at a rate of 4.32% as at 31 December 2010 (4.47% as at 31 December 2009).
Citycon's interest expenses in the statement of comprehensive income contain interest expenses from interest-bearing debt as well as all interest expenses arising from derivative financial instruments used for hedging purposes. Additional information on Citycon's derivative financial instruments, their fair values and hedge accounting treatment can be found in Note 22. Derivative Financial Instruments.
B) Recognised in the other comprehensive income
| EUR million | 2010 | 2009 |
|---|---|---|
| Losses arising during | ||
| the period from cash flow hedges | -17.7 | -20.6 |
| Less: interest expenses recognised in the | ||
| income statement on cash flow hedges 22.9 | 13.8 | |
| Net gains/losses on cash flow hedges | 5.1 | -6.7 |
| 15. income | taxes | ||
|---|---|---|---|
| EUR million | 2010 | 2009 |
|---|---|---|
| Current tax | 0.6 | 6.3 |
| Tax for prior periods | 0.0 | 0.1 |
| Deferred tax | 11.8 | -7.0 |
| Income taxes | 12.5 | -0.6 |
Reconciliation between tax charge and Group tax at the Finnish tax rate (26%):
| EUR million | 2010 | 2009 |
|---|---|---|
| Profit/loss before taxes | 102.8 | -37.5 |
| Taxes at Finnish tax rate | 26.8 | -9.7 |
| Fair value gains and losses | ||
| from subsidiaries owned abroad | -12.0 | 8.4 |
| Difference in foreign subsidiaries' tax rate | -1.6 | -1.1 |
| Unrecognised tax receivables from losses | 4.1 | 2.2 |
| Utilisation of previously | ||
| unrecognised tax losses | -4.8 | 0.1 |
| Other | 0.0 | -0.5 |
| Income taxes | 12.5 | -0.6 |
| Effective tax rate | 12.1 % | 1.5 % |
Earnings per share (basic) is calculated by dividing the net profit/loss attributable to parent company shareholders by the share issue adjusted weighted average number of shares.
| Earnings per share, basic | 2010 | 2009 |
|---|---|---|
| Profit/loss attributable to | ||
| parent company | ||
| shareholders (EUR million) | 78.3 | -34.3 |
| Average number | ||
| of shares (1,000) | 228,148.2 221,035.1 | |
| Earnings per share (basic) (EUR) | 0.34 | -0.16 |
| Earnings per share, diluted | 2010 | 2009 |
| Profit/loss attributable to parent | ||
| company shareholders (EUR million) 78.3 | -34.3 | |
| Expenses from convertible loan, | ||
| less the tax effect (EUR million) | 4.1 | - |
| Profit/loss used in the | ||
| calculation of diluted earnings | ||
| per share (EUR million) | 82.5 | -34.3 |
| Average number | ||
| of shares, million | 228,148.2 221,035.1 | |
| Convertible capital | ||
| loan impact, million | 17,519.6 | - |
| Adjustments for | ||
| stock options, million | 1.8 | - |
| Adjustments for long-term | ||
| share-based incentive plan, million 136.8 | - | |
| Average number of | ||
| shares used in the calculation | ||
| of diluted earnings per share, | ||
| million | 245,806.3 221,035.1 | |
| Diluted earnings per share (EUR) | 0.34 | -0.16 |
Incremental shares from assumed conversions or any income or cost related to dilutive potential shares are not included in the year 2009 diluted per-share amounts, because the profit attributable to parent company shareholders was negative.
Diluted earnings per share is calculated by adjusting the weighted average number of shares to assume the conversion of all dilutive potential shares. The Group currently has three categories of dilutive shares in place: convertible capital loan, stock options and long-term share-based incentive plan.
The holder of the convertible loan has the right, during 12 September 2006 - 27 July 2013, to convert the loan nominal amount into company shares. Based on the conversion price applicable on the balance sheet date, the dilution from full conversion of the loan nominal is approximately 17.0 million shares. When calculating the dilution effect, the loss/profit for the period is adjusted by the expenses arising from the convertible loan (including the tax effect).
Stock options have dilutive potential when the subscription price of shares based on the stock options is lower than the share's fair value. The dilutive potential of stock options is calculated by taking account of the total number of shares that can be subscribed based on stock options, less the number of shares the group could acquire using assets derived from exercising stock options.
The share-based incentive scheme has a dilutive effect when the earning period has ended, the performance conditions for the bonus have been fulfilled, and the shares have not yet been granted. In calculating the dilutive effect of the share-based incentive scheme, the remaining work covered by the scheme is assigned a per-share value, which is compared to the fair value of a share. When the value of the remaining work performance is lower than the fair value of a share, the share-based incentive scheme has a dilutive effect. In calculating the dilutive effect of the share-based incentive scheme, the number of shares the company would have received had it used assets to the value of the remaining work performance to acquire treasury shares at fair value, is considered a deductive factor in the full number of shares granted.
| Average number of shares used in the calculation of earnings per share |
Days | Number of shares |
|---|---|---|
| 1/1/10 | 45 | 221,059,735 |
| 15/2/10 | 28 | 221,416,293 |
| 15/3/10 | 38 | 221,715,474 |
| 22/4/10 | 39 | 222,360,952 |
| 31/5/10 | 116 | 222,564,972 |
| 24/9/10 | 99 | 244,564,972 |
| Weighted average (daily) | ||
| number of shares | 365 | 228,148,160 |
Citycon divides its investment properties into two categories: Investment Properties Under Construction (IPUC) and Operative Investment Properties. At 31 December 2010, the first mentioned category included Espoontori, Kirkkonummen Liikekeskus, Lahden Hansa (Trio ), Myllypuro, Martinlaakso and Myyrmanni in Finland as well as Åkersberga Centrum in Sweden.
Contractual obligations to purchase, construct or develop investment properties are presented in Note 31. B) Pledges and other contingent liabilities.
| EUR million 31 Dec. 2010 | Investment property under construction |
Operative investment properties |
Investment properties total |
|---|---|---|---|
| At period-start | 269.8 | 1,877.6 | 2,147.4 |
| Acquisitions during the period | 1.9 | 4.8 | 6.8 |
| Investments during the period | 69.5 | 52.2 | 121.7 |
| Disposals during the period | -3.4 | -36.3 | -39.7 |
| Capitalised interest | 2.2 | 1.2 | 3.4 |
| Fair value gains on investment property | 2.1 | 93.6 | 95.7 |
| Fair value losses on investment property | -14.0 | -30.8 | -44.9 |
| Exchange differences | 5.8 | 73.0 | 78.7 |
| Transfer between IPUC and operative investment properties | |||
| and transfer into investment properties held for sale | -7.8 | 6.3 | -1.5 |
| At period-end | 326.1 | 2,041.6 | 2,367.7 |
| EUR million 31 Dec. 2009 | Investment property under construction |
Operative investment properties |
Investment properties total |
|---|---|---|---|
| At period-start | 271.8 | 1,839.9 | 2,111.6 |
| Acquisitions during the period | 0.0 | 0.0 | 0.0 |
| Investments during the period | 84.4 | 33.4 | 117.8 |
| Disposals during the period | - | -2.7 | -2.7 |
| Capitalised interest | 6.3 | 1.6 | 7.9 |
| Fair value gains on investment property | - | 5.5 | 5.5 |
| Fair value losses on investment property | -14.9 | -88.0 | -102.9 |
| Exchange differences | 10.6 | 17.3 | 27.9 |
| Transfer between IPUC and operative investment properties | -88.3 | 70.6 | -17.7 |
| At period-end | 269.8 | 1,877.6 | 2,147.4 |
Under the IAS 40 Investment Property -standard, Citycon measures its investment properties at fair value. An external professional appraiser has conducted the valuation of the company's properties using a net rental income based cash flow analysis. Market rents, occupancy rate, operating expenses and yield requirement form the key variables used in the cash flow analysis.
Realia Management Oy within Realia Group conducted the valuation of Citycon's properties for the Annual Report 2010 and 2009. The resulting fixed fees based on the 2010 valuations total EUR 0.1 million (EUR 0.1 million in 2009).
The fair value of Citycon's investment properties in the balance sheet equals the property portfolio's total value determined by the external appraiser, capital expenditure on development projects not taken into account by the external appraiser, transfer into investment properties held for sale as well as the value of new properties acquired during the reporting quarter. The reconciliation between the fair value determined by the external appraiser and the fair value of investment properties in Citycon's balance sheet is as follows.
| EUR million 31 Dec. 2010 |
31 Dec. 2009 | ||
|---|---|---|---|
| Fair value of investment properties determined by the external appraiser as at Dec. 31 | 2,361.1 | 2,162.4 | |
| Capital expenditure on development projects | 5.6 | 11.0 | |
| Transfer into investment properties held for sale | -1.5 | -26.0 | |
| Acquisition of new properties | 2.5 | - | |
| Fair value of investment properties as at Dec. 31 | 2,367.7 | 2,147.4 |
The segments' assumptions used by the external appraiser in the cash flow analysis on 31 December 2010 and on 31 December 2009 are presented the table below. The average yield requirement decreased by 20bps from 6.6% on 31 December 2009 to 6.4% on 31 December 2010 as a result of general market changes (economic recovery and revival of demand for prime properties) and progress in development projects. Market rents increased by 7% from 22.1 EUR/sq.m. on 31 December 2009 to 23.6 EUR/sq.m. on 31 December 2010 due to the strengthening of the Swedish krona, development projects' progress/completion and general positive developments in the rental market. The vacancy assumption for the cash flow period decreased by 60bps from 5.0% in on 31 December 2009 to 4.4% on 31 December 2010 thanks to the general positive market developments and new leases.
| EUR million 31 Dec. 2010 | Finland | Sweden | Baltic Countries | Average |
|---|---|---|---|---|
| Yield requirement (%) | 6.4 | 6.1 | 8.1 | 6.4 |
| Initial yield (%) | 6.1 | 6.0 | 7.9 | 6.2 |
| Reversionary yield (%) | 6.9 | 6.8 | 8.3 | 6.9 |
| Market rents (€/m²) | 23.6 | 24.1 | 21.4 | 23.6 |
| Vacancy during the cash flow period (%) | 4.6 | 4.1 | 3.6 | 4.4 |
| Inflation assumption (%) | 2.00 | 2.00 | 2.50 | - |
| Operating expense growth assumption (%) | 2.25 | 2.25 | 2.75 | - |
| EUR million 31 Dec. 2009 | Finland | Sweden | Baltic Countries | Average |
| Yield requirement (%) | 6.6 | 6.4 | 8.1 | 6.6 |
| Initial yield (%) | 6.8 | 6.7 | 8.0 | 6.8 |
| Reversionary yield (%) | 7.1 | 7.9 | 8.9 | 7.4 |
| Market rents (€/m²) | 22.5 | 21,3 | 21.4 | 22.1 |
| Vacancy during the cash flow period (%) | 5.0 | 5.1 | 4.2 | 5.0 |
| Inflation assumption (%) | 2.00 | 2.00 | 3.00 | - |
| Operating expense growth assumption (%) | 2.25 | 2.25 | 3.25 | - |
A number of factors contribute to the value of retail properties, such as national and local economic development, investment demand created by property investors, and interest rates. While changes in investment properties' fair value have an effect on the company's profit for the financial year, they do not have an immediate impact on cash flow. The yield requirement, rents, the occupancy rate and operating expenses form the key variables used in an investment property's fair-value measurement, based on a ten-year cash-flow analysis. Sensitivity to change in the properties' fair value, or the risk associated with fair value, can be tested by altering the above key parameters. The sensitivity analysis below uses the investment properties' fair value of EUR 2,361.1 million defined by the external appraiser at 31 December 2010 as the starting value. Sensitivity analysis indicates that the market value is most sensitive to the yield requirement and gross income levels. A ten percent decrease in the yield requirement results in an approximately 11 percent increase in market value. Correspondingly, a ten percent increase in gross income increases the value by approximately 14 percent. The market value reacts to change in vacancy and operating expenses, but their relative effect is not as great as changes to rental income and yield requirement.
| Value of properties (EUR million) | |||||||
|---|---|---|---|---|---|---|---|
| Change % | -10% | -5% | ±0% | +5% | +10% | ||
| Yield requirement | 2,611.0 | 2,479.4 | 2,361.1 | 2,254.0 | 2,156.7 | ||
| Gross income | 2,016.1 | 2,188.0 | 2,361.1 | 2,529.9 | 2,702.3 | ||
| Operating expenses | 2,457.8 | 2,409.5 | 2,361.1 | 2,312.7 | 2,264.3 | ||
| Vacancy | 2,395.3 | 2,378.2 | 2,361.1 | 2,344.3 | 2,326.9 |
| EUR million | 2010 | 2009 |
|---|---|---|
| Acquisition cost Jan. 1 | 2.3 | 2.0 |
| Additions during the period | 0.7 | 0.3 |
| Accumulated acquisition cost Dec. 31. | 3.0 | 2.3 |
| Accumulated depreciation and | ||
| impairment losses, Jan. 1 | 1.6 | 1.3 |
| Depreciation during the period | 0.4 | 0.4 |
| Accumulated depreciation and | ||
| impairment losses, Dec 31. | 2.0 | 1.6 |
| Net carrying amount Jan 1. | 0.7 | 0.8 |
| Net carrying amount Dec 31. | 1.0 | 0.7 |
| EUR million | 2010 | 2009 |
|---|---|---|
| Acquisition cost Jan. 1 | 1.9 | 1.6 |
| Additions during the period | 1.0 | 0.3 |
| Accumulated acquisition cost Dec. 31. | 2.9 | 1.9 |
| Accumulated depreciation and | ||
| impairment losses, Jan. 1 | 1.0 | 0.6 |
| Depreciation during the period | 0.5 | 0.3 |
| Accumulated depreciation and | ||
| impairment losses, Dec 31. | 1.4 | 1.0 |
| Net carrying amount Jan 1. | 0.9 | 0.9 |
| Net carrying amount Dec 31. | 1.5 | 0.9 |
Intangible assets consisted mainly of computer soft-
Property, plant and equipment consisted mainly of machinery and equipment.
Machinery and equipment acquired through financial leases amounted to EUR 0.6 million (EUR 0.3 million).
Changes in deferred tax assets and liabilities in 2010:
| EUR million | 1 Jan. 2010 | Recognized in income statement |
Recognized in other comprehensive income |
31 Dec. 2010 |
|---|---|---|---|---|
| Deferred tax assets | ||||
| Tax losses | 0.0 | 1.3 | - | 1.3 |
| IAS 19 Defined benefit pension obligation | 0.0 | 0.0 | - | 0.0 |
| Measurement of interest-rate swaps at fair value | 8.6 | -0.6 | -3.6 | 4.4 |
| Deferred tax assets, total | 8.6 | 0.7 | -3.6 | 5.6 |
| Deferred tax liabilities | ||||
| Measurement of investment property at fair value | 48.7 | 11.0 | - | 59.7 |
| Temporary difference in financial expenses | 1.3 | 1.5 | - | 2.8 |
| Deferred tax liabilities, total | 50.0 | 12.5 | - | 62.6 |
ware.
Changes in deferred tax assets and liabilities in 2009:
| EUR million | 1 Jan. 2009 | Recognized in income statement |
Recognized in other comprehensive income |
31 Dec. 2009 |
|---|---|---|---|---|
| Deferred tax assets | ||||
| Tax losses | 0.1 | 0.0 | - | 0.0 |
| IAS 19 Defined benefit pension obligation | - | 0.0 | - | 0.0 |
| Measurement of interest-rate swaps at fair value | 6.8 | 0.0 | 1.8 | 8.6 |
| Deferred tax assets, total | 6.8 | 0.0 | 1.8 | 8.6 |
| Deferred tax liabilities | ||||
| Measurement of investment property at fair value | 56.0 | -7.2 | - | 48.7 |
| Temporary difference in financial expenses | 1.1 | 0.2 | - | 1.3 |
| Deferred tax liabilities, total | 57.1 | -7.0 | - | 50.0 |
Citycon's deferred taxes mainly arise from changes in the fair value of investment properties. In 2010, deferred taxes resulting from the changes in the investment properties' fair value recognised in the income statement totalled EUR -11.0 million (EUR 7.2 million). The fair value of an investment property reflects the market price that would be paid for the property on the date of measurement, while deferred taxes refer to taxes imposed on any gain on sale if the property were to be sold.
Citycon's policy is to realise its properties' sales by selling its shares representing ownership in the property. The ownership structure is mainly organised so that one real estate company owns one building. The sale of shares representing ownership in properties owned by subsidiaries abroad does not have tax implications. Consequently, Citycon does not recognise deferred taxes related to the fair value of investment properties owned abroad. If Citycon did recognise such deferred taxes, the tax impact would have been EUR -12.0 million in 2010 (EUR 8.4 million) (See Note 15. Income taxes).
On the contrary, divesting a property in Finland through an asset or share sale does have tax implications, due to which, Citycon recognises deferred taxes arising from the fair value changes of its investment properties located in Finland. Deferred taxes are calculated on the difference between an investment property's fair value and its taxable value. The taxable value consists of the acquisition cost of shares in the mutual real estate company and loans receivable from the company or a directly owned property's undepreciated, residual value.
The change in deferred taxes between the opening and closing balance sheets is recognised in the income statement as expense/income.
The fair value of investment properties is measured in accordance with IFRS (International Financial Reporting Standards). The provisions of Finnish accounting and tax legislation affect the value of shares in, and loans receivable from, the mutual real estate company. For instance, investments conducted by the mutual real estate company or depreciation recorded by subsidiaries with outstanding debt entail a change in the value of shares and loans receivable.
On 31 December 2010, Group companies had confirmed losses for which tax assets of EUR 16.6 million (EUR 13 million in 2009) were not recognised, since these Group companies are unlikely to record taxable profit, before the expiration of carry forwards of these losses, against which loss carry forwards can be utilised. Citycon didn't have any impairment not deducted in taxation on 31 December 2010 and on 31 December 2009.
A) Classification of financial instruments and their carrying amounts and fair values
| EUR million | Note | Carrying amount 2010 |
Fair value 2010 |
Carrying amount 2009 |
Fair value 2009 |
|---|---|---|---|---|---|
| Financial assets | |||||
| I Loans and other receivables | |||||
| Trade and other receivables | 24 | 37.4 | 37.4 | 46.1 | 46.1 |
| Cash and cash equivalents | 25 | 19.5 | 19.5 | 19.8 | 19.8 |
| Other non-current assets | 0.0 | 0.0 | 0.0 | 0.0 | |
| II Derivative contracts under hedge accounting | |||||
| Derivative financial instruments | 22 | 2.2 | 2.2 | 3.7 | 3.7 |
| Financial liabilities | |||||
| I Financial liabilities amortised at cost | |||||
| I.I Loans | |||||
| Loans from financial institutions | 27 | 1,291.3 | 1,293.6 | 1,142.6 | 1,145.2 |
| Convertible capital loan 1/2006 | 27 | 66.3 | 71.3 | 69.3 | 76.5 |
| Subordinated capital loan 1/2005 | 27 | - | - | 70.0 | 70.0 |
| Bond 1/2009 | 27 | 39.5 | 40.0 | 39.4 | 40.0 |
| Finance lease liabilities | 27 | 0.6 | 0.6 | 0.3 | 0.3 |
| I.II Other liabilities | |||||
| Other liabilities | 29 | 0.5 | 0.5 | 1.0 | 1.0 |
| Trade and other payables | 29 | 55.3 | 55.3 | 79.7 | 79.7 |
| II Financial liabilities at fair value through profit and loss | |||||
| Derivative financial instruments | - | - | 2.2 | 2.2 | |
| III Derivative contracts under hedge accounting | |||||
| Derivative financial instruments | 22 | 20.3 | 20.3 | 30.8 | 30.8 |
B) The principles for determinging the fair values of financial instruments
Citycon applies IFRS valuation principles when determining the fair value of financial instruments. The following presents the principles for determining the fair values of all financial assets and liabilities.
Due to their short maturity, the fair value of trade payables and receivables and other short-term receivables and payables is regarded as corresponding to their original carrying amount.
Derivative financial instruments are initially measured at cost in the statement of financial position and subsequently re-measured at their fair value on each balance-sheet date. The fair value of interest-rate swaps is calculated using the present value of estimated future cash flows. The fair value of a forward agreement is based on the difference between the exchange rate of the agreement and the prevailing exchange rate fixing on each balance-sheet date. The fair value of derivative financial instruments is the estimated amount that the Group would receive or pay to settle the related agreements.
Fair value of interest rate derivative financial instruments is determined by the counterparty banks based on customary valuation techniques used by market participants in the OTC derivative market. The fair value of interest rate derivative financial instruments corresponds to level 2 according to IFRS7p27a. The fair value of foreign exchange derivative contracts is based on quoted market prices.
Citycon's loans from financial institutions are floating rate loans which have fair value equal to the nominal amount of the loan. The difference between the fair value and carrying amount is the unamortised capitalised arrangement fees of the loans.
Convertible capital loan 1/2006 is a fixed rate loan which has a fair value equal to the nominal amount of the loan. The difference between the fair value and carrying amount is the unamortised capitalised arrangement fees of the loan, together with the market value of the option component on the issue date.
Subordinated capital loan 1/2005 is a fixed rate loan which has a fair value equal to the nominal amount of
A) Nominal amounts and fair values of derivative financial instruments
| EUR million | Nominal amount 2010 |
Fair value 2010 |
Nominal amount 2009 |
Fair value 2009 |
|---|---|---|---|---|
| Interest rate derivatives | ||||
| Interest rate swaps | ||||
| Maturity: | ||||
| less than 1 year | 40.0 | -1.6 | 48.8 | -1.2 |
| 1-2 years | 30.0 | -0.8 | 70.0 | 1.0 |
| 2-3 years | 161.2 | -10.2 | 60.0 | -3.0 |
| 3-4 years | 202.0 | -6.6 | 262.9 | -14.5 |
| 4-5 years | 123.6 | 0.5 | 198.0 | -7.3 |
| over 5 years | 313.1 | 0.6 | 97.9 | -4.0 |
| Subtotal | 869.8 | -18.1 | 737.6 | -29.0 |
| Foreign exchange derivatives | ||||
| Forward agreements | ||||
| Maturity: | ||||
| less than 1 year | - | - | 22.0 | -0.2 |
| Total | 869.8 | -18.1 | 759.7 | -29.2 |
Interest on floating-rate loans is mainly fixed every three or six months. Interest-rate swaps have been concluded for the same days to ensure the optimum interest cash flow hedging.
Citycon uses interest rate swaps to hedge the interest rate cash flow risk. The Group applies hedge accounting to all of its interest rate swaps valid as at 31 December 2010, under IAS 39, according to which the amount of financial instruments' fair value change stemming from effective hedging is recognised under other comprehensive income.
The fair value of a derivative financial instrument represents the market value of the instrument at the prices prevailing on the balance sheet date. Derivative financial instruments are used in hedging the interest rate risk of the interest bearing liabilities and foreign currency risk.
the loan. The carrying amount of the loan equals the
Bond1/2009 is a fixed rate loan which has a fair value equal to the nominal amount of the loan. The difference between the fair value and carrying amount is the unamortised capitalised arrangement fees of the
The fair value of finance leases is based on discounted future cash flows. The discount rate used corresponds
fair value. Bond 1/2009
loan.
Finance lease liabilities
to that applied to similar leases.
The fair values include foreign exchange loss of EUR -1.5 million (gain of EUR 3.5 million), which is recognised in the statement of comprehensive income.
Hedge accounting is applied to interest rates swaps, which have a nominal amount of EUR 869.8 million (EUR 713.2 million).
The average fixed interest rate of the interest rate swaps as at 31 December 2010 was 3.48 per cent (3.79%).
B) Cash flow hedging with derivatives
| Interest rate derivatives M€ |
2010 | Assets Liabilities 2010 |
2009 | Assets Liabilities 2009 |
|---|---|---|---|---|
| Fair value | 2.2 | -18.8 | - | -30.6 |
Citycon's cash flow hedges consist of interest rate and cross-currency swaps which are used to protect against exposure to changes in Citycon's interest expense cash outflow for variable rate interest bearing debt. Hedged instruments consist of long term floating rate debt and short term floating rate debt which is expected to be refinanced upon maturity on similar terms.
The critical terms of the interest rate derivatives have been negotiated to match the respective terms of the variable rate loans.
The cash flow from all hedged liabilities over time is the basis for determining the gain and loss on the effective portions of derivatives designed as cash flow hedges. Gains and losses are initially recognized under other comprehensive income and are transferred to the statement of comprehensive income when the forecast cash flows affect the statement of comprehensive income.
At 31 December 2010 and at 31 December 2009, interest rate derivatives assigned as cash flow hedges were assessed as highly effective. The fair values (net of taxes) of these derivatives were EUR -12.3 million (EUR -22.7 million) and the change of these fair values (net of taxes) EUR 3.8 million (EUR -5.0 million) is recognized under other comprehensive income, taking the tax effect into account.
In 2010, the Investment properties held for sale included MREC Naantalin Tullikatu 16, which was sold in January 2011. In 2009, the Investment properties held for sale comprised building rights acquired for the Myllypuro development project and 181 residential units in Åkersberga Centrum. Building rights acquired for the Myllypuro development project were sold to three different residential investors through share transactions on 12 January 2010. A gain on sale of EUR 2.3 million was recorded from this transaction. In July 2010, 181 residential units in Åkersberga Centrum were sold to Tegeltornet AB.
| EUR million | 2010 | 2009 |
|---|---|---|
| Acquisition cost Jan. 1 | 26.0 | - |
| Investments | - | 8.3 |
| Disposals | -28.5 | - |
| Exchange differences | 2.5 | - |
| Transfers from investment properties | 1.5 | 17.7 |
| Accumulated acquisition cost Dec. 31. | 1.5 | 26.0 |
| EUR million | 2010 | 2009 |
|---|---|---|
| Trade receivables | 4.9 | 4.7 |
| Credit loss provision | -1.3 | -0.3 |
| Trade receivables (net) | 3.7 | 4.4 |
| Accrued income and prepaid expenses | 5.3 | 2.2 |
| Tax receivables (incl. VAT-receivables) | 27.0 | 37.9 |
| Other receivables | 1.4 | 1.6 |
| Total | 37.4 | 46.1 |
| EUR million | 2010 | 2009 |
|---|---|---|
| NOT past due nor impaired | 1.6 | 0.7 |
| Past due, less than 1 month | 0.6 | 1.6 |
| Past due, 1-3 months | 0.8 | 1.9 |
| Past due, 3-6 months | 0.5 | 0.2 |
| Past due, 6-12 months | 1.4 | 0.2 |
| Past due, 1-5 years | 0.1 | 0.1 |
| Total | 4.9 | 4.7 |
| EUR million | 2010 | 2009 |
|---|---|---|
| At the beginning of the year | -0.3 | - |
| Exchange difference | 0.0 | - |
| Charge for the year | -1.0 | -0.3 |
| Utilised | 0.1 | 0.0 |
| Unused amounts reversed | 0.0 | - |
| Credit loss provision at the end of the year -1.3 | -0.3 |
Trade receivables are non-interest bearing and their payment terms vary between 2-20 days. Rent collaterals equal 2-6 month of rent and other payments.
| 2010 | 2009 |
|---|---|
| 13.5 | |
| 6.4 | |
| 19.5 | 19.8 |
| 19.4 0.1 |
Cash and cash equivalents in the cash flow statement comprise the items presented above.
A) The effect of the changed number of shares on funds included in the shareholders' equity
| Outstanding number of shares ¹⁾ |
Treasury shares |
Share capital (EUR million) |
Share (EUR million) |
Invested premium unrestricted fund equity fund (EUR million) |
Total (EUR million) |
|
|---|---|---|---|---|---|---|
| 1 Jan. 2009 | 220,998,989 | - | 259.6 | 131.1 | 177.3 | 567.9 |
| Directed share issue without payment | ||||||
| to Citycon Group key employees | 40,746 | - | - | - | - | - |
| Directed share issue without | ||||||
| payment to Citycon itself | - | 20,000 | - | - | - | - |
| Sale of treasury shares | 20,000 | -20,000 | - | - | 0.0 | 0.0 |
| Return from the invested | ||||||
| unrestricted equity fund | - | - | - | - | -22.1 | -22.1 |
| 31 Dec. 2009 | 221,059,735 | 0 | 259.6 | 131.1 | 155.2 | 545.8 |
| Directed share issue without payment | ||||||
| to Citycon Group key employees | 124,020 | - | - | - | - | - |
| Directed share issue without | ||||||
| payment to Citycon itself | - | 80,000 | - | - | - | - |
| Sale of treasury shares | 80,000 | -80,000 | - | - | 0.2 | 0.2 |
| Share issue | 22,000,000 | - | - | - | 62.2 | 62.2 |
| Share subscriptions based | ||||||
| on stock options | 1,301,217 | - | - | - | 3.3 | 3.3 |
| Return from the invested | ||||||
| unrestricted equity fund | - | - | - | - | -22.1 | -22.1 |
| 31 Dec. 2010 | 244,564,972 | 0 | 259.6 | 131.1 | 198.8 | 589.4 |
1) All outstanding shares were fully-paid on 31 December 2010 and 31 December 2009.
The company has a single series of shares, each share entitling to one vote at general meetings of shareholders. The shares have no nominal value and the share capital has no maximum value.
Since the entry into force of the new Finnish Companies Act, no new items are recognised in the share premium fund. The share premium fund accumulated before 2007 due to option schemes and share issues.
The invested unrestricted equity fund is credited, for instance, with that part of the subscription price of the shares that, according to the Memorandum of Association or the share issue decision, is not to be credited to the share capital. The invested unrestricted equity fund accumulated in 2010 and 2009 due to subscriptions under option schemes and sale of treasury shares. In addition, in 2010, the share issue was recognised in the invested unrestricted equity fund.
The translation reserve contains translation differences arising from the currency translation of foreign subsidiaries' financial statements.
The fair value reserve contains fair value changes of derivative instruments used to hedge cash flows.
C) Board proposal for dividends and return from the invested unrestricted equity fund To the Annual General Meeting held on 23 March 2011 , the Board of Directors of Citycon proposes a dividend of EUR 0.04 per share for the financial year 2010 (EUR 0.04 for the financial year 2009) and an equity return of EUR 0.10 per share from the invested unrestricted equity fund (EUR 0.10 for the financial year 2009). The proposal for dividends and return from the invested unrestricted equity fund has not not been recognised in the consolidated financial statements on 31 December 2010.
All Citycon loans were interest-bearing liabilities on 31 December 2010 and 2009. These interest-bearing loans are explained here in detail.
A) Breakdown of interest-bearing liabilities
| EUR million | Effective interest rate (%) |
Carrying amount 2010 |
Carrying amount 2009 |
|---|---|---|---|
| Long-term interest-bearing liabilities | |||
| Loans from financial institutions | |||
| EUR 435 million term loan facility | EURIBOR + 0.675 | 352.0 | 359.7 |
| EUR 165 million revolving credit facility | EURIBOR + 0.500 | - | 160.3 |
| EUR 200 million term loan facility | EURIBOR + 0.675 | 204.5 | 199.8 |
| EUR 150 million revolving credit facility | EURIBOR + 0.550 | 84.8 | 43.9 |
| SEK 500 million bank loan | STIBOR + 0.600 | 55.8 | 48.8 |
| EUR 50 million revolving credit facility | EURIBOR + 0.600 | 43.0 | 49.9 |
| EUR 50 million bank loan | EURIBOR + 1.500 | 50.6 | - |
| EUR 50 million bank loan | EURIBOR + 1.525 | 49.9 | - |
| EUR 50 million bank loan | EURIBOR + 1.500 | 49.9 | - |
| EEK 470 million bank loan | 5.599 | 25.2 | 26.4 |
| LTL 52 million bank loan | VILIBOR + 0.625 | - | 9.8 |
| EUR 30 million bank loan | EURIBOR + 0.750 | 30.0 | 30.0 |
| Other loans from financial institutions | - | 160.6 | 138.0 |
| Convertible capital loan 1/2006 | 7.580 | 66.3 | 69.3 |
| Bond 1/2009 | 5.461 | 39.5 | 39.4 |
| Finance lease liabilities | - | 0.3 | 0.2 |
| Total long-term interest-bearing liabilities | 1,212.4 | 1,175.4 |
| Loans from financial institutions | |||
|---|---|---|---|
| Commercial papers | - | 11.9 | 32.6 |
| Current portion of loans from financial institutions | - | 21.0 | 18.0 |
| Other loans from financial institutions | - | 152.0 | 25.5 |
| Subordinated capital loan 1/2005 | 4.700 | - | 70.0 |
| Finance lease liabilities | - | 0.3 | 0.2 |
| Total short-term interest-bearing liabilities | 185.3 | 146.3 |
The carrying amounts of term loan facilities, convertible capital loan 1/2006 and bond 1/2009 are stated at amortised cost using the effective yield method. The fair values of liabilities are shown in Note 21. Classification of Financial Instruments.
The market value of the option component on the issue date of the convertible capital loan 1/2006 of EUR 15.1 million is recognised in equity attributable to parent company shareholders, under the share premium fund.
| EUR million | 2010 | 2009 |
|---|---|---|
| 1-2 years | 132.3 | 190.9 |
| 2-3 years | 491.4 | 91.0 |
| 3-4 years | 312.3 | 466.3 |
| 4-5 years | 157.7 | 300.0 |
| over 5 years | 118.7 | 127.3 |
| Total | 1,212.4 | 1,175.4 |
Total 1,212.4 1,175.4
| Short-term interest-bearing liabilities by currency | |||
|---|---|---|---|
| 2010 | 2009 | ||
| 48.4 | 112.8 | ||
| 1.2 | |||
| 125.8 | 31.6 | ||
| 9.8 | 0.8 | ||
| 185.3 | 146.3 | ||
| 1.2 |
B) Terms and conditions of subordinated capital loans Subordinated capital loan 1/2005
On 17 June 2005, Citycon Oyj issued a five-year subordinated capital loan, 1/2005, of EUR 70 million at a fixed annual nominal interest rate of 4.70 per cent. The loan's issue price accounted for 99.956 per cent of the nominal loan amount, and its maturity date was 17 June 2010.
2 ) The loan's principal, including interest accumulated until the repayment date, will be repaid in one instalment on 17 June 2010 if full margin is available for the restricted shareholders' equity and other non-distributable earnings, based on the company's and its Group's latest adopted balance sheet, after the repayment.
3) Fixed annual interest of 4.70% will be paid annually in arrears on the loan's principal until 17 June 2010. Unless the loan is repaid in full on its maturity date of 17 June 2010, interest on the unpaid loan principal after that date is 12-month Euribor plus 5 percentage points. Interest can be paid only if this amount can be allocated to profit distribution based on the company's and its Group's latest adopted balance sheet.
On 2 August 2006, Citycon Oyj issued a seven-year convertible capital loan, 1/2006, of EUR 110 million at a fixed annual nominal interest rate of 4.50 per cent. After the buyback transactions performed during 2008, 2009 and 2010, the outstanding amount was EUR 71.3 million. The loan's conversion price is EUR 4.2000 per share and a full conversion of the loan would result in the issue of 16,964,285 shares. The loan's issue price accounted for 100.00 per cent of the nominal loan amount, and its maturity date is 2 August 2013.
2) The loan's principal, including interest accumulated until the repayment date, will be repaid in one instalment on 2 August 2013 if full margin is available for the restricted shareholders' equity and other non-distributable earnings, based on the company's and its Group's latest adopted balance sheet, after the repayment. The accrued interest for the loan was EUR 1.3 million as of 31 December 2010.
3) Fixed annual interest of 4.50% will be paid annually in arrears on the loan's principal until 2 August 2013. In the event, that the loan is not repaid in full on its maturity date of 2 August 2013, interest on the unpaid loan principal after that date is 3-month Euribor plus 5 percentage points. Interest can be paid only if this amount can be allocated to profit distribution based on the company's and its Group's latest adopted balance sheet. In the event, that the interest is not fully paid on any interest payment date, the interest on the unpaid interest amount after the interest payment date is 3-month Euribor plus 5 percentage points.
During 2008, 2009 and 2010, from the open markets, Citycon has repurchased the convertible capital loan for a nominal amount of EUR 38.8 million with a weighted average purchase price of 58.1%. The amount repurchased by Citycon equals approximately 35.2 per cent of the initial nominal amount of the loans issued. Net financial expenses in the statement of comprehensive income include a one-off gain of EUR 0.1 million (EUR 0.6 million ) for the buybacks of the convertible capital loan in 2010.
| C) Breakdown of finance lease liabilities | ||
|---|---|---|
| EUR million | 2010 | 2009 |
| Maturity of finance lease liabilities: | ||
| Finance lease liabilities | ||
| - minimum lease payments |
| Total | 0.7 | 0.3 |
|---|---|---|
| 1-5 years | 0.4 | 0.2 |
| Not later than 1 year | 0.3 | 0.2 |
| EUR million | 2010 | 2009 |
|---|---|---|
| Finance lease liabilities - present value of minimum lease payments |
||
| Not later than 1 year | 0.3 | 0.2 |
| 1-5 years | 0.3 | 0.2 |
| Total | 0.6 | 0.3 |
| Future finance charges on finance leases 0.0 | 0.0 | |
| Total finance lease liabilities | 0.7 | 0.3 |
Citycon's finance leases mainly apply to computer hardware and machinery and equipment.
Citycon uses a holistic Enterprise Risk Management (ERM) programme. The objective of risk management is to ensure that Citycon will reach its business targets and to identify key risks which may threaten its ability to meet these targets before they realise.
Citycon's risk management process involves identifying, analysing, measuring, mitigating and controlling business-related risks. The Board of Directors has approved the company's risk management guidelines specifying risk management principles, which are subject to updating in order to take account of changes in business operations. During the ERM process for each business unit a risk management policy has been prepared which outlines objectives, responsibilities and development plans within the unit.
Part of the ERM process includes identification of existing and the planning of new, risk mitigation plans in the event that current actions are not deemed sufficient for each risk identified. Successful risk management decreases the likelihood of risk realisation and mitigates the negative effects of realised risks.
Risk management under ERM in Citycon comprises three main elements, namely 1) risk management implemented main business processes 2) risk reporting and 3) continuous improvement of risk management.
Citycon has analysed and identified five main business processes during the implementation of ERM. These are property acquisitions, takeover of acquired properties, shopping centre management, property development and planning and control. Each main process has been carefully analysed from a risk management angle. A detailed process description has been prepared for each process determining the target state of the process, after implementation of improvement measures and taking risk management requirements into account. The implementation of these common best practices in daily operations forms an essential part of daily risk management throughout the organisation.
The risk reporting process gathers analytical data on risks and the respective mitigation plans, for reporting to the Board of Directors. During the risk reporting period, each business unit and legal and finance unit independently defines its near term targets, risks threatening these targets and mitigation plans related to the risks. In order to evaluate the importance of each risk, an estimate of the loss associated with the risk is determined together with the probability of risk realisation and the effectiveness of each mitigation plan on the loss and/or probability. An additional feature of risk reporting involves each business unit reporting the potentially realised risks during the previous year, and mitigation plans put into effect during the period. Risk data is inputted into one group-wide risk register, from which business unit risk reports are prepared for the Board of Directors and Audit Committee. In addition, from the risk register a consolidated Citycon Group risk report and analysis is prepared. which aims to recognise group level risk concentrations across business units. Risk reports to the Board of Directors and Audit Committee are prepared in conjunction with budgeting during the autumn and the strategy review during the spring. Risk management and business unit risk reports are additionally discussed four times a year by the Corporate Management Committee.
Citycon aims to continuously evaluate and develop its ERM process and risk management in general. Four times a year a risk management supervisory group meets, whose tasks include acceptance of the risk reports, annually evaluating the sufficiency of the risk management measures taken in the light of identified risks, monitoring progress in the implementation of the mitigation plans and annually assessing the adequacy of Citycon's risk management capabilities.
Each business unit and the legal and finance units have a dedicated person responsible for the ERM process who is in charge of reporting the risks and mitigation
plans and following-up on their implementation.The Group Treasurer prepares the risk report for the Board of Directors and Audit Committee. The membership of the risk management supervisory group includes the CEO, CFO, Head of Legal Affairs, Group Treasurer and business unit directors or the dedicated risk management person from each business unit.
Financial risks have been defined as business critical risks for Citycon. Financial risk arises for Citycon in the form of financial instruments, which are mainly used to raise financing for operations. The Group also has interest rate and foreign exchange derivatives used in to manage interest rate and currency risks arising from operations and financing sources. The Board of Directors has approved a Treasury Policy which defines the objectives, responsibilities and risk management indicators applicable to interest rate, foreign exchange, counterparty, liquidity and electricity risk management. The execution of interest rate risk management is performed by the Group Treasurer, under the supervision of the CFO. The Group Treasurer reports compliance with the objectives, in conjunction with the interim and annual report to the Board of Directors and CFO.
Citycon's identified, key financial risks include interest rate risk related to cash flow, liquidity risk, credit risk and foreign currency risk. These risks are summarised below.
Citycon's key financial risk is the interest rate risk of its interest bearing liabilities, whereby changes in money market interest rates lead to fluctuations in future interest cash flows on floating rate borrowings. Interest rate risk management aims to reduce or eliminate the adverse effect of interest rate fluctuations on the company's profit and cash flow. The company aims at a loan portfolio with the right balance of fixed and variable rate debts. Under the company's interest rate risk management policy, the target debt portfolio is one in which a minimum of 70 and a maximum of 90 per cent of interest bearing liabilities are based on fixed interest rates.
The company uses interest rate swaps to manage its interest rate risks and to convert floating rate loans into fixed rate loans. A portion of the hedges can also be performed using inflation derivatives. The interest sensitivity of Citycon's loan portfolio at the end of 2010 is depicted by the fact that a one-percentage point rise in money market interest rates would increase its interest expenses for 2011 by EUR 2.6 million, while a fall of one-percentage point in such rates would decrease them by EUR 2.6 million in the same year.
The following table shows the interest expenses' sensitivity to a 100 basis point change in short term interest rates assuming that all other variables remainconstant. The impact is shown as a change in interest expenses resulting from changes in the interest rate related to a floating rate debt.
| EUR million | 2010 | 2009 |
|---|---|---|
| an increase of 100 basis points | ||
| Effect on interest expenses of |
| Total | 2.6 | 2.7 |
|---|---|---|
| Other currencies | 0.3 | 0.3 |
| Swedish krona | 1.8 | 1.7 |
| Euro | 0.6 | 0.7 |
The following table shows the consolidated shareholders' equity's sensitivity to a 100 basis point change in short term interest rates, assuming that all other variables remain constant. The impact is shown as a change in shareholders' equity resulting from changes in interest rates, which relate to interest rate derivatives under hedge accounting treatment.
| EUR million | 2010 | 2009 |
|---|---|---|
| Euro | 11.5 | 9.6 |
| Swedish krona | 12.2 | 7.0 |
| Total | 23.7 | 16.5 |
Given that Citycon's strategy is to expand in Finland, the Baltic countries and Sweden, the company will need both equity capital and borrowings. Minimum shareholders' equity is determined by the company's loan covenants. The Group uses cash-flow forecasts to continuously assess and monitor financing required for its business. Here, the goal is to arrange financing on a long term basis and avoid any large concentration of due dates for the loan agreements. Citycon aims to guarantee the availability and flexibility of financing through unused credit limits and by using several banks and financing methods as sources of finance.
Citycon's financing policy states that the company's commited credit limits or liquid assets should cover all approved and on-going investments. In addition, available liquidity should provide a sufficient buffer for unexpected payments, based on the management's assesment of the amount required, and the company will arrange committed back-up limits for all funds drawn under commercial paper programmes. On 31 December 2010, unused credit limits amounted to EUR 225.5 million.
Table below summarises the maturity profile of the Group's financial liabilities, based on contractual payments. The table includes both interest and principal flows of loans and payments arising from derivative financial instruments. Future interest payments of floating rate loans have been determined based on the interest rate applicable on the balance sheet date and are not discounted. Future interest payments for derivative financial instruments are based on discounted net present values and future interest rates are obtained through interpolation based on the yield curve prevailing on the balance sheet date.
| Less than 1 month |
1 to 12 months |
1-5 years |
Over 5 years |
Total |
|---|---|---|---|---|
| 7.1 | 209.9 | 1,065.3 | 132.7 | 1,415.0 |
| - | 3.2 | 77.7 | - | 80.9 |
| - | 2.0 | 46.1 | - | 48.2 |
| - | 0.3 | 0.3 | 0.0 | 0.6 |
| 0.1 | 13.6 | 7.3 | -3.6 | 17.4 |
| 33.6 | - | 48.3 | ||
| 10.2 4.5 |
| 13.6 | 84.0 | 1,005.7 | 145.9 | 1,249.2 |
|---|---|---|---|---|
| - | 3.4 | 86.8 | - | 90.3 |
| - | 73.3 | - | - | 73.3 |
| - | 2.0 | 48.2 | - | 50.2 |
| - | 0.2 | 0.2 | - | 0.3 |
| 0.1 | 19.9 | 16.5 | -0.3 | 36.3 |
| 13.4 | 56.9 | - | - | 70.3 |
Citycon's rent revision procedures, long leases and high occupancy ratio generate a stable long-term cash flow profile. Citycon expects to meet its liabilities shown in the table above from this stable cash flow and undrawn committed credit facilities. In the long-term, debt refinancings and disposals of investment properties can be considered. The table below shows the maturity profile of the undrawn committed credit facilities.
| EUR million | Less than 1 month |
1 to 12 months |
1-5 years |
Over 5 years |
Total |
|---|---|---|---|---|---|
| 31 December 2010 | |||||
| Undrawn committed credit facilities | - | 24.9 | 150.6 | 50.0 | 225.5 |
| 31 December 2009 | |||||
| Undrawn committed credit facilities | - | - | 185.8 | - | 185.8 |
The above mentioned credit facilities are freely available to Citycon based on group's financing needs.
The Group's most significant credit-risk concentration relates to receivables from Kesko Group. Citycon controls its receivables within the framework of the given credit limits and has not so far identified any major credit risk associated with them. Credit-risk management caters for tenant-risk management, which is aimed at minimising the adverse effect of unexpected changes in the customers' financial standing on Citycon's business and financial results. Customer-risk management is primarily based on the knowledge of the customers' business and active monitoring of customer data. Citycon's lease agreements include lease deposit provisions used to contribute to managing customers' risks. The maximum exposure from trade receivables is the carrying amount as disclosed in Note 24. Trade and other receivables.
Credit risk arising from cash and cash equivalents and certain derivative agreements relate to a default of a counterparty with a maximum exposure equal to the carrying amount of these instruments. Citycon invests its liquidity in a manner which does not put the nominal amount at risk. Citycon does not, for example, invest in equity markets. Citycon's cash and cash equivalents are primarily placed in short term money market deposit in which the counterparties are commercial banks participating in Citycon's credit agreements. Citycon's financing policy also sets forth the approved financial instruments in which the company can invest, and includes counterparty limits for those investments.
Citycon's entry into countries outside the euro-zone exposes the company to exchange rate risk. Exchange rate risk stems from transaction risks resulting from the conversion of foreign currency denominated transactions into local currency, on the one hand, and from translation risks in the balance sheet associated with investments in foreign subsidiaries. The company hedges against exchange rate risk in the balance sheet by aiming to finance its foreign investments mainly in the local currency. The company uses foreign exchange derivatives to manage the transaction risk on committed transactions. Foreign exchange derivatives are also used to hedge a possible mismatch between assets and liabilities denominated in the same currency in the balance sheet. Currently the company's exchange rate risk mainly relates to fluctuations in the euro/ Swedish krona exchange rate.
The following table shows the sensitivity in the statement of comprehensive income to a five percent change in foreign exchange rates, assuming that all other variables remain constant. Such an impact is attributable to a change in the fair value of financial instruments, given the assumed change in foreign exchange rates.
| Effect of a five percent change in foreign exchange rates on net financial expenses |
|
|---|---|
| 2010 | 2009 |
| -0.2 | -0.2 |
| - | - |
| -0.2 | -0.2 |
Other currencies comprise those of in Estonia and Lithuania. The foreign exchange rate in these countries is pegged to the euro and Estonia has adopted euro as its functional currency as of 1 January 2011.
The objective of the company's capital management is to support the growth strategy, maximise shareholder value, comply with loan agreement provisions and ensure the company's ability to pay dividends. Citycon's capital structure is managed in an active manner and capital structure requirements are taken into account when considering various financing alternatives. The company can adjust the capital structure by deciding on the issuance of new shares, raising debt financing or making adjustments to the dividend.
The company's long term equity ratio target is 40 per cent and its current syndicated loan agreements require a minimum equity ratio of 32.5 per cent. The equity ratio of the loan agreements is calculated by making certain adjustments to the equity ratio defined in the Financial Supervisory Authority standard 5.1. Disclosure of periodic information, among other things, adding the capital loan and convertible capital loan issued by the company to the shareholders' equity. As of 31 December 2010, the company's equity ratio stood at 37.1 per cent and the equity ratio as defined in the loan agreement was around 39.4 per cent.
Citycon monitors its capital structure based on equity ratio and gearing. The formulas for calculating the equity ratio and gearing can be found on page 53 in the consolidated financial statements.
Company monitors its capital structure mainly with equity ratio.
| Equity ratio: | ||
|---|---|---|
| EUR million | 2010 | 2009 |
| Total shareholders' equity (A) | 900.2 | 767.9 |
| Total assets | 2,436.5 | 2,253.2 |
| Less advances received | 12.7 | 8.8 |
| ./. (Total assets | ||
| - advances received) (B) | 2,423.8 | 2,244.4 |
| Equity ratio (A/B) | 37.1% | 34.2% |
| Gearing-%: | ||
| EUR million | 2010 | 2009 |
| Interest-bearing debt total | ||
| (Note 27) | 1,397.7 | 1,321.8 |
| Less cash and cash | ||
| equivalents (Note 25) Interest-bearing net debt (A) |
19.5 1,378.2 |
19.8 1,302.0 |
| Total shareholders' equity (B) | 900.2 | 767.9 |
Higher equity ratio and lower gearing in 2010 is due to higher shareholders' equity as a result of fair value gains from investment properties and a share issue.
Trade and other payables
| EUR million | 2010 | 2009 |
|---|---|---|
| Trade payables | 18.0 | 17.2 |
| Short-term advances received | 12.2 | 8.3 |
| Interest liabilities | 6.9 | 9.3 |
| Other liabilities | 12.6 | 8.4 |
| Accrued expenses total | 19.6 | 17.8 |
| VAT-liabilities | 5.1 | 36.0 |
| Other short-term payables | 0.5 | 0.4 |
| Other short-term payables total | 5.5 | 36.4 |
| Total | 55.3 | 79.7 |
Due dates of future payments of trade and other payables:
| EUR million | 2010 | 2009 |
|---|---|---|
| Due in less than 1 month | 34.7 | 15.6 |
| Due in 1-3 months | 6.3 | 62.5 |
| Due in 3-6 months | 5.7 | 1.5 |
| Due in 6-12 months | 4.1 | -0.1 |
| Due in 1-2 years | 4.5 | 0.2 |
| Due in 2-5 years | - | 0.0 |
| Due in over 5 years | 0.0 | 0.1 |
| Total | 55.3 | 79.7 |
In 2004, the AGM decided to grant a maximum of 3,900,000 stock options. Stock options entitle their holders to subscribe for company shares at the price and within the period specified in the terms and conditions of the stock options. The terms and conditions of the 2004 stock option scheme are available on the corporate website at www.citycon.fi/options.
The subscription period with the 2004 A option rights expired on 31 March 2009 and that of 2004 B option rights on 31 March 2010. By the end of the financial year 2010, 1,687,665 company shares had been subscribed for with these stock options by exercising 1,418,073 option rights. Of these, 1,301,217 shares were subscribed during 2010. 2004 C option rights have not been exercised for share subscription.
Citycon used the Black & Scholes option-pricing model to measure the fair value of stock options on the grant date and recognised them under personnel expenses in the statement of comprehensive income allocated over the instrument's vesting period. Since the last vesting period ended on 1 September 2008, no expenses have been recognised in the statement of comprehensive income from the granted stock options during 2009 or 2010.
| 2004 stock options | 2004 A | 2004 B | 2004 C |
|---|---|---|---|
| Number of options granted | 1,040,000 | 1,090,000 | 1,050,000 |
| Held by Veniamo-Invest Oy, number (1 | - | - | 250,000 |
| Subscription ratio, stock option/share | 1:1,2127 | ||
| Subscription price/share, EUR (2 | 4.2213 | ||
| Share subscription period started | 1.9.2006 | 1.9.2007 | 1.9.2008 |
| Share subscription period ended/ends | 31.3.2009 | 31.3.2010 | 31.3.2011 |
| Number of exercised option rights | 345,075 | 1,072,998 | - |
| Number of subscribed shares (3 | 386,448 | 1,301,217 | - |
| No. of options available for share subscription | - | - | 1,050,000 |
| No. of shares that can be subscribed | - | - | 1,273,335 |
1) Veniamo-Invest Oy, a wholly-owned subsidiary of Citycon Oyj, cannot subscribe for its parent company's shares. 2) Share subscription price is reduced by half of the per-share dividends paid and per-share equity returned.
3) Subscription of shares will not result in an increase in the company's share capital, since the entire subscription price is recognised under the invested unrestricted equity fund.
Changes in the stock options and their weighted average exercise prices during the period were as follows (excluding Veniamo-Invest Oy's stock options that cannot be exercised for share subscription):
| 2010 | 2009 | |||
|---|---|---|---|---|
| Exercise price, weighted average, EUR/share |
Number of stock options |
Exercise price, weighted average, EUR/share |
Number of stock options |
|
| At period start | 3.43 | 2,140,000 | 3.20 | 2,834,925 |
| Exercised stock options | 2.56 | 1,072,998 | - | - |
| Lapsed stock options | 2.52 | 17,002 | 2.20 | 694,925 |
| At period end | 4.22 | 1,050,000 | 3.43 | 2,140,000 |
| Exercisable stock options at period-end | 1,050,000 | 2,140,000 |
The per-share exercise price of the stock options exercised during 2010 averaged EUR 2.56 and these were exercised during January-March of 2010. The stock options exercised during 2010 brought in EUR 3.3 million, which were recognised in invested unrestricted equity fund. No stock options were exercised during 2009.
Exercise prices and lapse periods of outstanding stock options on the balance sheet date were as follows:
| 2010 | 2009 | ||
|---|---|---|---|
| Year of lapse | Exercise price, EUR |
Number of shares, 1,000 |
Number of shares, 1,000 |
| 2011 | 4.22 | 1,273 | 1,273 |
On 26 April 2007, the Board of Directors decided on a long-term share-based incentive plan for key personnel of Citycon Group. The aim of the plan is to encourage key personnel to engage in sustained efforts to increase shareholder value and to strengthen their commitment to the developing the Group's operations. The potential incentive is determined on the basis of Citycon's consolidated adjusted net cash-flow from operations per share and net rental income. The incentive plan is divided into three incentive periods: 2007, 2008 and 2009. In addition, on 9 February 2010, Citycon Oyj's Board of Directros decided to continue the long-term share-based incentive plan by one year into the financial year 2010.
The incentives will be granted to key personnel during the years 2008-2013, so that the incentives earned during each incentive period are paid evenly in the following three years. The Board of Directors decides annually on the key personnel participating in the long-term incentive plan and on the incentive goals set. The incentive granted will comprise Citycon shares, cash or both. The maximum number of shares granted for each incentive period was determined by their volume weighted average price during the first quarter of each period. The incentive period 2010 is an exception as its maximum number of shares granted was decided by the Board of Directors.
Incentives paid in shares are charged to administration expenses and recognised as an increase in shareholders' equity. Incentives paid in cash are charged to administration expenses and recognised as liabilities. In 2010, expenses recognised in the statement of comprehensive income amounted to EUR 0.7 million (EUR 0.4 million in 2009).
The following table presents additional information on the share-based incentive plan:
| Incentive period 2010 |
Incentive period 2009 |
Incentive period 2008 |
Incentive period 2007 |
|
|---|---|---|---|---|
| Grant date | 9 February 2010 | 22 April 2009 | 15 May 2008 | 26 April 2007 |
| No. of key personnel at period end | 25 | 24 | 20 | 13 |
| Maximum number of shares | ||||
| to be granted on grant date | 86,800 | 221,600 | 82,200 | 38,700 |
| Shares granted in 2008 | - | - | - | 4,293 |
| Shares granted in 2009 | - | - | 20,109 | 4,288 |
| Shares granted in 2010 | - | 60,041 | 18,965 | 3,960 |
According to the terms and conditions of the incentive plan, a participant can also choose to receive shares instead of the cash component intended for paying the related income tax. In addition to shares granted as presented above, 41,054 shares were granted in 2010 (16,349 shares in 2009) instead of paying the cash component in cash.
In addition, related to incentive period 2010, the Board of Directros can grant 37 200 shares to key personnel on top of the maximum number fo shares presented in the table above.
C) Pension obligation - defined benefit plan The company has taken out pension insurance to cover CEO Petri Olkinuora's pension plan, which is a defined benefit contribution plan. The company announced in December 2010 that Mr Olkinuora will leave his position. He will remain the company's CEO until the Annual General Meeting on 23 March 2011. Citycon has settled its obligations related to CEO's pension plan during 2010. Therefore, the pension liability recognised in the statement of financial position amounted to EUR 0.0 million on 31 December 2010 (EUR 0.1 million on 31 December 2009).
| EUR million | 2010 | 2009 |
|---|---|---|
| Present value of obligation 1.1. | 0.3 | 0.2 |
| Interest cost | 0.0 | 0.0 |
| Current service cost | 0.0 | 0.0 |
| Settlements | -0.4 | - |
| Actuarial losses | 0.1 | - |
| Present value of obligation 31.12. | - | 0.3 |
| Fair value of plan assets 1.1. | 0.2 | 0.2 |
| Expected return on plan assets | 0.0 | 0.0 |
| Contributions | 0.5 | 0.0 |
| Settlements | -0.7 | - |
| Actuarial losses | 0.0 | - |
| Fair value of plan assets 31.12. | - | 0.2 |
| EUR million | 2010 | 2009 |
|---|---|---|
| Present value of obligation | 0.0 | 0.3 |
| Fair value of plan assets | 0.0 | -0.2 |
| Liability recognised in | ||
| the statement of financial position | - | 0.1 |
| Unrecognised actuarial gains/losses | 0.0 | 0.0 |
| Unrecognised past service | ||
| costs, non-vested | - | - |
| Liability recognised in | ||
| the statement of financial position | - | 0.1 |
Liability recognised in the statement of financial position was completely funded on 31 December 2009.
| Expense recognised in income statement 0.5 | 0.0 | |
|---|---|---|
| Settlements | 0.5 | - |
| Expected return on pension assets | 0.0 | 0.0 |
| Current service cost | 0.0 | 0.0 |
| Interest cost | 0.0 | 0.0 |
Out of the pension expense recognised in income statement, EUR 0.4 million was considered as non-recurring resulting from the fact that Petri Olkinuora was agreed to leave his position.
| Actual return on plan assets | ||
|---|---|---|
| Expected return on plan assets | 0.0 | 0.0 |
| Actuarial gain (loss) on plan assets | 0.0 | 0.0 |
| Actual return on plan assets | 0.0 | 0.0 |
Two insurance companies have invested the pension insurance assets. Each insurance company has approximately half of the assets. One of the insurance companies has invested 75 per cent to money market instruments, 12.5 per cent to government bonds and 12.5 per cent to corporate bonds. The return on assets of the other insurance company is determined by 2.5 per cent calculated interest rate and possible additional interest rate compensated by the insurance company.
| EUR million | 2010 | 2009 |
|---|---|---|
| Actuarial assumptions used | ||
| Discount rate at year start | 4.75% | 5.00% |
| Expected rate of return on pension | ||
| assets at year start | 4.50% | 4.50% |
| Current service cost | 0.0 | 0.0 |
| Benefits paid | 0.0 | 0.0 |
| Contribution paid | 0.5 | 0.0 |
| Present value of obligation at 31.12. | - | 0.3 |
| Fair value of pension assets at 31.12. | - | 0.2 |
| Expected avg. remaining working life (yr) | - | 9 |
| EUR million | 2010 | 2009 |
|---|---|---|
| Profit/ loss before taxes | 102.8 | -37.5 |
| Adjustments for: | ||
| Depreciation and | ||
| amortisation (Note 12) | 0.8 | 0.7 |
| Net fair value gains (-)/losses (+) | ||
| on investment property (Note 17) | -50.8 | 97.4 |
| Profit (-)/losses(+) on disposal of | ||
| investment property (Notes 17 and 23) -2.6 | -0.1 | |
| Share-based payments (Note 29) | 0.3 | 0.4 |
| Other non-cash income | -0.4 | -0.4 |
| Foreign exchange gains (-)/losses (+) | ||
| in financing expenses (Note 14) | -0.1 | 0.0 |
| Fair value gains (-)/losses (+) | ||
| of derivatives (Note 14) | -0.2 | 0.1 |
| Interest and | ||
| other financing income (Note 14) | -0.6 | -0.8 |
| Interest and | ||
| other financing expenses (Note 14) | 55.8 | 48.5 |
| Changes in working capital | ||
| Trade and other receivables (Note 24) -8.2 | -22.5 | |
| Trade and other payables (Note 28) | 11.0 | 33.2 |
| Cash generated from operations | 108.0 | 119.0 |
A) Other leases - Group as lessee Future minimum lease payments under non-cancellable other leases are as follows:
| EUR million | 2010 | 2009 |
|---|---|---|
| Not later than 1 year | 1.2 | 1.1 |
| 1-5 years | 1.7 | 1.7 |
| Over 5 years | 0.0 | 0.1 |
| Total | 2.9 | 2.9 |
Leases mainly concern premises and cars. Lease of premises are in effect until further notice and have a notice period of six months. For most leases, rent increases are tied to the cost-of-living index. Car lease agreements are in effect for three years. With the lease agreements have no renewal clause, in practice the contact period can be extended for one to two years.
Lease payments recognised as expenses during the period were EUR 1.0 million (EUR 1.0 million) and they don't include contingent rents or sublease payments. Lease expenses recognised in the statement of comprehensive income are included in Administrative expenses on row office and other administrative expenses (Note 10. Administrative expenses).
| Loans, for which mortgages are given | ||
|---|---|---|
| in security and shares pledged | ||
| Loans from financial institutions | 27.7 | 33.0 |
| Contingent liabilities for loans | ||
| Mortgages on land and buildings | 36.9 | 42.9 |
| Bank guarantees | 43.4 | 45.4 |
| Capital commitments | 32.3 | 44.0 |
| VAT refund liabilities | 51.2 | 46.2 |
Mortgages relate to certain bank loans of the subsidiaries where the subsidiary has given security on the loan via mortgages.
Bank guarantees relate to bank loans of subsidiaries which Citycon Oyj has guaranteed via parent guarantee or alternatively third party bank guarantees.
Capital commitments mainly relate to on-going (re) development projects.
There are value-added tax refund liabilities arising from capitalized renovations and new investments in Citycon's investment properties. The VAT refund liabilities will realise if the investment property is sold or transferred for non-VAT-liability use within 10 years. Exception to 10-year review rule apply to investments in Finland that have been completed prior to 2008, and the review period is 5 years.
Under a commitment given in the terms of the syndicated loan facilities, Citycon Group undertakes to maintain its equity ratio at above 32.5% and its interest coverage ratio at a minimum of 1.8. For the calculation of equity ratio, shareholders' equity includes capital loans and excludes non-cash valuation gain/loss from derivative contracts recognised in equity and the minority interest. The interest coverage ratio is calculated by dividing the EBITDA - adjusted by extraordinary gains/losses, provisions and non-cash items - by net financial expenses.
Accordingly, equity ratio on 31 December 2010 stood at around 39.4 per cent and interest coverage ratio at around 2.0 (2009: equity ratio was around 40.6 per cent and interest coverage ratio around 2.3).
Citycon Group's related parties comprise the parent company, subsidiaries, associated companies, minority companies, Board members, CEO, Corporate Management Committee members and Gazit-Globe Ltd., whose shareholding in Citycon Oyj accounted for 47.3% on 31 December 2010 (31 December 2009: 47.9%).
| G Group companies |
Country | roup P holding, % |
arent company holding, % |
|---|---|---|---|
| Parent company: Citycon Oyj | Finland | ||
| 1. Asematie 3 Koy | Finland | 100.0 | 100.0 |
| 2. Asolantien Liikekiinteistö Oy | Finland | 100.0 | 100.0 |
| 3. Citycon AB | Sweden | 100.0 | 100.0 |
| 4. Citycon Development AB | |||
| (former Liljeholmsplan Hotellfastigheter AB) | Sweden | 100.0 | - |
| 5. Citycon Estonia OÜ | Estonia | 100.0 | - |
| 6. Citycon Jakobsbergs Centrum AB | |||
| (former BHM Centrumfastigheter AB) | Sweden | 100.0 | - |
| 7. Citycon Liljeholmstorget Galleria AB | |||
| (former Liljeholmsplan Fastighets AB) | Sweden | 100.0 | - |
| 8. Citycon Services AB | Sweden | 100.0 | - |
| 9. Citycon Shopping Centers AB (former Citycon Sverige AB) | Sweden | 100.0 | - |
| 10. Citycon Tumba Centrumfastigheter AB | |||
| (former Tumba Centrumfastigheter AB) | Sweden | 100.0 | - |
| 11. Drabantvägen bostäder AB | Sweden | 100.0 | - |
| 12. Espoon Asemakuja 2 Koy | Finland | 100.0 | 100.0 |
| 13. Forssan Hämeentie 3 Koy | Finland | 100.0 | 100.0 |
| 14. Jakobsberg LB Bostäder AB | Sweden | 100.0 | - |
| 15. Jyväskylän Forum Koy | Finland | 100.0 | 100.0 |
| 16. Jyväskylän Kauppakatu 31 Koy | Finland | 100.0 | 100.0 |
| 17. Kaarinan Liiketalo Koy | Finland | 100.0 | 100.0 |
| 18. Karjaan Ratakatu 59 Koy | Finland | 100.0 | 100.0 |
| 19. Karjalan Kauppakeskus Koy | Finland | 100.0 | 100.0 |
| 20. Kauppakeskus Columbus Koy | Finland | 100.0 | 100.0 |
| 21. Kauppakeskus Isokarhu Oy | Finland | 100.0 | 100.0 |
| 22. Kivensilmänkuja 1 Koy | Finland | 100.0 | 100.0 |
| 23. Kotkan Keskuskatu 11 Koy | Finland | 100.0 | 100.0 |
| 24. Kouvolan Valtakadun Kauppakeskus Koy | Finland | 100.0 | 100.0 |
| 25. Kuopion Kauppakatu 41 Koy | Finland | 100.0 | 100.0 |
| 26. Kuusankosken Kauppakatu 7 Koy | Finland | 100.0 | 100.0 |
| 27. Kuvernöörintie 8 Koy | Finland | 100.0 | 100.0 |
| 28. Lahden Hansa Koy | Finland | 100.0 | 100.0 |
| 29. Lahden Kauppakatu 13 Koy | Finland | 100.0 | 100.0 |
| 30. Lappeenrannan Villimiehen Vitonen Oy | Finland | 100.0 | 100.0 |
| 31. Lentolan Perusyhtiö Oy | Finland | 100.0 | 100.0 |
| 32. Liljeholmstorget Development Services AB | Sweden | 100.0 | - |
| 33. Lillinkulma Koy | Finland | 100.0 | 100.0 |
| 34. Lintulankulma Koy | Finland | 100.0 | 100.0 |
| 35. Lippulaiva Koy | Finland | 100.0 | 100.0 |
| 36. Magistral Kaubanduskeskuse OÜ | Estonia | 100.0 | - |
| G Group companies |
Country | roup P holding, % |
arent company holding, % |
|---|---|---|---|
| 37. Martinlaakson Kivivuorentie 4 Koy | Finland | 100.0 | 100.0 |
| 38. Minkkikuja 4 Koy | Finland | 100.0 | 100.0 |
| 39. Montalbas B.V. | The Netherlands | 100.0 | 100.0 |
| 40. Myllypuron Ostoskeskus Oy (in liquidation) | Finland | 100.0 | 100.0 |
| 41. Myyrmanni Koy | Finland | 100.0 | 100.0 |
| 42. Mäntyvuoksi Koy | Finland | 100.0 | 100.0 |
| 43. Naantalin Tullikatu 16 Koy (divested on 5 Jan. 2011) | Finland | 100.0 | 100.0 |
| 44. Oulun Galleria Koy | Finland | 100.0 | 100.0 |
| 45. Porin Asema-Aukio Koy | Finland | 100.0 | 100.0 |
| 46. Porin Isolinnankatu 18 Koy | Finland | 100.0 | 100.0 |
| 47. Riddarplatsen Fastigheter HB | Sweden | 100.0 | - |
| 48. Rocca al Mare Kaubanduskeskuse AS | Estonia | 100.0 | - |
| 49. Runeberginkatu 33 Koy | Finland | 100.0 | 100.0 |
| 50. Sinikalliontie 1 Koy | Finland | 100.0 | 100.0 |
| 51. Säkylän Liiketalo Koy | Finland | 100.0 | 100.0 |
| 52. Talvikkitie Koy 7-9 | Finland | 100.0 | 100.0 |
| 53. Tampereen Hatanpää Koy | Finland | 100.0 | 100.0 |
| 54. Tampereen Hermanni Koy | Finland | 100.0 | 100.0 |
| 55. Tampereen Suvantokatu Koy | Finland | 100.0 | 100.0 |
| 56.Tumba Bostäder AB (former AB Coport 251) | Sweden | 100.0 | - |
| 57. UAB Citycon | Lithuania | 100.0 | - |
| 58. UAB Prekybos Centras Mandarinas | Lithuania | 100.0 | - |
| 59. Ultima Oy | Finland | 100.0 | 100.0 |
| 60. Valkeakosken Torikatu 2 Koy | Finland | 100.0 | 100.0 |
| 61. Vantaan Laajavuorenkuja 2 Koy | Finland | 100.0 | 100.0 |
| 62. Varkauden Relanderinkatu 30 Koy | Finland | 100.0 | 100.0 |
| 63. Wavulinintie 1 Koy | Finland | 100.0 | 100.0 |
| 64. Veniamo-Invest Oy | Finland | 100.0 | 100.0 |
| 65. Vaakalintu Koy | Finland | 95.8 | 95.8 |
| 66. Lahden Trio Koy | Finland | 89.7 | 89.7 |
| 67. Linjurin Kauppakeskus Koy | Finland | 88.5 | 88.5 |
| 68. Lappeenrannan Brahenkatu 7 Koy | Finland | 84.5 | 84.5 |
| 69. Tikkurilan Kauppakeskus Koy | Finland | 83.8 | 83.8 |
| 70. Koskikeskuksen Huolto Oy | Finland | 81.7 | 81.7 |
| 71. Lappeen Liikekeskus Koy | Finland | 90.6 | 90.6 |
| 72. Orimattilan Markkinatalo Oy | Finland | 77.3 | 77.3 |
| 73. Strömpilen AB | Sweden | 75.0 | - |
| 74. Åkersberga Centrum AB | Sweden | 75.0 | - |
| 75. Hervannan Liikekeskus Oy | Finland | 74.6 | 74.6 |
| 76. Myyrmäen Kauppakeskus Koy | Finland | 74.0 | 74.0 |
| 77. Stenungs Torg Fastighets AB | Sweden | 70.0 | - |
| 78. Kirkkonummen Liikekeskus Oy | Finland | 66.7 | 66.7 |
| 79. Espoontori Koy | Finland | 66.6 | 66.6 |
| 80. Heikintori Oy | Finland | 65.3 | 65.3 |
| 81. Tampereen Koskenranta Koy | Finland | 63.7 | 63.7 |
| 82. Myyrmäen Autopaikoitus Oy | Finland | 62.7 | - |
| 83. Vantaan Säästötalo Koy | Finland | 61.2 | 61.2 |
| G Group companies |
Country | roup P holding, % |
arent company holding, % |
|---|---|---|---|
| 84. Espoontorin Pysäköintitalo Oy | Finland | 60.1 | - |
| 85. Big Apple Top Oy | Finland | 60.0 | - |
| 86. Manhattan Acquisition Oy | Finland | 60.0 | - |
| 87. Tullintori Koy | Finland | 57.4 | 57.4 |
| 88. Espoon Asematori Koy | Finland | 54.1 | 54.1 |
| 89. Laajasalon Liikekeskus Oy | Finland | 50.4 | 50.4 |
| 90. Retail Park Oy | Finland | 50.0 | 50.0 |
| 91. Espoon Louhenkulma Koy | Finland | 48.9 | 48.9 |
| 92. Pihlajamäen Liiketalo Oy | Finland | 42.7 | 42.7 |
| 93. Länsi-Keskus Koy | Finland | 41.4 | 41.4 |
| 94. Hakunilan Keskus Oy | Finland | 41.1 | 41.1 |
| 95. Otaniemen Liikekeskus Oy | Finland | 39.2 | 39.2 |
| 96. Hansaparkki Koy | Finland | 36.0 | - |
| 97. Kontulan Asemakeskus Koy | Finland | 34.8 | 34.8 |
| 98. Puijonlaakson Palvelukeskus Koy | Finland | 31.3 | 31.3 |
| 99. Salpausseläntie 11 Koy | Finland | 31.3 | 31.3 |
| 100. Valtakatu 5-7 Koy | Finland | 31.3 | 31.3 |
| 101. Jyväskylän Ydin Oy | Finland | 29.0 | 21.5 |
| 102. Soukan Itäinentorni As Oy | Finland | 27.3 | 27.3 |
| 103. Valkeakosken Liikekeskus Koy | Finland | 25.4 | 25.4 |
| 104. Lauttasaaren Liikekeskus Oy | Finland | 23.7 | 23.7 |
| 105. Hakucenter Koy | Finland | 18.7 | 18.7 |
| 106. Tikkurilan Kassatalo As Oy | Finland | 8.1 | 8.1 |
| 107. Liesikujan Autopaikat Oy | Finland | 8.0 | - |
| 108. Tapiolan Alueen Kehitys Oy | Finland | 7.7 | 7.7 |
| Partnerships for taxation purposes: | |||
| 1. Hakarinne 4 (divested on 27 Jan. 2011) | Finland | 55.6 | 55.6 |
| 2. Parkeringshuset Väpnaren | Sweden | 64.0 | - |
Group companies have paid each other fees such as. maintenance and financial charges, interest expenses, loan repayments and other administrative service charges.
Such income and expenses have been eliminated from the consolidated financial statements. There have been no other related party transactions between Group companies.
| CEO wages and salaries | ||
|---|---|---|
| EUR | 2010 | 2009 |
| Petri Olkinuora | 403,207 388,637 |
Citycon's Board of Directors appoints the CEO and decides on the terms and conditions of his/her executive contract, in writing. Since 2002, Citycon Oyj's CEO has been Petri Olkinuora. The company announced in December 2010 that Mr Olkinuora will leave his position following the AGM of 2011. The decision to leave the CEO position was mutual between Mr Olkinuora and the Board of Directors of Citycon. In accordance with Mr Olkinuora's executive contract, he will be paid a lump-sum compensation equalling his 18-month salary, in addition to the salary payable for the notice period. The company has taken out pension insurance to cover Mr Olkinuora's pension plan. The costs of this pension insurance for the company amounted to EUR 0.5 million for the financial year 2010.
On 31 December 2010, the CEO held 140,000 2004C stock options. In relation to the company's share-based incentive scheme the CEO was granted 39,680 shares in 2010 (11,730 shares in 2009).
| EUR million | 2010 | 2009 |
|---|---|---|
| Wages and salaries | 1.4 | 1.3 |
| Pensions: defined contribution plans | 0.2 | 0.3 |
| Pension charges: defined benefit plans 0.0 | 0.1 | |
| Social charges | 0.1 | 0.1 |
| Total | 1.8 | 1.8 |
In addition to wages and salaries, corporate management committee received income of EUR 0.2 million (EUR 0.2 million) from stock options and share-based incentive plan. Also, non-recurring personnel expenses of EUR 1.3 million arising from employment terminations of CEO Petri Olkinuora and Vice President of the companies Finnish operations were recognised in 2010.
Board members do not participate in the company's share-based incentive schemes.
The outstanding amount of the company's conver-
tible capital loan was EUR 71.3 million on 31 December 2010 (EUR 76.5 million on 31 December 2009) and the carrying amount was EUR 66.3 million on 31 December 2010 (EUR 69.3 million). Based on the information Citycon has received, Gazit-Globe Ltd. held 58.9% (54.9%) out of the outstanding amount of convertible capital loan, i.e. EUR 39.1 million (EUR 38.1 million) out of the carrying amount of convertible capital loan on 31 December 2010. Total of EUR 1.9 million ( EUR 1.9 million) out of the convertible capital loan annual coupon payment made in 2010 belong to Gazit-Globe Ltd. and EUR 0.8 million (EUR 0.8 million) out of the convertible capital loan interest liability on 31 December 2010.
Citycon has paid flight and travel expenses of EUR 0.6 million to MGN Icarus Inc., a subsidiary of Gazit-Globe Ltd, and of EUR 0.0 million to Gazit-Globe Ltd. Trade payables of EUR 0.2 million arose from the purchases of services and they were non-interest bearing.
In September 2010, the company issued 22 million new shares in a share issue directed to Finnish and international institutional investors, raising approximately EUR 63 million in new equity. Gazit-Globe Ltd. subscribed 10 million shares in this share issue.
The company's main shareholder, Gazit-Globe Ltd, holding approximately 47 per cent of the shares in the company, has announced that it has been applying International Financial Reporting Standards (IFRS) in its financial reporting starting from 2007. According to IFRS one company may exercise a controlling interest in another company even if its shareholding in that company does not exceed 50 per cent. Gazit-Globe Ltd. holds the view that it exercises a controlling interest, as defined in IFRS, in Citycon Oyj based on the fact that it has been able to exercise controlling interest in Citycon Oyj's shareholders' meetings pursuant to its shareholding. In accordance with an agreement concluded between the companies, Citycon Oyj will provide Gazit-Globe Ltd. with a more detailed breakdown of the accounting information it discloses in its interim and full-year reports, so that Gazit-Globe Ltd. can consolidate Citycon Group figures into its own IFRS financial statements.
| AB Coport 238 (current Citycon Services AB) |
|---|
| AB Coport 251 (current Tumba Bostäder AB) |
| AB Coport 252 (current Drabantvägen bostäder AB) |
| Aktiebolaget Grundstenen 121670 |
| (current Jakobsberg LB Bostäder AB ) |
| Asematie 3 Koy |
| As Oy Tikkurilan Kassatalo (8.1% of the shares) |
| Lappeen Liikekeskus Koy |
| (increase of ownership by 10.4% to 90.6%) |
| Mäntyvuoksi Koy (increase of |
| ownership by 13.2% to 100%) |
Companies established
| Companies sold | ||
|---|---|---|
| ---------------- | -- | -- |
| Asunto Oy Helsingin Kivensilmänkuja 3 |
|---|
| Asunto Oy Helsingin Myllypiha |
| Fastighets AB Fartyget i Åkersberga |
| Fastighets AB Kajutan i Åkersberga |
| (former AB Coport 202) |
| Helsingin Autotalo Oy, (8.9% of the shares) |
| Helsingin Kiviparintien asumisoikeusasunnot Oy |
| Liljeholmsplan Bostadsfastigheter AB |
| Tenrot Fastighets AB |
| Vantaan Kivivuorenlaki As Oy |
| Citycon Centrum Sverige AB |
|---|
| Citycon Göteborg AB |
| Jakobsbergs Centrum Fastighets AB |
| Jakobsbergs Centrum Galleria AB |
| Jakobsbergs 565 Fastighets AB |
| Järfälla 7055 Fastighets AB |
| Sverige 7059 Fastighets AB |
On 13 January 2011, Marcel Kokkeel was appointed to be the company's new Chief Executive Officer, effective 24 March 2011. Mr Kokkeel is 52 (b. 1958) and holds a degree in law from the University of Amsterdam, the Netherlands, which is his home country.
Also on 13 January 2011, Michael Schönach was appointed Executive Vice President, Finnish Operations and a member of the Corporate Management Committee, effective 1 March 2011.
After the end of the financial year, the number of Citycon's properties decreased by two following divestments of non-core properties for a total of approximately EUR 2.5 million. The sold properties were the mutual real estate company Kiinteistö Oy Naantalin Tullikatu 16 and the commercial building owned by it, located in Naantali, as well as a real estate called Hakarinne in Tapiola, Espoo, both in Finland.
| EUR million | Formula | 2010 | 2009 | 2008 | 2007 | 2006 |
|---|---|---|---|---|---|---|
| Statement of comprehensive income data | ||||||
| Turnover | 195.9 | 186.3 | 178.3 | 151.4 | 119.4 | |
| Other operating income and expense | 0.3 | 0.0 | 6.1 | 0.5 | 0.6 | |
| Operating profit/loss | 157.7 | 10.3 | -105.0 | 298.7 | 196.5 | |
| Profit/loss before taxes | 102.8 | -37.5 | -162.3 | 253.5 | 165.6 | |
| Profit/loss attributable to parent company shareholders | 78.3 | -34.3 | -124.1 | 200.3 | 124.9 | |
| Statement of financial position data | ||||||
| Investment properties | 2,367.7 | 2,147.4 | 2,111.6 | 2,248.9 | 1,447.9 | |
| Current assets | 56.9 | 65.9 | 52.4 | 48.1 | 33.1 | |
| Equity attributable to parent company shareholders | 849.5 | 731.1 | 799.1 | 982.0 | 565.3 | |
| Minority interest | 50.7 | 36.8 | 38.2 | 28.9 | 15.0 | |
| Interest-bearing liabilities | 1,397.7 | 1,321.7 | 1,199.5 | 1,154.0 | 814.0 | |
| Total liabilities | 1,536.3 | 1,485.3 | 1,341.2 | 1,297.7 | 906.1 | |
| Total liabilities and shareholders' equity | 2,436.5 | 2,253.2 | 2,178.5 | 2,308.6 | 1,486.4 | |
| Key performance ratios | ||||||
| Equity ratio, % | 1 | 37.1 | 34.2 | 38.5 | 43.9 | 39.1 |
| Equity ratio for the banks, % | 39.4 | 40.6 | 45.1 | 50.1 | 49.8 | |
| Gearing, % | 2 | 153.1 | 169.5 | 141.3 | 111.8 | 136.6 |
| Return on equity, % (ROE) | 3 | 11.1 | -4.7 | -15.0 | 23.3 | 25.8 |
| Return on investment, % (ROI) | 4 | 10.6 | -0.5 | -1.5 | 16.3 | 16.8 |
| Quick ratio | 5 | 0.3 | 0.4 | 0.5 | 0.3 | 0.2 |
| Gross capital expenditure, EUR million | 133.7 | 134.6 | 157.9 | 603.9 | 436.4 | |
| % of turnover | 68.3 | 72.2 | 88.6 | 398.9 | 365.5 | |
| Per-share figures and ratios | ||||||
| Earnings per share, EUR | 6 | 0.34 | -0.16 | -0.56 | 1.00 | 0.76 |
| Earnings per share,diluted, EUR | 7 | 0.34 | -0.16 | -0.56 | 0.91 | 0.73 |
| Net cash from operating activities per share, EUR | 8 | 0.09 | 0.30 | 0.21 | 0.20 | 0.20 |
| Equity per share, EUR | 9 | 3.47 | 3.31 | 3.62 | 4.44 | 3.30 |
| P/E (price/earnings) ratio | 10 | 9 | -19 | -3 | 3 | 7 |
| Return from invested unrestricted equity fund per share, EUR | 0.10 | 0.10 | 0.10 | 0.10 | - | |
| Dividend per share, EUR | 0.04 | 0.04 | 0.04 | 0.04 | 0.14 | |
| Dividend and return from invested unrestricted equity fund per share total, EUR | 0.14 | 0.14 | 0.14 | 0.14 | 0.14 | |
| Dividend and return of equity per earnings, % | 11 | 40.8 | -90.2 | -24.9 | 13.9 | 18.4 |
| Effective dividend and return of equity yield, % | 12 | 4.5 | 4.8 | 8.3 | 4.3 | 2.8 |
| Operative key ratios | ||||||
| Net rental yield, % | 13 | 5.8 | 6.1 | 5.8 | 5.8 | 7.1 |
| Occupancy rate (economic), % | 15 | 95.1 | 95.0 | 96.0 | 95.7 | 97.1 |
| Citycon's GLA, sq.m. | 942,280 | 961,150 | 937,650 | 923,980 | 735,029 | |
| Personnel (at the end of the period) | 129 | 119 | 113 | 102 | 73 |
1) Board proposal
Formulas are available on page 53.
| EUR million | Q4/2010 | Q3/2010 | Q2/2010 | Q1/2010 | Q4/2009 | Q3/2009 | Q2/2009 | Q1/2009 |
|---|---|---|---|---|---|---|---|---|
| Turnover | ||||||||
| Finland | 32.0 | 30.8 | 31.1 | 32.5 | 32.7 | 32.4 | 32.6 | 33.5 |
| Sweden | 13.8 | 13.1 | 13.2 | 12.6 | 12.4 | 9.9 | 9.5 | 9.3 |
| Baltic Countries | 4.1 | 4.0 | 4.2 | 4.3 | 3.8 | 3.6 | 3.5 | 3.1 |
| Total | 49.9 | 48.0 | 48.6 | 49.5 | 48.9 | 45.9 | 45.6 | 45.9 |
| Net rental income | ||||||||
| Finland | 22.0 | 22.0 | 21.5 | 21.3 | 23.0 | 23.4 | 22.9 | 23.1 |
| Sweden | 6.6 | 8.1 | 7.6 | 6.4 | 6.1 | 6.4 | 5.6 | 5.2 |
| Baltic Countries | 3.1 | 2.9 | 2.8 | 3.0 | 2.5 | 2.7 | 2.5 | 2.1 |
| Other | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Total | 31.8 | 33.0 | 31.8 | 30.6 | 31.6 | 32.5 | 31.0 | 30.3 |
| Direct operating profit | ||||||||
| Finland | 20.1 | 20.5 | 19.8 | 20.5 | 21.4 | 22.0 | 21.4 | 21.5 |
| Sweden | 5.5 | 6.9 | 6.2 | 5.5 | 5.1 | 5.7 | 4.8 | 4.4 |
| Baltic Countries | 2.6 | 2.6 | 2.6 | 2.7 | 2.2 | 2.5 | 2.2 | 1.9 |
| Other | -3.9 | -2.1 | -2.2 | -2.4 | -2.3 | -1.6 | -1.4 | -2.0 |
| Total | 24.3 | 28.0 | 26.3 | 26.4 | 26.3 | 28.6 | 27.1 | 25.7 |
| Operating profit/loss | ||||||||
| Finland | 26.2 | 30.4 | 31.2 | 19.8 | 6.8 | 17.4 | 1.0 | -4.0 |
| Sweden | 7.8 | 11.5 | 16.2 | 11.2 | -12.0 | 4.4 | 0.1 | 7.8 |
| Baltic Countries | 5.2 | 3.0 | 4.1 | 1.7 | -4.9 | 7.2 | 1.5 | -7.7 |
| Other | -3.9 | -2.1 | -2.2 | -2.4 | -2.3 | -1.6 | -1.4 | -2.0 |
| Total | 35.4 | 42.8 | 49.2 | 30.3 | -12.4 | 27.4 | 1.1 | -5.8 |
| EUR million | Note 1 Jan.–31 Dec. 2010 1 Jan.–31 Dec. 2009 | ||
|---|---|---|---|
| Gross rental income | 98.8 | 104.1 | |
| Service charge income | 4.7 | 3.9 | |
| Turnover | 2 | 103.5 | 108.1 |
| Property operating expenses | 66.6 | 51.0 | |
| Other expenses from leasing operations | 3 | 0.4 | 0.2 |
| Net rental income | 36.5 | 56.9 | |
| Administrative expenses | 4, 5 | 22.5 | 18.0 |
| Other operating income and expenses | 6 | 6.1 | 2.3 |
| Operating profit | 20.1 | 41.2 | |
| Financial income | 112.4 | 90.1 | |
| Financial expenses | -137.5 | -105.2 | |
| Net financial income and expenses | 7 | -25.1 | -15.1 |
| Loss/profit before taxes | -5.0 | 26.1 | |
| Income tax expense | 8 | 0.0 | 7.5 |
| Loss/profit for the period | -5.0 | 18.5 |
| EUR million | Note | 31 Dec. 2010 | 31 Dec. 2009 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Intangible assets | 9 | 12.9 | 10.5 |
| Tangible assets | 10 | 30.8 | 34.0 |
| Investments | |||
| Shares in subsidiaries | 11 | 857.5 | 830.3 |
| Shares in associated companies | 12 | 34.8 | 34.8 |
| Other investments | 13 | 972.9 | 864.8 |
| Total investments | 1,865.2 | 1,729.9 | |
| Total non-current assets | 1,908.8 | 1,774.4 | |
| Current assets | |||
| Short-term receivables | 15 | 25.9 | 28.5 |
| Cash and cash equivalents | 0.8 | 6.6 | |
| Total current assets | 26.7 | 35.1 | |
| Total assets | 1,935.5 | 1,809.5 |
| EUR million | Note | 31 Dec. 2010 | 31 Dec. 2009 |
|---|---|---|---|
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||
| Shareholders' equity | 16 | ||
| Share capital | 259.6 | 259.6 | |
| Share premium fund | 133.1 | 133.1 | |
| Invested unrestricted equity fund | 201.5 | 157.0 | |
| Retained earnings | 18.6 | 8.9 | |
| Loss/profit for the period | -5.0 | 18.5 | |
| Total shareholders' equity | 607.8 | 577.1 | |
| Liabilities | 17 | ||
| Long-term liabilities | |||
| Convertible capital loan 1/2006 | 66.3 | 69.3 | |
| Bond 1/2009 | 39.5 | 39.4 | |
| Other long-term liabilities | 987.9 | 955.7 | |
| Total long-term liabilities | 1,093.7 | 1,064.4 | |
| Short-term liabilities | |||
| Subordinated capital loan 1/2005 | - | 70.0 | |
| Other short-term liabilities | 234.1 | 98.0 | |
| Total short-term liabilities | 234.1 | 168.0 | |
| Total liabilities | 1,327.7 | 1,232.4 | |
| Total liabilities and shareholders' equity | 1,935.5 | 1,809.5 |
| EUR million | 1 Jan.–31 Dec. 2010 1 Jan.–31 Dec. 2009 | |
|---|---|---|
| Cash flow from operating activities | ||
| Loss/profit before taxes | -5.0 | 26.1 |
| Adjustments: | ||
| Depreciation and impairment loss | 4.2 | 4.2 |
| Non-cash property operating expenses | 25.3 | 20.6 |
| Net financial income and expenses | 25.1 | 15.1 |
| Gain on sale of shares in subsidiaries and other investments | -4.4 | -1.1 |
| Cash flow before change in working capital | 45.2 | 64.8 |
| Change in working capital | 22.8 | -10.8 |
| Cash generated from operations | 68.0 | 54.0 |
| Interest expense and other financial expenses paid | -64.2 | -46.7 |
| Interest income and other financial income received | 15.0 | 14.2 |
| Realized exchange rate losses and gains | -10.6 | 11.8 |
| Income taxes paid | -8.8 | -9.3 |
| Net cash flow from operating activities | -0.5 | 24.0 |
| Cash flow from investing activities | ||
| Investment in tangible and intangible assets | -3.3 | -4.8 |
| Loans granted | -98.0 | -154.5 |
| Repayments of loans receivable | 66.9 | 82.9 |
| Increase in subsidiary shares | -27.3 | -6.2 |
| Sale of subsidiary shares | 2.8 | 3.1 |
| Purchase of minority and associated companies' shares | -0.3 | - |
| Sale of associated companies' shares | 3.2 | - |
| Net cash used in investing activities | -56.0 | -79.5 |
| Cash flow from financing activities | ||
| Proceeds from share issue | 63.1 | - |
| Sale of treasury shares | 0.2 | - |
| Share subscriptions based on stock options | 3.3 | - |
| Proceeds from short-term loans | 107.8 | 148.5 |
| Repayments of short-term loans | -198.5 | -75.9 |
| Proceeds from long-term loans | 347.6 | 293.9 |
| Repayments of long-term loans | -242.0 | -270.8 |
| Dividends paid and return from the invested unrestricted equity fund | -31.0 | -30.9 |
| Net cash from financing activities | 50.5 | 64.8 |
| Net change in cash and cash equivalents | -6.1 | 9.3 |
| Cash and cash equivalents at period-start | -1.5 | -10.9 |
| Effects of exchange rate changes | - | - |
| Cash and cash equivalents at period-end ¹⁾ | -7.6 | -1.5 |
1) Cash and cash equivalents of Citycon Oyj were negative as at 31 December 2010 and at 31 December 2009 due to Group cash pool in which the parent company's bank account can have a negative balance. Cash pool balance of EUR -8.4 million as at 31 December 2010 and EUR -8.1 million as at 31 December 2009 has been recognised in the parent company's balance sheet under short-term liabilities.
The parent company's financial statements are prepared in accordance with the Finnish law.
The income statement is presented in accordance with the function-based format and it includes both gross and net rental income.
Non-current assets are recognized in the balance sheet at acquisition cost less impairment losses and depreciation/amortisation.
The buildings' acquisition cost is depreciated annually on a straight line basis at 2–4 per cent. Repair costs are expensed as incurred.
Other non-current assets include capitalised costs related to the acquisition of properties, which are amortised over three years, and tenant improvements, which are amortised during the lease term.
Machinery and equipment is depreciated at 25 percent annually, using the reducing balance method of depreciation. The machinery and equipment category includes also technical equipment in buildings and the depreciation is made accordingly.
The company's employee pension cover is based on statutory pension insurance.
Receivables and payables denominated in foreign currencies as well as forward rate agreements are measured at the exchange rate quoted on the balance sheet date. Any exchange rate differences resulting from currency translations are recognised as exchange rate differences in the income statement.
Subordinated Loan And Convertible Capital Loan The subordinated loan and convertible capital loan are shown as separate items in liabilities.
Taxes are recognised on an accrual basis.
Individual figures and sum totals presented in the financial statements have been rounded to the nearest thousands of euros; this may cause minor discrepancies between the sum totals and the sums of individual figures as given.
| EUR million | 2010 | 2009 |
|---|---|---|
| Turnover by business segments: | ||
| Shopping centres | ||
| Helsinki Metropolitan Area | 32.5 | 33.4 |
| Other areas in Finland | 44.8 | 45.6 |
| Other retail properties | 26.2 | 29.1 |
| Total | 103.5 | 108.1 |
Geographically the parent company's turnover is generated in Finland. Parent company turnover includes the following administrative fees received from Group companies:
| EUR million | 2010 | 2009 |
|---|---|---|
| Administrative fees from Group companies |
. 0.9 1.2
| EUR million | 2010 | 2009 |
|---|---|---|
| Tenant improvements and commissions | 0.0 | 0.1 |
| Credit losses | 0.3 | 0.2 |
| Total | 0.4 | 0.2 |
| EUR million | 2010 | 2009 |
|---|---|---|
| Average number of employees | ||
| during period | 81 | 77 |
| Personnel expenses | ||
| Wages and salaries | 7.4 | 6.4 |
| Pension charges | 1.7 | 1.0 |
| Other social charges | 0.3 | 0.5 |
| Total | 9.4 | 7.9 |
| Total | 1.1 | 1.0 |
|---|---|---|
| Board remuneration | 0.7 | 0.6 |
| CEO's salary and emoluments | 0.4 | 0.4 |
| salaries and emoluments | ||
| Personnel expenses include management |
In addition to items presented above, non-recurring personnel expenses of EUR 1.2 million arising from employment termination of CEO Petri Olkinuora was recognised in 2010. More information about the nonrecurring expense is provided in the Consolidated Financial Statements in Note 32. Related party transactions.
| Total | 4.2 | 4.2 |
|---|---|---|
| Impairment of shares in subsidiairies | - | 0.4 |
| and equipment | 0.3 | 0.4 |
| Depreciation on machinery | ||
| and constructions | 0.5 | 0.5 |
| Depreciation on buildings | ||
| Amortisation on intangible assets | 3.3 | 2.9 |
| included in the administrative expenses: | ||
| amortisation as well as impairments are | ||
| The following depreciation and | ||
| EUR million | 2010 | 2009 |
|---|---|---|
| Gain on sale of shares | ||
| in subsidiaries and other investments | 4.4 | 1.1 |
| Leasing and asset management | ||
| fees from Group companies | 1.6 | 1.2 |
| Other operating income | 0.1 | 0.0 |
| Total | 6.1 | 2.3 |
| EUR million | 2010 | 2009 |
|---|---|---|
| Dividend income | ||
| From Group companies | 0.1 | 0.1 |
| From others | 0.0 | 0.0 |
| Total | 0.1 | 0.1 |
| Interest and other financial income | ||
| From Group companies | 38.8 | 37.7 |
| Gain from convertible bond buybacks 0.2 | 2.3 | |
| Foreign exchange rate gains | 73.0 | 50.0 |
| Other interest and financial income | 0.3 | 0.1 |
| Total | 112.3 | 90.1 |
| Total financial income | 112.4 | 90.1 |
| 2010 | 2009 |
|---|---|
| 5.3 | 12.4 |
| 72.8 | 49.9 |
| 8.6 | - |
| 42.9 | |
| 137.5 | 105.2 |
| Interest and other financial expenses 50.8 |
| EUR million | 2010 | 2009 |
|---|---|---|
| Taxes for the period | 0,0 | -7.5 |
| EUR million | 2010 | 2009 |
|---|---|---|
| Intangible rights | ||
| Acquisition cost 1 Jan. | 1.7 | 1.4 |
| Additions during the period | 0.3 | 0.3 |
| Accumulated acquisition costs 31 Dec. | 2.0 | 1.7 |
| Accumulated depreciation 1 Jan. | -0.9 | -0.6 |
| Depreciation for the period | -0.3 | -0.2 |
| Accumulated depreciation 31 Dec. | -1.2 | -0.9 |
| Net carrying amount 31 Dec. | 0.8 | 0.8 |
| Connection fees | ||
| Acquisition cost 1 Jan. | 0.2 | 0.2 |
| Net carrying amount 31 Dec. | 0.2 | 0.2 |
| Total intangible assets 31 Dec. | 12.9 | 10.5 |
|---|---|---|
| Net carrying amount 31 Dec. | 11.8 | 9.5 |
| Accumulated depreciation 31 Dec. | -11.9 | -8.9 |
| Depreciation for the period | -3.1 | -2.7 |
| Accumulated depreciation 1 Jan. | -8.9 | -6.2 |
| Accumulated acquisition costs 31 Dec. 23.7 | 18.4 | |
| Transfer between items | 0.0 | 0.0 |
| Additions during the period | 5.4 | 1.7 |
| Acquisition cost 1 Jan. | 18.4 | 16.6 |
| EUR million | 2010 | 2009 |
|---|---|---|
| Land | ||
| Acquisition cost 1 Jan. | 3.3 | 3.3 |
| Net carrying amount 31 Dec. | 3.3 | 3.3 |
| Buildings and constructions | ||
|---|---|---|
| Acquisition cost 1 Jan. | 68.7 | 68.6 |
| Additions during the period | 0.0 | 0.1 |
| Accumulated acquisition costs 31 Dec. 68.7 | 68.7 | |
| Accumulated depreciation 1 Jan. | -44.1 | -43.6 |
| Depreciation for the period | -0.5 | -0.5 |
| Accumulated depreciation 31 Dec. | -44.6 | -44.1 |
| Machinery and equipment | ||
|---|---|---|
| Acquisition cost 1 Jan. | 5.5 | 5.3 |
| Additions during the period | 0.3 | 0.2 |
| Accumulated acquisition costs 31 Dec. | 5.7 | 5.5 |
| Accumulated depreciation 1 Jan. | -4.3 | -3.9 |
| Depreciation for the period | -0.3 | -0.4 |
| Accumulated depreciation 31 Dec. | -4.7 | -4.3 |
Net carrying amount 31 Dec. 24.1 24.6
Machinery and equipment also include technical equipment in buildings.
Net carrying amount 31 Dec. 1.1 1.2
| Other tangible assets | ||
|---|---|---|
| Acquisition cost 1 Jan. | 0.2 | 0.2 |
| Accumulated acquisition costs 31 Dec. | 0.2 | 0.2 |
| Accumulated depreciation 1 Jan. | -0.2 | -0.2 |
| Accumulated depreciation 31 Dec. | -0.2 | -0.2 |
| Net carrying amount 31 Dec. | 0.1 | 0.1 |
| Construction in progress | ||
| Acquisition cost 1 Jan. | 4.9 | 2.4 |
| Reductions/additions during the period -2.7 | 2.6 | |
| Transfer between items | 0.0 | 0.0 |
| Net carrying amount 31 Dec. | 2.2 | 4.9 |
| Total tangible assets 31 Dec. | 30.8 | 34.0 |
| EUR million | 2010 | 2009 |
|---|---|---|
| Acquisition cost 1 Jan. | 830.3 | 826.4 |
| Additions during the period | 27.3 | 6.2 |
| Impairment | - | -0.4 |
| Reductions during the period | 0.0 | -2.0 |
| Net carrying amount 31 Dec. | 857.5 | 830.3 |
| 12. SHARES IN ASSOCIATED COMPANIES | ||
| EUR million | 2010 | 2009 |
| Acquisition cost 1 Jan. | 34.8 | 34.8 |
| Net carrying amount 31 Dec. | 34.8 | 34.8 |
| EUR million | 2010 | 2009 |
| Minority holdings | ||
| Acquisition cost 1 Jan. | 3.7 | |
| Additions during the period | 0.3 | |
| Reductions during the period | -3.2 | |
| Net carrying amount 31 Dec. | 0.9 | |
| Loan receivables from | 3.7 - - 3.7 |
|
| Group companies | 972.0 | 857.3 |
| Other receivables from | ||
| outside the Group | 0.0 | 3.8 |
| Total other investments 31 Dec. | 972.9 | 864.8 |
Parent company's subsidiaries and associated companies are presented in the notes to the consolidated financial statements 32. Related party transactions.
| 15. SHORT-TERM RECEIVABLES | |||
|---|---|---|---|
| EUR million | 2010 | 2009 |
|---|---|---|
| Receivables from outside the Group | ||
| Trade receivables | 1.0 | 1.2 |
| Other receivables | 11.4 | 0.1 |
| Accrued income and prepaid expenses 0.8 | 0.4 | |
| Total | 13.2 | 1.7 |
| EUR million | 2010 | 2009 |
|---|---|---|
| Receivables from Group companies | ||
| Trade receivables | 0.9 | 2.1 |
| Loan receivables | -0.2 | 0.8 |
| Maintenance charge receivables | 2.4 | 3.8 |
| Other receivables | 0.0 | 9.1 |
| Total other receivables | 2.3 | 13.7 |
| Interest receivables | 9.4 | 10.9 |
| Other accrued income | ||
| and prepaid expenses | 0.1 | 0.1 |
| Total accrued income and | ||
| prepaid expenses | 9.5 | 11.0 |
| Total | 12.7 | 26.8 |
| Total short-term receivables | 25.9 | 28.5 |
| 16. SHAREHOLDERS' EQUITY | ||
| EUR million | 2010 | 2009 |
| Share capital at 1 Jan. | 259.6 | 259.6 |
| Share capital at 31 Dec. | 259.6 | 259.6 |
| Share premium fund at 1 Jan. | 133.1 | 133.1 |
| Share premium fund at 31 Dec. | 133.1 | 133.1 |
| Invested unrestricted | ||
| equity fund at 1 Jan. | 157.0 | 179.0 |
| Proceeds from share issue | 63.1 | - |
| Sale of treasury shares | 0.2 | - |
| Share subscriptions based | ||
| on stock options | 3.3 | 0.0 |
| Equity return from the invested | ||
| unrestricted equity fund | -22.1 | -22.1 |
| Invested unrestricted | ||
| equity fund at 31 Dec. | 201.5 | 157.0 |
| Retained earnings at 1 Jan. | 27.5 | 17.8 |
| Dividends | -8.8 | -8.8 |
| Net loss/profit for the period | -5.0 | 18.5 |
| Retained earnings at 31 Dec. | 13.6 | 27.5 |
| Total shareholders' equity at 31 Dec. 607.8 | 577.1 |
| 17. LIABILITIES | ||
|---|---|---|
| A) Long-term liabilities | ||
| EUR million | 2010 | 2009 |
| Fixed-rate loans | ||
| Convertible capital loan 1/2006¹⁾ | 66.3 | 69.3 |
| Bond 1/2009 | 39.5 | 39.4 |
| Floating-rate loans, which are | ||
| converted into fixed rates | ||
| through interest-rate swaps | 869.8 | 737.6 |
| tied to market interest rates | 90.1 | 195.1 |
| Total | 959.9 | 932.7 |
| Current portion of long-term loans | -19.7 | -18.0 |
| Total | 940.2 | 914.7 |
| Other long-term loans | ||
| Loans from financial institutions | 940.2 | 914.7 |
| Loans from Group companies | 47.7 | 41.0 |
| Total | 987.9 | 955.7 |
| Total long-term liabilities | 1,093.7 | 1,064.4 |
| Loans maturing later than 5 years | 12.5 | 17.5 |
| B) Short-term liabilities | ||
| EUR million | 2010 | 2009 |
| Short-term interest-bearing liabilities | ||
| Subordinated capital loan 1/2005¹⁾ | - | 70.0 |
| Total | 193.1 | 138.9 |
|---|---|---|
| Loans from Group companies | 19.3 | 18.3 |
| Loans from financial institutions | 161.8 | 18.0 |
| Commercial papers | 11.9 | 32.6 |
| EUR million | 2010 | 2009 |
|---|---|---|
| Short-term non interest-bearing liabilities | ||
| Payables to outside the Group | ||
| Advances received | 0.3 | 0.3 |
| Accounts payable | 1.7 | 0.7 |
| Tax liability | - | 1.4 |
| VAT liability | - | 1.1 |
| Derivative financial instruments | 1.5 | 0.2 |
| Other payables | 0.1 | 0.1 |
| Total other payables | 1.6 | 2.8 |
| Interest liability | 5.2 | 7.8 |
| Other accruals | 3.9 | 2.3 |
| Total accruals | 9.0 | 10.1 |
| Total | 12.7 | 13.9 |
| Payables to Group companies | ||
| Accounts payable | 0.6 | 0.0 |
| Charge-for-financial cost payables | 13.9 | 12.3 |
| Other payables | 13.3 | 1.9 |
| Total other payables | 27.2 | 14.2 |
| Accruals | 0.5 | 1.1 |
| Total | 28.3 | 15.2 |
| Total short-term liabilities | 234.1 | 168.0 |
The parent company doesn't have any mortgages nor given securities.
| A) Lease liabilities | ||
|---|---|---|
| EUR million | 2010 | 2009 |
| Payables on lease commitments | ||
| Maturing next financial year | 0.9 | 1.0 |
| Maturing later | 0.9 | 1.0 |
| Total | 1.8 | 2.0 |
Citycon's finance leases mainly apply to computer hardware, machinery and equipment, cars and office premises.
| B) Guarantees given | ||
|---|---|---|
| EUR million | 2010 | 2009 |
| Bank guarantees | 43.4 | 45.4 |
| On behalf of Group companies | 5.9 | 5.4 |
| C) VAT refund liabilities | ||||
|---|---|---|---|---|
| EUR million | 5 year review period 2010 2009 |
10 year rewiev period 2010 2009 |
||
| Property investment (net) | 0.9 | 0.9 | 0.5 | 0.5 |
| VAT of property investment (100%) | 0.3 | 0.3 | 0.1 | 0.1 |
| out of which VAT has been deducted | ||||
| on the date of completion | 0.3 | 0.3 | 0.1 | 0.1 |
| Annual amount under review | 0.1 | 0.1 | 0.0 | 0.0 |
| VAT refund liability at 31 Dec. | 0.0 | 0.0 | 0.0 | 0.0 |
1) The terms and conditions of subordinated capital loan and convertible capital loan are presented in Note 27. Loans in the Notes to the Consolidated Financial Statements.
Total liabilities 1,327.7 1,232.4
All derivative financial instruments in Citycon are executed by the parent company Citycon Oyj. The fair values of derivative financial instruments are presented in Note 22. Derivative Financial Instruments in the Notes to the Consolidated Financial Statements.
| Name | Number of shares | % of shares and votes |
|---|---|---|
| Ilmarinen Mutual Pension Insurance Company | 9,403,914 | 3.85 |
| The State Pension Fund of Finland | 1,300,000 | 0.53 |
| Odin Finland | 1,270,673 | 0.52 |
| OP-Finland Value Fund | 1,000,000 | 0.41 |
| Investment Fund Aktia Capital | 1,000,000 | 0.41 |
| Folketrygdfondet | 765,000 | 0.31 |
| Bnp Paribas Arbitrage | 680,182 | 0.28 |
| Nordea Finland Fund | 668,344 | 0.27 |
| von Fieandt Johan | 480,000 | 0.20 |
| Tudeer Lauri | 478,850 | 0.19 |
| 10 major, total | 17,046,963 | 6.97 |
| Number of P owners |
ercentage of owners |
shares | Number of Percentage of shares and voting rights |
|
|---|---|---|---|---|
| Financial and insurance corporations | 36 | 0.82 | 214,589,386 | 87.74 |
| Corporations | 307 | 6.96 | 3,306,904 | 1.35 |
| Households | 3,984 | 90.36 | 10,716,741 | 4.38 |
| General government | 4 | 0.09 | 10,784,914 | 4.41 |
| Foreign | 35 | 0.79 | 4,133,572 | 1.70 |
| Non-profit institutions | 43 | 0.98 | 1,033,455 | 0.42 |
| Total | 4,409 | 100 | 244,564,972 | 100 |
| of which nominee-registered | 9 | 209,621,447 | 85.71 | |
| Issued stock, total | 244,564,972 |
| Shares, total | 244,564,972 | 100 |
|---|---|---|
| Others | 17,896,562 | 7.32 |
| Nominee-registered shares, total | 209,621,447 | 85.71 |
| Other nominee-registered shares | 891,246 | 0.36 |
| Svenska Handelsbanken AB (publ), Branch Operation in Finland | 24,801,905 | 10.14 |
| Nordea Bank Finland Plc | 32,688,164 | 13.37 |
| Skandinaviska Enskilda Banken AB | 35,385,823 | 14.47 |
| Sampo Bank Plc | 115,854,309 | 47.37 |
| Nominee-registered shares |
Gazit-Globe Ltd. has informed the company that the number of shares held by it on 31 December 2010 amounts to 115,791,279 shares accounting for 47.3 per cent of the shares and voting rights in the company at the year-end of 2010. Gazit-Globe Ltd.'s shareholding is nominee-registered.
According to a notice received by Citycon Oyj on 31 August 2010, ING Clarion Real Estate Securities, LLC's (f/k/a ING Clarion Real Estate Securities, L.P.) ("ING CRES") holding in the company had fallen below the threshold of five per cent on 18 August 2008. As additional information to the notice ING CRES announced that the notice was provided to remedy a missed filing that should have been made in August 2008. According to the notice, on 30 August 2010 ING CRES held 1,344,574 (0.60%) shares of Citycon and had voting authority over 1,235,780 (0.56%) shares. ING CRES held such shares and voting authority in its capacity as investment manager for various institutional investors.
The company did not receive any other notifications of changes in shareholding during the year.
| Number of P | ercentage of | Number of Percentage of shares | |
|---|---|---|---|
| and voting rights | |||
| 433 | 9.82 | 26,158 | 0.01 |
| 1,973 | 44.75 | 1,005,979 | 0.41 |
| 1,496 | 33.93 | 3,618,920 | 1.48 |
| 248 | 5.62 | 1,842,361 | 0.75 |
| 191 | 4.33 | 4,009,602 | 1.64 |
| 21 | 0.48 | 1,449,312 | 0.60 |
| 34 | 0.77 | 7,100,871 | 2.90 |
| 6 | 0.14 | 4,806,981 | 1.97 |
| 7 | 0.16 | 220,704,788 | 90.24 |
| 4,409 | 100 | 244,564,972 | 100 |
| 9 | 209,621,447 | 85.71 | |
| 244,564,972 | |||
| shareholders | owners | shares |
| Share price and tradin g volume |
||||||
|---|---|---|---|---|---|---|
| Formula | 2010 | 2009 | 2008 | 2007 | 2006 | |
| Share price, transactions, EUR | ||||||
| Low | 2.29 | 1.30 | 1.26 | 3.24 | 3.02 | |
| High | 3.31 | 3.16 | 4.28 | 6.09 | 5.09 | |
| Average | 16 | 2.84 | 1.99 | 2.94 | 4.76 | 3.86 |
| Market capitalisation, EUR million | 17 | 753.3 | 649.9 | 371.3 | 806.6 | 844.3 |
| Share trading volume | ||||||
| No. of shares traded as of year-start, 1,000 | 114,974 | 149,340 | 150,852 | 153,696 | 51,193 | |
| Percentage of total | 47.0 | 67.0 | 68.3 | 69.6 | 30.6 | |
| Average number of shares, 1,000 | 228,148 | 221,035 | 220,991 | 199,404 | 163,339 | |
| Average number of shares, diluted, 1,000 | 245,806 | 239,502 | 247,223 | 227,122 | 175,345 | |
| Number of shares on 31. Dec., 1,000 | 244,565 | 221,060 | 220,999 | 220,981 | 171,233 |
| Shareholders' equity | |||
|---|---|---|---|
| 1) | Equity ratio, % | Balance sheet total - advances received | X 100 |
| 2) | Gearing, % | Interest-bearing liabilities - cash and cash equivalents Shareholders' equity |
X 100 |
| 3) | Return on equity (ROE), % | Profit/loss for the period Shareholders' equity (weighted average) |
X 100 |
| 4) | Return on investment (ROI), % | Profit/loss before taxes + interest and other financial expenses Balance sheet total (weighted average) - (non-interest-bearing liabilities on the balance sheet date + opening balance of non-interest-bearing liabilities)/2 |
X 100 |
| 5) | Quick ratio | Current assets Short-term liabilities |
|
| 6) | Earnings per share (EPS), EUR | Profit/loss for the period attributable to parent company shareholders Average number of shares for the period |
X 100 |
| 7) | Earnings per share, diluted, EUR | Profit/loss for the period attributable to parent company shareholders Diluted average number of shares for the period |
X 100 |
| 8) | Net cash from operating activities per share, EUR | Net cash from operating activities Average number of shares for the period |
X 100 |
| 9) | Equity per share, EUR | Equity attributable to parent company shareholders Number of shares on the balance sheet date |
|
| 10) | P/E ratio (price/earnings) | Closing price at year-end EPS |
|
| 11) | Dividend and return of equity per earnings, % | Dividend per share EPS |
X 100 |
| 12) | Effective dividend and return of equity yield, % | Dividend per share Closing price at year-end |
X 100 |
| 13) | Net rental yield, % | Net rental income (last 12 months) Average fair value of investment property |
X 100 |
| 14) | Occupancy rate, %, sq.m. | Leased space Leasable space |
X 100 |
| 15) | Occupancy rate (economic), % | Rental income as per leases Estimated market rent of vacant premises + rental income as per leases |
X 100 |
| 16) | Average share price, EUR | Value of shares traded (EUR) Average number of shares traded |
|
| 17) | Market capitalisation | Number of shares x closing price for the period excl. treasury shares | |
| 18) | Net interest-bearing debt (fair value), EUR million | Fair value of interest-bearing debts - cash and cash equivalents |
| In Helsinki, on 8 February 2011 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Chaim Katzman | Ronen Ashkenazi | |||||||
| Gideon Bolotowsky | Raimo Korpinen | |||||||
| Tuomo Lähdesmäki | Claes Ottosson | |||||||
| Dor J. Segal | Thomas W. Wernink | |||||||
Signatures to the Financial Statements 1 January - 31 December 2010
Petri Olkinuora CEO
Per-Håkan Westin Ariella Zochovitzky
We have today submitted the report on the conducted audit.
In Helsinki, on 8 February 2011
Ernst & Young Oy Authorised Public Accountants
Tuija Korpelainen Authorised Public Accountant
We have audited the accounting records, the financial statements, the report of the Board of Directors, and the administration of Citycon Oyj for the year ended 31 December 2010. The financial statements comprise the consolidated statement of financial position, statement of comprehensive income, statement of changes in equity and statement of cash flows, and notes to the consolidated financial statements, as well as the parent company's balance sheet, income statement, cash flow statement and notes to the financial statements.
The Board of Directors and the Managing Director are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, as well as for the preparation of financial statements and the report of the Board of Directors that give a true and fair view in accordance with the laws and regulations governing the preparation of the financial statements and the report of the Board of Directors in Finland. The Board of Directors is responsible for the appropriate arrangement of the control of the company's accounts and finances, and the Managing Director shall see to it that the accounts of the company are in compliance with the law and that its financial affairs have been arranged in a reliable manner.
Our responsibility is to express an opinion on the financial statements, on the consolidated financial statements and on the report of the Board of Directors based on our audit. The Auditing Act requires that we comply with the requirements of professional ethics. We conducted our audit in accordance with good auditing practice in Finland. Good auditing practice requires that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the report of the Board of Directors are free from material misstatement, and whether the members of the Board of Directors of the parent company and the Managing Director are guilty of an act or negligence which may result in liability in damages towards the company or have violated the Limited Liability Companies Act or the articles of association of the company.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements and the report of the Board of Directors. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation of financial statements and report of the Board of Directors that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements and the report of the Board of Directors.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
In our opinion, the consolidated financial statements give a true and fair view of the financial position, financial performance, and cash flows of the group in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.
Opinion on the company's financial statements and the report of the Board of Directors In our opinion, the financial statements and the report of the Board of Directors give a true and fair view of both the consolidated and the parent company's financial performance and financial position in accordance with the laws and regulations governing the preparation of the financial statements and the report of the Board of Directors in Finland. The information in the report of the Board of Directors is consistent with the information in the financial statements.
Helsinki, 8 February 2011
Ernst & Young Oy Authorised Public Accountant Firm
Tuija Korpelainen Authorised Public Accountant
| P | roperty | Address | Built in / renovated in |
Holding, % | Citycon's GLA, sq.m. |
Occupancy rate, %, sq.m. ¹⁾ |
Occupancy rate (economic), % ¹⁾ |
|
|---|---|---|---|---|---|---|---|---|
| FINLAND | ||||||||
| HELSINKI METROPOLITAN AREA | ||||||||
| 1 | Asolantien Liikekiinteistö Oy | Asolanväylä 50 | 01360 VANTAA | 1986 | 100% | 1,900 | 55.1 | 59.9 |
| 2 | Columbus | 20,900 | 98.7 | 99.6 | ||||
| Kauppakeskus Columbus Koy | Vuotie 45 | 00980 HELSINKI | 1997/2007 | 100% | ||||
| 3 | Espoon Louhenkulma Koy | Louhentie 2 | 02130 ESPOO | 1963 | 49% | 880 | 100.0 | 100.0 |
| 4 | Espoontori | 17,200 | 93.3 | 94.8 | ||||
| Espoon Asemakuja 2 Koy | Asemakuja 2 | 02770 ESPOO | 1991 | 100% | 6,300 | |||
| Espoon Asematori Koy | Kamreerintie 5 | 02770 ESPOO | 1989/2010 | 54% | 1,800 | |||
| Espoontori Koy | Kamreerintie 3 | 02770 ESPOO | 1987/2010 | 67% | 9,100 | |||
| Espoontorin Pysäköintitalo Oy | Kamreerintie 1 | 02770 ESPOO | 1987/2010 | 60% | ||||
| 5 | Hakarinne 4 | Hakarinne 4 | 02120 ESPOO | 1985 (Property sold on 27 Jan. 2011) | 56% | 380 | 0.0 | 0.0 |
| 6 | Hakunilan Keskus | 3,780 | 85.1 | 83.7 | ||||
| Hakucenter Koy | Laukkarinne 6 | 01200 VANTAA | 1986 | 19% | 780 | |||
| Hakunilan Keskus Oy | Laukkarinne 4 | 01200 VANTAA | 1982 | 41% | 3,000 | |||
| 7 H | eikintori | 5,800 | 80.8 | 90.5 | ||||
| Heikintori Oy | Kauppamiehentie 1 | 02100 ESPOO | 1968 | 65% | ||||
| 8 | Iso Omena | 60,500 | 98.9 | 99.3 | ||||
| Big Apple Top Oy | Piispansilta 9 | 02230 ESPOO | 2001 | 60% | ||||
| 9 | Isomyyri | 10,900 | 79.4 | 88.8 | ||||
| Myyrmäen Kauppakeskus Koy | Liesitori 1 | 01600 VANTAA | 1987 | 74% | ||||
| Liesikujan Autopaikat Oy | Liesikuja 2 | 01600 VANTAA | 1987 | 8% | ||||
| 10 Aseman Ostari | 67% | 5,000 | 100.0 | 100.0 | ||||
| Kirkkonummen Liikekeskus Oy | Asematie 3 | 02400 KIRKKONUMMI | 1991/2010- | |||||
| 11 Kontulan Asemakeskus Koy | Keinulaudankuja 4 | 00940 HELSINKI | 1988/2007 | 35% | 4,500 | 100.0 | 100.0 | |
| 12 Laajasalon Liikekeskus | 2,660 | 90.6 | 91.9 | |||||
| Laajasalon Liikekeskus Oy | Yliskyläntie 3 | 00840 HELSINKI | 1972/1995 | 50% | 2,300 | |||
| Kuvernöörintie 8 Koy | Kuvernöörintie 8 | 00840 HELSINKI | 1982 | 100% | 360 | |||
| 13 Lauttasaaren Liikekeskus Oy | Lauttasaarentie 28-30 | 00200 HELSINKI | 1970 | 24% | 1,500 | 100.0 | 100.0 | |
| 14 Lippulaiva | 18,500 | 99.3 | 99.7 | |||||
| Lippulaiva Koy | Espoonlahdenkatu 4 | 02320 ESPOO | 1993/2007 | 100% | ||||
| 15 Länsi-Keskus Koy | Pihatörmä 1 | 02210 ESPOO | 1989 | 41% | 8,600 | 45.8 | 45.4 | |
| 16 Martinlaakson Ostari (under construction) | ||||||||
| Martinlaakson Kivivuorentie 4 Koy | Kivivuorentie 4 | 01620 VANTAA | building demolished 2010 | 100% | ||||
| 17 Minkkikuja 4 Koy | Minkkikuja 4 | 01450 VANTAA | 1989 | 100% | 2,300 | 100.0 | 100.0 | |
| 18 Myllypuron Ostari (under construction) | ||||||||
| Kivensilmänkuja 1 Koy | Kivensilmänkuja 1 | 00920 HELSINKI | 1988 | 100% | 1,400 | 100.0 | 100.0 | |
| Myllypuron Ostoskeskus Oy | Kiviparintie 2 | 00920 HELSINKI | building demolished 2009, company in liquidation 100% | |||||
| 19 Myyrmanni | 40,500 | 92.5 | 93.5 | |||||
| Myyrmanni Koy | Iskoskuja 3 | 01600 VANTAA | 1994/2007/2010- | 100% | ||||
| Myyrmäen Autopaikoitus Oy | Iskoskuja 3 | 01600 VANTAA | 1994 | 63% | ||||
| 20 Otaniemen Liikekeskus Oy | Otakaari 11 | 02150 ESPOO | 1969 | 39% | 340 | 100.0 | 100.0 | |
| 21 Pihlajamäen liiketalo Oy | Meripihkatie 1 | 00710 HELSINKI | 1970 | 43% | 1,700 | 26.3 | 17.1 | |
| 22 Salpausseläntie 11 Koy | Salpausseläntie 11 | 00710 HELSINKI | 1973 | 31% | 600 | 100.0 | 100.0 | |
| 23 Sampotori | Heikintori, Kauppamiehentie 1 | 02100 ESPOO | lot | 100% | 50 | 100.0 | 100.0 | |
| 24 Sinikalliontie 1 Koy | Sinikalliontie 1 | 02630 ESPOO | 1964/1992 | 100% | 15,700 | 95.7 | 98.1 |
| P | roperty | Address | Built in / renovated in |
Holding, % | Citycon's GLA, sq.m. |
Occupancy rate, %, sq.m. ¹⁾ |
Occupancy rate (economic), % ¹⁾ |
|
|---|---|---|---|---|---|---|---|---|
| 25 Soukan Itäinentorni As Oy | Soukantie 16 | 02360 ESPOO | 1972 | 27% | 1,600 | 100.0 | 100.0 | |
| 26 Talvikkitie 7-9 Koy | Talvikkitie 7-9 | 01300 VANTAA | 1989 | 100% | 9,800 | 100.0 | 100.0 | |
| 27 Tikkuri | 12,230 | 90.6 | 94.6 | |||||
| Tikkurilan Kauppakeskus Koy | Asematie 4-10 | 01300 VANTAA | 1984/1991 | 84% | 10,600 | |||
| Asematie 3 Koy | Asematie 3 | 01300 VANTAA | 1972 | 100% | 1,400 | |||
| Tikkurilan Kassatalo As Oy | Asematie 1 | 01300 VANTAA | 1956 | 8% | 230 | |||
| 28 Ultima Oy | Äyritie 1 | 01510 VANTAA | lot | 100% | ||||
| 29 Vantaan Laajavuorenkuja 2 Koy | Laajavuorenkuja 2 | 01620 VANTAA | 1976 | 100% | 2,000 | 100.0 | 100.0 | |
| 30 Vantaan Säästötalo Koy | Kielotie 20 | 01300 VANTAA | 1983 | 61% | 3,800 | 96.8 | 97.9 | |
| 31 Wavulinintie 1 Koy | Wavulinintie 1 | 00210 HELSINKI | 1950/1992 | 100% | 1,700 | 29.5 | 13.4 | |
| OTHER AREAS IN FINLAND | ||||||||
| 32 Forssan Hämeentie 3 Koy | Hämeentie 3 | 31100 FORSSA | 1978 | 100% | 4,500 | 0.0 | 0.0 | |
| 33 Forum | 16,500 | 94.5 | 97.1 | |||||
| Jyväskylän Forum Koy | Asemakatu 5 | 40100 JYVÄSKYLÄ | 1953/1972/1980/1991/2010 | 100% | ||||
| 34 Galleria | 3,500 | 93.2 | 95.6 | |||||
| Oulun Galleria Koy | Isokatu 23 | 90100 OULU | 1987 | 100% | ||||
| 35 Isokarhu | 14,800 | 95.9 | 98.9 | |||||
| Kauppakeskus IsoKarhu Oy | Yrjönkatu 14 | 28100 PORI | 1972/2001/2004 | 100% | ||||
| 36 IsoKristiina | 19,500 | 91.0 | 95.4 | |||||
| Karjalan Kauppakeskus Koy | Brahenkatu 3 | 53100 LAPPEENRANTA | 1987 | 100% | 8,400 | |||
| Lappeen Liikekeskus Koy | Brahenkatu 5 | 53100 LAPPEENRANTA | 1987 | 91% | 7,400 | |||
| Lappeenrannan Brahenkatu 7 Koy | Brahenkatu 7 | 53100 LAPPEENRANTA | 1993 | 84% | 3,700 | |||
| Lappeenrannan Villimiehen Vitonen Oy | Kaivokatu 5 | 53100 LAPPEENRANTA | lot | 100% | ||||
| 37 Isolinnankatu 18 Koy | Isolinnankatu 18 | 28100 PORI | 1986/2010- | 100% | 5,300 | 80.4 | 75.9 | |
| 38 Jyväskeskus | 5,800 | 93.3 | 93.0 | |||||
| Jyväskylän Kauppakatu 31 Koy | Kauppakatu 31 | 40100 JYVÄSKYLÄ | 1955/1993 | 100% | ||||
| 39 Kaarinan Liiketalo Koy | Oskarinaukio 5 | 20780 KAARINA | 1979/1982 | 100% | 9,200 | 94.1 | 96.0 | |
| 40 Karjaan Ratakatu 59 Koy | Ratakatu 59 | 10320 KARJAA | 1993 | 100% | 3,100 | 100.0 | 100.0 | |
| 41 Duo | 13,000 | 92.4 | 94.3 | |||||
| Hervannan Liikekeskus Oy | Insinöörinkatu 23 | 33720 TAMPERE | 1979 | 75% | 4,700 | |||
| Tampereen Hermanni Koy | Pietilänkatu 2 | 33720 TAMPERE | 2007 | 100% | 8,300 | |||
| 42 Koskikara | 5,800 | 96.1 | 96.5 | |||||
| Valkeakosken Liikekeskus Koy | Valtakatu 9-11 | 37600 VALKEAKOSKI | 1993 | 25% | 1,500 | |||
| Valkeakosken Torikatu 2 Koy | Valtakatu 9-11 | 37600 VALKEAKOSKI | 1993 | 100% | 4,300 | |||
| 43 Koskikeskus | 27,700 | 94.3 | 96.8 | |||||
| Tampereen Koskenranta Koy | Hatanpään valtatie 1 | 33100 TAMPERE | 1988/1995 | 64% | 12,100 | |||
| Tampereen Hatanpää Koy | Hatanpään valtatie 1 | 33100 TAMPERE | 1988 | 100% | 7,200 | |||
| Tampereen Suvantokatu Koy | Hatanpään valtatie 1 | 33100 TAMPERE | 1988 | 100% | 8,400 | |||
| 44 Kotkan Keskuskatu 11 Koy | Keskuskatu 11 | 48100 KOTKA | 1976 | 100% | 4,300 | 100.0 | 100.0 | |
| 45 Kuopion Kauppakatu 41 Koy | Kauppakatu 41 | 70100 KUOPIO | 1977 | 100% | 11,200 | 93.6 | 96.2 | |
| 46 Kuusankosken Kauppakatu 7 Koy | Kauppakatu 7 | 45700 KUUSANKOSKI | 1980 | 100% | 2,100 | 100.0 | 100.0 | |
| 47 Lahden Kauppakatu 13 Koy | Kauppakatu 13 | 15140 LAHTI | 1971 | 100% | 8,600 | 100.0 | 100.0 | |
| 48 Lentolan Perusyhtiö Oy | Mäkirinteentie 4 | 36220 KANGASALA | 2007 | 100% | 11,900 | 79.7 | 79.6 |
| P | roperty | Address | Built in / renovated in |
Holding, % | Citycon's GLA, sq.m. |
Occupancy rate, %, sq.m. ¹⁾ |
Occupancy rate (economic), % ¹⁾ |
|
|---|---|---|---|---|---|---|---|---|
| 49 Lillinkulma Koy 50 Linjuri |
Jännekatu 2-4 | 20760 PIISPANRISTI | 2007 | 100% | 7,400 9,200 |
100.0 94.0 |
100.0 94.7 |
|
| Linjurin Kauppakeskus Koy | Vilhonkatu 14 | 24100 SALO | 1993/2007 | 89% | ||||
| 51 Mäntyvuoksi Koy | Vuoksenniskantie 50 | 55800 IMATRA | 1974 | 100% | 1,500 | 100.0 | 100.0 | |
| 52 Naantalin Tullikatu 16 Koy | Tullikatu 16 | 21100 NAANTALI | 1985 (Property sold on 5 Jan. 2011) | 100% | 3,100 | 100.0 | 100.0 | |
| 53 Orimattilan Markkinatalo Oy | Erkontie 3 | 16300 ORIMATTILA | 1983 | 77% | 3,500 | 100.0 | 100.0 | |
| 54 Aseman Ostari | 18,900 | 40.9 | 46.0 | |||||
| Porin Asema-aukio Koy | Satakunnankatu 23 | 28130 PORI | 1957/1993 | 100% | ||||
| 55 Puijonlaakson Palvelukeskus Koy | Sammakkolammentie 6 | 70200 KUOPIO | 1971 | 31% | 1,500 | 100.0 | 100.0 | |
| 56 Runeberginkatu 33 Koy | Runeberginkatu 33 | 06100 PORVOO | 1988 | 100% | 6,300 | 100.0 | 100.0 | |
| 57 Sampokeskus | 13,700 | 79.7 | 84.3 | |||||
| Rovaniemen Sampotalo | Maakuntakatu 29-31 | 96200 ROVANIEMI | 1990 | 100% | 11,700 | |||
| Lintulankulma Koy | Rovakatu 28 | 96200 ROVANIEMI | 1989/1890 | 100% | 2,000 | |||
| 58 Kiinteistö Oy Säkylän Liiketalo | Pyhäjärventie | 27800 SÄKYLÄ | 1969 | 100% | 1,200 | 100.0 | 100.0 | |
| 59 Torikeskus | Kauppatori 1 | 60100 SEINÄJOKI | 1992/2007 | 100% | 11,500 | 84.7 | 88.8 | |
| 60 Trio | 45,700 | 89.6 | 92.7 | |||||
| Lahden Hansa Koy | Kauppakatu 10 | 15140 LAHTI | 1992/2010- | 100% | 10,700 | |||
| Lahden Trio Koy | Aleksanterinkatu 20 | 15140 LAHTI | 1977/1985-1987/1992/2007 | 90% | 35,000 | |||
| Kiinteistö Oy Hansaparkki | Kauppakatu 10 | 15140 LAHTI | 1992 | 36% | ||||
| 61 Tullintori | 10,000 | 84.5 | 88.3 | |||||
| Tullintori Koy | Hammareninkatu 2 | 33100 TAMPERE | 1930/1990 | 57% | ||||
| 62 Vaakalintu Koy | Keskuskatu 15 | 11100 RIIHIMÄKI | 1980 | 96% | 6,700 | 100.0 | 100.0 | |
| 63 Valtakatu 5-7 Koy | Valtakatu 5-7 | 37600 VALKEAKOSKI | 1938/1992 | 31% | 460 | 51.2 | 44.6 | |
| 64 Valtari | 7,600 | 80.5 | 83.6 | |||||
| Kouvolan Valtakadun Kauppakeskus Koy | Valtakatu 15 | 45100 KOUVOLA | 1971-1975 /1994-2002 | 100% | ||||
| 65 Varkauden Relanderinkatu 30 Koy | Relanderinkatu 28-34 | 78200 VARKAUS | 1990 | 100% | 8,200 | 100.0 | 100.0 | |
| 65 FINLAND TOTAL | 579,980 | 89.7 | 94.0 |
| P | roperty | Address | Built in / renovated in |
Holding, % | Citycon's GLA, sq.m. |
Occupancy rate, %, sq.m. ¹⁾ |
Occupancy rate (economic), % ¹⁾ |
||
|---|---|---|---|---|---|---|---|---|---|
| THE BALTIC COUNTRIES | |||||||||
| ESTONIA | |||||||||
| 1 | Rocca al Mare | 53,300 | 99.4 | 99.7 | |||||
| Rocca al Mare Kaubanduskeskuse AS | Paldiski mnt 102 | 13522 TALLINN | 1998/2000/2007-2009 | 100% | |||||
| 2 | Magistral | 9,500 | 99.6 | 99.8 | |||||
| Magistral Kaubanduskeskuse Oü | Sõpruse pst 201/203 | 13419 TALLINN | 2000 | 100% | |||||
| LITHUANIA | |||||||||
| 3 | Mandarinas | 8,000 | 100.0 | 100.0 | |||||
| UAB Prekybos Centras Mandarinas | Ateities g. 91 | 06324 VILNIUS | 2005 | 100% | |||||
| 3 | THE BALTIC COUNTRIES TOTAL | 70,800 | 99.5 | 99.7 | |||||
| SWEDEN | |||||||||
| STOCKHOLM AREA AND UMEÅ | |||||||||
| 1 | Åkersberga Centrum | 27,500 | 89.9 | 92.4 | |||||
| Åkersberga Centrum AB | Storängsvägen | 18430 ÅKERSBERGA | 1985/1995/1996/2010- | 75% | |||||
| 2 | Åkermyntan Centrum | Drivbänksvägen 1 | 16574 HÄSSELBY | 1977 | 100% | 8,500 | 97.0 | 97.7 | |
| 3 | Kallhäll | Skarprättarvägen 36-38 | 17677 JÄRFALLA | 1991 | 100% | 3,700 | 100.0 | 100.0 | |
| 4 | Jakobsbergs Centrum | 60,700 | 96.7 | 96.8 | |||||
| Citycon Jakobsbergs Centrum AB | Tornérplatsen 30 | 17730 JÄRFALLA | 1959/1993 | 100% | |||||
| Drabantvägen bostäder AB | Tornérplatsen 30 | 17730 JÄRFALLA | 1959/1993 | 100% | |||||
| Jakobsberg LB Bostäder AB | Tornérplatsen 30 | 17730 JÄRFALLA | 1959/1993 | 100% | |||||
| 5 | Fruängen Centrum | Fruängsgången | 12952 HÄGERSTERN | 1965 | 100% | 14,600 | 98.7 | 99.0 | |
| 6 | Liljeholmstorget | 41,000 | 96.6 | 96.0 | |||||
| Citycon Liljeholmstorget Galleria AB | Liljeholmstorget 7 | 11763 STOCKHOLM | 1973/1986/2007/2008/2009 | 100% | |||||
| 7 | Strömpilen | 27,000 | 97.5 | 98.1 | |||||
| Strömpilen AB | Strömpilsplatsen | 90743 UMEÅ | 1927/1997 | 75% | |||||
| 8 | Länken | Gräddvägen 1 | 90620 UMEÅ | 1978/2004/2006 | 75% | 7,300 | 100.0 | 100.0 | |
| 9 | Tumba Centrum | 31,400 | 99.9 | 99.7 | |||||
| Citycon Tumba Centrumfastigheter AB | Tumba Torg 115 | 14730 BOTKYRKA | 1954/2000 | 100% | |||||
| Tumba Bostäder AB | Tumba Torg 115 | 14730 BOTKYRKA | 1954/ 2000 | 100% | |||||
| G | OTHENBURG AREA | ||||||||
| 10 Stenungs Torg | 36,400 | 97.0 | 98.4 | ||||||
| Stenungs Torg Fastighets AB | Östra Köpmansgatan 2-16, 18A-C44430 STENUNGSUND | 1967/1993 | 70% | ||||||
| 11 Backa | Backavägen 3-5 | 41705 GOTHENBURG | 1990 | 100% | 7,800 | 51.8 | 53.8 | ||
| 12 Floda | Rurik Holms väg | 44830 FLODA | 1960/1990 | 100% | 11,300 | 90.6 | 92.6 | ||
| 13 Hindås | Hindås Stationsväg 41-47 | 43063 HINDÅS | 1978/1999 | 100% | 1,700 | 93.8 | 95.0 | ||
| 14 Landvetter | Brattåsvägen | 43832 LANDVETTER | 1975/1988/1999 | 100% | 4,800 | 100.0 | 100.0 | ||
| 15 Lindome | Almåsgången | 43730 LINDOME | 1974 | 100% | 7,800 | 96.8 | 97.7 | ||
| 15 SWEDEN TOTAL | 291,500 | 95.3 | 96.4 | ||||||
| 83 TOTAL ALL | 942,280 | 92.2 | 95.1 |
1) Formulas are available on page 53.
Realia Management Oy has made a valuation of Citycon's property portfolio as at 31st of December 2010. The valuation was carried out as a cash flow analysis of the net operating income for a period of 10 years. For undeveloped plots, properties subject to town plan alterations and for buildings of low value due to their current state, market values for the relevant assets are determined by the value of building right in the existing town plan.
Realia Management Oy has inspected the properties originally during 2007. Reinsertion of properties is carried out as needed, giving emphasising to the most important assets, newly acquired properties and development projects. During the previous quarter, the following properties have been reinspected: Sampokeskus, Espoontori, Lippulaiva, Länsi-keskus, Iso Omena, Isomyyri, Myyrmanni, Isokarhu, Asema-aukio in Pori, Valtari, Columbus, Keskuskatu in Kotka and K-Supermarket in Kuusankoski.
The year-on-year cash flow was calculated on Citycon's existing leases, upon the expiry of which, the contract rent has been replaced with Realia Management Oy's view of the market rent. Potential Gross Rental Income (PGI) equals leased space with respect to contract rents and vacant space with respect to market rents. Deducting both the market rent for the idle time between the expired contract and assumed new contract, and the assumed general vacancy level, results in the Effective Gross Rental Income. Effective Gross Rental Income less operating expenses (incl. repairs and tenant improvements) equals the Net Operating Income (NOI). NOI less any investment type of repairs (CAPEX) equals the bottom level cash flow that has been discounted (IRR) to reach the present value of the income stream.
The exit value at the end of the valuation period was calculated by capitalising the 11th year cash flow (base year) with an exit yield. The total value of the property was calculated as the sum of the yearly discounted net income stream, the discounted residual value at the end of the calculation period and any other value added assets such as unused building rights or unbuilt lots.
All variables were estimated based on Realia Management's knowledge of the markets and specified market observations, such as transactions, rental levels and other observations. The collection of relevant information was done in close cooperation with Citycon's property management in order to obtain an extensive set of data, where Realia Management used its objective veto on the data provided.
The world economy is back on track towards strong growth, but is largely split between the emerging markets, characterised by strong growth and low indebtedness, and the developed markets, which in turn are characterised by uncertainty and high indebtedness. Strong fiscal stimulus programs have temporarily supported national economies around the world and especially those across Europe. These countries must now brace for more stringent economic policies to limit public indebtedness, which may result in further market lethargy. Conversely, should the emerging economies continue growing despite the looming threat of inflation and oil price increases, world economy growth may exceed forecasts. According to IMF, the world economy output is likely to have grown by 4.8 % in 2010 and grow by 4.2 % in 2011, with Europe growing at roughly half the speed (2.0 % and 1.8 % respectively)
According to Eurostat, the euro area inflation is up, and has reached 2.2 % in December, up from 1.8 % in September, 0.9 % from a year earlier, and is now above the long-term inflation target. This is likely to limit the functioning of ECB should the economic recovery prove to be more sluggish than anticipated. High inflation is problematic from another aspect too; it is likely to further increase pressure on interest rate increases in the mediumterm that so far have been kept historically low. Seasonally adjusted unemployment remained roughly at the same level in December from the previous quarter, and the steady upward trend in unemployment looks to be stabilising. Euro area unemployment rate is now at 10.1 %
The Finnish economy had a very strong recovery during spring 2010 and recovery has picked up again, reaching 5.5 % growth year-on-year in October, with the trend continuing throughout the fourth quarter towards the end of 2010. The Finnish gross domestic product growth is heavily influenced by traditional industry and production, which in turn is heavily reliant on demand for investment goods. This demand has been supported by fiscal stimulus both in Finland e.g. in the form of housing development and across the world. Order books have been swelling, capacity utilisation rate has improved notably and economic base conditions have improved to almost normal levels. Industrial output grew by a rapid 6.2 % year-on-year, although down by 1 % when compared to previous month, while exports grew by 22 % in November from a year ago. Finnish exports are expected to accelerate further in 2011-2012 due to increased weight of investment goods, but growth in total output is likely to be slow. In November, the business outlook balance indicator for manufacturing was +5, which was stronger than the long term average (+3).
The Finnish household level of indebtedness level has reached record levels in 2010, according to Bank of Finland. High level indebtedness coupled with the fact that the majority of mortgages are tied to short-term rates will result in lower level of disposable income should the ECB decide to fight looming inflation by increasing interest rates. Too low interest rates on the other hand may lead to asset overvaluation especially in housing. According to Statistics Finland, inflation accelerated to 2.9 percent in December 2010, approximately 0.6-0.7 percentage points higher than EU average, and in the short-term accelerated mainly by increases in fuel price. Current inflation is considerably higher than in September 2010 when inflation was at 1.4 %. On the longer term, the drivers of inflation have been price increases across the board, and average inflation rate for 2010 is 1.2 %. Consumer prices in Finland are expected to remain at a higher level than the Euro-zone average, although inflation is estimated to remain at around 2% during the next few years. Both Finland and Sweden have seen their unemployment rates drop faster than in other European countries. In Finland, unemployment was at 7.1 % in November according to Statistic Finland, having come steadily down by 0.2 percentage points from last August, or 1.4 percentage points from a year ago.
In December, consumer confidence fell to its long-term average level after very strong confidence levels in summer 2010. The confidence indicator stood at 13.5 whereas in November it was 20.8, and a year earlier at 14.4. Expectations concerning Finland's economy have weakened but, by contrast, consumers' views about their own economy remained almost unchanged. Even if moderate economic growth is forecast to continue for the next few years, purchasing power will be negatively affected by austerity measures from 2011 onwards.
Retail sales rose by 6.8 % in November yearon-year, while the figures for total trade were up by 17.5 % year-on-year including car dealership, wholesale, daily consumer goods and retail trade. Between January and November, retail sales increased by 3.7 % and total trade by 8.6 % when compared to the equivalent period the previous year.
Sweden's economic recovery has accelerated even further and the economy is now growing at a pace of 6.8 %, according to the Swedish Riksbank, the strongest growth in Europe and the record rate in Sweden since the beginning of detailed GDP measurements in 1970. Even inflation has so far remained around the long-term target, at 2.3 % in December, while consumer consumption has increased. The Swedish government is expected to reach in surplus in 2011 and may reduce income tax depending on the political climate, further boosting consumer demand – a stark contrast to many countries where austerity measures are in place.
Sweden is nevertheless largely dependent on the recovery on the rest of the Europe, as problems abroad are likely to reflect strongly in exports. In addition, the Swedish Krona has appreciated strongly, hurting the very exports that the Swedish economy is dependent on. The value of the Swedish Krona is further strengthened by expectations of repo rate increases by the Swedish Riksbanken. Together with Finland, drop in unemployment levels were fastest in Europe, and unemployment now stands at 7.1 % according to Eurostat methods.
One of the key drivers for growth in the Baltics area has been the determined recovery in the Nordic region and Germany. Baltics, previously seen as a rather uniform area, is becoming divided as Estonia, having just entered the Euro zone at the turn of the year, is growing and stabilising at a faster pace than either Latvia or Lithuania. While joining the Euro zone has bolstered market confidence, Estonia, however, has its own problems to grapple with as inflation soared to 5.7 % in December, up from -1.9 % from a year ago. The economic growth projections for Estonia are 1.8 % for 2010 and 3.5 % for 2011, whereas similar figures for Latvia and Lithuania are -1.0 % and +1.3 % for 2010 and +3.3 % and +3.1 % for 2011 respectively. Projections are by IMF. Unemployment, while still a considerable problem in the Baltics, has come steadily down in Estonia and Latvia, but purchasing power is nevertheless affected by strict austerity measures undertaken when aiming to meet Euro zone accession criteria.
1.3 Property Market Analysis
The property market outlook has improved since summer 2010 as news of stronger than expected expansion of the Finnish economy and growth in exports has boosted confidence in the future. The improved economic conditions, record low interest rates, slowly improving availability of finance and positive yield expectations enabled investment opportunities already in 2010, but investor activity has so far been subdued. Total property transaction volume for Finland in 2010 amounted to EUR 2.0 billion, only slightly higher than the figure for previous year (EUR 1.7 billion). What characterised transactions during the examined period was the large share of single transactions while portfolio transactions were few in number.
The property transaction volume will most likely grow between years 2011 and 2013 for a number of reasons. First, the recovery of the economy is likely to activate financers and investors to carry out delayed divestments. Second, many unlisted property funds will reach their planned exit stage and will liquidate at least part of their fund investments. Third, the recovery in the economy and property markets will activate property sellers due to more traditional reasons; investors collect capital for new investment opportunities by divesting existing assets and owner-users free up capital to focus in their core business. Essential to market development is the mutual development of demand and supply; this is to assure that demand growth will meet the growing supply.
In 2010, by far the largest property transaction in Finland was the transaction for Norgan's hotel portfolio of which 16 hotel properties, with a value close to EUR 415 million, was allocated to Finland. This transaction had a substantial effect on both the share of foreign investment and the share of hotel investment as a property type when the whole 2010 transaction volume is considered.
The divergence between different property submarkets is maintained, if not worsened, despite the gradual recovery in the economy as no rapid surge in demand for commercial space is expected. The Euro Zone's serious imbalances, such as the troubles of Greece, Ireland, Portugal and Spain reflect the uncertainty in the current European economic situation and its future development. Afore mentioned are reflected in the property markets, both in the investor and end-user sectors. Even if the economy continues growing moderately during the next few years, government deficit and managing of the deficit is likely to reduce consumer purchasing power, which, in turn, is expected to subdue demand growth for retail premises. This will concentrate demand for retail premises on established and well functioning shopping locations and on the most promising development projects. On the other hand, the functional life cycle of premises is becoming shorter and shorter, premises become obsolete at an increasing pace and user demand is focused on new, energy efficient and ecological premises. As the financial situation of municipalities become challenging, a geographical divergence can also be discerned with coming saving measures aggravating existing regional disparities and possibly causing a slowdown in development projects outside growth centres.
The rental level increases in Finland have been helped by the faster–than-expected recovery since summer 2010. Rent increases were first observed in best premises, beginning with retail premises. Average rental levels have continued their rise in all premises types, but differences have become increasingly prominent both geographically and in response to quality requirements. Whereas higher rental levels have increased smoothly, lower level rents have further fallen in some of the sub-markets. In part, the reason is over supply – part of the premises stock does not match the needs of tenants e.g. in terms of location and quality, and thus even low rents are not sufficient to generate user interest. Thus, a divergence is present in rental markets too.
In Sweden investment market has seen a great improvement in 2010 compared to previous year. Low interest rates and recovering economy have resulted in a hefty increase in the overall transaction volume in the investment market. Prime properties have seen a downward yield shift while secondary properties have in general been stable. Prime yield in Stockholm CBD is currently at ca. 5 per cent, down some 50 to 75 bps from the peak of the crises.
Citycon has had several considerable development projects underway in 2010. During the last quarter of 2010, the renewed Forum in Jyväskylä and Espoontori shopping centre, among others, were taken into use. Similarly, in Sweden, Åkersberga Centrum's renewed part was opened during the final quarter. Other significant development projects currently under development include renewal of the old part of the afore mentioned Åkersberga, Myllypuro's new retail property in Helsinki and Martinlaakso's new retail property in Vantaa. In addition, a few other smaller development projects are underway.
The development projects have been included in valuation of the total portfolio. In the applied valuation model, future rental income is based on finalised rental agreements and rental projections of the valued development project. Conversely, the development period is considered a period where premises generate no income and where uncommitted investments are included in the costs side of the valuation model as a value reducing factor. Thus, the value of development projects increase automatically as investments are committed and the opening day of the renewed premises is approaching.
All properties are evaluated based on their current plan unless otherwise noted. Should an ongoing official plan alteration be in process, unambiguous decision made and relevant document exist, and thus property's purpose of use and attributes be substantially changed, the altered plan can be taken into account in valuation through the value of unused building right. Prerequisite for the valu-
ation is that the sanctioning of the plan is highly likely and that the new plan regulations are fully known. In that case, the remaining (current) rental income flow and demolition costs are also considered in the valuation.
Citycon Oyj owns 65 properties in Finland, 15 properties in Sweden, and, in the Baltic countries, two in Estonia and one in Lithuania. All in all Citycon Oyj either fully owns, or owns a share of 83 different properties or property companies. The property portfolio is very heterogeneous both in quality and in value. The body of the holding is formed by 33 shopping centre properties, although the portfolio also includes other commercial properties, occasional commercial premises, development properties and, for example, one unbuilt lot. Citycon Oyj primarily owns retail properties. Only in a few selected properties the main use is other than retail. A large majority of the portfolio value is in shopping centres (approximately 86 %).
The value of the total portfolio is calculated as the sum of the individual properties. A separate adjustment for the aggregate value has not been applied. In the sections below, we have presented the valuation result on an aggregate and a sub-market level.
The aggregated market value of the whole portfolio has been valued at approximately EUR 2,361 million. The aggregated value of portfolio has increased by approximately EUR 67 million quarteron-quarter (EUR 2,294 million in Q3 2010). The relative change is approximately 2.9 %. Over half of the change in value can be explained by the advancement of development projects and commitment of investments. Exchange rate fluctuations between the Euro and Swedish Krona have resulted in a positive change in value, amounting to EUR 13 million when compared to the previous quarter; the Swedish Krona has appreciated approximately 2 % against the Euro. In addition, the positive market development has had a positive value impact, in part evident through lowered yield requirements. However, there have been no significant changes in net rental income as the slight rent level increases were met with roughly equal increases in operating expenses.
The weighted average yield requirement of the portfolio has come down by a tenth of a percentage point, now at 6.4 % (6.5 %, Q3 2010). The yield requirement has come down slightly in several of the properties located in Finland, Sweden and the Baltics. The average initial yield has come down, and is now at a level of 6.2 % (6.4 % Q3 2010) and the market rent yield has come down, now at a level of 6.9 % (7.3 % Q3 2010).
The weighted averages in the table are weighted by the value of the property. Properties with relatively higher values will therefore have a stronger influence on the averaged figures than other properties. In the Citycon property portfolio in particular, the influence of largest properties is significant. The ten largest properties, 12 percent of the properties in the property portfolio, form over 60 percent of the entire portfolio value. Changes in these properties dominate the changes in the weighted averages. The most valuable property in the portfolio is shopping centre Iso Omena in Espoo, Finland.
The Finnish property portfolio has been valued at approximately EUR 1,527 million, which is 2.2% higher than in the previous quarter (EUR 1,493 million in Q3 2010). The weighted yield requirement for Finnish properties came down to 6.4 % from 6.5 % for Q3 2010. Similarly, the average initial yield has come down to a level of 6.1 % (6.3% in Q3 2010) and yield for market rents to a level of 6.9 % (7.2 % in Q3 2010).
These changes in the Finnish property portfolio are largely explained by reductions in yield requirement in large properties and the advancement of development projects (e.g. Jyväskylän Forum and Espoontori). Overall, the yield requirement has decreased in 14 properties and increased in five properties in the Finnish portfolio when compared to Q3 2010. The changes in initial yields and market rent yields primarily mirror the advancement and completion of development projects.
Market value of the Swedish property portfolio has been valued at EUR 668 million, which is approximately 4.4 % higher than the previous quarter's value (EUR 640 million in Q3 2010). The positive change in value is partly due to the changes in the exchange rate, in part due to the advancement of the Åkersberga Centrum's development project and in part due to the overall positive market development.
For the entire Swedish portfolio, the weighted average of yield requirements has remained at a level of 6.1 % (6.1 % for Q3 2010). The yield requirement has come down in five properties and has increased in one, but these changes have not caused a change in the rounded weighted average figure.
The market value of the Baltic portfolio has increased approximately 1.8 % to a level of EUR 166 million (EUR 163 million for Q3 2010). The average yield requirement has come down by a tenth of a percentage point and is now at 8.1 % (8.2 % in Q3 2010).
The downward spiral in the Baltic economy is levelling out, especially in Estonia. Transaction volumes are still low, but activity has increased primarily thanks to domestic interest. At the same time, upward pressure on yield requirements has abated and cautious anticipation of lower yield requirements has taken its place for best properties. Temporary rents reductions are still in place in many of the properties in the Baltic countries, which generally are valid for a few months at a time. However, occupancy rates for quality premises have so far remained at a high level. The tenants' declined ability to pay rent has been taken into account through adjustments of cash flows for the time period between 2010 and 2013 despite the fact that thus far rent concessions have been only few months in duration at a time.
Citycon's prime property in the Baltic region is Tallinn's Rocca Al Mare Shopping centre where the third and final stage of an extensive development and extension project was completed in November 2009. Rocca Al Mare now forms close to 87 percent of the value in Citycon's Baltic portfolio. Therefore, its effect on the weighted average of the Baltic portfolio is considerable.
The sensitivity analysis of the fair value of the portfolio was tested by creating a so-called portfolio cash flow statement based on individual cash flow calculations. Changes in fair value have then been examined by modifying key input parameters of the calculations one at a time. The parameters tested were required yield, market rent level, operational costs and vacancy rate. The current market value of the properties is used as a reference for the analysis. The analysis is performed by changing one parameter at a time while all others remain unchanged, and then calculating the corresponding market value of the total portfolio. The sensitivity analysis is a simplified model intended to facilitate understanding of the effect of different parameters on the valuation.
The results indicate that the market value is most sensitive to yield requirement and market rent levels. A ten percent decrease in yield requirement results in an approximately 11 % increase in value. Correspondingly, a ten percent increase in rental income increases the value by approximately 14 %.
The market value reacts to change in vacancy and operating expenses, but their relative effect is not as great as changes to rental income and yield requirement. A ten percent increase in the expenses decreases the market value of the property portfolio by just over four percent. It should be noted however that in retail premises, the rental income and property expenses are often linked through the changes in the rental level in the form of maintenance rent charged from tenants. The ratio is not quite one-to-one, but the correlation is still strong enough to decrease the expense risk in the valuation.
The effects of changes in the vacancy rate are not studied on a similar scale as other parameters – vacancy level is altered by 50 or 100 basis points at a time. Therefore, the relative change is larger than if adjusting by five or ten percents at a time, as is the case in other parameters. Still, the relative effect of changes in the vacancy level is smaller than in other parameters – a change of 100 basis points (one percentage point) in the vacancy level alters the value of the portfolio by ca. 1.4 %.
We have made an assessment of the market value of Citycon Oyj's property portfolio. We have defined the value as at December 31st, 2010. The valuation was primarily carried out as a cash flow analysis. Based on the provided information, we have evaluated the overall debt-free market value of the portfolio at approximately EUR 2,361,000,000 (two billion three hundred sixty one million euro).
Helsinki 19.1.2011
Antti Hänninen Seppo Koponen Valuer Director Authorised Real Estate Valuer (AKA)
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