Annual Report • Mar 1, 2010
Annual Report
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Forum Jyväskylä Citycon's gross leasable area 17,500 sq.m. Built in 1953/1972/1980. Extended and/or renovated in 1991.
Lappeenranta Citycon's gross leasable area 18,700 sq.m. Built in 1987/1993.
Seinäjoki Citycon's gross leasable area 11,500 sq.m. Built in 1992. Extended and/or renovated in 2007.
Galleria Oulu Citycon's gross leasable area 3,500 sq.m. Built in 1987.
Jyväskeskus Jyväskylä Citycon's gross leasable area 5,800 sq.m. Built in 1955. Extended and/or renovated in 1993.
Heikintori Espoo, Tapiola Citycon's gross leasable area 5,800 sq.m. Built in 1968.
IsoKarhu Pori Citycon's gross leasable area 14,800 sq.m. Built in 1972/2001. Extended and/or renovated in 2004.
Sampokeskus Rovaniemi
Citycon's gross leasable area 14,000 sq.m. Built in 1989/1990.
Espoo, Matinkylä Citycon's gross leasable area 60,400 sq.m. Built in 2001.
Shopping centre Iso Omena is not classifi ed.
Helsinki, Vuosaari Citycon's gross leasable area 21,000 sq.m. Built in 1997. Extended and/or renovated in 2007.
Citycon's gross leasable area 40,300 sq.m. Built in 1994. Extended and/or renovated in 2007.
Vantaa, Tikkurila Citycon's gross leasable area 10,700 sq.m. Built in 1984/1991.
PARTNERS IN
Espoo, Espoon keskus Citycon's gross leasable area 17,300 sq.m. Built in 1987. Extended and/or renovated in 2010.
EVERYDAY LIFE CENTRES STOCKHOLM AREA ESTONIA
Vantaa, Myyrmäki Citycon's gross leasable area 10,900 sq.m. Built in 1987.
Salo Citycon's gross leasable area 9,300 sq.m. Built in 1993. Extended and/or renovated in 2007.
Tampere Citycon's gross leasable area 10,300 sq.m. Built in 1930. Extended and/or renovated in 1990.
Duo Tampere, Hervanta Citycon's gross leasable area 13,000 sq.m. Built in 1979. Extended and/or renovated in 2007.
Koskikara Valkeakoski
Citycon's gross leasable area 5,800 sq.m. Built in 1993.
Valtari Kouvola area 7,600 sq.m. Built in 1971-1975. in 2002.
Citycon's gross leasable Extended and/or renovated
Lippulaiva Espoo, Espoonlahti Citycon's gross leasable area 23,400 sq.m. Built in 1993. Extended and/or renovated in 2007.
| Citycon in Brief. | |
|---|---|
| CEO's Review | |
| Strategy. | |
| Business Environment. | |
| Citycon's Stakeholders | |
| Property Portfolio | 1 |
| Business Units: Citycon is a Versatile Shopping Centre Expert |
1 $\overline{\mathbf{c}}$ |
| Finland: (Re)development Projects Prepared, Sales Withstood Downturn |
2 |
| Sweden: Liljeholmstorget Galleria, a Major Investment, Opened in Stockholm |
þ |
| Baltic Countries: Rocca al Mare-Citycon's Flagship in the Baltic Countries. |
ï |
| Environmental Responsibility. | ĵ |
| Social Responsibility and Human Resources | ì À |
| Risks and Risk Management. | |
| Risks Related to Climate Change | |
| and Sustainable Development. Profit Performance and Financial Position |
|
| Corporate Governance Comparison of the Report with the Guidelines |
|
| of the Global Reporting Initiative | |
| Citycon as an Investment and Information for Shareholders |
Some statements in this Annual 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.
Citycon is an active owner and long-term developer of shopping centres, laying the foundation for a successful retail business. Citycon's retail properties serve both consumers and retailers. The company takes into account environmental aspects and the well-being of the areas surrounding its shopping centres. Citycon is the market leader in the Finnish shopping centre business and has a strong position in Sweden and a solid foothold in the Baltic countries.
At the end of 2009, Citycon owned a total of 33 shopping centres and 51 other properties. The fair value of the company's property portfolio totalled EUR 2,147.4 million.
Citycon Oyj's shares are listed on NASDAQ OMX Helsinki. Citycon's trading code is CTY and the company is classifi ed under Financials, Real Estate Operating Companies.
| 2009 | 2008 | |
|---|---|---|
| Turnover, EUR million | 186.3 | 178.3 |
| Operating profi t/loss, EUR million | 10.3 | -105.0 |
| % of turnover | 5.5 | - |
| Loss before taxes, EUR million | -37.5 | -162.3 |
| Loss for the period, EUR million | -36.9 | -138.9 |
| Direct operating profi t, EUR million | 107.7 | 105.3 |
| Fair market value of investment properties, EUR million | 2,147.4 | 2,111.6 |
| Earnings per share (basic), EUR | -0.16 | -0.56 |
| Earnings per share (diluted), EUR | -0.16 | -0.56 |
| Direct result per share (diluted), (diluted EPRA EPS), EUR | 0.23 | 0.20 |
| Dividend and return from invested | ||
| unrestricted equity fund per share, total, EUR | 0.14*) | 0.14*) |
| Net cash from operating activities per share, EUR | 0.30 | 0.21 |
| Equity per share, EUR | 3.31 | 3.62 |
| Net asset value (EPRA NAV) per share, EUR | 3.54 | 3.88 |
| EPRA NNNAV, EUR | 3.35 | 3.80 |
| P/E (price / earnings) ratio | -19 | -3 |
| Return on equity (ROE), % | -4.7 | -15.0 |
| Return on investment (ROI), % | -0.5 | -1.5 |
| Equity ratio, % | 34.2 | 38.5 |
| Gearing, % | 169.5 | 141.3 |
| Net interest-bearing debt (fair value), EUR million | 1,312.2 | 1,194.6 |
| Net rental yield, % | 6.1 | 5.8 |
| Average net yield requirement by external appraiser | 6.6 | 6.4 |
| Occupancy rate, % | 95.0 | 96.0 |
| Personnel (average for the period) | 117 | 109 |
| Personnel at the end of the period | 119 | 113 |
| Carbon footprint, tnCO2e | 31,801 | - |
| Carbon footprint, tnCO2e/GLA | 0.03 | - |
| Average water consumption, l/visitor/year | 3.9 | - |
| Average recycling rate, % | 48.5 | - |
*) The fi gure includes a per-share dividend of EUR 0.04 and a return of equity from invested unresticted equity fund of EUR 0.10 per share. Year 2009 fi gure is a proposal by the Board of Directors.
This is Citycon's fi rst combined Annual Report and Corporate Social Responsibility Report. The aim of this report is to provide a comprehensive description of the economic, social and environmental pillars of responsibility and to increase reporting transparency for Citycon's various stakeholders.
Reporting covers all Citycon's operations in all operating regions and countries. This report has been prepared applying the recommendations issued by the Global Reporting Initiative (GRI) concerning the content and reporting principles in CSR reporting. Coverage in terms of GRI's G3 reporting recommendations is presented on pages 55-56. Citycon's self-declared GRI Application Level of this report is C. This level has been verifi ed by a third party.
The report is published annually and the presented information corresponds to the company's fi nancial year i.e. 1 January – 31 December. The following report will be published during the fi rst quarter of 2011.
The presented fi nancial key fi gures are based on audited accounting records and approved annual accounts. Principles and calculation methods used in the calculation of social and environmental responsibility indicators have been declared in their respective sections.
I n spite of the economic downturn, Citycon achieved the best direct result per share in its history. Turnover increased by 4.5 per cent, and the company's cash fl ow per share and net rental income grew as well. Our shopping centres' sales were stable and the occupancy rate remained at a good level. This year, Citycon was again capable of creating success for retailing.
The business environment was characterised by turbulence on the fi nancial market. Securing fi nancing became easier towards the end of the year, but the associated expenses grew markedly. In these exceptionally challenging market conditions, we were still able to maintain our stable fi nancing position. The rapid fall in interest rates and the repurchase of our convertible capital bonds clearly reduced our interest costs. Since the fi nancing of ongoing development and redevelopment projects has been secured, Citycon has no signifi cant refi nancing needs in the near future. We booked fair value losses on our properties, but the equity ration still remained at a good level. Changes in the business environment and the general uncertainty hindered the demand for retail premises and the rise in market rents levelled off .
The company continued its growth, through the development and redevelopment of shopping centres. Our main development projects were Rocca al Mare in Tallinn and Liljeholmstorget Galleria in Stockholm. Both of these centres were opened successfully during the last quarter of the year. In the Greater Stockholm Area, we initiated the extension and redevelopment of the Åkersberga Centrum shopping centre. We also have several major construction projects going on or under planning in Finland, including Myllypuro in Helsinki, Espoontori in Espoo, Forum in Jyväskylä and, at the future Matinkylä metro station to be located by the Iso Omena shopping centre in Espoo.
Our development and redevelopment projects refl ect our company's strong design and construction competence, which we combine with our solid shopping centre management. We off er our tenants well-planned and –managed, competitive shopping centres. 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.
The rapid change in market conditions was refl ected in the volume of real property transactions. Citycon agreed to sell its Stockholm area residential units in both Åkersberga and Liljeholmstorget and purchased the lots for the Myllypuro shopping centre in Finland. No other major transactions took place during the year.
The recession also aff ected retail trade, reducing consumers' purchasing power and willingness to spend. Demand for various expensive consumer durables faded during the second half of the year. Grocery sales, however, grew markedly in Finland and Sweden. Grocery stores and providers of daily necessities are anchor tenants in many of Citycon's shopping centres, which is a real strength in the current market conditions.
At the end of the year, Citycon owned 33 shopping centres and 50 other retail properties. In Finland, our market share was 22 per cent and the total sales of our shopping centres amounted to approximately 1.6 billion euros. Our market position strengthened further in both Stockholm and Tallinn, as a result of the completion of our major construction projects.
Responsible business in Citycon means fi nancial effi ciency and eff ectiveness, fair play and solutions which take account of the environment in all of the company's activities. Responsibility stems from openness and transparency. Accordingly, for the fi rst time Citycon is now issuing a combined Annual Report and Corporate Social Responsibility Report.
In 2009, we launched an extensive environmental programme for reducing the environmental impacts of our business and enhancing internal processes, by integrating environmental aspects into daily operations. As a result of the development of our reporting, for the fi rst time we are now publishing energy and water consumption data for our properties, their waste recycling rates and the carbon footprint value arising from Citycon's business.
Finally, I should like to take this opportunity to thank our shareholders, customers and partners for the confi dence you have shown in our operations. I would also like to express my special thanks to every Citycon employee for their contribution to our company and its continued success.
Helsinki, 15 February 2010
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.
| EUR million | Finland Sweden Countries | The Baltic | Other | Total | |
|---|---|---|---|---|---|
| Actual 2007 | 75.7 | 21.6 | 6.0 | 0.1 | 103.4 |
| Acquisitions | 13.5 | 1.4 | 0.7 | - | 15.7 |
| (Re)developments | 1.2 | 0.4 | 0.4 | - | 1.9 |
| Divestments | -0.3 | 0.0 | 0.0 | - | -0.3 |
| Like-for-like properties | 1.8 | 0.7 | 0.0 | - | 2.5 |
| Other | -1.0 | -0.2 | -0.3 | -0.1 | -1.5 |
| Actual 2008 | 90.9 | 24.1 | 6.8 | 0.0 | 121.8 |
| Acquisitions | 0.0 | 0.0 | 0.0 | - | 0.0 |
| (Re)developments | 1.0 | 1.0 | 3.3 | - | 5.4 |
| Divestments | -0.2 | 0.0 | 0.0 | - | -0.2 |
| Like-for-like properties | 0.7 | 0.5 | -0.4 | - | 0.8 |
| Other (incl. exchange rate diff .) | 0.0 | -2.4 | 0.1 | 0.0 | -2.3 |
| Actual 2009 | 92.4 | 23.2 | 9.8 | 0.0 | 125.4 |
– Reduction of greenhouse gas emissions by 20 per cent by year 2020 from the 2009 level
– Lowering water consumption to an average level of less than 3.5 litres per visitor
| 1. Strategic objective: Growth through selected (re)development projects and acquisitions (partnerships and joint-venture-based fi nancial arrangements can also be used for individual properties) |
2. Strategic objective: Property portfo lio optimisation |
3. Strategic objective: Controlling vacancy, improving effi ciency, and adding value through good shopping centre management |
|---|---|---|
| • KPIs: For (re)development projects, the yield, costs, and pre-leasing rate will be carefully determined as a pre requisite for an investment decision. • Objectives for 2010–2012: Detailed fi nancial objectives will be specifi ed for each project. The return on investment (ROI) in a (re)develop ment project must clearly exceed the weighted average cost of capital (WACC). |
• KPIs: Divestments of non-core properties will continue. In Sweden, the residential portfolio still amounts to approximately EUR 40 million. • Objectives for 2010–2012: Property portfolio optimasation by carrying out the (re)development projects in the pipeline worth several hundred millions of euros (see pages 22-23); divestment of residential and other non-core units. |
• KPIs: Reorganisation of the Finnish Operations resulted to improved leasing and marketing. • Objectives for 2010–2012: Control ling and reducing vacancy. |
| 4. Strategic objective: More effi cient | 5. Strategic objective: Sustainability in | 6. Strategic objective: Active and |
| property maintenance and improved maintenance quality |
business operations | conservative fi nancing policy |
T he year 2009 had a challenging start in all of Citycon's operating countries. The global economic downturn turned into recession most visibly in the Baltic countries, but the Finnish and Swedish economies also showed negative fi gures. In spite of hardship in the real economy, the stock market's downward slide took an upward trend in the late summer. At the same time, consumer confi dence in economic development strengthened, particularly in Finland and Sweden.
In Sweden, retail sales saw an upward turn in the summer, and in Finland retail sales picked up a litt le from the fi gures in the spring. Meanwhile, economic conditions continue to be harsh in the Baltic countries and retail sales have fallen. 1) 2) 3) Grocery sales grew in Finland and Sweden, and in Estonia decreased by less than retail sales in general 4) 2) 3). Aff ordable clothing sales grew in Finland and Sweden while furniture and car sales suff ered most 5).
Infl ation gave way to defl ation during the year. Interest rate levels for the whole year were at a record low in all of Citycon's operating countries 1) 2) 3) . The volatility of the global fi nancial markets aff ected the cost and availability of fi nancing for the fi nancial year. Although availability improved from the fi rst half of the year, loan margins continued to be rather high. Citycon's fi nancial position remained good throughout the year. The available liquidity will cover authorised investments and scheduled debt interest and repayments until at least the end of 2010. More detailed information on Citycon's profi t performance and fi nancial position can be found on pages 47–48 of this Annual Report.
During the year, changes in real economy trends refl ected on retail trade. In all, retail sales measured in current prices in Finland declined in 2009 by 1.6 per cent and grocery sales grew by 2.1 per cent. In Sweden, retail sales grew by 3.6 per cent and grocery sales by 4.5 per cent. The greatest slowdown in sales was seen in the Baltic countries. In Estonia, retail sales measured in constant prices decreased by 15 per cent and grocery sales by 8 per cent. For Lithuania, the corresponding fi gures were -21.6 per cent and -18.7 per cent 1) 2) 6) 3) 7).
In Finland, value added tax on food was cut from 17 to 12 per cent at the beginning of October. The -2.5 per cent decrease observed in October grocery sales indicates that the VAT reduction on food was directly transferred to prices.
Among retailers in Finland, the S Group in particular continued to increase its market share in grocery retail and now accounts for more than 40 per cent of all grocery retail in Finland. Kesko ranked second largest in Finland, with its market share of some 35 per cent and, among the rest of the retailers, Suomen Lähikauppa Oy's (previously Tradeka) market share was approximately 10 per cent. The rest of the market is split between several retailers. 8)
In Sweden, ICA is the grocery market leader with its 50 per cent share. COOP has an approximately 20 per cent market share 9). In Estonia, the largest grocery retailers include Rimi owned by the Swedish ICA; local co-operative ETK; Selver, the subsidiary of Tallinna Kaubamaja; the Lithuanian Maxima and Prisma of the Finnish S Group. In Lithuania, the local Maxima has a nearly 50 per cent share of the market, other larger retailers include Rimi and the local IKI.
While grocery sales have been least affected by the economic turmoil, speciality retail and the hardware trade in particular have suffered in all of Citycon's operating countries. In accordance with its strategy, grocery stores or retailers of daily necessities are usually anchor tenants in Citycon's shopping centres.
Grocery represents around 21 per cent of the company's rental income.
In the Finnish and Swedish property markets, the greatest impacts of the economic downturn were felt by offi ce properties, whose vacancy rates clearly rose during 2009. By contrast, occupancy rates in shopping centres continue to be high both in Finland and in Sweden.
The steepest fall in occupancy rates was experienced in large-format retail units that do not represent Citycon's core business 10).
In the Baltic countries, the property market faces a tougher situation, vacancy rates also being a problem for some shopping centres. Over recent years several new, large shopping centres have been built in Lithuania, and some of those completed in 2009 had to open with a high proportion of vacant premises. Citycon's situation in the Baltic countries is, however,
2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Jones Lang LaSalle
T he economic downturn is having an impact on Finns' willingness to consume. According to consumers themselves, the materialism of the boom years has made way for soft er values: leisure time has become more important and longing for more money is not the priority. On the other hand, consumers look for experiences, and buying also means seeking enjoyment and an escape from the everyday life. Indeed, luxury treatments, games, confectionery and fi lms are highly popular. (Source: Redera)
A survey commissioned by the Finnish Ministry of the Environment also suggests that enjoyment is emphasised in shopping behaviour. Shopping is not merely viewed as a way of spending time, but customers require high-quality shopping venues with an inspiring ambience. The general household structure also supports this trend: the number of small households is on the rise, and they spend more money on services and specialty goods.
Consumers' environmental awareness has increased markedly, with many Finns stating that climate change affects their purchase decisions. For example, consumers appreciate energy-effi cient housing and wish to avoid unnecessary car use and throwing away food (source: Kuulas Milward Brown, the 'Ilmastotalkoot' Climate Co-operation campaign, February 2009). Some 60 per cent of Finns consider that, over the next ten years, climate change will represent a greater threat than economic recession.
A similar trend emerges in the views of food business executives. In 2008, they already regarded corporate social responsibility as the main concern in the food industry, while the second most important issue was the purity and safety of food. Both issues achieved a higher ranking than in 2007. (Source: CIES, Top of Minds)
good since it does not have any vacancy problems. Indeed, the two latest phases of the extension and redevelopment project of Estonia's largest shopping centre, Rocca al Mare, opened in 2009 fully leased.
Construction costs have decreased clearly in all of Citycon's operating regions, which supports the company's property development operations. While construction costs declined the most in the Baltic countries, prices quoted in Finnish and Swedish contract tenders also decreased throughout 2009.
The property transaction market has been slow both in Finland, Sweden and the Baltic countries. Owing to the low interest rate levels, there has been hardly any distressed sales, even in the case of high-leverage property deals. Transaction volume has also decelerated due to a mismatch between demand and supply on the market. While demand has focused mainly on low-risk properties with a central location, mainly higher-risk, non-prime properties have been on sale. 10)
1) Statistics Finland 2) Statistics Sweden 3) Statistics Estonia 4) The Finnish Grocery Trade Association 5) Newsec Property Report, Autumn 2009 6) Handelns Utredningsinstitut 7) Statistics Lithuania 8) A.C. Nielsen 9) Fri köpenskap 10) Jones Lang Lasalle, Nordic City Report, Autumn 2009
Level of interest to stakeholders
MATERIALITY MATRIX C itycon aims to operate actively and interactively with its stakeholders and wishes to learn about stakeholders' values and interests as well as their expectations towards the company. Citycon's stakeholders are:
In the stakeholder defi nition process, stakeholders' expectations towards the company were assessed based both on experiences and feedback. Stakeholders' expectations, tools of interaction and key results from 2009 are presented on pages 12–13.
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.
This integrated Annual and CSR Report includes selected topics from the areas of economic,
| +++ Local community development |
Safety and health in shopping centres Land use and zoning Sustainable construction Transparency and reliability |
Successful retail locations Cost eff ective use of resourses in daily operations Profi tability and growth Continuous development of properties |
|---|---|---|
| Transport | Stakeholder relations Code of ethics Supply chain management Improvement of employee competencies |
Shopping center as a product meets the consumer needs Accessibility of the retail properties Corporate governance Carbon footprint |
| Cultural heritage Biodiversity + |
Promotion of environmental consciousness |
Job satisfaction Climate change risks |
| + | +++ |
• Topics are reported extensively • Topics are reported, focus on their development • Topics are reported
social and environmental responsibility which are material for Citycon's business and for its stakeholders. The topics that are addressed in this report were discussed and selected by the extended Corporate Management Committ ee.
The signifi cance of the topics may vary by stakeholder. All topics included in the table above are covered in this report.
Stakeholders' level of interest on the topics was assessed on the following scale:
The topic's signifi cance to business operations was assessed on the following scale:
| Stakeholder group |
Expectations towards Citycon | Interaction tools | Key results in 2009 |
|---|---|---|---|
| Consumers | Shopping centre as a product and consumer relationship • right tenant mix and service off ering • clean and safety shopping centre Accessibility • public transportation • parking possibilities Ability to serve the community • development of services Green topics • properties' environmental impacts • availability of ecological products |
Consumer surveys Market research Events Campaigns Communication CSR report |
In Finland, spontaneous awareness fi gures of 14 shopping centres above 40% ; over 60% of the shopping centre customers consider the off ering as an important criteria for visiting a shopping centre. The development of cluster strategy continued in Finland. Rocca al Mare invested heavily in marketing and shows higher awareness growth fi gures than other shopping centres in Tallinn (source: TNS Emor). According to Swedish Consumer Index, the strengths in Citycon shopping centres are accessibility, parking facilities and safety (source: Centrumbarometern 2009, CFI Group). New free shutt le bus connection started between the Rocca al Mare and the harbour of Tallinn. All Citycon's shopping centres except one are located in urban environments with good public transportation. Openings of redeveloped shopping centres: Rocca al Mare's phase 2 in May and Liljeholmstorget and Rocca al Mare's phase 3 in Novem ber. The fi rst ever LEED certifi cate in the Nordic countries was granted to shopping centre Trio in Lahti. Visible campaigns for environment and social responsibility took place in shopping centres, e.g. Toy collection campaign, No Plastic Bags, Earth Hour. |
| Tenants | Successful retail location • achievement of sales targets Rent level • rent level proportional to sales Relationship • transparent and fl exible operating methods Effi cient retail property management • cost-effi cient use of resources • appropriate quality level of operations • green topics |
Market research OCR% (Occupancy Cost Ratio) rent's share of the tenant's sales Co-operation practices CSR report |
The footfall and sales of the shopping centres remained in average stable, see fi gures of each business unit on pages 27, 31 and 33. Capital expenditure on redevelopment projects totalled EUR 134 million. The most signifi cant changes in footfall and sales were due to a signifi cant change in the tenant mix or in the local market or competition. In shopping centres, the OCR% development was closely monitored by branches and by shopping centres. OCR% was in line with profi t ability structure in each branch. Regular contacts and disccussions with tenants. The development of environmental reporting: carbon footprint, energy effi ciency, water consumption and waste recycling are reported for the fi rst time. Green Shopping Centre Management program was launched and all shopping centres were assessed with consistent criteria. Purchasing of Green Electricity in Rocca al Mare, Liljeholmstorget and Åkersberga. |
| Employees | Job satisfaction • challenging and versatile tasks • maintaining ability to work Remuneration • competitive salary, bonuses Competence development |
Personnel survey Equality assessment Employee performance reviews Co-operation group and Occupa tional safety committ ee Training programs In-house job rotation New recruits Intranet |
The personnel survey was not conducted in 2009, because the survey cycle will be rescheduled to adjust bett er with the annual planning. The equality assessment covering the entire personnel was conducted: the response rate was 84% and based on the results, equality is eff ectively realised. Focus areas for HR strategy were developed by personnel interviews and workshops. Free time culture club started. 16 new recruitments, 8 in-house transfers. Time spent for training: 6.9 days/employee. |
| Stakeholder group |
Expectations towards Citycon | Interaction tools | Key results in 2009 |
|---|---|---|---|
| Investors Lenders Analyst |
Profi t • increasing/maintaining asset value • profi table growth • earnings per share • dividend payment capability Growth • growth of the company's net rental income • property portfolio and market value growth Transparency and reliability • reporting methods and schedule Ownership structure and management • duration of holding • shareholders' capability to participate in share issues • nature and location of the investors Investor relations • awareness of shareholders' expectations • open discussion between shareholders and the company Sustainability • economical, social and environmental responsibility |
Reliable and comparable reports Releases Presentations Investor meetings Asset tours Result press conferences, webcasting Annual and CSR report Financial Statements and Interim Reports |
Net rental income and turnover increased, fi nancing expenses decreased, dividend and equity return have stayed at the same level for 6 years in a row. New (re)development projects launched as planned to increase net rental income and value of the property portfolio. Share performance improved due to above-expectation achievements. Four new analysts started covering the company in 2009 partly because of the company's transparency. Number of domestic shareholders (=registered) nearly doubled. New bond issued successfully to domestic retail investors. Investor meetings aft er each quarter in Finland and abroad. The 2nd Capital Market's Day organised 16 September 2009. Reporting took place according to schedule. The fi rst integrated Annual and CSR Report was published. Investors interest towards sustainability increased substantially. |
| Co-operation partners |
Agreement procedures Long-term partnerships Reputation and reliability Professional process management |
Agreements Partnership models Co-operation programmes |
It was decided to develop methods and tools for measuring co-operation and responsibility in supply chain. |
| Authorities Local com munities |
Land use and city planning • pleasant environment • interactive planning Local community development Communication and open discussion Compliance Corporate Governance Sunday opening hours (Finland) |
Zoning process Panels Briefi ngs Communication |
All ongoing development projects are extensions and redevelopments of existing shopping centres and are situated in the urban environ ment. In the Finnish "Local Shopping Centres" cluster there were co-operation initiatives with local associations, communities and local develop ment projects (e.g. in Myyrmäki, Vantaa, in Espoonlahti, Espoo and in Vuosaari, Helsinki). The development project in Myllypuro, Helsinki was prepared in close co-operation with the Local Residents' Association. In Finland, a common Citycon level policy with local implementation according to the local market situation for Sunday opening hours. |
| Media | Open and reliable communication | Stock exchange and press releases Annual and Interim reports Websites |
According to media monitor tool Citycon increased media hits (494 pc) by 20% compared to the previous year. |
| Industry associations NGOs |
Development of the industry | Memberships and positions of trust Participation and infl uence in the industry development |
Representations and memberships at RAKLI, EPRA, ICSC, NCSC, the Finnish Council of Shopping Centres and in other industry associa tions. Participation in Global Reporting Initiative's Construction and Real Estate Sector Supplement work. A need for identifi cation of NGO's relevant to Citycon's operations was recognised. |
PORTFOLIO BY MARKET VALUE AND NUMBER OF
Market value, Share of Number of EUR million total portfolio, % properties over 100 49% 6 80-100 5% 1 60-80 6% 2 40-60 13% 6 20-40 9% 7 10-20 11% 17 5-10 5% 15 0-5 3% 30
PROPERTIES ON 31 DEC. 2009
Citycon owns a total of 33 shopping centres, 22 being in Finland, eight in Sweden, two in Estonia, and one in Lithuania. In addition to shopping centres, Citycon owns 51 other properties, 44 of them in Finland and seven in Sweden.
In 2009, Citycon focused on the redevelopment and extension of its shopping centres. No new shopping centres were acquuired or sold.
Instead, one non-core retail property in Lahti, Finland, was sold in January for approximately EUR 3 million.
In Sweden, divestments involved residential units which are also considered as non-core business. Residential units in Åkersberga Centrum were agreed to be sold for SEK 181 million (approx. EUR 16.7 million) to Tegeltornet AB. A total of 72 residential units being built in the centre of Stockholm at Liljeholmen are due for completion in the spring of 2010 and, once completed, they will be sold for SEK 176 million (approx. EUR 16.3 million) to Heba Fastighets AB.
Property valuation
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 market volatility and rapidly changing market conditions. The most recent valuation
14 CITYCON OYJ ANNUAL AND CSR REPORT 2009
statement on the situation at the end of 2009 begins from page 61 in the appended Financial Statements. The valuation has been conducted by Realia Management Oy, part of the Realia Group. Realia Management Oy is the preferred appraisal service provider of CB Richard Ellis in Finland. The valuation statement includes 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 10 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 projects have been appraised using an especially designed project calculation model. Further information on the valuation methods is also provided in said valuation statement.
On 31 December 2009, Realia Management Oy evaluated the average net yield requirement for Citycon's property portfolio at 6.6 per cent. The net yield requirement for properties in Finland, Sweden and the Baltic countries stood at 6.6 per cent, 6.4 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 a part of the operating profi t and, consequently, the profi t per 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, as well as the acquisition cost of new properties acquired during the last three months.
In 2009, the fair value loss of Citycon's property portfolio was EUR 97.4 million. This decrease was caused by the general economic downturn in the property and fi nancial market as well as increased yield requirements resulting from the general economic recession. The year saw a total increase of EUR 5.5 million in the value of 9 properties and a total decrease of EUR 102.9 million in the value of 70 properties.
| Change in market value, year 2009, EUR million |
Average yield | Average | Average operating |
Average | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Total portfolio | 31 Dec. 2009 | Fair market value, EUR million 31 Dec. 2008 |
Positive | Negative | Total | 31.12.2009 | requirement, % 31.12.2008 |
market rent, EUR/sq.m./month 31 Dec. 2009 |
expences EUR/sq.m./month 31 Dec. 2009 |
Average initial yield (%) 31 Dec. 2009 |
reversionary yield, (%) 31 Dec. 2009 |
| Finland | |||||||||||
| Helsinki Metropolitan Area | 786.0 | 806.9 | 1.2 | -32.1 | -30.8 | 6.3 | 6.1 | 24.7 | 5.6 | 6.6 | 6.7 |
| Other areas in Finland | 656.0 | 687.1 | 1.7 | -36.1 | -34.3 | 6.8 | 6.7 | 19.8 | 4.3 | 6.9 | 7.6 |
| Finland, total | 1,442.0 | 1,494.0 | 3.0 | -68.1 | -65.1 | 6.6 | 6.4 | 22.5 | 5.0 | 6.8 | 7.1 |
| Sweden | |||||||||||
| Stockholm area and Umeå | 479.1 | 397.3 | 2.6 | -19.5 | -16.9 | 6.3 | 6.3 | 22.7 | 6.0 | 6.5 | 7.8 |
| Gothenburg area | 69.7 | 65.1 | 0.0 | -2.6 | -2.6 | 7.2 | 7.1 | 11.2 | 3.9 | 7.8 | 8.8 |
| Sweden, total | 548.8 | 462.4 | 2.6 | -22.1 | -19.6 | 6.4 | 6.4 | 21.3 | 5.7 | 6.7 | 7.9 |
| Baltic Countries | |||||||||||
| Estonia | 145.9 | 140.3 | 0.0 | -8.4 | -8.4 | 8.0 | 7.3 | 21.6 | 4.2 | 8.0 | 8.8 |
| Lithuania | 10.7 | 15.0 | 0.0 | -4.3 | -4.3 | 9.3 | 8.1 | 18.4 | 6.8 | 8.2 | 10.3 |
| Baltic Countries, total | 156.6 | 155.3 | 0.0 | -12.7 | -12.7 | 8.1 | 7.4 | 21.4 | 4.3 | 8.0 | 8.9 |
| Total portfolio | 2,147.4 | 2,111.6 | 5.5 | -102.9 | -97.4 | 6.6 | 6.4 | 22.1 | 5.1 | 6.8 | 7.4 |
| Change in market value, year 2009, EUR million |
|||||
|---|---|---|---|---|---|
| Like-for-like properties | Fair market value, EUR million 31 Dec. 2009 31 Dec. 2008 |
Positive | Negative | Total | |
| Finland | |||||
| Helsinki Metropolitan Area | 689.6 | 715.5 | 0.1 | -28.6 | -28.5 |
| Other areas in Finland | 501.5 | 520.4 | 1.7 | -27.0 | -25.3 |
| Finland, total | 1,191.1 | 1,235.9 | 1.8 | -55.7 | -53.8 |
| Sweden | |||||
| Stockholm area | 233.6 | 221.8 | 2.6 | -6.3 | -3.8 |
| Gothenburg area | 69.7 | 65.1 | 0.0 | -2.6 | -2.6 |
| Sweden, total | 303.3 | 286.9 | 2.6 | -9.0 | -6.4 |
| Baltic Countries | |||||
| Tallin and Vilnius | 22.9 | 30.2 | 0.0 | -7.4 | -7.4 |
| Like-for -like properties, total | 1,517.4 | 1,553.0 | 4.4 | -72.1 | -67.7 |
C itycon aims to have a versatile and easily manageable lease portfolio, based primarily on fi xed-term leases. As a rule, all leases on new business premises are signed for a fi xed period in all countries. The only exception to this rule is apartments and storage facilities, or individual parking spaces. Leases in eff ect until further notice represent about 17 per cent of Citycon's property portfolio. Finland accounts for 81 per cent of the until further notice leases, Sweden for 19 per cent and the Baltic Countries for one per cent.
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 21 per cent of the total lease portfolio. More than 30 per cent of the leases in eff ect until further notice were signed before 1999; the oldest ones more than 30 years ago. Previously leases in eff ect until further notice were a typical feature of the Finnish market; they are not regarded as greater risk, nor are they associated with a particular tenant group.
In some cases, a lease in eff ect until further notice or a lease signed for a short fi xed term is in Citycon's interest. This might be the case in properties where a development project is being planned. In this situation, it may not be in Citycon's interest to form long-term ties with all tenants, but at the same time it is necessary to secure cash fl ows from the property before a development project begins. About 10 per cent of all leases signed in Finland in 2009 are in effect until further notice.
In Sweden, leases are typically signed for a term of 3-5 years, aft er which the lessor may terminate the lease contract or propose new lease terms. Tenants cannot be asked to pay a higher-than-market rent, because the tenants may appeal to a lease board (Hyresnämden), which specialises in resolving disputes. The lessor must be able to prove that the market rents have increased by presenting the board with recent leases on similar premises in the area.
In the Baltic countries, major anchor tenants' lease term is ten years, for smaller players they are approximately three years. A fi ve-year lease term is also quite common.
The local management in Citycon's shopping centres handles tenant-related risks. The tenants have a duty to report their monthly sales
• Fixed-term contract • Valid until further notice • Initially fi xed-term contract
Lease portfolio used in the calculation is measured in euros (not in number of agreements).
Enclosed chart illustrates Citycon's lease agreements divided into fi xed-term contracts, contracts valid until further notice and initially fi xed-term contracts.
fi gures to the shopping centre's management. Management closely monitors the performance of each store and makes every eff ort to contribute to their success. If the tenant's lease in relation to the annual 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 regardless of the duration of the lease term. The tenant may be off ered assistance with marketing, premises may be downsized, or relocation to a premise with a lower lease per square metre may be recommended.
Despite the recession, overdue lease payments have so far not been a problem. Major tenants have a fi nancial buff er, which means a small sales decline will not cause any problems in lease payment. Citycon makes determined eff orts to enhance property maintenance as the costs are creating pressure to increase the tenants' maintenance fees. Citycon's base rents are close to the market rent level. Leases oft en – especially in Sweden and in the Baltic Countries – contain a turnover-linked component but due to the level of the base rent it is not a signifi cant source of additional rental income. At the end of the year, turn-over-based lease agreements accounted for 36 per cent of Citycon's lease portfolio and approximately one per cent of the rental income came from the turn-over-based part of leases.
| Number of lease agreements | Citycon's GLA, sq.m. | Leased area, sq.m. | Average rent, EUR/sq.m./month |
|
|---|---|---|---|---|
| Finland | ||||
| Status 1 Jan. 2009 | 1,795 | 600,750 | 534,030 | 18.6 |
| Leases started | ||||
| New or extended leases | 295 | 400 | 57,220 | 22.5 |
| Leases ended | ||||
| Expired, fixed-term leases | 176 | 29,020 | 26.2 | |
| Terminated, until-further-notice leases | 207 | 40,660 | 19.1 | |
| Leases terminated due to development projects | 24 | 6,300 | 4,600 | 9.7 |
| Divestments | 1 | 7,200 | 7,200 | 3.3 |
| Status 31 Dec. 2009 | 1,682 | 587,650 | 509,770 | 19.7 |
| Sweden | ||||
| Status 1 Jan. 2009 *) | 2,114 | 282,700 | 259,280 | 11.8 |
| Leases started | ||||
| New or extended leases | 339 | 32,810 | 24.7 | |
| Leases started due to development projects | 110 | 28,510 | 26,540 | 22.1 |
| Leases ended | ||||
| Expired and terminated leases | 317 | 36,740 | 13.0 | |
| Leases terminated due to development projects | 1 | 8,710 | 680 | 3.1 |
| Status 31 Dec. 2009 | 2,245 | 302,500 | 281,210 | 13.3 |
| Baltic Countries | ||||
| Status 1 Jan. 2009 | 234 | 54,200 | 53,920 | 19.0 |
| Leases started | ||||
| New or extended leases | 11 | 620 | 12.0 | |
| Leases started due to development projects | 118 | 16,800 | 24,440 | 26.4 |
| Leases ended | ||||
| Expired and terminated leases | 11 | 980 | 16.9 | |
| Leases terminated due to development projects | 44 | 7,850 | 17.1 | |
| Status 31 Dec. 2009 | 308 | 71,000 | 70,150 | 18.6 |
*) The calculation method of the Swedish lease portfolio has been revised to correspond that of Finland and the Baltic Countries.
| Citycon's | Number | Fair market value, EUR million | Occupancy rate, % | ||||
|---|---|---|---|---|---|---|---|
| Total portfolio | Location | GLA sq.m |
of lease agreements |
31 Dec. 2009 | 31 Dec. 2008 | EUR 31 Dec. 2009 |
Sq.m. 31 Dec. 2009 |
| Finland | |||||||
| Shopping centres, Helsinki Metropolitan Area | |||||||
| Columbus | Helsinki | 21,000 | 74 | 74.1 | 74.7 | 99.6 | 98.6 |
| Espoontori | Espoo | 17,300 | 43 | 29.8 | 31.6 | 95.7 | 95.4 |
| Heikintori | Espoo | 5,800 | 39 | 10.5 | 11.8 | 95.2 | 89.9 |
| Isomyyri | Vantaa | 10,900 | 17 | 17.6 | 20.6 | 61.3 | 56.7 |
| Iso Omena | Espoo | 60,400 | 198 | 299.7 | 305.6 | 98.6 | 98.0 |
| Lippulaiva | Espoo | 23,400 | 83 | 63.5 | 62.1 | 99.8 | 99.7 |
| Myyrmanni | Vantaa | 40,300 | 109 | 152.3 | 158.4 | 97.0 | 96.3 |
| Tikkuri | Vantaa | 10,700 | 48 | 26.0 | 27.5 | 94.5 | 90.1 |
| Shopping centres, Helsinki Metropolitan Area, total | 189,800 | 611 | 673.6 | 692.4 | 96.8 | 94.6 | |
| Shopping centres, other areas in Finland | |||||||
| Duo | Tampere | 13,000 | 42 | 29.8 | 32.3 | 94.2 | 92.9 |
| IsoKarhu | Pori | 14,800 | 44 | 43.1 | 42.4 | 94.2 | 89.3 |
| IsoKristiina | Lappeenranta | 18,700 | 55 | 34.8 | 34.2 | 93.7 | 90.0 |
| Jyväskeskus | Jyväskylä | 5,800 | 71 | 14.5 | 15.1 | 97.8 | 96.3 |
| Jyväskylän Forum | Jyväskylä | 17,500 | 58 | 55.2 | 57.6 | 97.5 | 97.1 |
| Koskikara | Valkeakoski | 5,800 | 35 | 5.3 | 5.7 | 94.4 | 92.5 |
| Koskikeskus | Tampere | 26,300 | 155 | 113.4 | 114.8 | 96.4 | 94.9 |
| Linjuri | Salo | 9,300 | 9 | 15.1 | 15.8 | 88.5 | 88.5 |
| Oulun Galleria | Oulu | 3,500 | 33 | 8.2 | 8.9 | 94.3 | 91.1 |
| Sampokeskus | Rovaniemi | 14,000 | 80 | 23.2 | 25.0 | 80.8 | 76.5 |
| Torikeskus | Seinäjoki | 11,500 | 61 | 11.9 | 12.5 | 89.6 | 86.2 |
| Trio | Lahti | 45,700 | 164 | 143.2 | 150.7 | 94.6 | 90.2 |
| Tullintori | Tampere | 10,300 | 38 | 8.4 | 8.9 | 75.0 | 74.4 |
| Valtari | Kouvola | 7,600 | 20 | 4.8 | 5.0 | 90.6 | 85.6 |
| Shopping centres, other areas in Finland, total | 203,800 | 865 | 510.8 | 529.0 | 93.3 | 89.5 | |
| Other retail properties | 194,050 | 206 | 257.7 | 272.5 | 92.6 | 89.7 | |
| Finland, total | 587,650 | 1,682 | 1,442.0 | 1,494.0 | 94.6 | 91.2 | |
| Sweden | |||||||
| Shopping centres, Stockholm area and Umeå | |||||||
| Fruängen Centrum | Stockholm | 14,600 | 90 | 13.9 | 12.2 | 92.1 | 89.8 |
| Jakobsbergs Centrum | Järfälla | 69,300 | 646 | 99.8 | 93.3 | 94.1 | 92.5 |
| Liljeholmstorget | Stockholm | 40,700 | 131 | 205.3 | 126.9 | 91.3 | 92.4 |
| Strömpilen | Umeå | 27,000 | 33 | 40.4 | 42.0 | 95.9 | 87.4 |
| Tumba Centrum | Botkyrka | 31,300 | 467 | 51.4 | 47.4 | 98.5 | 98.8 |
| Åkermyntan Centrum | Hässelby | 8,400 | 41 | 10.8 | 10.0 | 92.3 | 91.0 |
| Åkersberga Centrum | Österåker | 30,500 | 354 | 40.2 | 48.6 | 97.2 | 97.4 |
| Shopping centres, Stockholm area and Umeå, total | 221,800 | 1,762 | 461.7 | 380.4 | 94.4 | 93.2 | |
| Shopping centres, Gothenburg area | |||||||
| Stenungs Torg | Stenungsund | 36,400 | 319 | 43.8 | 38.4 | 96.0 | 95.9 |
| Shopping centres, Sweden, total | 258,200 | 2,081 | 505.6 | 418.8 | 94.6 | 93.6 | |
| Other retail properties, total | 44,300 | 164 | 43.2 | 43.6 | 95.9 | 94.5 | |
| Sweden, total | 302,500 | 2,245 | 548.8 | 462.4 | 94.7 | 93.7 | |
| Baltic Countries | |||||||
| Estonia | |||||||
| Rocca al Mare | Tallinn | 53,500 | 192 | 133.7 | 125.1 | 99.3 | 98.8 |
| Magistral | Tallinn | 9,500 | 58 | 12.2 | 15.2 | 100.0 | 100.0 |
| Lithuania | |||||||
| Mandarinas | Vilnius | 8,000 | 58 | 10.7 | 15.0 | 100.0 | 100.0 |
| Baltic Countries, total | 71,000 | 308 | 156.6 | 155.3 | 99.4 | 99.1 | |
| Total portfolio | 961,150 | 4,235 | 2,147.4 | 2,111.6 | 95.0 | 92.6 |
| Number | Fair market value, EUR million | Occupancy rate, % | ||||
|---|---|---|---|---|---|---|
| Like-for-like portfolio | Citycon's GLA, sq.m. |
of lease agreements |
31 Dec. 2009 | 31 Dec. 2008 | EUR 31 Dec. 2009 |
Sq.m. 31 Dec. 2009 |
| Finland | ||||||
| Helsinki Metropolitan Area | 214,190 | 577 | 689.6 | 715.5 | 96.1 | 93.4 |
| Other areas | 268,460 | 792 | 501.5 | 520.4 | 92.8 | 89.4 |
| Finland, total | 482,650 | 1,369 | 1,191.1 | 1,235.9 | 94.6 | 91.2 |
| Sweden | ||||||
| Stockholm area | 161,400 | 1,280 | 233.6 | 221.8 | 95.5 | 93.0 |
| Gothenburg area | 69,900 | 480 | 69.7 | 65.1 | 95.2 | 94.4 |
| Sweden, total | 231,300 | 1,760 | 303.3 | 286.9 | 95.4 | 93.5 |
| Baltic Countries | ||||||
| Tallinn and Vilnius | 17,500 | 116 | 22.9 | 30.2 | 100.0 | 100.0 |
| Like-for-like portfolio, total | 731,450 | 3,245 | 1,517.4 | 1,553.0 | 94.9 | 92.1 |
| Average | Rental income, EUR million | |||
|---|---|---|---|---|
| Total portfolio | Average length of lease agreements 31 Dec. 2009 |
rent, EUR/sq.m./year 31 Dec. 2009 |
Gross rental income Year 2009 |
Net rental income Year 2009 |
| Finland | ||||
| Shopping centres, Helsinki Metropolitan Area | 2.6 | 299 | 53.8 | 39.5 |
| Shopping centres, other areas in Finland | 3.0 | 247 | 45.6 | 33.0 |
| Other retail properties | 3.1 | 159 | 27.2 | 19.9 |
| Finland, total | 2.8 | 237 | 126.5 | 92.4 |
| Sweden | ||||
| Shopping centres | 2.9 | 165 | 34.6 | 20.5 |
| Other retail properties | 3.2 | 123 | 4.7 | 2.8 |
| Sweden, total | 3.0 | 159 | 39.3 | 23.2 |
| Baltic Countries, total | 5.2 | 224 | 12.0 | 9.8 |
| Total portfolio | 3.1 | 211 | 177.8 | 125.4 |
| Average | Rental income, EUR million | ||||
|---|---|---|---|---|---|
| Like-for-like portfolio | Average length of lease agreements 31 Dec. 2009 |
rent, EUR/sq.m./year 31 Dec. 2009 |
Gross rental income Year 2009 |
Net rental income Year 2009 |
|
| Finland | |||||
| Helsinki Metropolitan Area | 2.2 | 278 | 57.8 | 43.4 | |
| Other areas | 3.1 | 198 | 49.4 | 35.4 | |
| Finland, total | 2.6 | 234 | 107.2 | 78.8 | |
| Sweden | |||||
| Stockholm area | 2.3 | 154 | 22.7 | 13.9 | |
| Gothenburg area | 2.6 | 128 | 7.9 | 4.5 | |
| Sweden, total | 2.4 | 146 | 30.6 | 18.4 | |
| Baltic Countries | 2.9 | 175 | 2.7 | 2.1 | |
| Like-for-like portfolio, total | 2.6 | 204 | 140.5 | 99.2 |
| Property | Location Country | Market value, MEUR (31 Dec. 2009) |
Area, sq.m. 1) | Post-develop ment area, sq.m. |
Estimated total investment, MEUR 2) |
Actual cumulative CAPEX by the end of the period, MEUR |
Additional information | |
|---|---|---|---|---|---|---|---|---|
| Rocca al | Tallinn | EST | 133.7 | 28,600 | 53,500 | 58.3 | 49.9 3) | Shopping centre built in 1998 was totally rebuilt and substantially extended. Now there are more than 170 |
| Mare | stores and the anchor tenant is the largest Prisma hypermarket in Estonia. One of Citycon's pilot projects | |||||||
| in the sustainable development of its properties. The entire project was completed in November 2009 as | ||||||||
| planned. | ||||||||
| Liljeholms | Stockholm | SWE | 205.3 | 20,100 | 27,100 | 138 | 132.1 | Construction of a new shopping centre south-west of Stockholm city centre. Liljeholmen is a major traffi c |
| torget | retail | hub and the whole area is being redeveloped. The existing building is totally developed and a new shopping | ||||||
| + 13,600 | centre was built adjacent to a subway station. Underground parking. The project was completed in October | |||||||
| offi ces | 2009 as planned. The project is one of Citycon's pilot projects in sustainable development of its properties. | |||||||
| Trio (exc. | Lahti | FIN | 118.8 | 32,300 | 35,000 | 60 | 58.3 | Total redevelopment and extension of the retail premises of the existing downtown shopping centre. The |
| Hansa) | project was carried out in two stages and the entire project was completed in autumn 2008 as planned. In | |||||||
| summer 2009, Trio received the fi rst environmental LEED-certifi cate in the Nordic Countries. |
1) Leasable area owned by Citycon before the project start. 2) New capital tied on the project. 3) Remaining capital expenditure payable in 2010.
| Property | Location Country | Market value, MEUR 31 Dec. 2009 |
Project area, sq.m. |
Post-devel opment area, sq.m. |
Total estimated invest ment, MEUR 1) |
Actual cumula tive CAPEX by the end of the period, MEUR |
Target year of completion |
Additional information | |
|---|---|---|---|---|---|---|---|---|---|
| Åkersberga | Österåker | SWE | 40.2 | 20,000 | 33,000 | 20.5 | 12.0 | 2011 | Refurbishment and extension of the shopping centre in the Greater Stockholm area, north-east of Stock |
| Centrum | holm. Very good pubic transportation. The shopping centre was built in 1985 and refurbished/extended in | ||||||||
| 1995/1996. The development project was 75% pre-let already in the beginning of the project. Large grocery | |||||||||
| store as anchor tenant. Minority owner (25%) is a local real estate company owned by the municipality. | |||||||||
| Torikeskus | Seinäjoki | FIN | 11.9 | 11,300 | 11,500 | 4 | 2.7 | 2010 | Refurbishment of interior premises of the shopping centre. |
| Myllypuro | 5.3 | 7,700 | 7,300 | 20 | 2012 | Building of a new retail centre replacing the existing one next to the Myllypuro subway station. Underground parking | |||
| facility will be built in conjunction to the shopping centre. Also rental and right-of-residence apartments will be | |||||||||
| built, that Citycon has sold. The estimated investment need for the whole project totals more than 60 EUR million. | |||||||||
| Espoontori | Espoo | FIN | 29.8 | 10,400 | 10,400 | 18 | 2010 | Refurbishment of 10,400 sq.m. of interior premises and the parking facility. The refurbishment of the premises | |
| will be completed in phases: the fi rst phase will open in May 2010. The entire project will be completed in | |||||||||
| December 2010. There are also plans to extend Espoontori, once the commercial requirements are in place. | |||||||||
| Forum | Jyväskylä | FIN | 55.2 | 12,000 | 12,000 | 16 | 2010 | Refurbishment of interior premises (12,000 sq.m) of the shopping centre. Shopping centre is located in the | |
| middle of vivid university town, Jyväskylä. Especially fashion and restaurant off ering will be strengthened. | |||||||||
| Hansa | Lahti | FIN | 24.4 | 8,000 | 8,000 | 8 | 0.5 | 2010 | The refurbishment of Hansa property located adjacent to the redeveloped shopiing centreTrio. The goal is to |
| (Trio) | connect the property bett er and more commercially to Trio. Alteration of the city plan pending to allow building | ||||||||
| of retail premises on the bridge connecting Trio and Hansa, over the street of Vapaudenkatu. | |||||||||
| Myyrmanni | Vantaa | FIN | 152.3 | 8,400 | 8,400 | 4.8 | 0.6 | 2010 | Refurbishment of the fi rst fl oor premises that will become vacant as Antt ila moves to smaller space. Tenant |
| improvement works will take place at the same time on the ground fl oor. | |||||||||
| Isolinnan | Pori | FIN | 4.4 | 7,600 | 7,600 | 3 | 2010 | Refurbishment of the retail premises in two phases. The fi rst 1.5 EUR million and 2,500 sq.m. phase was com | |
| katu | pleted. The lett ing of the second phase on-going. | ||||||||
1) New capital tied on the project.
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.
| Property | Location | Country | Market value, MEUR (31 Dec. 2009) |
Project area, sq.m. (1 |
Estimated in vestment need, MEUR 2) |
Target year of project launch |
Target year of completion |
Additional information |
|---|---|---|---|---|---|---|---|---|
| Lippulaiva | Espoo | FIN | 63.5 | 35,000 | 60-70 | 2011 | 2013 | Refurbishment and extension of the existing shopping centre. The refurbishment of interior premises com |
| Iso Omena | Espoo | FIN | 299.7 | 20,000-25,000 3) 4) |
100-130 | 2011 | 2013 | pleted. Planning of the extension project continues. Planning reservation together with the construction company NCC for subway centre which will be build on the future Matinkylä subway station adjacent to the shopping centre. The goal is to create a subway centre, that combines excellent commercial services and well-functioning connections to the future subway and commuter parking. The western subway line, that connects Helsinki and Espoo is planned to be completed in 2014. |
| 5 000 4) | 15 | 2012 | 2013 | Extension of the shopping centre in two phases depending on the fi nal conclusion of the above mentioned subway centre project. |
||||
| Myyrmanni | Vantaa | FIN | 152.3 | 20,000 3), 4) | 50-60 | 2012 | 2014 | The City of Vantaa granted site reservations to Citycon for the former health care centre's and Paalutori's plot, on which the centre is planned to be extended. Prisma hypermarket is planned to Myyrmanni's immediate vicin ity. |
| Galleria | Oulu | FIN | 8.2 | 17,000 | 50-55 | 2012 | 2014 | Redevelopment of the Galleria block into a shopping centre in co-operation with the block's and the adjacent block's other property owners. The other main owner is retail cooperative Arina. The estimated investment need for the whole project totals 130-140 EUR million. Due to the city of Oulu's decision on the underground parking matt er, the grounds to carry out the project will be re-analyzed. 3) |
| Koskikeskus | Tampere | FIN | 113.4 | 2,000 5) | 8-12 | 2010 | 2011 | Refurbishment of interior premises of the shopping centre underway, the project started in 2007. |
| Kuopion Antt ila | Kuopio | FIN | 21.4 | 12,000 | 20-25 | 2011 | 2013 | Redevelopment of interior premises of the existing building. Commercial concept of the project will be analyzed in the beginning of 2010. The project has been postponed due to more diffi cult market conditions and it starts at the earliest in summer 2011. 3) |
| Heikintori 6) | Espoo | FIN | 10.5 | 23,000 | 6-7 | 2011 | 2011 | Renovation of interior premises of the existing shopping centre. The contemplated redevelopment and exten sion project as well as the related zoning has not proceeded according to the earlier plans since the shareholders of the shopping centre company do not have a common understanding on the project. |
| Martinlaakso | Vantaa | FIN | 4.5 | 7,400 | 20-25 | 2010 | 2011 | Building a new shopping centre replacing the existing retail centre. Negotiations with the possible fi nal owners of the residential units on-going. |
| Laajasalo | Helsinki | FIN | 3.8 | 8,000 | 25-30 | 2012 | 2013 | Building a new retail centre replacing the existing one. Site reservation together with Kesko and HOK-Elanto (S Group). 3) |
| IsoKristiina | Lappeen ranta |
FIN | 34.8 | 25,000 | 60-70 | 2011 | 2013 | Refurbishment and extension of the existing shopping centre under planning. Citycon purchased the adjacent plot for the extension in February 2009. Commercial concept as well as the city plan ready. |
| Kirkkonummen Liikekeskus |
Kirkko nummi |
FIN | 5.5 | 5,000 | 4 | 2010 | 2010 | Market-property will be refurbished aft er Kesko agreement's expiry into a Partner in Everyday Life Centre. |
| Isomyyri | Vantaa | FIN | 17.6 | 5,000 | 5-7 | 2010 | 2011 | Refurbishment of premises owned by Citycon. Commercial concept under planning. |
| Lautt asaari retail centre |
Helsinki | FIN | 2.4 | 2,600 3) | 10-15 | 2011 | 2013 | Refurbishment or possible demolition and new construction of the retail centre. Future subway station entrance of western subway line on the plot. Planning process required by zoning under way. 10,000 sq.m. of apartments under planning. Citycon is a minority owner of the property. |
| Location | Country | Market value, MEUR (31 Dec. 2009) |
Project area, sq.m. (1 |
Estimated in vestment need, MEUR 2) |
Target year of project launch |
Target year of completion |
Additional information |
|---|---|---|---|---|---|---|---|
| Vantaa | FIN | 15.0 | 9,700 | 10-15 | 2011 | 2012 | Indoor refurbishment of the department store property. |
| Pori | FIN | 17.3 | 10,000 | 10-15 | 2010 | 2011 | Indoor refurbishment and renewed tenant concept. Kesko continues with smaller grocery concept. Building of |
| residential units is being analyzed. | |||||||
| Botkyrka | SWE | 51.4 | 20,000 | 35 | 2011 | 2012 | Redevelopment and extension of the shopping centre. In the fi rst phase the centre will be refurbished and |
| extented slightly, the project (approx. EUR 6 million) is on-going and included in the fi gure. The second phase | |||||||
| includes remarkable redevelopment and extension and is planned to start 2011. | |||||||
| Stenung | SWE | 43.8 | 15,000 | 30 | 2010 | 2012 | Citycon has agreed with the shopping centre's minority shareholder on the redevelopment and extension of the |
| sund | shopping centre. The estimated investment refers to Citycon's share. First phase started in January 2009. | ||||||
| Umeå | SWE | 40.4 | 40,000 | 50 | 2010 | 2013 | Refurbishment and extension of the shopping centre. |
| Umeå | SWE | 12.2 | 5,000 | 9 | 2010 | 2011 | Refurbishment and extension of the retail property. |
| Järfälla | SWE | 99.8 | 12,000 | 30 | 2010 | 2012 | Redevelopment and extension of the shopping centre. Started in January 2009. |
| Hässelby | SWE | 10.8 | 10,000 | 15 | 2010 | 2012 | Redevelopment of the shopping centre, building of new residential units adjoining the centre under review. |
| Tallinn | EST | 12.2 | 10,000 | 10 | 2010 | 2011 | Refurbishment and extension of the shopping centre. |
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.
| Property | Location | Country | Market value, MEUR (31 Dec. 2009) |
Area, sq.m. | Additional information |
|---|---|---|---|---|---|
| Ultima | Vantaa | FIN | 4.2 | - | Vacant plot of approximately 42,000 sq.m. with 20,000 sq.m. in current permitt ed offi ce and/or warehouse build ing right. |
| Valtari | Kouvola | FIN | 4.8 | 7,600 | Opportunities to redevelop the property are analysed. |
| Columbus | Helsinki | FIN | 74.1 | 21,000 | Opportunities to expand the shopping centre are reviewed. |
| Sampokeskus | Rovaniemi | FIN | 23.2 | 14,000 | Opportunities to redevelop the property are analysed. |
| Kaarinan liiketalo | Kaarina | FIN | 6.1 | 9,200 | The redevelopment of the existing retail property in line with the development plan of the town centre is analyzed. |
| Tullintori | Tampere | FIN | 8.4 | 10,300 | Refurbishment on the property is under consideration. |
| Hakunila | Vantaa | FIN | 4.2 | 3,000 | Opportunities to redevelop the property are analysed. |
| Tikkuri | Vantaa | FIN | 26.0 | 10,700 | Opportunities to redevelop and extend the shopping centre by 20000 sq.m. are analysed. Underground parking under planning. |
| Backa | Gothenburg | SWE | 6.4 | 7,800 | Opportunities to develop the property are analysed. |
| Fruängen Centrum | Stockholm | SWE | 13.9 | 14,600 | Opportunities to refurbish and possibly extend the property are analysed. |
| Lindome | Gothenburg | SWE | 6.3 | 7,800 | Possibilities to build residential units adjoining the retail centre under review. |
| Liljeholmstorget | Stockholm | SWE | 205.3 | 40,700 | Possibilities to extend the shopping centre is under review. |
Citycon owns and develops all its shopping centres actively and with long term perspective.
I n Finland, Citycon is the market leader in the shopping centre business and the only property investment company specialising in retail premises. In Sweden, Citycon holds a solid position which strengthened markedly in October, when the new Liljeholmstorget shopping centre was opened in Stockholm's centre. Citycon also has a good foothold on the Baltic market. In Tallinn, Citycon already grew into a signifi cant player in 2009 when Tallinn's largest shopping centre, Rocca al Mare, opened the
(re)development project's second phase in May and third phase in November.
Citycon is a versatile shopping centre expert which owns, develops and manages all of its shopping centres itself, on a long-term basis. This approach diff erentiates Citycon from most other property investors and construction fi rms with property developing operations. These are the company's major competitors, particularly on the Finnish property development market.
Citycon's strength lies in its versatile knowledge of retail business as well as its shopping centre expertise, which have proven particularly important during 2009's economic downturn. The company has a strong, comprehensive understanding of shopping centre management and defi ning the tenant mix best suited to each shopping centre. This expertise has borne fruit, especially in the midst of the very challenging market situation in the Baltic countries: both the second and third phases of Rocca al Mare's (re)development project were fully leased by the time of their opening. Meanwhile, many competitors had to struggle with major vacancy problems.
Citycon's main product is shopping centres, its core business being shopping centre management and development. In line with Citycon's brand promise, the key business objective is the creation of successful retail premises for retail business. For Citycon to succeed, its tenants need to fl ourish and prosper in their own business operations. In practice, this means that shopping centres must remain att ractive to consumers and be constantly developed to correspond to consumer demand. Citycon's business operations include the effi cient leasing, marketing and maintenance of retail premises. These are considered Citycon's core operations, which are the responsibility of the company's own employees.
In particular, shopping centre marketing and chain leasing are operated on a centralised basis. Leasing to key customers within each industry is centralised into a responsibility area managed by a designated individual in Citycon. For instance, fashion and clothing brands and restaurant chains have their own managers. The underlying idea is that a person responsible for industry-specifi c customers will have a deep
| Finland | Baltic Sweden Countries |
Total | ||
|---|---|---|---|---|
| Number of leases started | ||||
| during the fi nancial year | 295 | 449 | 129 | 873 |
| Total area of leases started, sq.m. | 57,220 | 59,351 | 25,057 141,628 | |
| Occupancy rate at end of fi nancial year, % 94.6 | 94.7 | 99.4 | 95.0 | |
| Average length of lease | ||||
| portfolio at the end of fi nancial year, year | 2.8 | 3.0 | 5.2 | 3.1 |
| EUR million | Total | |
|---|---|---|
| Finland | Helsinki Metropolitan Area | 786.0 |
| Other areas in Finland | 656.0 | |
| Sweden | Stockholm area and Umeå | 479.1 |
| Gothenburg area | 69.7 | |
| Baltic Countries | Estonia and Lithuania | 156.6 |
| Total | 2,147.4 |
Based on market value of property portfolio on 31 Dec. 2009
understanding of the industry's competitive environment and the customers' business.
However, each shopping centre has its own local management, which precisely understands the structure of local consumer demand, the area's competition and other local characteristics. Based on these factors, Citycon seeks to provide each customer with the most suitable retail location.
In addition to shopping centres, Citycon owns other retail properties: local retail centres, supermarkets and shops as well as large retail units. These complement its property portfolio and represent an integral part of Citycon's business.
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 cafés, 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 23.2 per cent (26.6% in 2008). Lease agreements being shop-specifi c, Kesko and Citycon have a total of 75 agreements involving 40 properties. Other large tenants in fashion and clothing include Lindex, KappAhl, Seppälä and H&M. In addition to Kesko, the S Group is also a key tenant.
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 Liljeholmstorget. Specialty retail tenants include many of the same fashion and clothing 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. The largest single tenant, however, is the Prisma hypermarket which is part of the Finnish S Group. In the smaller-scale Baltic shopping centres, Magistral in Tallinn and Mandarinas in Vilnius, the key tenant is the RIMI grocery chain representing the Swedish ICA chain.
| Finland | Baltic Sweden Countries |
Total | ||
|---|---|---|---|---|
| Citycon's GLA, sq.m. | 587,650 302,500 | 71,000 961,150 | ||
| Gross rental income, EUR million | 126.5 | 39.3 | 12.0 | 177.8 |
| Net rental income, EUR million | 92.4 | 23.2 | 9.8 | 125.4 |
| Net rental income yield, % | 6.5 | 4.7 | 6.4 | 6.1 |
| Net rental income yield, | ||||
| like-for-like properties, % | 6.7 | 6.5 | 8.2 | 6.7 |
| Proportion of rental income based on valid rent roll at 31 Dec. 2009, % | |
|---|---|
| Kesko | 23.2% |
| S Group | 4.8% |
| ICA | 3.2% |
| Stockmann | 2.9% |
| H & M Hennes & Mauritz | 1.5% |
| Top 5, total | 35.6% |
Citycon is the clear market leader in the Finnish shopping centre market. The company has 22 shopping centres in Finland, located in major cities. Its share of the Finnish shopping centre market is around 22 per cent. Last year, Citycon's shopping centres att racted 81.4 million customers, the number of visitors decreasing by 1.5 per cent from 2008.
Citycon's business diff ers from that of its competitors in the shopping centre industry, in that Citycon is the only Finnish property investment company focusing solely in retail properties. Citycon is not only the owner of its centres, but also develops and manages them. Therefore, Citycon's core business is more than property investment, it comprises versatile shopping centre expertise based on all of the above elements.
In addition to shopping centres, Citycon's Finnish property portfolio includes 43 other retail properties and one undeveloped plot near the Helsinki-Vantaa Airport. In January, Citycon sold a Finnish property located at Keijutie 15, Lahti, for approximately EUR 3 million. The divestment of non-core properties may continue in 2010.
In terms of sales, Citycon's Finnish shopping centres performed well, despite the downturn. Sales in shopping centres fell by only approximately one per cent compared to 2008. A large share of Citycon's shopping centres are service entities focusing on groceries and daily necessities intended for the whole family. Only a small portion of shopping centres' turnover originates in activities more sensitive to the downturn. For instance, sports shops and chain stores selling well-known fashion brands have continued to perform well.
For this reason, rent rebates in Finland have only concerned individual cases, which have been few in number. However, the downturn can be seen in the clear slow-down in leasing business. Tenants are now giving thorough consideration to investment decisions and decisions on renting premises take time. With res-pect to international players, rental decisions are increasingly taken abroad.
Citycon has addressed this situation by increasing its resources directed at the leasing business. The Finnish Business Unit underwent a management process reform which resulted in the dismantling of the regional director organisation and the alignment of the management focus with business processes. In practice, this means that Citycon will invest more than before in the tenant interface and retail property management. The restructured Finnish organisation began operating on 1 December 2009.
The year 2009 also saw investments in speciality leasing operations, introducing a new product package: Citycon Media (www.cityconmedia.fi ). The underlying idea is that a shopping centre itself is a medium and unique due to its closeness to the customer. Opportunities to infl uence purchase decisions are particularly high when the customer has already entered the shopping centre. While traditional marketing channels bring the customer to the centre, Citycon Media reaches customers who are already there and ready to shop.
Citycon Media off ers a comprehensive range of marketing means. The customer can use the shopping centre's promotion spaces, sales stands for periods under 3 months, video screens, sound advertising and special advertising spaces. Citycon benefi ts from strong partners: Clear Channel in outdoor advertising and JPC Studiot for sound advertising. Citycon's strength lies in its nationwide network: a customer implementing a campaign can choose suitable locations from any of the company's 22 shopping centres and use any or all marketing means. No other shopping centre operator in Finland can off er such range and scope. Reservations are made through an electronic system on the Citycon Media website.
In 2009, planning was initiated for the new Matinkylä metro station area in Espoo and the adjacent shopping centre (more details on the next page 28). In Helsinki, the old Myllypuro retail centre was demolished, and the construction of a new shopping centre providing a broader off ering has been launched. Redevelopment of Espoontori at Espoo has also begun.
At Myyrmanni, Vantaa, the Antt ila department store will continue with more compact consept, freeing up more space for fashionoriented specialty retail. A similar redevelopment will be carried out at Forum in the centre of Jyväskylä, when the Antt ila department store moves out in February 2010 and vacates
| 2009 | 2008 | |
|---|---|---|
| Gross rental income, EUR million | 126.5 | 122.5 |
| Turnover, EUR million | 131.3 | 126.8 |
| Net rental income, EUR million | 92.4 | 90.9 |
| Net fair value losses on | ||
| investment property, EUR million | -65.1 | -154.3 |
| Operating profi t/loss, EUR million | 21.2 | -62.9 |
| Capital expenditure (gross), EUR million | 24.5 | 69.2 |
| Fair market value of investment | ||
| properties, EUR million | 1,442.0 | 1,494.0 |
| Net rental yield, % | 6.5 | 6.0 |
| Net rental yield, like-for-like properties, % | 6.7 | 6.1 |
| Proportion of rental income based on valid rent roll at 31 Dec. 2009, % |
|
|---|---|
| KESKO | 34.7% |
| S Group | 5.9% |
| Stockmann/Seppälä/Lindex | 3.3% |
| Tokmanni | 2.2% |
| Nordea | 1.6% |
| Top 5, total | 47.7% |
I n September, Citycon and NCC Property Development were granted a reservation for land use involving the metro station to be located in Matinkylä, Espoo. Matinkylä is one of seven new metro stations on the future western metro line from Helsinki to Espoo, and the terminal station for the fi rst phase of the metro extension. The metro line will be opened to traffi c in the autumn of 2014.
The Matinkylä metro station will be located right next to the shopping centre Iso Omena. In addition to the underground metro station, the hub will include a feeder bus terminal, retail premises and apartments. An indoor swimming pool is also planned to be located in the area. The new retail premises will be realised as an extension of the shopping centre Iso Omena, creating a consistent commercial entity in the area.
The metro will considerably speed up the growth and development of the Matinkylä area. Alongside the metro, the vicinity will gain more inhabitants and jobs. The feeder bus terminal will centralise transit traffi c in the metro station. The library already existing in the shopping centre and the new swimming pool to be built represent important public services. Together with the shopping centre, they form an easily accessible entity, effi cient in terms of land use and genuinely serving the people living in the area.
premises for specialty retail. Simultaneously, Forum's entire commercial concept will be renewed.
Several other redevelopment projects were prepared and advanced: IsoKristiina in Lappeenranta; the refurbishment of the Antt ila department store in Kuopio; Heikintori in Tapiola, Espoo; the demolition of the Martinlaakso retail centre in Vantaa and construction of a shopping centre to replace it. In the centre of Kirkkonummi in the Helsinki Metropolitan Area, Kesko's lease agreement in a supermarket property by the railway station has expired, and the property will be redeveloped into everyday life cluster shopping centre.
The recession has depressed construction costs in Finland, and this was clearly shown in the tenders obtained in 2009. This lower cost level encourages to launch (re)development projects, as long as they are commercially viable.
In 2008, Citycon adopted a cluster strategy in its marketing with respect to all of its Finnish shopping centres, excluding Iso Omena. This strategy forms the basis for positioning and marketing its various shopping centres.
Meeting points in city centres are shopping centres with a specialty store focus and located in the hearts of cities, grocery retail playing a smaller role. Larger-scale grocery shopping is conducted elsewhere, only mainly complementary grocery purchases take place in the city centre.
Local centres have a broad range of services but the anchor tenant is a strong grocery operator. While the centre's spe-
cialty retail off ering may be wide, the off ering in a certain fi eld of activity is not as deep and versatile as in meeting points in city centres.
Partners in everyday life are strongly groceryoriented, day-to-day service centres located on the way home and within walking distance of home. In addition to grocery shopping, daily needs can be satisfi ed by using services such as pharmacies, the alcohol retailer Alko or cafeterias.
The property maintenance effi ciency increase project of Citycon's shopping centres and most supermarkets was started. The main idea is to concentrate cleaning, maintenance and security guard services with either one service provider or a consortium formed by several providers. While Citycon defi nes the quality level, the service provider is now given more freedom to decide how to att ain it.
Technical building management for supermarket and shop properties was subjected to competitive tendering and consequently centralised with Corbel. The centralisation of property maintenance will continue during 2010.
| Entire retail property | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Property | Location | Gross leasable area total, sq.m. |
Retail premises total, sq.m. |
2009 | Sales, EUR million 2008 |
2009 | Number of visitors, million 2008 |
Catchment area population *) |
Citycon's gross leas able area, sq.m. |
| Helsinki Metropolitan Area | |||||||||
| Columbus | Helsinki | 21,000 | 19,200 | 96.1 | 99.7 | 7.7 | 7.5 | 95,800 | 21,000 |
| Iso Omena | Espoo | 60,400 | 48,500 | 224.0 | 222.9 | 8.2 | 8.4 | 148,000 | 60,400 |
| Espoontori 1) | Espoo | 23,800 | 12,000 | 22.7 | 30.9 | 2.9 | 3.3 | 58,000 | 17,300 |
| Heikintori | Espoo | 9,500 | 7,000 | 20.2 | 20.5 | 2.0 | 2.2 | 138,700 | 5,800 |
| Lippulaiva (incl. Ulappatori) | Espoo | 23,400 | 19,800 | 72.4 | 70.8 | 3.7 | 3.7 | 45,300 | 23,400 |
| Isomyyri | Vantaa | 14,800 | 8,800 | 27.7 | 34.2 | 2.2 | 2.6 | 54,100 | 10,900 |
| Myyrmanni | Vantaa | 42,000 | 32,000 | 158.5 | 159.3 | 7.1 | 7.0 | 97,600 | 40,300 |
| Tikkuri | Vantaa | 15,300 | 8,100 | 30.7 | 31.9 | 2.9 | 2.9 | 133,700 | 10,700 |
| Other areas in Finland | |||||||||
| Jyväskeskus | Jyväskylä | 12,000 | 7,600 | 22.1 | 22.5 | 4.2 | 4.0 | 141,700 | 5,800 |
| Forum | Jyväskylä | 23,000 | 18,800 | 65.2 | 66.1 | 6.9 | 6.9 | 142,200 | 17,500 |
| Trio | Lahti | 48,900 | 34,600 | 73.5 | 62.2 | 6.4 | 5.8 | 123,900 | 45,700 |
| IsoKristiina | Lappeenranta | 19,800 | 14,100 | 46.4 | 47.0 | 2.0 | 2.2 | 58,000 | 18,700 |
| Galleria | Oulu | 4,200 | 2,600 | 7.1 | 8.0 | 0.9 | 1.0 | 188,300 | 3,500 |
| IsoKarhu | Pori | 14,800 | 12,300 | 33.9 | 37.4 | 3.2 | 3.4 | 111,000 | 14,800 |
| Koskikeskus | Tampere | 29,000 | 24,700 | 115.6 | 117.8 | 5.5 | 5.7 | 342,000 | 26,300 |
| Tullintori | Tampere | 23,800 | 9,100 | 15.9 | 15.8 | 2.8 | 2.7 | 133,000 | 10,300 |
| Duo | Tampere | 13,500 | 11,900 | 50.3 | 48.2 | 3.9 | 3.7 | 38,500 | 13,000 |
| Sampokeskus | Rovaniemi | 14,000 | 7,800 | 17.4 | 20.0 | 2.3 | 2.8 | 53,900 | 14,000 |
| Torikeskus | Seinäjoki | 11,400 | 7,100 | 17.5 | 16.3 | 1.3 | 1.3 | 117,600 | 11,500 |
| Koskikara | Valkeakoski | 10,400 | 10,000 | 34.0 | 32.7 | 2.1 | 2.2 | 19,900 | 5,800 |
| Valtari | Kouvola | 7,600 | 6,400 | 4.0* | 4.0* | 0.5 | 0.5 | 31,300* | 7,600 |
| Linjuri | Salo | 10,600 | 8,100 | 32.9 | 34.5 | 2.7 | 2.8 | 40,200 | 9,300 |
| Largest other retail properties by area | |||||||||
| Porin Asema-Aukio Koy | Pori | 18,900 | 10,900 | ||||||
| Sinikalliontie 1 | Espoo | 15,700 | 10,600 | ||||||
| Lentola | Kangasala | 11,900 | 11,700 | ||||||
| Kauppakatu 41 | Kuopio | 11,200 | 7,300 | ||||||
| Talvikkitie 7-9 | Vantaa | 9,800 | 9,700 | ||||||
| Kaarinan Liiketalo Koy | Kaarina | 9,200 | 5,200 | ||||||
| Total | 529,900 | 385,900 | 1,188.1 | 1,202.7 | 81.4 | 82.6 | 393,600 |
*) Estimate 1) Inc. gross leasable area of Espoon Asemakuja and Asematori
S hopping 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 Shopping Centres. However, its catchment area is wider and off ering more extensive than Citycon's other Local Shopping Centres.
• Health & Beauty 10% • Other Specialty Stores 6% • Services and Offi ces 6% • Clothes and Fashion 34% • Groceries 6% • Department Stores 7%
Home Supplies 21%
• Leisure,
• Cafes & Restaurants 6% • Health & Beauty 5% • Other Specialty Stores 2% • Services and Offi ces 6% • Clothes and Fashion 14% • Groceries 27% • Department Stores 26% • Leisure,
RETAIL SALES AREA BY BRANCHES 12/2009
• Leisure,
• Cafes & Restaurants 8% • Health & Beauty 6% • Other Specialty Stores 2% • Services and Offi ces 9% • Clothes and Fashion 8% • Groceries 26% • Department Stores 21%
Home Supplies 20%
30 CITYCON OYJ ANNUALAND CSR REPORT 2009
Citycon's position in Sweden In Sweden, Citycon is concentrated in the areas of the country's largest cities, Stockholm and Gothenburg, and owns a total of seven shopping centres and six other retail properties there. In addition, Citycon owns one shopping centre and one retail property in Umeå. Citycon is Sweden's ninth largest owner of retail premises (source: Fastighets Världen). In the Stockholm area, Citycon clearly sharpened its profi le in the autumn alongside the opening of the new Liljeholmstorget Galleria.
In Sweden, there has been no major pressure for rent reductions. Support for gett ing started has been granted to some tenants in the newly opened Liljeholmstorget Galleria through rent inducements or, for instance, by participating in stores' interior construction. In addition to these, signifi cant investments have been made in shopping centre marketing.
The leasing of premises is markedly more successful at the moment than in the fi rst half of 2009. However, the leasing of premises to franchise chains is still slower than normal. The impacts of the fi nancial crisis can still be seen as entrepreneurs experience more diffi culties than before in fi nding fi nancing for starting up business operations.
Last year's most important single event was the opening of Liljeholmstorget Galleria in the centre of Stockholm. Liljeholmstorget is Citycon's largest individual development project ever; investments in the existing properties, building right and the construction of the new shopping centre totalled approximately EUR 200 million.
Liljeholmstorget benefi ts from an excellent location, only a few metro stops from downtown Stockholm. A metro station is situated right next to the shopping centre, allowing direct access from the platform area. For instance, from the grocery store ICA Kvantum's cashier section, there is just a walk of only a few dozen metres to the metro platform. A tram line and a feeder bus terminal are also located adjacent to the shopping centre. The Liljeholmen area is one of the strongest growing residential and working districts in Stockholm.
Upon its opening, Liljeholmstorget's occupancy rate was over 90 per cent. The shopping centre had an excellent start, since its footfall and sales fi gures during the fi rst two months exceeded expectations.
In 2009, Citycon also launched a redevelopment and extension project of the Åkersberga Centrum located in the Greater Stockholm Area. Citycon owns 75 per cent of the shopping centre, while the remainder is held by the real estate company Armada Fastigheter AB owned by the municipality of Österåker. The project's investment cost of SEK 467 million (some EUR 46 million) will be shared in proportion to holdings.
In reality, Åkersberga Centrum is the centre of the municipality of Österåker, and key municipal services are located in its immediate vicinity. At the moment, a large share of purchasing power is leaking outside the municipality due to an insuffi cient commercial off ering. Consequently, the extension and commercial development of Åkersberga Centrum provides an opportunity to substantially increase the shopping centre's turnover. The new section will open in the autumn of 2010 and the entire redeveloped shopping centre in the summer of 2011. The shopping centre will remain open throughout this period.
Citycon has agreed to sell its residential units in Åkersberga Centrum to the Swedish investment company Tegeltornet AB for a sale price of SEK 181 million (EUR 16.7 million). A total of 72 residential units are being built in the centre of Stockholm, at Liljeholmen, and they will be sold to Heba Fastighets AB aft er their completion in the spring of 2010. The value of this divestment amounts to SEK 176 million (some EUR 16.3 million). In addition, Citycon agreed in February 2010 on the divestment of 89 apartments in Jakobsbergs Centrum for SEK 120 million (around EUR 12 million). Closings of these transactions are expected to take place in March-April 2010.
Tumba Centrum and Jakobsbergs Centrum also underwent refurbishing and commercial development last year. This refurbishment work att racted many new tenants to both shopping centres, remarkably increasing both their total sales and footfall. StenungsTorg, too, saw the redevelopment of the grocery store Coop.
| 2009 | 2008 | |
|---|---|---|
| Gross rental income, EUR million | 39.3 | 41.1 |
| Turnover, EUR million | 41.0 | 41.9 |
| Net rental income, EUR million | 23.2 | 24.1 |
| Net fair value losses on | ||
| investment property, EUR million | -19.6 | -70.1 |
| Operating profi t/loss, EUR million | 0.3 | -49.1 |
| Capital expenditure (gross), EUR million | 95.9 | 65.6 |
| Fair market value of investment | ||
| properties, EUR million | 548.8 | 462.4 |
| Net rental yield, % | 4.7 | 5.0 |
| Net rental yield, like-for-like properties, % | 6.5 | 5.6 |
| Entire property | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Gross leasable | Retail | Sales, EUR million | Number of visitors, | Citycon's gross | |||||
| Property | Location | area, total, sq.m. |
premises total, sq.m. |
2009 2008 |
million 2009 2008 |
Catchment area population (* |
leasable area, sq.m. |
||
| Stockholm area | |||||||||
| Åkersberga Centrum | Österåker | 30,500 | 16,100 | 50.5 | 55.8* | 4.1 | 4.3 | 37,000* | 30,500 |
| Åkermyntan Centrum | Hässelby | 8,400 | 6,600 | 23.4* | 19.5* | 1.0* | 0.9* | 32,000* | 8,400 |
| Jakobsbergs Centrum | Järfälla | 69,300 | 27,300 | 54.2 | 61.7 | 5.3 | 5.5 | 82,800 | 69,300 |
| Fruängen Centrum | Stockholm | 14,600 | 6,700 | 17.1* | 17.8* | - | - | 33,400* | 14,600 |
| Liljeholmstorget | Stockholm | 40,700 | 27,100 | 19.9 | - | 1.7 | - | 104,000 | 40,700 |
| Tumba Centrum | Botkyrka | 31,300 | 13,700 | 35.5 | 35.1 | 3.4 | 3.4 | 58,600 | 31,300 |
| Umeå | |||||||||
| Strömpilen | Umeå | 27,000 | 23,600 | 93.2 | 103.1 | 3.4 | - | 109,800 | 27,000 |
| Gothenburg area | |||||||||
| StenungsTorg | Stenungsund | 36,400 | 17,400 | 45.6 | 39.6 | 3.2 | 3.2 | 74,000 | 36,400 |
| Total | 258,200 | 138,500 | 339.5 | 332.6 | 22.1 | 17.3 | - | 258,200 |
| Proportion of rental income based on valid rent roll at 31 Dec. 2009, % |
|---|
| 10.9% |
| 3.9% |
| 3.4% |
| 3.3% |
| 2.4% |
| 23.9% |
* Estimate
Municipalities in Sweden played a major role as developers of retail properties, particularly in the 1950–70s. In many cases, a retail centre was constructed in the suburbs built at the time. These centres remained the property of the municipality. Constructing a store was an inherent part of urban planning in suburbs, with residential units, municipal services and good public transport clustered densely around shopping centres.
Several of Citycon's Swedish shopping and retail centres have a similar history. While many of them require refurbishment and commercial development, their location within the existing community structure is excellent. Redevelopment work has already been initiated for some properties, but the Swedish property portfolio still presents further redevelopment opportunities.
Compared to Citycon's other operating areas, the Swedish market is the most liquid one. Since Citycon already is the market leader in Finland, it is Sweden that provides the company with more potential for growth. Citycon's strategy is to grow in Sweden both by redeveloping existing properties and, where possible, acquiring new ones.
The shopping centre Strömpilen said no to plastic bags!
T he shopping centre Strömpilen, located in Umeå, was the fi rst Swedish retail property to begin a six-month pilot period during which all specialty stores stopped accompanying customer purchases with free-of-charge plastic bags. The pilot period started in October 2008 already. The aim was to inspire customers to bring along their own shopping bags.
The project succeeded beyond all expectations. Aft er only two months, the number of shopping bags consumed had dropped by 200,000. Moreover, bags sold to customers were made of paper, with environmental certifi cation, which entailed a 33.7 ton reduction in CO2 emissions.
Aft er six months, the consumption of shopping bags had fallen by 543,000 from the year before. This represented a decrease of at least 78 per cent, perhaps even more, since the number of visitors in Strömpilen had increased from the previous year. During the fi rst half year, CO2 emissions reduced by 85 per cent.
Strömpilen's "No plastic bags" campaign was awarded the "Stora Handelspriset – Årets Medvetna butik" prize granted for actions promoting environmental awareness. It also earned Strömpilen the Norrland region's own marketing prize, "Guldfyren 2009". Other prizes received in 2009 by Strömpilen included "Leva Bätt re Priset 2009", awarded for actions acknowledging both people and the environment, and Marketer of the Year 2009, based on Strömpilen's marketing campaign, which also paid strong att ention to corporate social responsibility. Furthermore, the campaign was viewed as having considerably enhanced the reputation of the people of Umeå as responsible consumers.
Citycon still owns over 600 unsold residential units in Sweden worth some EUR 40 million. Given that residential properties are not part of Citycon's core business, the company intends to divest them and allocate the ensuing capital to growing its core business.
Citycon owns three shopping centres in the Baltic Countries: two in Tallinn, Estonia, and one in Vilnius, Lithuania. Citycon has a strong market share in Tallinn, of almost 25 per cent. The Rocca al Mare shopping centre became Tallinn's largest shopping centre aft er its three-phase redevelopment and extension project was completed.
The economic recession is aff ecting the Baltic countries in particular, and retail sales have decreased throughout the area by some 24 per cent (source: Economic Survey of the Baltic States 2009; Estonian Institute of Economic Research). In Tallinn, Citycon is the only real estate investor specialising in the retail properties. In the present market situation, shopping centre expertise and management play a key role, that helps Citycon and its tenants over the recession in relatively sound condition. Good tenants important for the commercial portfolio have also been supported through temporary rent reductions.
The year's most important events in the Baltic Countries were the openings of the second and third phases of the Rocca al Mare shopping centre's extension and redevelopment project. The second phase, the Fashion Gallery, was opened on 7 May and the third phase introducing shoe stores, wellbeing services and restaurants opened on 12 November. Both extensions opened fully leased and, at the end of the year, Rocca al Mare's occupancy rate was over 99 per cent despite the diffi cult economic situation in the Baltic countries. Last year, many competitive Baltic development projects had to open with vacancy rates of several tens of per cent.
Rocca al Mare has some 170 stores, strongly focusing in fashion. Among others, Rocca includes the only Marks & Spencer in Estonia and fl agship
stores of several chains, such as Reserver, New Yorker and the Estonian cosmetics chain I.L.U. A new thematic approach was followed in Tallinn's Rocca al Mare: stores operating in the same fi eld of activity were grouped together to form a commercial entity. The shoe store area totals more than 2,000 square metres and includes more than ten stores located close to one another. The versatile food court, which opened in November, is Tallinn's fi rst restaurant cluster inside a shopping centre.
Rocca al Mare has invested strongly in marketing and shows higher awareness growth fi gures than other shopping centres in Tallinn (source: TNS EMOR Trackofshoppingcentres in Tallinn August – September 2009). In addition, the number of visitors increased in Rocca al Mare, whereas for competitors they have decreased. An important booster in the footfall are Finnish travellers who mainly arrive in Tallinn by ferry. These customers are served by a free-of-charge bus connection from the harbour to Rocca al Mare.
Magistral, the other shopping centre in Tallinn, and Mandarinas located in Lithuania both have a fi rm foothold as a provider of local services. In addition to the grocery anchor tenant Rimi, both host a bank and post offi ce which add signifi cantly to the footfall since, for instance, pensions are still oft en paid via the post offi ce in these countries. Furthermore, Lithuanian Mandarinas houses the Chili-Pica restaurant chain, which is a remarkably strong local brand with a loyal clientele.
The economic situation in the Baltic countries remains challenging and the outlook is unclear. Rocca al Mare has established a sound position on Tallinn's shopping centre market and strong marketing investments will be continued. In environmental issues, Rocca al Mare is a forerunner in the Baltic countries, and in January 2010, it was awarded with the international, silver level LEED (Leadership in Energy and Environmental Design) certifi cate as a fi rst building in the Baltic countries.
Expansion possibilities in the Baltic countries are being investigated particularly in Tallinn, Estonia and Riga, Latvia. While today's economic situation involves short-term risks, as a longterm owner Citycon has the possibility, through strategic acquisitions, to benefi t from shortterm owners' increasing willingness to sell.
Currently, Tallinn off ers the possibility for organic growth: Rocca al Mare can be further extended by some 4,000 square metres and the local shopping centre Magistral by some 3,000 square metres. If needed, these extension projects can be initiated rapidly, since they necessitate no amendments in city plans. Furthermore, extension projects could now benefi t from the dramatically lower construction costs.
Citycon's objective is to grow and strengthen its presence in the Baltic capitals, but in the current market situation we will steer a prudent course. Citycon's advantages include shopping centre expertise and a profound knowledge of the market and shopping centre properties. On this basis, Citycon can detect high-potential centres and understand properties' realistic value levels.
| 2009 | 2008 | |
|---|---|---|
| Gross rental income, EUR million | 12.0 | 9.3 |
| Turnover, EUR million | 14.0 | 9.6 |
| Net rental income, EUR million | 9.8 | 6.8 |
| Net fair value losses/gains on | ||
| investment property, EUR million | -12.7 | 8.3 |
| Operating loss/profi t, EUR million | -3.8 | 14.4 |
| Capital expenditure (gross), EUR million | 13.9 | 22.7 |
| Fair market value of | ||
| investment properties, EUR million | 156.6 | 155.3 |
| Net rental yield, % | 6.4 | 6.2 |
| Net rental yield, like-for-like properties, % | 8.2 | 7.4 |
Entire shopping centre
| Property | Location | Gross leasable area total, sq.m. |
Retail premises total, sq.m. |
Sales, EUR million 2009 |
2008 | number of visitors, million 2009 |
2008 | Catchment Area Population (* |
Citycon's gross leasable area, sq.m. |
|---|---|---|---|---|---|---|---|---|---|
| Estonia | |||||||||
| Rocca al Mare | Tallinn | 53,500 | 52,200 | 77.0 | 62.3 | 5.4 | 4.5 | 340,000 | 53,500 |
| Magistral | Tallinn | 9,500 | 9,400 | 14.9 | 18.3 | 3.3 | 3.5 | 64,000 | 9,500 |
| Lithuania | |||||||||
| Mandarinas | Vilnius | 8,000 | 7,900 | 16.5* | 22.5* | 2.4 | 2.7 | 50,000 | 8,000 |
| Total | 71,000 | 69,500 | 108.4 | 103.1 | 11.1 | 10.7 | - | 71,000 |
| Proportion of rental income based on valid rent roll at 31 Dec. 2009, % |
|---|
| 14.6% |
| 7.0% |
| 2.5% |
| 2.8% |
| 2.2% |
| 29.0% |
* Estimate
Properties generate approximately 30–40 per cent of all greenhouse gas emissions worldwide, which is why the property business can also signifi cantly contribute to the prevention and reduction of emissions. The best ways of cutt ing greenhouse gas emissions are to improve energy effi ciency and to increase the use of renewable energy sources in energy production and procurement.
According to the Sustainable Buildings and Climate Change Initiative of the United Nations Environment Programme (UNEP), the built environment accounts for 30 per cent of all material and 20 per cent of water consumption. Consequently, the built environment also has an impact on ecosystems. Large amounts of waste during the construction and use of buildings create 30 per cent of all solid waste.
Shopping centres are located in built-up environments, which cause smaller environmental impacts as less customer traffi c is required. Citycon redevelops shopping centres, lots or land areas that are located within good transport connections.
Citycon has made a strategic choice to pursue sustainable development. As a result of the climate change, and particularly its consequences, changes are expected in legislation on energy and emissions as well as in taxation, and materials costs are expected to grow. Consumers are becoming increasingly eco-conscious, 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 more transparency in operations. Employees are also showing growing concern for environmental, health and safety issues. Other motivational factors for fostering sustainable development include cost-effi ciency and competitive advantage.
The technical solutions used in existing properties signifi cantly aff ect energy consumption and emissions, which is why it is important for shopping centres to actively monitor their energy and water consumption as well as waste processing effi ciency.
Citycon's development eff orts produced the Green Shopping Centre Management programme that allows the assessment of shopping centre management in several areas:
proving management and operations in practice. The audit consists of 73 questions that help assess the level of operations in the before mentioned areas. The results and feedback from assessment enable the principle of continuous improvement on the country and the property levels. In 2009 consistent criterias were applied in the assessment of all shopping centres. As a result of auditing few development ideas concerning Citycon as a company level were recognised, e.g. an initiative to develop methods and tools to measure co-operation and responsibility in supply chain.
Citycon's eff orts to make operations more ecological and energy effi cient include changing the way people work in offi ce environments. Key priority areas include energy effi ciency of offi ce premises and IT equipment, waste management, paper consumption, travel policies and company car policy. Citycon applies 3 Step IT Oy's IT equipment life cycle management model in which more than 95 per cent of the IT equipment will be reused aft er the lease period is expired.
Ilmastotalkoot is the largest climate campaign organised in Finland. The purpose of the campaign is to tell Finnish people what kind of small actions individuals can take to curb the climate change. In January-February 2010, eight Citycon-owned shopping centres participate in a climate campaign focusing on ways of reducing carbon dioxide emission in everyday activities.
All 33 Citycon-owned shopping centres in Finland, Sweden and the Baltic countries participated in the Earth Hour campaign in March 2009 to express concerns over the climate change by switching the lights off in the shopping centres for one hour. The energy saving during the hour was 5-7 per cent compared to regular consumption during the corresponding period.
Action Citycon can take to fi ght the climate change:
energy consumption and follow-up systems as feasible, and these are monitored during the design and building stage and during use.
Annual energy performance certifi cates are prepared for all properties in Finland and Sweden. The energy performance certifi cate indicates the total energy consumption in the property that includes heating energy, electricity and cooling energy. An energy effi ciency rating, the total consumption per gross area, shows how energy effi cient the property is. Energy-saving measures in each property are specifi ed on the basis of consumption, energy audits and equipment life cycle analyses.
The energy consumption most relevant for Citycon's operations covers the electricity and heating in its properties. All energy consumption in Citycon's properties is indirect, in other words, there are no heating plants in the properties whose fuels are reported as direct energy consumption. In 2009, Citycon's electricity purchases totalled 117 GWh and heating purchases 142 GWh. Out of purchased energy 67.3 per cent originates from fossil fuels and peat, 9.5 per cent from nuclear power and 23.2 per cent from renewable energy sources.
The energy consumption include all Citycon-owned shopping centres and other retail properties in which Citycon's holding is at least 50 per cent. Citycon has limited the reported electricity consumption to such areas that it can directly infl uence. These include general lighting, ventilation, lift s and escalators and other building technical systems, excluding electricity consumption used by tenants. As a rule, tenant facilities are equipped with their own meters – only fi ve Citycon shopping centres do not have separate meters for tenants.
In 2009, Citycon's primary energy consumption totalled 1,713 TJ. The volume of primary energy was estimated by fi rst calculating distribution by source in relation to the electricity suppliers disclosing this information1). For other Nordic electricity companies the source distribution is estimated by using the source distribution of Nord Pool market electricity. For Baltic countries the source distribution is based on country-specifi c energy generation statistics and the IEA's statis-
1) The source of electricity is known for almost 90 per cent of electricity purchased by Citycon. No statutory obligation to disclose CO2 emissions exists in Sweden and the Baltic countries. Since no environmental profi le for 2009 was available from electricity producers by the time of calculation in January 2010, each producer's environmental profi les for 2008 are used in calculations.
ENERGY EFFICIENCY RATING, FINNISH PORTFOLIO PRIMARY ENERGY SOURCES
Percentage of the amount of properties Percentage of the gross area
tics. Heat source distribution has been estimated for Finland based on the Finnish Energy Industries' (ET) statistics and for other countries, based on country-specifi c energy production statistics and the IEA's statistics. The primary source factors come from EU's CHP-directive and EN 15603 standard. Factors have been chosen according to the prudence principle2).
For the year 2009, Citycon is reporting its carbon footprint for the fi rst time. In this calcula-
tion, Citycon uses the Greenhouse Gas Protocol (GHG Protocol) developed by World Resources Institute and World Business Council for Sustainable Development, which represents the best available calculation method.
2) According to the prudence principle the factor for renewable energy is the factor of biomass, which is bigger than the factor for wind or hydro electric power. When the energy source is defi ned as wind or water in the electricity agreement, the factor of that energy source have been used.
• Electricity consumption • Heat consumption
In Citycon's case, relevant carbon dioxide emissions originate from properties' electricity and heat consumption and waste. This calculation also takes account of water consumption, emissions from Citycon's own offi ces for the above-mentioned emission sources, paper consumption, business travel and commuting. Citycon's carbon footprint in 2009 totalled 31,801 tonnes of CO2 equivalent, broken down as illustrated in fi gure on page 38. The accuracy of calculations, +/-6.4 per cent, is at a good level, based on the GHG Protocol.
In addition to CO2 emissions, relevant GHG emissions arise from sulphur and nitrogen oxides released in energy production which, for example, cause acidifi cation of waters, decelerate plant growth and corrode buildings. For energy purchased by Citycon, acidifying emissions are estimated to
T he three scenic lift s at Vantaa's Myyrmanni Shopping Centre were modernised and made eco-effi cient in 2009. This lift modernisation was performed by the Finnish KONE Elevators Ltd, which develops energy-effi cient lift solutions. Myyrmanni's scenic lift s were now fi tt ed with a KONE Eco-Disc® hoisting machine, consuming 50 per cent less energy than the technology previously used.
While the new lift s cost some 10 per cent more than lift s using conventional technology, this investment is expected to pay itself back during the lift s' estimated service life or, depending on energy price fl uctuations, even earlier. The lift s' lighting uses eco-effi cient LED lamps which reduce energy consumption by 80 per cent and last 10 times longer than conventional lights. In addition, the lift s are regularly serviced in line with a preventive maintenance system. This minimises the number of surprise repairs, which also reduces the lift s' ecological footprint.
Myyrmanni still has six customer lift s equipped with older technology. Their energy effi ciency will be enhanced as their service lives draw to an end.
I n 2009, Citycon surveyed the means of transport used by the customers of its shopping centres in Finland. From the survey data, the following three centres were selected for the calculation of the carbon footprint of shopping centre visit: Tikkuri at Vantaa, showing the highest share of public transport users, and the two centres with the highest share of customers using a private car, Iso Omena at Espoo and Sampokeskus at Rovaniemi. The carbon footprints arising from these shopping centres visit were compared with that of an imaginary shopping centre located outside population centres (the average one-way shopping journey being 10 km), to which people mainly arrive (75 per cent) by car.
The location of the shopping centre and the means of transport used by customers has an impact on the carbon footprint arising from shopping centre visit. Due to good public transport and light traffi c connections, the carbon footprint of shopping centre visit from Citycon's shopping centres remains below average.
total 223 metric tonnes 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 112 kg of radioactive waste.
Water
The total water consumption in Citycon-owned retail properties in 2009 was 541,833 cubic metres, including water consumed by the real
estate companies and tenants. Tenant water consumption was highest in grocery stores, restaurants and cafes, hair salons, laundries and car wash facilities. The objective is to install more water meters to enable follow-up of user-specifi c consumption. The property's water consumption includes water used in public facilities such as customer toilets, and water used for cleaning, property maintenance and for watering plants.
*) includes water used in apartments
Increasingly strict objectives for waste management are set to prevent harm to the environment. Sorting even small amounts of waste
helps save waste-processing costs and protect the environment. Cost savings benefi t the entire property and the shopping centre's tenants.
In 2009, properties managed by Citycon generated 11,813 tonnes of waste, of which 11,275 tonnes were collected from shopping centres and 538 tonnes from other properties. The average recycling rate of waste materials for Citycon's shopping centres was 48.5 per cent, the share of landfi ll waste being approximately 39.1 per cent. A total of 16 of Citycon's shopping centres already exceed the target recycling rate of 50 per cent and 12 centres managed to achieve the maximum target of sending waste to landfi ll. The recycling rate is calculated as the share of treated waste types, recycled or recovered, of total waste volume. Landfi ll waste and energy waste are excluded from recycled items.
Citycon has arranged its property waste management and sorting in accordance with the country-specifi c waste acts and local regulations. Citycon is responsible for waste resulting from municipal waste from tenant operations and any hazardous waste from property maintenance and repairs. Tenants are responsible for the safe and correct disposal of any hazardous waste generated through their own operations. In certain retail properties, the tenant is responsible for waste management; therefore these volumes are not shown in Citycon's report.
In LEED projects, the recycling rate of waste generated during the construction stage has been calculated. This calculation takes account of construction waste which is diverted from landfi ll waste fl ow.
Emissions can be signifi cantly reduced by means of property development project design and implementation. To adhere to the principles of sustainable development, projects are
implemented in accordance with environmental certifi cation systems. The most widely recognised environmental certifi cation systems are the LEED® (Leadership in Energy and Environmental Design) originally developed in the United States, and the BREEAM (The Building Research Establishment Environmental Assessment Method) widely used in Europe.
Citycon has three LEED pilot projects. In June 2009, the redevelopment project of the shopping centre Trio in Lahti was awarded the fi rst LEED certifi cate in the Nordic countries. The other two pilot projects are the Rocca al Mare shopping centre extension and redevelopment project in Tallinn and the Liljeholmstorget shopping centre redevelopment project in Stockholm. Rocca al Mare was awarded the silver level LEED certifi cate in January 2010. Liljeholmtorget seeks the highest platinum level certifi cate, which is expected to be confi rmed in spring 2010. All of Citycon's construction projects will be carried out according to environmental classifi cation principles.
| Waste sort | tn | % |
|---|---|---|
| Landfi ll waste | 3,928.1 | 34.8% |
| Energy waste | 1,563.0 | 13.9% |
| Bio waste | 1,356.7 | 12.0% |
| Paper | 445.3 | 3.9% |
| Cardbord | 3,303.5 | 29.3% |
| Plastic | 65.1 | 0.6% |
| Glass | 283.4 | 2.5% |
| Metal | 123.1 | 1.1% |
| Hazardous waste | 28.5 | 0.3% |
| Other reusable waste | 124.6 | 1.1% |
| Other mixed waste | 54.0 | 0.5% |
| Total | 11,275.1 | 100.0% |
T he eff ective recycling of beverage containers, i.e. glass and plastic bott les and cans, signifi cantly reduces the environmental burden. Finns are among the world's most ardent returners of beverage containers with a deposit. More than 90 per cent of such containers are returned for recycling or refi lling (source: www.palpa.fi ). Such a high return rate is mainly due to the granting of a refund for returning a beverage container, but increased environmental awareness among consumers is also playing a role in this.
Those Citycon shopping centres which include a grocery store also contain reverse vending machines accepting used bott les and cans. Plastic bag waste emerging near the bott le return station is also collected, by placing separate collection bins in these areas.
Some of Citycon's properties also have sorting stations for collecting e.g. cardboard, paper, glass, metal and household hazardous waste such as batt eries. Thus, these shopping centres off er the consumer a convenient opportunity to sort waste while visiting shopping centre.
C itycon considers the promotion and maintenance of equality within the work community important. Each individual should be valued regardless of gender, religion, age or similar reasons, and equitable treatment should form the very basis of his or her treatment. In Citycon, work on behalf of equal opportunities is an important part of the development of working practices and conditions. The equal opportunities scheme is updated annually together with personnel representatives. Commitment to the implementation of this scheme is ensured through supervisor work and personnel development. At the end of 2009, an equality assessment covering the entire personnel was conducted in order to collect information and opinions on the success of equal opportunities work and the development needs of our work community. The response rate was 84 per cent and, based on the responses equality is eff ectively realised in Citycon.
Citycon seeks to extend equitable treatment and respect to all humans, also to its business operations. Safety of customers and personnel in the shopping centres is secured by educated security guards. They are the ones most likely to encounter and to deal with diff erent types of people and resolve confl icts. In Citycon's Finnish shopping centres, all property-specifi c supervisors have completed a vocational degree for security guards.
Citycon is categorical in its opposition to corruption and bribery. A practical implementation tool in this regard is the travel and representation regulations concerning the entire personnel and defi ning the rules applicable to suitable representation. These regulations also stipulate that nobody can approve their own travel and representation expenses. Travel is limited to work-related issues and the decisions over an employee's travel are taken by his or her supervisor. The main purpose of this is to ensure that enjoying entertainment or accepting a gift does not impose obligations on or compromise neutrality in the relationships between Citycon representatives and other parties.
Citycon did not support the activities of any political parties in 2009. Political parties can arrange electoral campaign events in Citycon's shopping centres, but normal rental fees are charged for these. Citycon has never participated in the organisation of such events and has no plans to do so.
Citycon's HR management is based on its HR strategy. This strategy identifi es focus areas for the measures by which personnel are managed and the company endeavours to support employees in performing successfully at work. Citycon employs many types of retail property professionals and, within a short period of time, the company's headcount and competence has increased and diversifi ed. Citycon's HR strategy could be summed up as "experts playing together towards the same goal".
Citycon's HR management's cornerstones include the development of co-operation; this means co-operation between experts, teams, units, operating countries as well as between the management and personnel. It also involves the development of HR management, which takes account of characteristics related to leading specialists. While separate development measures have been, and will be, launched for some development areas, others involve issues which need to be integrated into all activities. In 2009, particular att ention was paid to improving the operations of HR management by specifying its objectives and roles and clarifying the division of responsibilities.
Citycon expanded its operations in 2009 and its number of personnel grew moderately. By the end of 2009, the company employed a total of 119 persons. 78 were employed in Finland, 33 in Sweden, 7 in Estonia and 1 in Lithuania. Permanent employees numbered 115 and those with a fi xed-term employment contract 4. All of Citycon's permanent employment contracts are full-time contracts.
During the past year, 16 new employees joined Citycon. While interest in job opportunities in Citycon was already high in the past, the weakened employment situation in 2009 in the company's operating countries entailed a sharp rise in job applications sent to Citycon. Citycon's recruitment policy is to off er any vacancies fi rst for internal application. Indeed, last year saw many transfers from one post to another. During the year, 8 employees left Citycon, one at the end of fi xed-term substitution contract and one due to retirement.
During the year, there was only one minor injury in Finland. The incident took place on a way home from work and it didn't cause any absence from work.
In 2009, absent days due to illness totalled 422 days i.e. 3.6 days per employee. The absentee rate was 1.4 per cent(*.
Citycon brings together people who are skilled in various fi elds. Key competence areas include retail property management, knowledge of the real estate and construction industry, fi nancing and real estate transactions. A person starting with Citycon is most oft en an expert in his or her fi eld seeking enhanced competences and additional professional skills through new duties.
*) Absentee rate = total absent days due to illness/employees avg./year's theoretical working days
The way in which each employee can enhance his or her competences and develop at work is considered in development discussions, conducted twice a year. For each employee, a tailored development plan is prepared based on these discussions and meeting his or her development needs for the coming period and in the long term. Citycon particularly values longterm self-development, for instance in the form of further studies or longer-term training programmes. In addition, the company has a positive att itude towards updating competences through course-type training. Development programmes are planned for specifi c personnel groups, targeted at, for instance, supervisors or shopping centre managers. Furthermore, training is also off ered to all personnel in areas such as improving their language skills or increasing their competences in using applications. In 2009, training days totalled 810 days i.e. 6.9 days per employee.
Citycon's personnel are assembled twice a year to att end Citycon Day events, including a spring event for employees in all operating countries and a local, country-specifi c event in the autumn. These events involve sharing information and experiences internally and hearing external speakers from various fi elds. Positive feedback has been received on the events and they have continued to be considered a priority.
Citycon encourages its personnel to give their best performances by developing various approaches to incentivisation and commitment. Financial means of supplementing the basic salary include an annually confi rmed performance bonus scheme targeted at the entire personnel and a long-term share-based incentive plan directed at Group management and key employees. These incentive schemes focus on rewarding joint success, with a lesser emphasis on direct, personal activities. With respect to employment-related benefi ts, the emphasis is on benefi ts that support the employee's work, such as good working facilities and equipment, comprehensive occupational health services and ergonomics, as well as support for undertaking physical activity.
Citycon also aims to continuously develop its operations on the basis of development needs arising in personnel surveys. The personnel survey was previously conducted in the autumn but will be rescheduled to the spring, a more suitable point in the company's annual cycle. During the reform, practices for further processing of results will also be developed. The next results from a personnel survey covering the entire personnel will be available in April 2010.
In Finland, a co-operation group and occupational safety committ ee selected by elections continued their work. The groups discussed issues aff ecting both the entire personnel like the equal opportunities scheme and the travel and representation regulations and issues concerning especially the Finnish personnel like comprehensive occupational health services.
AGE DISTRIBUTION
• 20-24 years: 1.7% • 25-29 years: 3.4% • 30-34 years: 14.3% • 35-39 years: 16.8% • 40-44 years: 16.0% • 45-49 years: 21.8% • 50-54 years: 18.5% • 55-59 years: 6.7% • 60- years: 0.8%
• Finnish operations 40.3% • Swedish operations 27.7% • Baltic operations 9.2% • Group functions 22.7%
• Female 46.2% • Male 53.8%
Citycon's shopping centres are located where people are: embedded within an existing community structure. Some shopping centres are located in city centres. Those situated in local centres are accessible by public transport, with all but two reachable by an existing or future rail connection.
Citycon considers shopping centres as venues providing a wide array of services to their neighbourhood. For this reason, their service off ering includes more than commercial services. Public administration service points, a library, a chapel or a health care centre can be a perfect fi t with a shopping centre's concept.
On Valentine's Day, 14 February, Citycon conducted a toy collection event in co-operation with the Mannerheim League for Child Welfare. In 14 Citycon shopping centres, used but undamaged toys were collected for reuse. With the help of the Mannerheim League, the collected toys were distributed to day-care centres, family clubs and children's homes operating in each shopping centre's local area. A total of around 30,000 usable toys were collected.
Citycon carried out the related communications and marketing and made its shopping centre available for the event. The collection's purpose was to increase the recycling of toys, bring happiness to local children and help to overcome the shortage of toys in day-care centres, children's homes and family clubs operating on small purchasing budgets. Year 2010, the toy collection campaign will be repeated in Finland in 17 shopping centres, and for the fi rst time in Rocca al Mare, Tallinn.
Citycon's shopping centres are part of the local community structure. Some are part of their urban districts' history and are valuable in terms of their cultural history or construction heritage.
The fi rst, original section of the shopping centre Duo was part of the red-brick sett ing created in the Hervanta district centre in Tampere, Finland, by the architects Reima and Raili Pietilä. Duo's new section was constructed by taking account of the existing architecture. Heikintori at Espoo, Finland, is a protected site under the supervision of the National Board of Antiquities and part of the valuable cultural landscape of Tapiola. Therefore, its redevelopment plans will respect the spirit of the Tapiola garden city.
The old retail centres at Myllypuro, Helsinki, and Martinlaakso, Vantaa, are severely outdated both in commercial terms and as buildings. Myllypuro is already demolished and a new shopping centre is under construction. Forthcoming Martinlaakso-project has similar plans: demolishing an old centre and building a new one. In Martinlaakso Citycon has an obligation to photographically document the old urban milieu surrounding the retail centre and the interior of the centre itself. This project is conducted in co-operation with Vantaa City Museum.
Next to Tallinn's Rocca al Mare is a nature reserve whose existence was acknowledged in the expansion project, the area's tree stand being protected prior to the initiation of the construction project.
42 Citycon OYJ ANNUAL REPORT 2009
C itycon applies a holistic Enterprise Risk Management (ERM) programme. Risk management aims to ensure that Citycon meets its strategic and operational 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.
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 is also discussed on pages 32- 34 of the att ached Financial Statements.
A number of factors contribute to the value of retail properties, such as general and local economic development, investor demand and interest rate level. Investment property value trends are subject to untypical levels of uncertainty due to the challenging economic situation and increased unemployment throughout the company's operating areas.
During recent years, retail property values have declined, with Citycon recognising fair value losses on its investment properties during the fi nancial years 2008 and 2009. Trading activity in the property market remained at historically low levels during 2009. While changes in properties' fair value 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.
Yield requirement by property investors, gross income, vacancy rate and operating expenses form the key variables used in an investment property's fair value measurement, based on a ten-year cash-fl ow 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 2,162.4 million defi ned by the external appraiser on 31 December 2009 as the starting value. Accordingly, various changes would alter the investment properties' fair value as follows:
| • Yield requirement +5% | Æ Fair value EUR -97.9 million |
|---|---|
| • Gross income +5% | Æ Fair value EUR 156.0 million |
| • Vacancy rate +5% | Æ Fair value EUR -15.1 million |
| • Operating expenses +5% Æ Fair value EUR -41.4 million | |
While the company cannot infl uence yield requirement, 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 shopping centre management process inhouse with the help of its own employees.
Economic fl uctuations and trends have a signifi cant infl uence on demand for leasable premises as well as rental rates. These constitute one of the key nearterm risks for the company. Economic growth has decelerated distinctly in all of the company's operating areas since 2008, and many economists predict that growth will remain modest in 2010 in Finland, Sweden and the Baltic Countries. In addition, unemployment is expected to remain at abovenormal levels while infl ation remains low. Such an economic development might reduce demand for retail premises, weaken the lessees' ability to pay rent and limit opportunities for increasing rents.
In an environment characterised by weak economic growth, rents for retail premises have a tendency to fall and vacancy rates tend to rise, since diminished growth in retail trade oft en aff ects demand for retail premises. Indeed, vacancy rates in retail premises owned by Citycon have increased in 2009, and rent development of like-forlike properties has been only slightly posi-
tive. If the operating areas' economic growth does not pick up, reducing or maintaining the current vacancy rates for existing properties and increasing rental income from them may prove challenging.
While prospects for increasing the earnings are discouraging, costs such as wages and salaries or property maintenance expenses may
keep rising, putt ing pressure on the profi tability of the company's business.
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 fi nancing.
The fi nancial market weakened remarkably in 2008 and the situation remained challenging throughout 2009. Banks' willingness to lend money to enterprises has not recovered to pre-crisis levels. Moreover, the margins of long-term unsecured bank loans, in particular, have remained high in spite of the fi nancial markets' improved situation during the second half of 2009. If stricter regulations for banks are realised in the future, it may maintain such abnormally high costs for fi nancing provided by banks.
Although share prices on the stock market have risen rapidly since March 2009, Citycon's share value has remained below per-share net asset value, eroding willingness to seek major equity increases through share issues. On the other hand, the return of investors to the stock market rendered the share issue market very lively in 2009, which has enabled several sectors to obtain extensive equity fi nancing. Globally, companies in the real estate industry have also seized this opportunity.
Citycon's fi nancial position is good. At the end of the year, the company's available liquidity totalled EUR 205.6 million, consisting mainly of committ ed long-term credit limits and cash equivalents. Citycon is capable 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, whose terms will naturally be aff ected by the fi nancial market crisis. Credit margins for companies still remain clearly higher than before the fi nancial crisis.
Citycon is att empting to safeguard its fi nancing costs and liquidity by applying a conservative but active funding 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. Interest-rate risk management is aimed at reducing or eliminating the adverse eff ect of increased market rates on the company's profi t, statement of fi nancial 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. Citycon's debt portfolio's hedging ratio on 31 December 2009 was 80.2 per cent.
More information on fi nancial risks is provided on pages 33-34 of the att ached Financial Statements.
A key element in Citycon's strategy lies in the development of existing properties to meet the lessees' needs more eff ectively. The most central short-term risk related to development projects includes leasing new premises in the currently diffi cult economic environment.
Citycon is preparing major redevelopment projects throughout its operating countries, meaning - if all of these projects are carried out - that the leasable area in the company's centres will increase signifi cantly in the forthcoming years. Successful implementation of these new development projects is of primary importance as regards 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 slow economic growth. At this very moment, relatively low construction costs would favour launching new projects but, on the other hand, in order for new projects to be viable, they require att aining a suffi cient rate of pre-leasing with suffi cient rental levels.
The company's major construction projects in Sweden and Estonia were completed as planned towards the end of 2009. Completing the rental eff orts of these new premises and utilizing the centres' income-generating potential to the maximum as soon as possible will also essentially aff ect the profi tability of the company's business in 2010.
Leasing risks in projects are minimised by securing the allocation of suffi cient resources to the leasing operations 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 associated with project implementation are being managed through suffi cient resourcing. Responsibility for projects lies with experienced in-house Project Development Managers.
T he risks associated with climate change will aff ect Citycon's business environment in the long term. Diff erent sources predict a rise of 2 to 6 degrees Celsius in average temperatures in Citycon's operating regions. This warming will have some positive effects, as less property heating will be required and for a shorter period, but at the same time the need for cooling will grow.
Global warming will increase the frequency of extreme weather conditions such as storms, fl oods and snowfalls. These extreme conditions are risk factors against which preparations should be made in each property. Protection against property damage could increase maintenance costs.
No restrictions in water consumption or supply are expected in Citycon's operating regions. Nevertheless, a risk factor related to the price of water could rise sharply due to the EU's scarce water resources. Action should be taken to measure water consumption in each property, to enable consumption and the resulting costs to be allocated according to actual consumption. Water scarcity will create pressure for developing solutions of grey water recycling.
Land use and construction involve the threat of disrupting biodiversity. In most cases, an environmental impact assessment, which also includes a biodiversity assessment, is conducted in conjunction with zoning and major projects. The Finnish Land-use and Building Act requires the Environmental Impact Assessment (EIA) procedure conducted in projects that may have a signifi cant adverse impact on the environment. In individual cases, the local environment institute may decide to apply the EIA procedure to projects that are likely to have signifi cant adverse environmental impacts.
Shopping centres located in built-up environments and with excellent public transport connections reduce their environmental impacts. Citycon redevelops shopping centres, lots or land areas that are located within reach of excellent transport connections, many such properties having previously served another purpose. Sometimes, these brownfi eld development projects include soil cleaning, which involves cost, health and safety risks. However, such soil cleaning operations are subject to strict legislation and supervision by the authorities.
Renewable energy sources have not been actively used in Citycon's operating regions. This could be att ributed to expensive investments, long repayment periods, and relatively new solutions for which experience-based feedback is not yet available. The price of electricity in Citycon's operation area has been relatively low compared with several European countries, and has not therefore been the driving force for exploring new alternatives.
As global warming proceeds, so called climate refugees from density populated areas are forced to relocate to other countries and continents. Some of these refugees end up in receiving countries in jobs that require hardly any education and are low-paid. Citycon's supply chain also includes this kind of jobs, among others cleaning, assistant construction work and property maintenance. The hiring of people for these jobs may involve risk factors related to labor practices and work conditions. Citycon can try to eliminate these risk factors by preparing codes of ethics for its supply chains and by requiring its subcontractors to act ethically and responsibly.
C itycon's income mainly derives from the rental income generated by its retail properties. In 2009, gross rental income accounted for 95.6 per cent of turnover. Citycon's turnover increased by 4.5 per cent to EUR 186.3 million (2008: EUR 178.3 million).
The Finnish business operations accounted for 73.7 per cent (74.7%) of net rental income, while Sweden accounted for 18.5 per cent (19.8%) and the Baltic Countries for 7.8 per cent (5.6%). Net rental income totalled EUR 125.4 million (EUR 121.8 million). The property portfolio's net rental yield stood at 6.1 per cent (5.8%). The net rental yield was 6.5 per cent (6.0%) in Finland, 4.7 per cent (5.0%) in Sweden and 6.4 per cent (6.2%) in the Baltic Countries.
Operating profi t came to EUR 10.3 million (EUR -105.0 million). The increase in operating profi t was mainly due to fair value changes of the property portfolio, totalling EUR -97.4 million (EUR -216.1 million). The operating profi t rose also due to the completion of (re)development projects, thanks to net rental income generated by new and refurbished premises. Credit losses (incl. credit loss provision of EUR 0.3 million) remained modest at EUR 0.6 million. Temporary rental rebates amounted to EUR 1.6 million during the year.
The direct result grew by 16.3 per cent, to EUR 50.9 million. This growth is mainly att ributed to the increased net rental income and lower fi nancing expenses. Current taxes on the direct result were higher than during the reference period, due to the growth in the direct result and buybacks of convertible bonds.
Earnings per share were EUR -0.16 (EUR -0.56). Direct result per share, diluted, (diluted EPRA EPS) came to EUR 0.23 (EUR 0.20). Net cash from operating activities per share amounted to EUR 0.30 (EUR 0.21).
The company's per-share net asset value (NAV) was EUR 3.54 (EUR 3.88) and the pershare triple net asset value (NNNAV) was EUR 3.35 (EUR 3.80).
Statement of fi nancial position and fi nancing At the end of 2009, Citycon owned 84 properties: 33 shopping centres, 50 other retail properties and one lot. The property portfolio's year-end fair value totalled EUR 2,147.4 million, showing a total annual fair value decrease of EUR -97.4 million.
The total assets at the end of the year stood at EUR 2,253.2 million (EUR 2,178.5 million). Liabilities totalled EUR 1,485.3 million (EUR 1,341.2 million), with short-term liabilities accounting for EUR 227.4 million (EUR 109.5 million). The Group's fi nancial position remained good.
Citycon's total available liquidity at the end of the year was EUR 205.6 million, of which EUR 185.8 million consisted of undrawn, committ ed long-term credit facilities and EUR 19.8 million of cash and cash equivalents. At the end of the year, Citycon's liquidity, commercial papers and short-term credit limits excluded, stood at EUR 172.9 million. Total available liquidity will cover the authorised investments and scheduled debt interest and repayments at least until the end of 2010, without any additional fi nancing sources.
Year-on-year, reported interest-bearing debt increased by EUR 122.1 million, to EUR 1,321.7 million (EUR 1,199.5 million). The fair value of the Group's interest-bearing debt stood at EUR 1,332.0 million (EUR 1,211.3 million).
The year-to-date weighted average interest rate was 4.16 per cent (4.85% during reference period). The average loan maturity, weighted according to the principal amount of the loans, stood at 3.6 years (4.6 years). The average interest-rate fi xing period was 3.2 years (3.3 years).
The weighted interest rate, interest-rate swaps included, averaged 3.87 per cent on 31 December 2009. The Group's equity ratio was 34.2 per cent (38.5%). Period-end gearing stood at 169.5 per cent (141.3%).
Net fi nancial expenses totalled EUR 47.7 (EUR 57.3 million). Net fi nancial expenses decreased in 2009, primarily due to the lower interest rates and the buybacks of convertible bonds.
In March, Citycon signed an agreement for a EUR 75 million unsecured revolving credit facility with a group of three Nordic banks. This loan will mature in three years. The syndicated loan will further strengthen the company's available liquidity and provide means of fi nancing Citycon's growth on a committ ed basis. The credit margins of the loan are subject to a pricing grid based on Citycon's interest cover ratio covenant, as has been the case with the company's previous loan agreements.
In July 2006, Citycon's Board of Directors decided to issue subordinated capital convertible bonds to institutional investors. The total Citycon prepares its fi nancial statements in accordance with IFRS and applies recommendations issued by EPRA.
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 the bonds at a price clearly below their face value. In addition, the buybacks enabled the company to strengthen its fi nancial position and decrease its net fi nancial expenses. Citycon continued to buy back the convertible bonds during 2009 and repurchased a total of 128 bonds for EUR 3.6 million (including interest accrued).
By the end of the year, Citycon had repurchased a total principal amount of EUR 33.5 million of the 2006 convertible bonds, corresponding to approximately 30.5 per cent of the aggregate amount of the convertible bonds. The weighted average repurchase price was 53.5 per cent of the bonds' face value.
Citycon's operations have a fi nancial impact on several stakeholders such as tenants, personnel, suppliers and contructors. The fi nancial impact on each stakeholder group is assessed below, based on cash
On 30 November 2009, the Board of Directors of Citycon Oyj resolved to issue an unsecured domestic bond and off er it for subscription for domestic retail investors. The total nominal amount of the issued bond is EUR 40 million. The interest rate for the bond is 5.10 per cent, payable annually on 17 December until maturity in fi ve years. The bond is listed on the Offi cial List of NASDAQ OMX Helsinki Ltd.
Citycon's syndicated loans involve a commitment to maintain the Group's equity ratio above 32.5 per cent and the interest cover ratio at a minimum of 1.8. The equity ratio defi ned in the covenants diff ers from the standard presentation of equity ratio.
In terms of its equity ratio and the interest cover ratio, Citycon has always, including in 2009, exceeded the levels required by the covenants. The company publishes loan covenant calculations in quarterly investor presentations.
fl ows between Citycon and the stakeholder in question.
Citycon's turnover consists of rental income, service income and utility charges. Turnover totalled EUR 186.3 million in 2009 (2008: EUR 178.3 million). Citycon charges reasonable market-level rent. The average rent at the end of the year was EUR 17.5 per square meter.
Wages and salaries to Citycon employees totalled EUR 7.6 million (EUR 7.0 million), pension costs EUR 1.2 million (EUR 1.1 million) and other social charges EUR 1.2 million (EUR 1.0 million). Approximately 74 per cent of the wages and salaries were paid in Finland, 22 per cent in Sweden and 4 per cent in the Baltic Countries. Citycon spent about EUR 0.2 million on personnel training (EUR 0.2 million).
Citycon's purchases related to property operations totalled EUR 54.2 million (EUR 50.0 million). The purchases related to property operations are made locally by each business unit. Finland accounted for 65 per cent out of before mentioned purchases, Sweden 28 per cent and the Baltic Countries 7 per cent. Out of purchases, EUR 20.2 million (EUR 19.4 million) was paid to suppliers of electricity and heating and EUR 20.1 million (EUR 18.4 million) to maintenance service providers. Amounts used for property repairs were EUR 6.9 million (EUR 6.7 million). In addition, marketing and property management services were purchased with EUR 6.9 million (EUR 5.3 million).
In each property development project, Citycon's business units calls bids locally according to the goals set to the project . Citycon's capital expenditure totalled EUR 134.6 million (EUR 157.8 million), with property development accounting for EUR 134.0 million (EUR 139.6 million), new property acquisition for EUR 0.0 million (EUR 17.4 million), and other investments for EUR 0.6 million (EUR 0.8 million). Finland accounted for 18 per cent out of Citycon's investments, Sweden 71 per cent and the Baltic Countries 10 per cent. Cash fl ow from operations and the existing fi nancing arrangements were used to fi nance these investments.
Citycon Group's corporate governance is based on the Finnish Limited Liability Companies Act and the Articles of Association of the Group's parent company, Citycon Oyj, which are available on the corporate website at www.citycon. com/aoa.
The company complies with the Finnish Corporate Governance Code, issued for companies listed on NASDAQ OMX Helsinki. This Code is publicly available on the Securities Market Association's website at www.cgfi nland.fi . This Corporate Governance Code is accompanied by Citycon's own guidelines for the division of duties between the company's decision-making bodies, as well as the principles governing internal control and risk management (Rules of Procedure).
The Group's business operations and administration are under the responsibility of organs specifi ed in the Finnish Limited Liability Companies Act: General Meeting, which elects the members of the parent company's Board of Directors; Board of Directors; and the CEO elected by the Board of Directors. The Corporate Management Committ ee assists the CEO in managing the company's business operations. The Board of Directors' work is enhanced by four Board committ ees.
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, the documents to be presented to the General Meeting and the resolution proposals by the Board of Directors, at least 21 days prior to the meeting. Upon request, the meeting material can be sent to a shareholder by mail. By any reasonable means available to it, the company will att empt 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 and speak in the meeting as extensively as possible.
Following a General Meeting, the company will publish the decisions taken by the General Meeting, without delay, as a stock exchange release and on its website. The minutes of the General Meeting will be 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.
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 rst-time 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 shall also be present at the General Meeting of shareholders.
The General Meeting of shareholders decides the number of members of the Board of Directors and elects them for a term of one year. Under 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 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 shall annually assess 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 in this information.
Citycon's AGM of 18 March 2009 decided to re-elect the following Directors: Amir Bernstein, Gideon Bolotowsky, Raimo Korpinen, Tuomo Lähdesmäki, Claes Ott osson, Dor J. Segal, Thomas W. Wernink and Per-Håkan Westin. Ariella Zochovitzky was elected as a new member to the Board of Directors. Amir Bernstein resigned from the Board of Directors due to a change in his main employment and Ronen Ashkenazi was elected to the Board at the Extraordinary General Meeting held on 1 December 2009, replacing Mr Bernstein. Personal details of the Directors and their shareholdings in the company are provided in these pages, while further details
Chairman of the Board Thomas W. Wernink (Chairman since 2006 and Deputy Chairman 2005-2006)
M.A. (General Economics) Dutch citizen, born 1945 Director since 2005 Independent of the company and signifi cant shareholders Main occupation: Wernink Consultancy & Investment B.V., Managing Director since 2003
M.Sc. (Eng.), MBA Finnish citizen, born 1957 Director since 2004 Independent of the company and signifi cant shareholders Main occupation: Boardman Oy, Founding and Senior Partner since 2002
Ronen Ashkenazi
Amir Bernstein (Director until 30 Nov. 2009)
Independent of the company Main occupation: Gazit Europe (Netherlands)
concerning their careers and key positions of trust are presented on the corporate website at www.citycon.com/Board. Neither the Chairman nor the members of the Board of Directors have an employment or executive contract with the company.
The Board of Directors elects the Chairman and Deputy Chairman from among its members. In 2009, Thomas W. Wernink acted as Chairman and Tuomo Lähdesmäki as the Deputy Chairman of the Board of Directors.
In the view of the Board of Directors, all Directors are independent of 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.
In 2009, Citycon's Board of Directors met 14 times. The average att endance rate stood at 96.0 per cent.
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.
BOARD OF DIRECTORS' COMMITTEES 2009
The essential content of the Rules of Procedure is explained on the corporate website at www. citycon.com/CG. The Board of Directors is responsible, for example, for the Citycon Group's strategic policies and the due organisation of its business operations and Group 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:
decide on major, individual and strategically important property acquisitions and divestments and other major investments - confi rm the company executives' duties and
areas of responsibility, and the reporting system
A meeting agenda is prepared for meetings of the Board of Directors, according to which items are discussed in meetings. Minutes are prepared of the Board of Directors' meetings and reviewed and approved in the following meeting.
The Board of Directors evaluates its performance and working methods once a year.
The Board of Directors' work is assisted by the following four Board committ ees: the Audit Committ ee, Nomination Committ ee, Remuneration Committ ee and Strategy and Investment Committ ee (until 16 December 2009: Investment Committ ee). The Board committ ees prepare matt ers discussed by the Board of Directors, and Directors sitt ing on the committ ees are able to examine the matt ers discussed by the committ ee in greater detail than the entire Board. The Rules of Procedure for the company's decision-making bodies, approved by the Board of Directors, lay down the Board committees' main duties and working principles. These are also presented on the corporate website at www.citycon.com/CG.
The Board of Directors elects the Board committ ees' chairmen and members from among the Directors. A Board committ ee always has at least three members. The committee's Chairman reports on issues discussed by the committ ee to the Board of Directors and, in addition, minutes are prepared of all committ ee meetings and submitt ed to all Directors.
The enclosed table contains information on the Board committ ees' composition, number of meetings and att endance in 2009.
The AGM confi rms the remuneration of the members of the Board of Directors every year, in advance.
The AGM 2009 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 decided that the Board Chairman and the Chairman of each Board committee receive a meeting fee of EUR 700 and other
| Audit Committ ee | Nomination Committ ee | Remuneration Committ ee | Strategy and Investment Committ ee (* | |
|---|---|---|---|---|
| Members | Bolotowsky Gideon | Bernstein Amir (until 18 March 2009) | Bolotowsky Gideon | Ashkenazi Ronen (member and Ch. as of 16 Dec. 2009) |
| Korpinen Raimo (Ch.) | Lähdesmäki Tuomo (Ch.) | Lähdesmäki Tuomo (Ch.) | Bernstein Amir (until 30 Nov. 2009) | |
| Wernink Thomas W. | Ott osson Claes | Wernink Thomas W. | Korpinen Raimo | |
| Westin Per-Håkan | Wernink Thomas W. | Zochovitzky Ariella (as of 23 April 2009) | Segal Dor J. | |
| Zochovitzky Ariella (as of 18 March 2009) | Westin Per-Håkan (as of 16 Dec. 2009) | Wernink Thomas W. (Ch. until 16 Dec. 2009) | ||
| Westin Per-Håkan | ||||
| Number of meetings | Five | Three | Six | Five |
| Att endance-% | 100 | 100 | 100 | 100 |
*) Former Investment Committ ee
Board and Board committ ee members EUR 500 for each meeting. These fees remained the same as in the previous year.
The enclosed table shows the remunerations paid to Citycon's Board members in 2009. The remunerations were paid in cash. Meeting fees include those paid for both the Board's and its committ ees' meetings. Citycon's Board members are not involved in the company's sharebased incentive schemes. The Board of Directors has issued a recommendation according to which each Director should, during his/her term of offi ce, own the company's shares to a value corresponding at least to his/her remuneration for one year.
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 in accordance with authorisations and guidelines received from the Board of Directors.
The CEO oversees compliance with the guidelines, procedures and strategic plans on which the Board of Directors has decided, and he or she must see to it that these guidelines, procedures and plans are submitt ed when necessary to the Board of Directors for update or review. The CEO att ends the Board of Directors' meetings and is responsible for ensuring that the documentation related to information and resolution proposals to be discussed at the Board meetings have been duly prepared. The CEO also ensures that, on a continuous basis, Directors receive information necessary to monitoring 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, Petri Olkinuora has functioned as Citycon Oyj's CEO. He is entitled to retire upon turning 62, provided that he will remain in the company's employ until he reaches that age. Both the CEO and the company may terminate the CEO's executive contract at six months' notice. If the company terminates the contract for a reason not att ributable to the CEO, it will pay the CEO lump-sum compensation equalling his 18-month salary in cash, in addition to the salary payable for the notice period.
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 2009, the Corporate Management Committ ee convened on 10 occasions. 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, lay down 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 intra-organisational communication and co-operation, 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.
In 2009, the Corporate Management Committ ee had six members. Their personal details as well as information on their share and stock option holdings are presented on these pages. The members' careers and any positions of trust are presented on the corporate website at www.citycon.com/management.
| EUR | Annual fee | Meeting fees | Total |
|---|---|---|---|
| Ashkenazi Ronen | 12,000 | 1,000 | 13,000 |
| Bernstein Amir | 28,000 | 8,500 | 36,500 |
| Bolotowsky Gideon | 40,000 | 12,000 | 52,000 |
| Korpinen Raimo | 40,000 | 13,000 | 53,000 |
| Lähdesmäki Tuomo | 60,000 | 14,300 | 74,300 |
| Ott osson Claes | 40,000 | 7,000 | 47,000 |
| Segal Dor J. | 40,000 | 9,000 | 49,000 |
| Wernink Thomas W. | 160,000 | 19,300 | 179,300 |
| Westin Per-Håkan | 40,000 | 12,000 | 52,000 |
| Zochovitzky Ariella | 40,000 | 10,500 | 50,500 |
| Total | 500,000 | 106,600 | 606,600 |
M.Sc. (Eng.) Finnish citizen, born 1947 Director since 2006 Independent of the company and signifi cant shareholders Main occupation: OsakeTieto FSMI Oy, CEO and Chairman of the Board since 2003
Raimo Korpinen
Finnish citizen, born 1950 Director since 2004 Independent of the company and signifi cant shareholders Main occupation: Governia Oy (former Solidium Oy), Managing Director since 1998
Electrical Engineer Swedish citizen, born 1961 Director since 2004 Independent of the company Main occupation: ICA Kvantum Hovås, Managing Director since 1989
High school US citizen, born 1962 Director since 2004 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
M.Sc. (Civil Engineering) Swedish citizen, born 1946 Director since 2008 Independent of the company and signifi cant shareholders Main occupation: PH WESTIN Real Management AB, Board member since 2007
B.A. (Economics and Accounting), CPA (Israel), MBA Israeli citizen, born 1957 Director as of 18 March 2009 Independent of the company Main occupation: C.I.G. Consultants / Capital Investments Group Ltd., General Manager & Partner since 2001; U. Dori Group Ltd., Co-Chairman since 2008
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.
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. Further details on the management's remuneration are presented in the salary and remuneration report available on the corporate website at www.citycon.com/CG.
In 2009, the CEO received EUR 409,977 in salary, fringe benefi ts and performance bonus as well as EUR 18,000 as income from stock options. Additionally, the CEO was granted a total of 11,730 shares in the context of the company's long-term share-based incentive plan.
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 auditor. Statutory insiders also comprise
CLOSELY ASSOCIATED WITH THEM, 1 JAN.–31 DEC. 2009 Stock Stock Stock Shares options options options 2009 2004A 1) 2004B 2004C Bonds 2) Board of Directros Ashkenazi Ronen 1.12. - - - - - (Director as of 1 Dec.) 31.12. - - - - - Bernstein Amir 1.1. - - - - - (Director until 30 Nov.) 30.11. 7,150 - - - - Bolotowsky Gideon 1.1. 4,626 - - - - 31.12. 4,626 - - - - Korpinen Raimo 1.1. 14,456 - - - - 31.12. 14,456 - - - - Lähdesmäki Tuomo 1.1. 37,289 - - - - (Deputy Chairman) 31.12. 52,289 - - - - Ott osson Claes 1.1. 10,336 - - - - 31.12. 23,336 - - - - Segal Dor J. 1.1. 7,174 - - - - 31.12. 7,174 - - - - Wernink Thomas W. (Ch.) 1.1. 45,000 - - - - 31.12. 50,000 - - - - Westin Per-Håkan 1.1. 10,000 - - - - 31.12. 10,000 - - - - Zochovitzky Ariella 18.3. - - - - - (Director as of 18 March) 31.12. - - - - 1 Corporate Management Committee Olkinuora Petri 1.1. 138,155 75,000 140,000 140,000 - CEO 31.12. 149,885 - 100,000 140,000 - Att ebrant Ulf 1.1. 330 - - - - Vice President, Swedish Operations 31.12. 1,854 - - - - Holmström Harri 1.1. 826 - 70,000 70,000 - Vice President, Baltic Operations 31.12. 2,350 - - 70,000 - Raekivi Outi 1.1. 826 75,000 70,000 70,000 - Head of Legal Aff airs, Board secretary 31.12. 2,350 - - 70,000 - Sihvonen Eero 1.1. 2,026 - 70,000 70,000 - CFO, Executive VP 31.12. 8,335 - - 70,000 - Vuorio Kaisa 1.1. 3,698 75,000 70,000 70,000 - Vice President, Finnish Operations 31.12. 5,222 - - 70,000 - Chief auditor Korpelainen Tuija 1.1. - - - - - 31.12. - - - - -
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.
1) Stock options 2004 A expired worthless on 31 March 2009. 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.
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 2009. 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 and 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.
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 the 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 laid down 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 inhouse by the senior and executive management as well as by other 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 following:
the economical and effi cient use of resources
the suffi cient management of risks associated with business
The company's Board of Directors is responsible for arranging and maintaining adequate and functional 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 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 Group's day-today business.
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. The system also permits long-term planning and serves as a tool for budgeting.
CITYCON OYJ ANNUAL AND CSR REPORT 2009 53
CEO Petri Olkinuora
M.Sc. (Eng.), MBA Finnish citizen, born 1957 CMC member since 2002
CFO, Executive VP Eero Sihvonen
M.Sc. (Econ.) Finnish citizen, born 1957 CMC member since 2005
Head of Legal Aff airs Outi Raekivi
LL.M., Certifi ed Property Manager Finnish citizen, born 1968 CMC member since 2002
Vice President, Baltic Operations Harri Holmström
M.Sc. (Surveying), Authorised Property Appraiser Finnish citizen, born 1956 CMC member since 2005
Vice President, Finnish Operations Kaisa Vuorio M.Sc. (Surveying),
Authorised Property Appraiser Finnish citizen, born 1967 CMC member since 2003
Vice President, Swedish Operations Ulf Att ebrant
Swedish citizen, born 1963 CMC member since 2007
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 a separately agreed meeting in the autumn. 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 of Directors. Furthermore, the company's Board of Directors regularly monitors the company's business risks and uncertainties and reports on them as required in applicable laws as well as regulations and guidelines issued by the Financial Supervision Authority.
More detailed information on the company's risk management process and risks associated with the company's business operations can be found on pages 43–45 of the present Annual Report, on pages 32–34 of the appended fi nancial 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 Committ ee 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. Auditors responsible for internal audit shall report internal audit results to the Audit Committ ee, which must without delay initiate any actions necessitated by audit fi ndings made. The internal audit 2009 was outsourced to KPMG Oy Ab. The audit conducted by Citycon's auditor also involves auditing the company's corporate governance, on which the auditor reports to the Audit Committ ee and the CEO.
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 auditors' 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. In addition to providing the auditor's report in connection with the annual fi nancial statements, the auditor also reports to the company's CEO and the Audit Committ ee as necessary.
Upon the Audit Committ ee's invitation, the auditor may att end the committ ee meetings as an expert when deemed necessary.
The AGM 2009 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.
In 2009, Citycon paid EUR 0.2 million in remuneration to its auditor, related to its general audit. In addition, Citycon paid to the auditor a total of EUR 0.1 million for professional services related to IFRS, property transactions and taxation.
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 communication channel is the corporate website, which includes all fi nancial reports and releases issued by the company as well as other investor information required in the Finnish Corporate Governance Code.
Reported Partly reported Not reported
| Code | Content | Page | Comments |
|---|---|---|---|
| Strategy and Analysis | |||
| 1.1-1.2 | CEO's statement, key impacts, risks and opportuni ties |
4, 6-7, 35, 43-45 |
|
| Organizational Profi le | |||
| 2.1-2.9 | Organizational profi le | 1-4, 9-10, 24-25, 27- 33, 40-41, 49-54, 62 |
|
| 2.10 | Awards received in the reporting period | 32 | Strömpilen Marketing Awards for No Plastic Bags campaign. |
| Reporting Parametres | |||
| Report Profi le | |||
| 3.1-3.11 Report profi le, scope and boundary | 3-4. 11, 35-41, 60 |
||
| 3.12 | GRI Content Index | 55-56 | |
| 3.13 | Assurance policy and practice | ||
| Governance, Commitments and Engagement | |||
| Governance | |||
| 4.1-4.4, 4.6- 4.7, 4.10 |
Governance | 49-50 | |
| 4.5 | Executive compensation and linkage to organiza tion's performance |
50-51 | More information can be found in fi nancial statements. |
| 4.8 | Mission or values, codes of conduct, and principles relevant to economic, environmental, and social performance and their implementation |
6-7 | Sustainability strategy is integrated in overall strategy. |
| 4.9 | Procedures for overseeing sustainability manage ment |
The board oversees sustainability is sues as part of overall strategy. |
|
| Commitments to External Initiatives | |||
| 4.11 | Explanation of whether and how the precautionary approach or principle is addressed |
43-44 | |
| 4.12 | Externally developed charters, principles, or other initiatives |
||
| 4.13 | Memberships in associations and/or national/inter national advocacy organizations |
13 | |
| Stakeholder Engagement | |||
| 4.14- 4.17 |
List of stakeholder groups, basis for identifi cation, approaches to stakeholder engagement, key topics raised through stakeholder engagement |
10-13 | |
| Economic Performance Indicators | |||
| Economic Performance | |||
| EC1 | Economic value generated and distributed | 2, 47-48 | |
| EC2 | Financial implications and other risks and opportuni ties due to climate change |
35, 45 |
| Code | Content | Page | Comments |
|---|---|---|---|
| EC3 | Coverage of the organization's defi ned benefi t plan obligations |
The company acts in accordance with legislation, not reported separately. |
|
| EC4 | Signifi cant fi nancial assistance received from government |
48 | Citycon has not received any fi nancial assistance from government. |
| Market Presence | |||
| EC6 | Policy, practices, and proportion of spending on locally-based suppliers |
43-45, 48 | |
| EC7 | Procedures for local hiring and proportion of senior management hired from the local community |
24-25, 27- 28, 40-41, 51-54 |
|
| Indirect Economic Impacts | |||
| EC8-EC9 Infrastructure investments and services provided primarily for public benefi t and signifi cant indirect economic impacts |
|||
| Environmental Performance Indicators | |||
| Materials | |||
| EN1-EN2 Materials used by weight or volume and recycled input materials |
|||
| Energy | |||
| EN3-EN4 Direct and indirect energy consumption by primary energy source |
36 | All energy consumed in Citycon's prop erties is indirect. |
|
| EN5 | Energy saved due to conservation and effi ciency improvements |
||
| EN6-EN7 Initiatives to provide energy-effi cient or renewable energy based products and services and to reduce indirect energy consumption |
36, 45 | LEED certifi cates, Green Shopping Cen tre Management programs. Reductions achieved can not be reported due to the lack of previous statistics. |
|
| Water | |||
| EN8 | Total water withdrawal by source | 38 | |
| EN9-EN 10 |
Water sources signifi cantly aff ected by withdrawal of water and recycled water |
Not material to Citycon, water comes from municipal waterworks. |
|
| Biodiversity | |||
| EN11 | Location and size of land owned, leased, managed in, or adjacent to, protected areas |
42 | Rocca al Mare is located adjacent to the protected area. |
| EN12 | Signifi cant impacts of activities on biodiversity in protected areas |
45 | Environmental impact assessment, which also includes a biodiversity as sessment, is conducted in conjunction with zoning. |
| Emissions, Effl uents, and Waste | |||
| EN16- EN17 |
Total direct and indirect greenhouse gas emissions by weight |
36-38 | |
| EN18 | Initiatives to reduce greenhouse gas emissions and reductions achieved |
36 | See EN6. |
| EN19 | Emissions of ozone-depleting substances by weight | ||
| EN20 | NOx, SOx, and other signifi cant air emissions by type and weight |
37-38 | |
| EN21 | Total water discharge by quality and destination | 38 | Waste and rain water is led to municipal |
sewer system.
CITYCON OYJ ANNUAL AND CSR REPORT 2009 55
nization's policies or procedures concerning relevant
aspects of human rights
| Code | " Reported " Partly reported " Not reported Content |
Page | Comments | Code | Content | Page | Comments | |||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| EN22 EN23 |
Total weight of waste by type and disposal method Total number and volume of signifi cant spills |
38-39 | One reported spill in Columbus: the | HR9 | Violations involving rights of indigenous people and actions taken |
No such violations, Citycon's operation area does not reach the areas of indige |
||||||
| maintenance company's tractor spilled | nious people. | |||||||||||
| oil on the parking lot and the driving ramp. Measures were taken against the damage immediately aft er noticing |
Society SO1 |
Impacts of operations on communities, including entering, operating, and exiting |
11-13, 42 | |||||||||
| the spill. The damaged area and eff ect were small. |
SO2 | Percentage and total number of business units | Citycon is categorical in its opposition | |||||||||
| Products and Services | analyzed for risks related to corruption | to corruption and bribery. | ||||||||||
| EN26 | Initiatives to mitigate environmental impacts of products and services, and extent of impact mitiga tion |
35-39 | LEED certifi cates, Green Shopping Cen tre Management programs. Reductions achieved can not be reported due to the lack of previous statistics. |
SO3 Percentage of employees trained organization's anti corruption policies and procedures |
40 | The company's travel and representa tion policy, including the guidelines against anti-corruption, has been introduced to the personnel. |
||||||
| EN27 | Reclaimed products and packaging materials | Not material to Citycon. | SO4- | Response to incidents of corruption, participation in | 40 | |||||||
| Compliance | SO6 | public policy development and lobbying, contribu tions to political parties and politicians |
||||||||||
| EN28 | Non-compliance with environmental laws and regulations |
No misconducts during 2009. | SO7 Total number of legal actions for anti-competitive -SO8 behavior and signifi cant fi nes and sanctions for non |
No such cases in 2009. | ||||||||
| Transport | compliance | |||||||||||
| EN29 | Signifi cant environmental impacts of transporting | 38 | Citycon reports on CO2 emissions of | Product Responsibility | ||||||||
| products, materials and workforce | business travel and commuting. | PR1-PR3 Health and safety impacts of products and services | ||||||||||
| Social Performance Indicators | PR5 | Practices related to customer satisfaction | 10, 12, 28, 30 |
|||||||||
| Employment | PR6 | |||||||||||
| LA1-LA2 Total workforce by employment type, employment contract, and region, number and rate of employee |
40-41 | Programs for adherence to laws, standards, and vol untary codes related to marketing communications, including advertising, promotion and sponsorship |
||||||||||
| LA4 | turnover by age group, gender, and region Percentage of employees covered by collective bargaining agreements |
PR9 Signifi cant fi nes for non-compliance with laws and regulations concerning the provision and use of products and services |
No such cases in 2009. | |||||||||
| LA5 | Minimum notice period(s) regarding signifi cant operational changes, including whether it is specifi ed in collective agreements |
Citycon complies with legislation and regulations. |
Based on its own assessment, Citycon has followed application level C of the GRI reporting guidelines. | |||||||||
| LA6 | Total workforce represented in formal joint manage ment-worker health and safety committ ees |
41 | The application level has been verifi ed by a third party, PricewaterhouseCoopers. | |||||||||
| LA7 | Rates of injury, occupational diseases, lost days, and absenteeism, and number of work-related fatalities |
40 | ||||||||||
| LA8 | Education, training, counselling, prevention, and risk-control programs in place to assist workforce members, their families, or community members regarding serious diseases |
Not material to Citycon. | REPORT APPLICATION LEVELS | |||||||||
| LA10 | Average hours of training per year per employee | 12, 41 | ||||||||||
| LA12 | Employees receiving regular performance and career development reviews |
40 | Each employee participates in yearly reviews. |
C | C+ | B | B+ | A | A+ | |||
| LA13 | Composition of governance bodies and breakdown of employees per category according to gender, age group, minority group membership |
40-41, 49-52 |
Mandatory | Self Declared |
||||||||
| LA14 | Ratio of basic salary of men to women by employee category |
|||||||||||
| Human Rights | Third | |||||||||||
| HR1-HR3 Investment, procurement and employee training practices relating to human rights |
Citycon complies with legislation. | Optional | Party Checked |
Report Externally Assured | Report Externally Assured | Report Externally Assured | ||||||
| HR4 | Non–discrimination | No cases in 2009. | ||||||||||
| HR5-HR7 Freedom of association and collective bargaining, child labor, forced and compulsory labor |
Citycon complies with legislation. | GRI Checked |
||||||||||
| HR8 | Percentage of security personnel trained in the orga | 40 | Qualitative description. |
Net initial yield: The annualized net rent from a property, at the balance sheet date, divided by the market value of the property.
Gross rental income: Gross rents, capital rents, maintenance charges and other possible rental income.
Net rental income: Gross rental income added by service charge income less property operating expenses and other expenses from leasing operations.
Net (rental) yield: 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.
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.
Net yield requirement: For market value calculation, the net yield requirement comprises riskfree 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.
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.
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.
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.
Occupancy rate (sq.m.): The ratio of leased premises to leasable premises.
Occupancy cost ratio (OCR): The ratio is calculated as the share of annual net rent and potential service charges (gross rent) paid by a tenant to Citycon, of the tenant's sales, excluding VAT. The VAT percentage is an estimate. Expresses tenant's ability to pay rent.
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.
Gross leasable area: An area which can reasonably be expected to be available for lease and for which the lessee is ready to pay a rent.
Like-for-like property: A property owned by the company for the whole of the current and previous fi nancial year (24 months), excluding properties under development and expansion as well as lots.
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 or other facility, not necessarily a polluted land area; opposite of "greenfi eld".
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.
Ecosystem: The term ecosystem refers to the combined physical and biological components of an environment.
EN 15603 -standard: A standard related to the Energy Performance of Buildings Directive (2002/91/EC). The purpose of the standard is to present general principles of the overall energy use of buildings and defi nitions of energy ratings.
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).
G3 guidelines: A reporting guideline update related to GRI reporting, published in 2006.
Greenfi eld site: An undeveloped land area. The opposite to brownfi eld site.
Carbon dioxide, CO2: A greenhouse gas produced during the combustion of organic matter (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 eff ect. The greenhouse eff ect has gained momentum because human activities have increased the amount of carbon dioxide and other greenhouse gases in the atmosphere.
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.
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 three dimensions: economic, ecological and social.
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.
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.
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.
RAKLI ry: The Finnish Association of Building Owners and Construction Clients.
ICSC: The International Council of Shopping Centers.
NCSC: The Nordic Council of Shopping Centers.
GRI, Global Reporting Initiative: An international initiative to create a framework comparable to fi nancial reporting, for social responsibility reporting by companies and organisations.
IEA: The International Energy Agency.
NGO : Non-governmental organization
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.
kWh = kilowatt -hour MWh = megawatt -hour MJ = megajoule TJ = terajoule t = tonne m3 = cubic metre
BREAKDOWN OF SHAREHOLDERS
CITYCON SHARE PRICE COMPARED TO INDICES
Investment in Citycon is an indirect investment in actively and professionally managed retail properties in Finland, Sweden and the Baltic countries. The company is specialised in properties engaged in retail trade i.e. shopping centres, hypermarkets and retail centres.
Citycon is not only a real estate investor but also a proactive owner and a long-term developer of its retail properties laying the foundation for a successful retail business. Citycon takes account of environmental aspects and well-being of the areas surrounding its retail properties, which provides solid foundations for the company's success and growth in the future.
Citycon's market capitalisation at the end of 2009 totalled EUR 649.9 million, whereas it
reached EUR 371.3 million at the end of 2008. The proportion of international investors remains high, accounting for 89.9 per cent of the company's shareholders at the end of the year. However, the number of domestic shareholders increased remarkably, since the total number of registered shareholders grew from 2,190 for the year before to 3,733 at the end of 2009.
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 share-price performance and total return. Citycon is also represented in the GPR 250 Property Securities Index consisting of the 250 most liquid real estate companies worldwide. In 2009, the number of Citycon shares traded on the NASDAQ OMX Helsinki totalled 149.3 million (150.9 million) at a total value of EUR 296.1 million (EUR 443.1 million).
The Board of Directors has set the following fi nancial targets for the company:
The profi t distribution in 2008 totalled EUR 0.14 per share, consisting of a per-share dividend of EUR 0.04 and an equity return of EUR 0.10 per share from the invested unrestricted equity fund.
Equity ratio stood at 34.2 per cent at yearend 2009.
The Board of Directors proposes that a pershare dividend EUR 0.04 be paid out for the year 2009, and that EUR 0.10 be returned from the invested unrestricted equity fund. The dividend and equity return will be paid on 7 April 2010 to a shareholder registered in the company's shareholders' register on 16 March 2010.
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 improving the company's business profi le. Investor communications focus on long-term value creation rather than seeking short-term benefi ts.
The investor communications' principle is to continuously 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.
During 2010, Citycon will release fi nancial reports as follows:
The company will publish its printed Annual Report at the latest in week 10.
The key channel for Citycon's investor communications is the corporate website. All stock exchange releases and press releases, fi nancial statements, interim reports, annual reports and notices to general meetings will be published on the website. 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 also 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.
Citycon actively meets with investors both in and outside Finland. In 2009, the company executives carried out presentations of Citycon as an investment target in approximately 40 events, and met with some 270 institutional investors either in one-on-one or smallgroup meetings. In addition, the company's representatives meet investors in seminars arranged by diff erent associations or banks, in broader public events and during asset tours to the company's shopping centres.
In September, Citycon organised a Capital Markets Day in the Iso Omena shopping centre in Espoo, for the second time in the company's history. The theme of this event, opened by Thomas W. Wernink, Chairman of Citycon's Board of Directors, was the corporate strategy and market situation in Citycon's operating countries and, in particular, the leasing business. Following the presentations, the att ending investors, analysts and journalists visited the Iso Omena shopping centre and the LEED certifi ed shopping centre Trio in Lahti. Encouraged by the abundant and positive feedback on the Capital Markets Day, Citycon aims to organise an equivalent event every year.
The company's IR contacts are the CEO, the CFO and Executive Vice President as well as the Investor Relations Offi cer.
Citycon Oyj will hold its AGM at Finlandia Hall, Helsinki Auditorium, Mannerheimintie 13e, Helsinki, Finland, on Thursday 11 March 2010, starting at 2.00 p.m.
The notice to the AGM was issued on 16 February 2010 and it is available on the corporate website at www.citycon.com/agm2010.
A shareholder is entitled to propose a certain matt er for discussion at a general meeting of shareholders, if such a matt er belongs to the competence of a general meeting of shareholders according to the Finnish Limited Liability Companies Act and if (s)he gives notice of this in writing to the Board of Directors in suffi cient time for it to be included in the notice of the meeting. Such notices can be mailed to [email protected] .
Company shareholders listed in the register of shareholders by the AGM record date of 1 March 2010 are entitled to att end the AGM if they have notifi ed the company of their intention to do so by 4.00 p.m. on 8 March 2010. If you wish to att end the AGM, please visit our website www.citycon.com/AGM2010 or contact us by telephone +358 20 7664 400.
A shareholder whose shares are registered in his/her personal book-entry securities account is listed on the company's register of shareholders. A shareholder holding nominee-registered shares are requested to contact his/her account manager if (s)he wishes to att end the AGM.
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 should notify their book-entry account manager of any changes in their name or address. This will also automatically update information in the shareholders' register maintained by Euroclear Finland Ltd.
CEO Mr Petri Olkinuora Tel. +358 20 766 4401 or +358 400 333 256 [email protected]
CFO and Executive Vice President Mr Eero Sihvonen Tel +358 20 766 4459 or +358 50 557 9137 [email protected]
Manager, Sustainability Ms Kirsi Borg Tel. +358 20 766 4408 or +358 40 557 6526 [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. However, the list below does not necessarily include all providers of such investment analysis. Analysts monitor Citycon on their own initiative and can also choose to cease doing so whenever they wish. Recommendations issued by analysts are available on Citycon's website at the "Consensus estimates" service. Citycon is not responsible for analysts' comments and statements.
Tel. +33 1 53 89 53 75 15-17 rue Vivienne F-75002 Paris France
Tel. +46 8 566 294 78 Box 7269 SE-103 89 Stockholm Sweden
Tel. +358 10 236 4867 Hiililaiturinkuja 2 FI-00180 Helsinki Finland
Stockholm Branch Tel. +46 8 463 55 15 Stureplan 4A, 4th fl oor P.O. Box 5781 SE-103 87 Stockholm Sweden
Tel. +47 22 94 88 45 Stranden Aker Brygge NO-0021 Oslo Norway
60 CITYCON OYJ ANNUAL AND CSR REPORT 2009
Evli Bank Plc Tel. +358 9 476 690 Aleksanterinkatu 19 A, 3rd fl oor FI-00101 Helsinki Finland
Tel. +44 20 7039 9496 20 St. James Street London SW1A 1ES United Kingdom
Tel. +358 9 613 4600 Pohjoisesplanadi 33 A FI-00100 Helsinki Finland
Tel. +44 207 552 5986 Peterborough Court 133 Fleet Street London EC4A 2BB United Kingdom
Tel. +46 8 701 80 16 Blasieholmstorg 11 SE-106 70 Stockholm Sweden
Kempen & Co N.V. Tel. +31 20 348 8000 Beethovenstraat 300 NL-1070 AR Amsterdam The Netherlands
Tel. +47 22 87 87 00 P.O. Box 1411 Vika NO-0115 Oslo Norway
Tel. +358 10 252 7390 Teollisuuskatu 1b, P.O. Box 362 FI-00101 Helsinki Finland
Tel. +31 20 460 4747 Amstelplein 1 NL-1096 HA Amsterdam The Netherlands
Tel. +31 20 383 6786 Gustav Mahlerlaan 10 NL-1000 EA Amsterdam The Netherlands
Tel. +358 10 241 5192 Pohjoisesplanadi 37 A FI-00100 Helsinki Finland
Tel. +46 8 453 73 30 Regeringsgatan 38, 7th fl oor SE-111 87 Stockholm Sweden
Tel. +358 9 8866 6026 Aleksanterinkatu 44 FI-00100 Helsinki Finland
| Report by the Board of Directors 3 | |||||||
|---|---|---|---|---|---|---|---|
| Consolidated statement of comprehensive income, IFRS 14 |
|||||||
| Consolidated statement of fi nancial position, IFRS 15 |
|||||||
| Consolidated cash fl ow statement, IFRS 16 | |||||||
| Consolidated statement of changes in shareholders' equity, IFRS 17 |
|||||||
| Notes to the consolidated | |||||||
| fi nancial statements, IFRS 18 | |||||||
| 1. Basic company data 18 | |||||||
| 2. Basis of preparation 18 | |||||||
| 3. Changes in IFRS and accounting policies 18 | |||||||
| 4. Summary of signifi cant accounting policies 19 | |||||||
| 5. Management's judgment in applying | |||||||
| the most signifi cant accounting policies | |||||||
| and other key assumptions about | |||||||
| future risks and uncertainties 22 | |||||||
| 6. Total revenues 24 | |||||||
| 7. Total expenses excluding | |||||||
| fi nancial expenses 24 | |||||||
| 8. Segment information 24 | |||||||
| 9. Property operating expenses 25 | |||||||
| 10. Other expenses from leasing operations 25 | |||||||
| 11. Administrative expenses 25 | |||||||
| 12. Personnel expenses 25 | |||||||
| 13. Depreciation and amortization 26 | |||||||
| 14. Other operating income and expenses 26 | |||||||
| 15. Net fi nancial income and expenses 26 | |||||||
| 16. Income taxes 26 |
| 17. Reconciliation between | |
|---|---|
| direct and indirect result 26 | |
| 18. Earnings per share | |
| and net asset value per share 27 | |
| 19. Investment properties 28 | |
| 20. Investment properties held for sale 29 | |
| 21. Property, plant and equipment 29 | |
| 22. Intangible assets 29 | |
| 23. Trade and other receivables 29 | |
| 24. Cash and cash equivalents 29 | |
| 25. Shareholders' equity 29 | |
| 26. Interest-bearing liabilities 30 | |
| 27. Financial instruments 31 | |
| 28. Deferred tax assets and liabilities 35 | |
| 29. Trade and other payables 35 | |
| 30. Employee benefi ts 35 | |
| 31. Cash generated from operations 37 | |
| 32. Commitments and contingent liabilities 38 | |
| 33. Related party transactions 38 | |
| 34. Changes in group structure in 2009 40 | |
| 35. Post balance sheet events 40 | |
| Key fi gures and ratios 41 | |
| 1. Consolidated key fi gures | |
| and ratios for fi ve years, IFRS 41 | |
| 2. Consolidated direct and | |
| indirect result for fi ve years 42 | |
| 3. Consolidated direct and | |
| indirect result quarterly 43 | |
| 4. Quarterly segment information 44 | |
| Parent company income statement, FAS 45 | |
| Parent company balance sheet, FAS 46 | |
Parent company cash fl ow statement, FAS .......47
| fi nancial statements, FAS 48 | |||||
|---|---|---|---|---|---|
| 1. Accounting policies 48 | |||||
| 2. Turnover 48 | |||||
| 3. Other expenses from leasing operations 48 | |||||
| 4. Personnel expenses 48 | |||||
| 5. Depreciation and amortization 48 | |||||
| 6. Other operating income and expenses 48 | |||||
| 7. Net fi nancial income and expenses 48 | |||||
| 8. Income tax expense 48 | |||||
| 9. Intangible assets 48 | |||||
| 10. Tangible assets 49 | |||||
| 11. Shares in subsidiaries 49 | |||||
| 12. Shares in associated companies 49 | |||||
| 13. Other investments 49 | |||||
| 14. Subsidiaries and associated companies 49 | |||||
| 15. Short-term receivables 49 | |||||
| 16. Shareholders' equity 49 | |||||
| 17. Liabilities 49 | |||||
| 18. Contingent liabilities 50 | |||||
| Shareholders and shares 51 | |||||
| Formulas for key fi gures and ratios 53 | |||||
| Signatures to the fi nancial statements 55 | |||||
| Auditors' report 56 | |||||
| List of properties 2009 57 | |||||
| Valuation statement 61 |
| KEY FIGURES | Q4/2009 | Q4/2008 | Q3/2009 | 2009 | 2008 | Change-% 1) |
|---|---|---|---|---|---|---|
| Turnover, EUR million | 48.9 | 45.2 | 45.9 | 186.3 | 178.3 | 4.5% |
| Net rental income, EUR million | 31.6 | 30.2 | 32.5 | 125.4 | 121.8 | 3.0% |
| Operating loss/profi t, EUR million | -12.4 | -27.9 | 27.4 | 10.3 | -105.0 | − |
| % of turnover | − | − | 59.6% | 5.5% | − | − |
| Loss/profi t before taxes, EUR million | -24.4 | -40.9 | 15.6 | -37.5 | -162.3 | -76.9% |
| Loss/profi t att ributable to parent company shareholders, EUR million | -23.8 | -30.7 | 13.3 | -34.3 | -124.1 | -72.4% |
| Direct operating profi t, EUR million | 26.3 | 25.6 | 28.6 | 107.7 | 105.3 | 2.3% |
| % of turnover | 53.9% | 56.7% | 62.2% | 57.8% | 59.1% | − |
| Direct result, EUR million | 12.5 | 11.8 | 14.2 | 50.9 | 43.8 | 16.3% |
| Indirect result, EUR million | -36.3 | -42.5 | -0.9 | -85.2 | -167.9 | -49.3% |
| Earnings per share (basic), EUR | -0.11 | -0.14 | 0.06 | -0.16 | -0.56 | -72.4% |
| Earnings per share (diluted), EUR | -0.11 | -0.14 | 0.06 | -0.16 | -0.56 | -72.4% |
| Direct result per share (diluted), (diluted EPRA EPS), EUR | 0.06 | 0.05 | 0.06 | 0.23 | 0.20 | 15.2% |
| Net cash from operating activities per share, EUR | 0.06 | 0.07 | 0.05 | 0.30 | 0.21 | 42.4% |
| Fair value of investment properties, EUR million 2) | 2,162.7 | 2,147.4 | 2,111.6 | 1.7% | ||
| Equity per share, EUR | 3.41 | 3.31 | 3.62 | -8.5% | ||
| Net asset value (EPRA NAV) per share, EUR | 3.64 | 3.54 | 3.88 | -8.8% | ||
| EPRA NNNAV per share, EUR | 3.46 | 3.35 | 3.80 | -11.8% | ||
| Equity ratio, % | 35.9 | 34.2 | 38.5 | − | ||
| Gearing. % | 159.5 | 169.5 | 141.3 | − | ||
| Net interest-bearing debt (fair value), EUR million | 1,272.3 | 1,312.2 | 1,194.6 | 9.8% | ||
| Net rental yield, % | 6.1 | 6.1 | 5.8 | − | ||
| Net rental yield, like-for-like properties, % | 6.6 | 6.7 | 6.0 | − | ||
| Occupancy rate, % | 94.7 | 95.0 | 96.0 | − | ||
| Personnel (at the end of the period) | 117 | 119 | 113 | 5.3% | ||
| Dividend per share, EUR | 0.04 3) | 0.04 | - | |||
| Return from invested unrestricted equity fund per share, EUR | 0.10 3) | 0.10 | - |
1) Change-% is calculated from exact fi gures and refers to the change between 2009 and 2008.
2) Due to the adoption of amended IAS 40 Investment property -standard, the fair value of investment properties also includes development properties. 3) Proposal by the Board.
Five-year key fi gures are available on page 41 in the Financial Statements.
Corporate Governance Statement of the Citycon Group for the fi nancial year 2009 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.
Dividend and return from invested unrestricted equity fund per share total, EUR 0.14 3) 0.14 -
project in Stockholm and the redevelopment and extension project of the Rocca al Mare shopping centre in Tallinn, Estonia were completed.
Earnings per share were EUR -0.16 (EUR -0.56). Changes in the fair value of investment properties have a substantial impact on earnings per share.
The occupancy rate was 95.0 per cent (96.0%). The decrease in the occupancy rate resulted from a slight increase in the vacancy rate in Finland, Sweden and in the Baltic Countries.
"The company's net cash from operating activities per share and direct result per share were among the best in the company's history. Direct result increased to EUR 50.9 million, thanks to growth in rental income and lower interest costs. Citycon's fi nancial position is stable and we have suffi cient committ ed, non-utilized credit facilities to fi nance the projects under construction.
Over the year, the occupancy rate showed only a slight decrease and was 95 per cent. Total sales of all of Citycon's shopping centres remained at almost their previous year's levels, although the retail environment continued to deteriorate.
At the end of 2009, the largest development projects in the history of Citycon were completed in Stockholm and in Tallinn where Liljeholmstorget and Rocca al Mare were opened to the public very successfully. These completed projects strengthen the company's market position within the Swedish and the Estonian shopping centre business.
Citycon continues to have several (re) development projects under planning in all of its operating countries. The company's investments mainly aim at improving the long-term competitiveness of its existing property portfolio. The extension and redevelopment of the Åkersberga Centrum shopping centre in Sweden, the thorough redevelopment of the Espoontori shopping centre in Finland, and the construction of the new Helsinki Myllypuro shopping centre are some of the latest projects. Significant development projects currently under planning in Finland include the extension of Iso Omena above the future metro station, a new shopping centre to be constructed in Vantaa Martinlaakso, and the redevelopment of the shopping centre Forum in Jyväskylä. These projects are targeted to meet the quality standards of the international LEED (Leadership in Energy and Design) certifi cation."
The year 2009 had a challenging start in all of Citycon's operating countries. The global recession turned into a depression most visibly in the Baltic countries, also the Finnish and the Swedish economies contracted. During 2009, developments in the real economy were refl ected in retailing.
In 2009, Finnish retail sales shrank by 1.6 per cent but grocery sales grew by 1.9 per cent in January-November. In Sweden, retail sales grew by 2.8 per cent and grocery sales by 1.9 per cent. Trade slowed down most in the Baltic countries. Retail sales reduced by 15.0 per cent and grocery sales by 8.0 per cent in Estonia, and by 18.3 per cent and 10.3 per cent in Lithuania. (Sources: Statistics Finland, Statistics Sweden, Statistics Estonia) Aff ordable clothing sales grew in Finland and Sweden, whereas furniture and car sales suff ered most (Newsec Property Report, Autumn 2009). The year 2009 was the second successive year for weakened retail trade profi tability in Finland (source: Statistics Finland).
In Sweden, retail sales took an upward swing in the summer, but in Finland and in the Baltic countries they continued on a downward trend throughout 2009. The economic situation continues to be diffi cult in the Baltic countries. (Sources: Statistics Finland, Statistics Sweden, Statistics Estonia)
Consumer confi dence in economic development weakened in the summer, but slowly began to recover, especially in Finland and in Sweden. Infl ation turned into a consumer price decline, and interest rates remained at record low levels in all of Citycon's operating countries. (Sources: Statistics Finland, Statistics Sweden, Statistics Estonia)
The instability of the global fi nancial market has impacted the price and availability of fi nancing throughout the year. Toward the end of 2009, availability did improve but the margins on debt fi nancing remained rather high.
Citycon is an active owner, operator and longterm developer of shopping centres, laying the foundation for a successful retail business. The company aims to increase its net yield from shopping centres over the long term through active retail property management and systematic redevelopment eff orts. Citycon's retail properties serve both consumers and retailers.
Citycon is the market leader in the Finnish shopping centre business, holds a strong position in Sweden and a fi rm foothold in the Baltic countries. It assumes responsibility for the business operations and the administration of its investment properties.
Citycon is involved in the day-to-day operations of its shopping centres and, in co-operation with its tenants, aims to increase the att ractiveness, footfall, sales and profi ts of its shopping centres on a continuous basis.
Citycon is a pioneer in the Nordic shopping centre market, seeking to factor environmental considerations into its shopping centre management and its redevelopment and development projects. The Trio shopping centre in Lahti, Finland, was the fi rst project in the Nordic countries to be awarded the LEED certifi cation in 2009. The Trio project was one of Citycon's three pilot projects for sustainable construction.
Citycon operates in Finland, Sweden and the Baltic countries, and the company's investments are focused on areas with expected population and purchasing power growth.
At the end of 2009, Citycon owned 33 (33) shopping centres and 51 (52) 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 entire property portfolio totalled EUR 2,147.4 million (EUR 2,111.6 million) with Finnish properties accounting for 67.2 per cent (70.7%), Swedish properties for 25.6 per cent (21.9%) and Baltic properties for 7.3 per cent (7.4%) of the portfolio. The gross leasable area at the end of the period was 961,150 square metres.
Citycon measures its investment properties at fair value, under the IAS 40 standard, according to which changes in the fair value of investment properties are recognised through profit or loss. Due to the amendment to IAS 40 standard on 1 January 2009, Citycon also measures its development properties at fair value instead of at cost, and no longer presents development properties separately from investment properties on the statement of fi nancial position.
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-byproperty basis at least once a year. In 2009, however, Citycon had its properties valued on a quarterly basis by an external appraiser, due to market volatility.
Citycon's property portfolio is valued by Realia Management Oy, part of the Realia Group. Realia Management Oy is the preferred appraisal service provider of CB Richard Ellis in Finland. A summary of Realia Management Oy's Property Valuation Statement at the end of 2009 can be found at www.citycon.com/valuation. 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.
In 2009, the fair value of Citycon's property portfolio decreased. This decrease was due to changes in the general conditions in the property and financial market and to higher yield requirements resulting from the general economic recession. The period saw a total value increase of EUR 5.5 million and a total value decrease of EUR 102.9 million. The net eff ect of these changes on the company's profi t was EUR -97.4 million (EUR -216.1 million).
On 31 December 2009, the average net yield requirement defi ned by Realia Management Oy for Citycon's property portfolio came to 6.6 per cent (31 December 2008: 6.4%, and 30 September 2009: 6.6%).
At the end of the fi nancial year, Citycon had a total of 4,235 (4,143) leases. The average remaining length of the lease agreements was 3.1 years (3.1 years).
Citycon's property portfolio's net rental yield was 6.1 per cent (5.8%) and its occupancy rate was 95.0 per cent (96.0%). The decrease in occupancy rate was a result of a slight increase in vacancies across the portfolio in all of Citycon's operating regions, due to toughened market conditions.
During the period under review, Citycon's net rental income grew by 3.0 per cent to EUR 125.4 million. The leasable area increased by 2.5 per cent to 961,150 square metres. Excluding the impact of the weakened Swedish krona (SEK), net rental income from like-for-like properties grew by 0.8 per cent.
Like-for-like properties are properties held by Citycon throughout the 24-month reference period, excluding properties under refurbishment and redevelopment as well as undeveloped lots. 78.5 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).
During the last 12 months, the rolling twelve-month occupancy cost ratio for like-forlike properties was 8.6 per cent. The occupancy cost ratio is calculated as the share of net rent and potential service charges paid by a tenant
| Q4/2009 | Q4/2008 | Q3/2009 | 2009 | 2008 | Change-% | |
|---|---|---|---|---|---|---|
| Number of leases started during the period | 386 | 255 | 140 | 873 | 572 | 52.6 |
| Total area of leases started, sq.m. | 69,262 | 69,730 | 23,789 | 141,628 | 124,960 | 13.3 |
| Occupancy rate at end of the period, % | 94.7 | 95.0 | 96.0 | -1.0 | ||
| Average remaining length of lease portfolio | ||||||
| at the end of the period, year | 3.0 | 3.1 | 3,1 1) | 0.0 |
1) Interpretation of the remaining length of a lease agreement has been revised.
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 shopping centres, and monitors the developments in the shopping centre markets across its operating regions. No new shopping centres were acquired during 2009.
At the start of January, Citycon divested all shares in its subsidiary MREC Kiinteistö Oy Keijutie 15. The debt-free sales price of this non-core property in Lahti amounted to approximately EUR 3 million and the company booked a gain on sale of EUR 0.1 million. As part of its strategy, the company aims to continue divestments of non-core properties.
In June, Citycon agreed to sell the 72 apartments under construction within the Liljeholmstorget shopping centre in Stockholm, Sweden, for approximately SEK 176 million (approximately EUR 16.3 million). The gain on sale is estimated to be around SEK 30 million (around EUR 2.8 million), depending on the fi nal construction expenditure. The gain on sale will be recognised under fair value changes in the statement of comprehensive income as the residential construction progresses.
In July, Citycon agreed on the sale of the 181 apartments within the Åkersberga Centrum, Sweden, for approximately SEK 181 million (approximately EUR 16.7 million). The intention was to execute the deal during the last quarter of 2009, but the closing is now expected to take place during the fi rst half of 2010, due to a delay in the offi cial property registration process. This transaction is not expected to generate any gain on sale.
Changes in the Group structure during the year 2009 are presented in greater detail in Note 33 of the Notes to the Consolidated Financial Statements.
Citycon is pursuing a long-term increase in the footfall and cash fl ow, as well as in the effi ciency and return on its retail properties. The aim of the company's development activities is to keep its shopping centres competitive for both customers and tenants.
In the short term, redevelopment projects may weaken returns from some properties, as some retail premises may temporarily have to be vacated for refurbishment, which affects rental income. Citycon aims to carry out its redevelopment projects phase by phase, so that the whole shopping centre does not have to be closed during the works in question, thus ensuring a continuous cash fl ow.
Towards the year end 2009, Citycon completed two major development projects, the Liljeholmstorget shopping centre in Stockholm and the Rocca al Mare centre in Tallinn. Both projects were completed within the planned schedule and in an environmentally sustainable manner.
In October, Citycon opened the Liljeholmstorget Galleria shopping centre, the largest single development project in Citycon's history. The total investment in this redevelopment project was almost EUR 200 million, including the initial acquisition cost. The gross leasable area in this south-western Stockholm shopping centre is 28,000 square metres, and the premises are essentially fully let. The three storey shopping centre houses some 90 tenants, including the ICA Kvantum and Willys Hemma grocery stores, Systembolaget, the well-known fashion stores KappAhl, H&M, Gina Tricot and Vero Moda, as well as numerous restaurants, sporting goods and interior decoration shops. Liljeholmstorget Galleria also houses an underground parking hall for 900 cars.
Liljeholmstorget Galleria has an excellent location at a busy transport node, in the middle of a developing residential and business district. Since a precondition for the building permit was that housing would also be constructed, 72 new rental flats will be built above the shopping centre. Apartments are not within Citycon's core business and therefore the company has already agreed to sell them.
The three-stage and three-year Rocca al Mare redevelopment and extension project was completed in November. This shopping centre was built in the 1990s and Citycon acquired it in 2005, deciding at the time to redevelop it thoroughly and to substantially extend it. This shopping centre is located in a well-off district eight kilometres west of the heart of Tallinn. Today, Rocca al Mare is the largest shopping centre in Estonia with a total of 53,500 square metres of leasable area. The premises are fully let. Rocca al Mare accommodates some 160 retail shops, including Ivo Nikkolo, New Yorker and the fi rst Estonian Marks & Spencer, as well as the largest Baltic Prisma hypermarket.
Citycon's total investment in Rocca al Mare amounts to approximately EUR 120 million, including the initial acquisition cost. All authorised investments having been implemented, the Rocca al Mare shopping centre may still be extended by a further 4,000 square metres.
(Re)development Projects in Progress During the period under review, Citycon initiated the redevelopment and extension project of the Åkersberga Centrum located in the Österåker district of Greater Stockholm area. The total budget for the project is about SEK 467 million (EUR 46 million), of which Citycon's share is 75 per cent.
The leasable area of the shopping centre will grow by about 13,000 square metres, the existing shopping centre will be redeveloped and additional parking facilities will be built for 350 vehicles. Construction work was initiated
| Location | Estimated total investment (EUR million) |
Actual gross capital expenditure by 31. Dec. 2009 (EUR million) |
Estimated fi nal year of completion |
|---|---|---|---|
| Stockholm, Sweden | 1382) | 132.1 | completed |
| Tallinn, Estonia | 58.3 | 49.93) | completed |
| Österåker, Sweden | 45.6 | 16.0 | 2011 |
| Seinäjoki, Finland | 4 | 2.7 | 2010 |
| Lahti, Finland | 8 | 0.5 | 2010 |
| Vantaa, Finland | 4.8 | 0.6 | 2010 |
1) Calculated at end of period exchange rates. 2) Does not include apartments to be sold. 3) Remaining capital expenditure payable in 2010.
in the summer of 2009 and the refurbished shopping centre will be completed in 2011. The shopping centre will remain open throughout the project.
The enclosed table lists the most signifi cant development and redevelopment projects in progress and completed during 2009, as approved by the Board of Directors. Capital expenditure during 2009 on all development projects reached EUR 24.2 million in Finland, EUR 95.9 million in Sweden and EUR 13.9 million in the Baltic Countries.
(Re)development projects under planning Citycon and the construction company NCC were jointly awarded a provisional contract for the design of a metro centre to be built for the western metro line at Matinkylä in Espoo, adjacent to the Iso Omena shopping centre. The aim of Citycon and NCC is to create a metro centre which combines excellent commercial services with smooth connections between the metro train and its feeder terminal. The western metro line connecting Helsinki and Espoo is due for completion in 2014. Other redevelopment projects under planning in Finland are the Martinlaakso shopping centre in Vantaa and the Forum shopping centre in Jyväskylä.
More information on planned projects can be found in the Annual Report 2009, to be published during week 9/2010.
Citycon's business operations are divided into the business units Finland, Sweden and the Baltic Countries. The Swedish and Baltic business units are sub-divided into the business areas Retail Properties and Property Development. The Finnish business unit was reorganised at the end of 2009. The Finnish unit is sub-divided into the 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. Citycon's market share was approximately 22 per cent of the Finnish shopping centre market in 2009 (source: Entrecon). During the period under review, the company's net rental income from its Finnish operations came to EUR 92.4 million (EUR 90.9 million). The business unit accounted for 73.7 per cent of Citycon's total net rental income.
The key figures of the Finnish property portfolio are presented on the following page. Development projects have been covered previously in this document.
Citycon has strengthened its position in the Swedish shopping centre market, and has eight shopping centres and seven other retail properties in Sweden. They are located in the Greater Stockholm and Greater Gothenburg areas and in Umeå. The company's net rental income from Swedish operations decreased by 3.5 per cent and totalled EUR 23.2 million (EUR 24.1 million). Excluding the impact of the weakened Swedish krona, net rental income from Swedish operations would have increased by 6.5 per cent from the previous year. The business unit accounted for 18.5 per cent of Citycon's total net rental income.
The key figures of the Swedish property portfolio are presented on the following page. Development projects have been covered previously in this document.
Baltic Countries
At the end of 2009, Citycon owned three shopping centres in the Baltic countries: Rocca al Mare and Magistral in Tallinn, Estonia, and Mandarinas in Vilnius, Lithuania. The diffi cult economic situation in the Baltic countries has aff ected the sales of Citycon's shopping centres and increased tenants' requests for rental rebates. At the same time, the risk of credit loss has increased. The Baltic vacancy rate has, however, not increased to any substantial degree during the period under review. Net rental income from the Baltic operations amounted to EUR 9.8 million (EUR 6.8 million). The business unit accounted for 7.8 per cent of Citycon's total net rental income.
The key fi gures of the Baltic property portfolio are presented on the following page. Ongoing development projects have been covered previously in this document.
Turnover for the financial year came to EUR 186.3 million (EUR 178.3 million), derived principally from the rental income generated by Citycon's retail premises. Gross rental income accounted for 95.5 per cent (97.0%) of turnover.
Operating profi t came to EUR 10.3 million (EUR -105.0 million). Profi t before taxes was EUR -37.5 million (EUR -162.3 million) and profit after taxes attributable to the parent company's shareholders was EUR -34.3 million (EUR -124.1 million). The increase in operating profi t was mainly due to fair value changes of the property portfolio. The operating profi t rose also due to the completion of (re)development projects, thanks to net rental income generated by new and refurbished premises. Credit losses remained modest at EUR 0.6 million. Temporary rental rebates amounted to EUR 1.6 million in 2009.
The eff ect of changes in the fair value of the property portfolio, of gains on sale and other indirect items on the profi t att ributable to the parent company's shareholders was EUR -85.2 million (EUR -167.9 million), tax eff ects included. Taking this into account, the direct result aft er taxes was EUR 7.1 million above the reference period level (see Note 17. Reconciliation between direct and indirect result on page 26 of the Financial Statements). The growth in the direct result is mainly att ributed to the increased net rental income and lower fi nancing expenses due to lower interest rates and changes in exchange rates. In addition, a gain of EUR 0.4 million, including tax eff ects, from the buybacks of convertible bonds was recognised under the direct result.
Current taxes on the direct result were higher for the fi nancial year than during the reference period, due to growth in the direct result and the buybacks of convertible bonds.
Earnings per share were EUR -0.16 (EUR -0.56). Direct result per share, diluted, (diluted EPRA EPS) was EUR 0.23 (EUR 0.20). Net cash flow from operating activities per share was EUR 0.30 (EUR 0.21).
At the end of the period, Citycon Group employed a total of 119 (113) persons, of whom 78 worked in Finland, 33 in Sweden and eight in the Baltic countries. Administrative expenses increased to EUR 17.8 million (EUR 16.9 million), including EUR 0.4 million (EUR 0.3 million) of expenses related to employee stock options and the company's share-based incentive scheme.
| Q4/2009 | Q4/2008 | Q3/2009 | 2009 | 2008 | Change-% | |
|---|---|---|---|---|---|---|
| Number of leases started during the period | 84 | 193 | 65 | 295 | 452 | -34.7 |
| Total area of leases started, sq.m. | 18,420 | 31,930 | 20,530 | 57,220 | 79,130 | -27.7 |
| Occupancy rate at end of the period, % | 94.1 | 94.6 | 95.7 | -1.1 | ||
| Average remaining length of lease | ||||||
| portfolio at the end of the period, year | 2.9 | 2.8 | 3.1 | -9.7 |
| Q4/2009 | Q4/2008 | Q3/2009 | 2009 | 2008 | Change-% | |
|---|---|---|---|---|---|---|
| Gross rental income, EUR million | 31.5 | 30.8 | 31.3 | 126.5 | 122.5 | 3.3 |
| Turnover, EUR million | 32.7 | 32.0 | 32.4 | 131.3 | 126.8 | 3.5 |
| Net rental income, EUR million | 23.0 | 22.6 | 23.4 | 92.4 | 90.9 | 1.7 |
| Net fair value losses/gains on | ||||||
| investment property, EUR million | -14.6 | -48.6 | -4.6 | -65.1 | -154.3 | -57.8 |
| Operating profi t/loss, EUR million | 6.8 | -21.7 | 17.4 | 21.2 | -62.9 | - |
| Capital expenditure, EUR million | 15.3 | 10.0 | 2.8 | 24.5 | 69.2 | -64.6 |
| Fair value of investment properties, EUR million (1 | 1,449.7 | 1,442.0 | 1,494.0 | -3.5 | ||
| Net rental yield, % (2 | 6.4 | 6.5 | 6.0 | - | ||
| Net rental yield, like-for-like properties, % | 6.6 | 6.7 | 6.1 | - |
| Lease Portfolio Summary, Sweden | |||||||
|---|---|---|---|---|---|---|---|
| -- | -- | -- | -- | --------------------------------- | -- | -- | -- |
| Q4/2009 | Q4/2008 | Q3/2009 | 2009 | 2008 | Change-% | |
|---|---|---|---|---|---|---|
| Number of leases started during the period | 245 | 19 | 71 | 449 | 58 | 674.1 |
| Total area of leases started, sq.m. | 42,163 | 9,060 | 2,995 | 59,351 | 15,340 | 286.9 |
| Occupancy rate at end of the period, % | 95.0 | 94.7 | 96.0 | -1.3 | ||
| Average remaining length of lease | ||||||
| portfolio at the end of the period, year | 2.2 | 3.0 | 2.4 | 25.0 |
| Q4/2009 | Q4/2008 | Q3/2009 | 2009 | 2008 | Change-% |
|---|---|---|---|---|---|
| -4.5 | |||||
| -2.0 | |||||
| -3.5 | |||||
| -17.0 | -21.4 | -1.3 | -19.6 | -70.1 | -72.1 |
| -12.0 | -16.9 | 4.4 | 0.3 | -49.1 | - |
| 33.4 | 21.7 | 29.1 | 95.9 | 65.6 | 46.0 |
| 551.0 | 548.8 | 462.4 | 18.7 | ||
| - | |||||
| 6.4 | 6.5 | 5.6 | - | ||
| 11.4 12.4 6.1 Fair value of investment properties, EUR million (1 |
9.9 10.1 5.3 |
9.6 9.9 6.4 4.8 |
39.3 41.0 23.2 4.7 |
41.1 41.9 24.1 5.0 |
| Q4/2009 | Q4/2008 | Q3/2009 | 2009 | 2008 | Change-% | |
|---|---|---|---|---|---|---|
| Number of leases started during the period | 57 | 43 | 4 | 129 | 62 | 108.1 |
| Total area of leases started, sq.m. | 8,679 | 28,740 | 264 | 25,057 | 30,490 | -17.8 |
| Occupancy rate at end of the period, % | 99.7 | 99.4 | 99.8 | -0.4 | ||
| Average remaining length of lease | ||||||
| portfolio at the end of the period, year | 5.4 | 5.2 | 5.4 1) | -3.7 |
| Financial performance, Baltic Countries | ||||||
|---|---|---|---|---|---|---|
| Q4/2009 | Q4/2008 | Q3/2009 | 2009 | 2008 | Change-% | |
| Gross rental income, EUR million | 2.3 | 3.0 | 3.4 | 12.0 | 9.3 | 29.1 |
| Turnover, EUR million | 3.8 | 3.1 | 3.6 | 14.0 | 9.6 | 45.5 |
| Net rental income, EUR million | 2.5 | 2.2 | 2.7 | 9.8 | 6.8 | 44.6 |
| Net fair value losses/gains | ||||||
| on investment property, EUR million | -7.1 | 10.6 | 4.7 | -12.7 | 8.3 | - |
| Operating loss/profi t, EUR million | -4.9 | 12.6 | 7.2 | -3.8 | 14.4 | - |
| Capital expenditure, EUR million | 1.7 | 6.1 | 1.2 | 13.9 | 22.7 | -38.8 |
| Fair value of investment properties, EUR million (1 | 162.0 | 156.6 | 155.3 | 0.8 | ||
| Net rental yield, % (2 | 6.7 | 6.4 | 6.2 | - | ||
| Net rental yield, like-for-like properties, % | 8.1 | 8.2 | 7.4 | - |
1) Due to the adoption of amended IAS 40 Investment property -standard, the fair value of investment properties also includes development properties.
1) Interpretation of the remaining length of a lease agreement has been revised. 2) Includes the lots for development projects.
The Citycon Group paid a total of EUR 8.2 million (EUR 7.6 million) in salaries and other remuneration, of which the share of the Group's managing directors''s salaries and other remuneration was EUR 0.4 million (EUR 0.3 million) and the share of the Board of Directors EUR 0.6 million (EUR 0.6 million). The parent company paid a total of EUR 6.3 million (EUR 5.8 million) in salaries and other remuneration, of which the share of the CEO's salary and remuneration was EUR 0.4 million (EUR 0.3 million) and the share of the Board of Directors EUR 0.6 million (EUR 0.6 million).
| 2009 | 2008 | 2007 | |
|---|---|---|---|
| Average number | |||
| of personnel in 2009 | 117 | 109 | 93 |
| Salaries and other | |||
| remuneration, EUR million | 8.2 | 7.6 | 6.6 |
Citycon's reported gross capital expenditure during the year totalled EUR 134.6 million (EUR 157.8 million). Of this, property acquisitions accounted for EUR 0.0 million (EUR 17.4 million), property development for EUR 134.0 million (EUR 139.6 million) and other investments for EUR 0.6 million (EUR 0.8 million). The investments were fi nanced through cash fl ow from operations and existing fi nancing arrangements.
In July, Citycon agreed on the sale of the 181 apartments within the Åkersberga Centrum, Sweden, for approximately SEK 181 million (approximately EUR 16.7 million). In June, Citycon agreed to sell the apartments under construction within the Liljeholmstorget shopping centre in Stockholm, Sweden, for approximately SEK 176 million (approximately EUR 16.3 million). At the end of January, Citycon divested all shares in its subsidiary MREC Kiinteistö Oy Keijutie 15. The debt-free sales price of this non-core property in Lahti amounted to approximately EUR 3 million.
The total assets at the end of the fi nancial year stood at EUR 2,253.2 million (EUR 2,178.5 million). Liabilities totalled EUR 1,485.3 million (EUR 1,341.2 million), with short-term liabilities accounting for EUR 227.4 million (EUR 109.5 million). The Group's financial position remained good. At the end of the period under review, Citycon's liquidity was EUR 205.6 million, of which EUR 185.8 million consisted of undrawn, committ ed credit facilities and EUR 19.8 million of cash and cash equivalents. At the end of the accounting period, Citycon's liquidity, excluding short-term credit limits and commercial papers, stood at EUR 172.9 million (31 December 2008: EUR 158.7 million).
For the purpose of short-term liquidity management, the company uses a EUR 100 million non-committ ed Finnish commercial paper programme and a non-committed Swedish commercial paper programme worth SEK one billion. During the second half of 2009, the domestic commercial papers market had picked up and by the end of the accounting period under review, Citycon had issued commercial papers to the value of EUR 32.6 million. Citycon's financing is mainly arranged on a long-term basis, with short-term interest-bearing debt constituting approximately 11 per cent of the Group's total interest-bearing debt at the end of the report period.
Year-on-year, reported interest-bearing debt increased by EUR 122.1 million, to EUR 1,321.7 million (EUR 1,199.5 million) in 2009. The fair value of the Group's interest-bearing debt was EUR 1,332.0 million (EUR 1,211.3 million).
The Group's cash and cash equivalents totalled EUR 19.8 million (EUR 16.7 million). The fair value of the Group's interest-bearing net debt stood at EUR 1,312.2 million (EUR 1,194.6 million).
The year-to-date weighted average interest rate decreased compared to the previous year and was 4.16 per cent (4.85% during reference period). The average loan maturity, weighted according to the principal amount of the loans, stood at 3.6 years (4.6 years). The average interest-rate fi xing period was 3.2 years (3.3 years).
Citycon's interest cover ratio covenant improved slightly due to lower interest costs and the improved direct result coming to 2.3 (Q3/2009: 2.2). Citycon's equity ratio covenant as defi ned in the loan agreements fell to 40.6 per cent (Q3/2009 42.4%) due to investments fi nanced with debt and the fair value loss of the property portfolio.
The weighted interest rate, interest-rate swaps included, averaged 3.87 per cent on 31 December 2009.
At the end of the reporting period, the Group's equity ratio was 34.2 per cent (38.5%). Gearing stood at 169.5 per cent (141.3%).
Citycon's period-end interest-bearing debt included 75.1 per cent (75.8 per cent) of fl oating-rate loans, of which 73.7 per cent (66.4%) had been converted to fi xed-rate ones by means of interest-rate swaps. Fixed-rate debt accounted for 80.2 per cent (74.5%) of the company's year-end interest-bearing debt, interest-rate swaps included. The debt portfolio's hedging ratio is in line with the Group's fi nancing policy. In 2009, Citycon utilized the prevailing low interest rates by making new interest-rate swaps and by extending maturing contracts, thereby increasing the debt portfolio's hedging ratio.
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 yearend nominal amount of interest-rate swaps totalled EUR 737.6 million (EUR 591.7 million), with hedge accounting applied to interest-rate swaps whose nominal amount totalled EUR 713.2 million (EUR 568.7 million).
On 31 December 2009, the nominal amount of all of the Group's derivative contracts totalled EUR 759.7 million (EUR 614.8 million), and their fair value was EUR -29.2 million (EUR -9.8 million). The decline of market interest rates during 2009 decreased the fair value of Citycon's interest rate derivatives. Hedge accounting is applied for the majority of interest rate derivatives, meaning that any changes in their fair value will be recognised under other comprehensive income. Thereby, the fair value loss for these derivatives does not aff ect the profi t for the period or the earnings per share, but the total comprehensive income. During the reporting period, the fair value loss recognised under other comprehensive income, taking account of the tax eff ect, totalled EUR -5.0 million (EUR -22.6 million).
Net fi nancial expenses totalled EUR 47.7 million (EUR 57.3 million). This decrease was mainly att ributable to lower interest rates and the buybacks of convertible bonds.
Net financial expenses in the statement of comprehensive income include EUR 0.6 million of non-recurring income for the buyback of the convertible bonds. In addition, net fi nancial expenses in the statement of comprehensive income include EUR 1.4 million (EUR 1.8 mil-
lion) in non-cash expenses related to the option component on convertible bonds.
In March, Citycon signed an agreement for a EUR 75 million unsecured revolving credit facility with a group of three Nordic banks. The agreement is valid for three years.
The new syndicated loan will further strengthen the company's available liquidity and provide the means of fi nancing Citycon's growth on a committed basis. The proceeds from the credit facility will be used to fi nance strategic investments such as shopping centre redevelopment projects. The credit margins of the loan are subject to a pricing grid based on Citycon's interest cover ratio covenant, as has been the case with the company's previous loan agreements.
Subordinated Convertible Bonds 2006 In July 2006, Citycon's Board of Directors decided to issue subordinated capital convertible bonds to the amount of EUR 110 million, directed at international institutional investors and consisting of 2,200 bonds, each with a face value of EUR 50,000. The issue of the convertible bonds waiving the shareholders' preemptive subscription rights was based on the authorisation given at Citycon's Annual General Meeting on 14 March 2006. These convertible bonds have been listed on the NASDAQ OMX Helsinki since 22 August 2006. The maturity of the bonds is 7 years and they will pay a coupon of 4.5 per cent annually in arrears. Furthermore, the conversion period is from 12 September 2006 to 27 July 2013, and the maturity date is 2 August 2013. The current conversion price is EUR 4.20.
In the autumn of 2008, Citycon began the buybacks of the convertible bonds as the market situation enabled the repurchases at a price clearly below the face value of the bonds, and as the repurchases enabled the company to strengthen its statement of fi nancial position and cut its net fi nancial expenses.
Citycon continued to repurchase the convertible bonds during the period under review, during which time the company repurchased a total of 128 bonds for EUR 3.6 million (including interest accrued). The repurchased bonds have been cancelled. The total number of bonds aft er the cancellations is 1,530, and they entitle to subscribe for a maximum of 18,214,285 shares and allow a maximum increase of EUR 24,589,284.75 in Citycon's share capital.
By the end of the accounting period under review, Citycon had repurchased a total principal amount of EUR 33.5 million of the 2006 convertible bonds, corresponding to approximately 30.5 per cent of the aggregate amount of the convertible bonds. The weighted average repurchase price was 53.5 per cent of the face value of the bonds.
The terms and conditions of the convertible bonds in more detail as well as the accrued interest are presented in the Notes to the Consolidated Financial Statements under Note 26, Interest-bearing Debt. The terms and conditions and the accrued interest of Citycon's capital loan are presented in the Note 26 as well.
On 30 November 2009, the Board of Directors of Citycon decided to issue an unsecured domestic bond and off er it for subscription for domestic retail investors. The total nominal amount of the unsecured bond issued is EUR 40 million. Unless the loan is prior to that redeemed or repurchased on the secondary market, the loan period is 17 December 2009-17 December 2014. The bond will pay a coupon of 5.1 per cent annually on 17 December until 17 December 2014. This bond is listed on the NAS-DAQ OMX Helsinki exchange.
The proceeds from the issue of the bond will be used to fi nance redevelopment and extension projects and to fi nance potential acquisitions in line with Citycon's investment strategy.
For risk management purposes, Citycon has a holistic Enterprise Risk Management (ERM) programme in place. The purpose 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.
Citycon's Board of Directors estimates that major short-term risks and uncertainties are associated with economic developments in the company's operating regions, the cost of debt fi nancing, changes in the fair value of investment properties and execution of redevelopment projects.
Economic fluctuations and trends have a significant influence on demand for leasable premises as well as rental levels. These 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, and many economists predict that growth will remain modest in 2010 in Finland, Sweden and the Baltic countries. In addition, unemployment is expected to remain at above-normal levels while infl ation remains low. Such an economic development might reduce demand for retail premises, weaken the lessees' ability to pay rent, increase vacancy rate and limit opportunities for increasing rents.
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 fi nancing. The fi nancial market weakened markedly in 2008 and the situation remained challenging throughout 2009. Banks' willingness to lend money to enterprises has not recovered to pre-crisis levels. Moreover, the margins of long-term unsecured bank loans, in particular, have remained high in spite of the fi nancial markets' improved situation during the second half of 2009. If stricter regulations for banks are realised in the future, it may maintain such abnormally high costs for fi nancing provided by banks. Citycon's fi nancial position is good. At the end of 2009, the company's available liquidity totalled EUR 205.6 million, consisting mainly of committed long-term credit limits and cash and cash equivalents. Citycon is capable of fi nancing its current projects in their entirety as planned.
A number of factors contribute to the value of retail properties, such as general and local economic development, demand among property investors and the expected rate of infl ation. Investment property value trends are subject to untypical levels of uncertainty due to the challenging economic situation and increased unemployment throughout the company's operating areas. During recent years, retail property values have declined, with Citycon recognising fair value losses on its investment properties during the fi nancial years 2008 and 2009. Trading activity in the property market remained at historically low levels during 2009. While changes in properties' fair value 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.
A key element in Citycon's strategy lies in the development of existing properties to meet the lessees' needs more eff ectively. The most central short-term risk related to development projects includes leasing new premises in the currently difficult economic environment. Citycon is preparing major redevelopment projects throughout its operating countries, meaning – if all of these projects are carried out – that the leasable area in the company's centres will increase significantly in the forthcoming years. Successful implementation of these new development projects is of primary importance as regards 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 slow economic growth. At this very moment, relatively low construction costs would favour launching new projects but, on the other hand, in order for new projects to be viable, they require att aining a suffi cient rate of pre-leasing with suffi cient rental levels.
More details on Citycon's risk management are available on the corporate website at www. citycon.com/riskmanagement and on pages 32- 34 of the Financial Statements 2009.
Citycon seeks to lead the way in responsible shopping centre business and to promote sustainable development within the business. 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 has initiated a Green Shopping Centre Management programme to foster sustainable development in all Citycon shopping centres. The programme was implemented in 2009, and it aims to promote energy effi ciency, recycling and other operations that promote sustainable development.
At the end of June, the Trio shopping centre was awarded the first LEED® (Leadership in Energy and Environmental Design) environmental certifi cate in the Nordic countries. Trio, located in Lahti, Finland, is one of Citycon's three pilot projects of sustainable construction. The other LEED projects include the redevelopment and extension of the Rocca al Mare shopping centre in Tallinn, and the construction of the Liljeholmstorget shopping centre in Stockholm. Citycon has sought LEED certifi cation also for these projects. Certifi cation forms an essential element of Citycon's eff orts toward sustainable development.
Citycon defi ned its long-term environmental responsibility goals in connection with its strategic planning in summer 2009. For the fi rst time, in its Annual Report 2009 Citycon is including data on its environmental performance, with key fi gures on energy and water consumption, waste recycling rates, and the carbon footprint of the company's business operations. These key fi gures are used to specify site-specifi c action plans to help promote the company's environmental performance goals.
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 signifi cant impact on the Group's fi nancial position or fi nancial results.
Citycon Oyj's Annual General Meeting (AGM) took place in March in Helsinki, Finland. The AGM adopted the company's financial statements for the accounting year 2009 and discharged the members of the Board of Directors and the Chief Executive Offi cer from liability. 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 dividend and equity return were paid on 3 April 2009.
Under the Articles of Association, which were amended by Citycon's Annual General Meeting, the Board of Directors consists of a minimum of fi ve and a maximum of ten members, elected by the Annual General Meeting for a term of one year at a time. A member of the Board of Directors may only be dismissed upon a decision of 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.
The number of Board members was increased from eight to nine, with Amir Bernstein, Gideon Bolotowsky, Raimo Korpinen, Tuomo Lähdesmäki, Claes Ott osson, Dor J. Segal, Thomas W. Wernink and Per-Håkan Westin being reelected to the Board for a one-year-term. Israeli citizen Ariella Zochovitzky, B.A., MBA and CPA, born in 1957, was elected as a new member of the Board.
On 1 December 2009, Citycon's Extraordinary General Meeting elected Mr. Ronen Ashkenazi, B.Sc., Civil Engineering, born in 1962, a member of the Board of Directors to replace Mr. Amir Bernstein, who had resigned on 30 November 2009 for the remainder of the term ending on 11 March 2010.
Mr. Thomas W. Wernink continued as the Board Chairman and Tuomo Lähdesmäki as the Deputy Chairman during the accounting period under review.
Ernst & Young Oy, a fi rm of authorised public accountants, was re-elected by the Annual General Meeting to act as the company's auditor during the accounting period 2009, with Authorised Public Accountant Tuija Korpelainen as the chief auditor.
Citycon shares have been listed on the Helsinki exchange 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 2009, the number of Citycon shares traded on the NASDAQ OMX Helsinki totalled 149.3 million (150.9 million) at a total value of EUR 296.1 million (EUR 443.1 million). The highest quotation during the year was EUR 3.16 (EUR 4.28) and the lowest EUR 1.30 (EUR 1.26). The reported trade-weighted average price was EUR 1.99 (EUR 2.94), and the share closed at EUR 2.94 (EUR 1.68). The company's year-end market capitalisation totalled EUR 649.9 million (EUR 371.3 million).
There was a signifi cant increase in the number of Finnish Citycon shareholders during the
period under review. On 31 December 2009, Citycon had a total of 3,733 (2,190) registered shareholders, of which ten were account managers of nominee-registered shares. Nomineeregistered and other international shareholders held 198.7 million (210.7 million) shares, or 89.9 per cent (95.3%) of shares and voting rights in the company. Information on the company's major shareholders and on the breakdown of shareholding as well as on the notifi cations of changes in shareholdings received in 2009 can be found on page 51 of the Financial Statements 2009.
At the beginning of 2009, the company's registered share capital totalled EUR 259,570,510.20 and the number of shares was 220,998,989. During the period, there were no changes in the company's share capital but the number of shares grew by 60,746 shares, which the company issued through directed, free share issues in May as part of the company's long-term, share-based incentive plan. At the end of the period, the company's registered share capital totalled EUR 259,570,510.20, and the number of shares amounted to 221,059,735. 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.
The AGM for 2007 authorised the Board of Directors to decide on issuing new shares and disposing of treasury shares through paid or free share issues. New shares can be issued and treasury shares can be transferred to shareholders in proportion to their existing shareholding or through a directed share issue waiving the pre-emptive rights of shareholders,
| 2004 B | 2004 C | |
|---|---|---|
| No. of options granted | 1 090 000 | 1 050 000 |
| No. held by Veniamo-Invest Oy ¹) | 210 000 | 250 000 |
| Subscription ratio, option/shares | 1:1.2127 | 1:1.2127 |
| Subscription price per share, EUR ²) | 2.5908 | 4.2913 |
| Subscription period began | 1.9.2007 | 1.9.2008 |
| Subscription period ends | 31.3.2010 | 31.3.2011 |
| No. of options exercised | - | - |
| No. of shares subscribed with options | - | - |
| No. of options available for share subscription | 1 090 000 | 1 050 000 |
| No. of shares that can be subscribed | 1 321 843 | 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 2009. The share subscription prices are reduced by half of the per-share dividends paid and per-share equity returned. However, the share subscription price is always at least EUR 1.35.
if a weighty fi nancial reason exists for doing so. The Board can also decide on a free share issue to the company itself. In addition, the Board was authorised to grant special rights referred to in Section 1 of Chapter 10 of the Finnish Limited Liability Companies Act, entitling their holders to receive, against payment, new shares in the company or treasury shares. The combined number of new shares to be issued and treasury shares to be transferred, including the shares granted on the basis of the special rights, may not exceed 100 million. At the end of the accounting period, the number of shares that can be issued or disposed of on the basis of the authorisation totalled 72,317,432. This authorisation is valid until 13 March 2012.
The 2009 AGM 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 accounting period.
At the end of the accounting period, the Board had no other authorisations.
The Annual General Meeting held on 15 March 2004 authorised the issue of a maximum of 3,900,000 stock options to the personnel of the Citycon Group. The stock options are listed on the NASDAQ OMX Helsinki exchange.
The subscription period for Citycon's stock options 2004 A expired at the end of March. A total of 386,448 shares were subscribed with these options. The number of unexercised stock options 2004 A totalled 694,925. These stock options have been deleted as worthless from their holders' book-entry accounts.
The enclosed table shows details of the 2004 stock options. The full terms and conditions of the stock option plan are available on the corporate website at www.citycon.com/options. No shares were subscribed based on the stock options 2004 during the period under review.
Shares and Stock Options Held by Members of the Board of Directors and the Company Executives
The members of the Board of Directors of Citycon, its CEO, the other Corporate Management Committee members and their related parties held a total of 331,877 company shares on 31 December 2009. These shareholdings represent 0.15 per cent of the company's total shares and total voting rights.
At year end 2009, the CEO of Citycon held a total of 100,000 stock options 2004B and 140,000 stock options 2004C. Other members of the Corporate Management Committ ee jointly held a total of 280,000 stock options 2004C. The maximum number of shares that can be subscribed for exercising these outstanding stock options amounts to 630,604 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 Committ ee can be found on the corporate website at www.citycon.com/insiders.
The key terms of the company's CEO's executive contract can be found on page 40 in the Financial Statements.
Initiated development projects In the beginning of January, the company announced the start of two planned development projects.
A new shopping centre will be built in Myllypuro in 2010-2012 to replace the current retail centre, and 255 new privately fi nanced rental and right-of-occupancy fl ats will be built adjacent to it, as well as an underground parking hall for 270 cars. The total value of the project is over EUR 60 million, of which EUR 20 million will pay for the shopping centre and parking hall to be owned by Citycon. At the beginning of 2009, Citycon sold all apartments to be built within the shopping centre, as well as the three companies incorporated by it to manage their ownership. Residential investors are responsible for the building development and the leasing of their own apartments. The leasable area of the new shopping centre will be about 7,300 square metres. Currently, over 60 per cent of the premises have been leased.
Citycon's shopping centre Espoontori in Espoo will be thoroughly redeveloped in 2010. The entire shopping centre of 10,400 square metres and the adjacent parking hall will be renovated and modernised to fi t the requirements of today's clientele. Citycon's investment in this project will total EUR 18 million.
In February, the company announced that shopping centre Forum in Jyväskylä, Finland, will be redeveloped completely. The company's investment in this project will total EUR 16 million.
Citycon's total investment in these three projects amounts to approximately EUR 54 million.
Subscription of shares with option rights A total of 356,558 new Citycon shares were subscribed for at a per-share subscription price of EUR 2.5908 exercising stock options B under the company's 2004 stock option scheme at the start of the year. The share subscription price of EUR 923,770.47 was recognised under the invested unrestricted equity fund. The new shares are expected to be registered in the Trade Register on 15 February 2010. Following the registration, the number of registered Citycon shares will amount to 221,416,293 shares. The unexercised 2004 B stock options entitle their holders to subscribe for additional 965,285 new shares.
The parent company's retained earnings amount to EUR 27.5 million, of which profi t for the period is EUR 18.5 million. On 31 December 2009, the funds in the parent company's invested unrestricted equity fund amounted to a total of EUR 157.0 million.
The Board of Directors proposes to the Annual General Meeting of 11 March 2010 that a per-share dividend of EUR 0.04 be paid out for the fi nancial year ending on 31 December 2009, and that 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 16 March 2010 and that the dividend and equity return be paid on 7 April 2010.
Moreover, the Board of Directors proposes that the remaining profi t for the period be recognised in the retained earnings.
In the view of the Board of Directors, the proposed distribution of profi ts 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 profi t. In order to implement this strategy, the company will pursue value-added activities while cautiously monitoring the market for potential acquisitions.
Due to market changes and tight fi nancing conditions, the initiation of planned projects will be carefully evaluated against stricter preleasing criteria. Citycon intends to continue the divestment of its non-core properties to improve the property portfolio and strengthen the company's fi nancial position. The company is also considering alternative property fi nancing sources.
The grocery sales sector, which accounts for a substantial share of the company's lease portfolio, cushions the impact of rental cyclicality in the company's business. The company expects only moderate changes in net rental income, direct operating profi t and direct result in 2010, since new (re)development projects will not be fully operational until towards the end of 2010.
Amsterdam, 9 February 2010
Citycon Oyj
Board of Directors
| EUR million | Note | 1 Jan.-31 Dec. 2009 | 1 Jan.-31 Dec. 2008 |
|---|---|---|---|
| Total revenues | 6 | 194.6 | 207.4 |
| Total expenses excluding fi nancial expenses | 7 | -184.3 | -312.5 |
| Gross rental income | 177.8 | 173.0 | |
| Service charge income | 8.5 | 5.3 | |
| Turnover | 8 | 186.3 | 178.3 |
| Property operating expenses | 9, 12 | 60.2 | 56.3 |
| Other expenses from leasing operations | 10 | 0.7 | 0.2 |
| Net rental income | 125.4 | 121.8 | |
| Administrative expenses | 11, 12, 13 | 17.8 | 16.9 |
| Other operating income and expenses | 14 | 0.0 | 6.1 |
| Fair value gains on investment property | 5.5 | 15.3 | |
| Fair value losses on investment property | -102.9 | -231.4 | |
| Net fair value losses/gains on investment property | -97.4 | -216.1 | |
| Investment property disposal proceeds | 2.8 | 7.7 | |
| Carrying value of investment property disposals | -2.7 | -7.6 | |
| Profi t/losses on disposal of investment property | 0.1 | 0.1 | |
| Operating profi t/loss | 10.3 | -105.0 | |
| Financial income | 50.8 | 72.3 | |
| Financial expenses | -98.5 | -129.6 | |
| Net fi nancial income and expenses | 15 | -47.7 | -57.3 |
| Loss/profi t before taxes | -37.5 | -162.3 | |
| Current taxes | 16 | -6.5 | -6.6 |
| Change in deferred taxes | 16, 28 | 7.0 | 30.0 |
| Income taxes | 0.6 | 23.4 | |
| Loss/profi t for the period | -36.9 | -138.9 | |
| Loss/profi t att ributable to | |||
| Parent company shareholders | -34.3 | -124.1 | |
| Minority interest | -2.6 | -14.8 | |
| Earnings per share att ributable to parent company shareholders: | |||
| Earnings per share (basic), EUR | 18 | -0.16 | -0.56 |
| Earnings per share (diluted), EUR | 18 | -0.16 | -0.56 |
| Direct result per share (diluted), (diluted EPRA EPS), EUR | 17, 18 | 0.23 | 0.20 |
| Direct result | 17 | 50.9 | 43.8 |
| Indirect result | 17 | -85.2 | -167.9 |
| Loss/profi t for the period att ributable to parent company shareholders | -34.3 | -124.1 |
| EUR million | Note | 1 Jan.-31 Dec. 2009 | 1 Jan.-31 Dec. 2008 |
|---|---|---|---|
| Other comprehensive expenses/income | |||
| Net losses/gains on cash fl ow hedges | 15, 27 | -6.7 | -30.5 |
| Income taxes relating to cash fl ow hedges | 28 | 1.8 | 7.9 |
| Exchange gains/losses on translating foreign operations | 2.0 | -13.0 | |
| Other comprehensive expenses/income for the period, net of tax | -3.0 | -35.6 | |
| Total comprehensive loss/profi t for the period | -39.9 | -174.5 | |
| Total comprehensive loss/profi t att ributable to | |||
| Parent company shareholders | -38.4 | -156.8 | |
| Minority interest | -1.4 | -17.8 |
| EUR million | Note | 31 Dec. 2009 | 31 Dec. 2008 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Investment properties | 19 | 2,147.4 | 2,111.6 |
| Property, plant and equipment | 21 | 0.7 | 0.7 |
| Intangible assets | 22 | 0.9 | 0.9 |
| Deferred tax assets | 28 | 8.6 | 6.8 |
| Derivative fi nancial instruments and other non-current assets | 27 | 3.8 | 6.0 |
| Total non-current assets | 2,161.4 | 2,126.1 | |
| Current assets | |||
| Investment properties held for sale | 20 | 26.0 | - |
| Trade and other receivables | 23 | 46.1 | 21.7 |
| Derivative fi nancial instruments | 27 | - | 13.9 |
| Cash and cash equivalents | 24 | 19.8 | 16.7 |
| Total current assets | 91.8 | 52.4 | |
| Total assets | 2,253.2 | 2,178.5 |
| EUR million | Note | 31 Dec. 2009 | 31 Dec. 2008 |
|---|---|---|---|
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||
| Equity att ributable to parent company shareholders | 25 | ||
| Share capital | 259.6 | 259.6 | |
| Share premium fund | 131.1 | 131.1 | |
| Fair value reserve | -22.7 | -17.7 | |
| Invested unrestricted equity fund | 155.2 | 177.3 | |
| Translation reserve | -9.5 | -10.3 | |
| Retained earnings | 217.3 | 259.1 | |
| Total equity att ributable to parent company shareholders | 731.1 | 799.1 | |
| Minority interest | 36.8 | 38.2 | |
| Total shareholders' equity | 767.9 | 837.3 | |
| LIABILITIES | |||
| Long-term liabilities | |||
| Interest-bearing liabilities | 26 | 1,175.4 | 1,149.2 |
| Derivative fi nancial instruments | 27 | 31.5 | 24.7 |
| Other non-interest-bearing liabilities | 1.0 | 0.8 | |
| Deferred tax liabilities | 28 | 50.0 | 57.1 |
| Total long-term liabilities | 1,257.9 | 1,231.7 | |
| Short-term liabilities | |||
| Interest-bearing liabilities | 26 | 146.3 | 50.3 |
| Derivative fi nancial instruments | 27 | 1.5 | 4.9 |
| Trade and other payables | 29 | 79.7 | 54.3 |
| Total short-term liabilities | 227.4 | 109.5 | |
| Total liabilities | 1,485.3 | 1,341.2 | |
| Total liabilities and shareholders' equity | 2,253.2 | 2,178.5 | |
| Net asset value per share | |||
| Equity per share, EUR | 18 | 3.31 | 3.62 |
| Net asset value (EPRA NAV) per share, EUR | 18 | 3.54 | 3.88 |
| EPRA NNNAV per share, EUR | 18 | 3.35 | 3.80 |
| EUR million | Note | 1 Jan.-31 Dec. 2009 | 1 Jan.-31 Dec. 2008 |
|---|---|---|---|
| Cash fl ow from operating activities | |||
| Loss/Profi t before taxes | -37.5 | -162.3 | |
| Adjustments: | |||
| Depreciation and amortization | 13 | 0.7 | 0.5 |
| Net fair value losses and gains on investment property | 19 | 97.4 | 216.1 |
| Profi t/losses on disposal of investment property | 19 | -0.1 | -0.1 |
| Financial income | 15 | -50.8 | -72.3 |
| Financial expenses | 15 | 98.5 | 129.6 |
| Other adjustments | 0.0 | -5.6 | |
| Cash fl ow before change in working capital | 108.3 | 105.8 | |
| Change in working capital | 10.7 | -2.1 | |
| Cash generated from operations | 119.0 | 103.7 | |
| Interest expenses and other fi nancial expenses paid | -54.4 | -63.1 | |
| Interest income and other fi nancial income received | 0.3 | 1.2 | |
| Realized exchange rate gains and losses | 11.8 | 5.1 | |
| Taxes paid/received | -10.4 | 0.2 | |
| Net cash from operating activities | 66.2 | 47.2 | |
| Cash fl ow from investing activities | |||
| Acquisition of subsidiaries, less cash acquired | 19 | - | -24.0 |
| Capital expenditure on investment properties | 19 | -130.5 | -58.2 |
| Capital expenditure on PP&E and intangible assets | 21, 22 | -0.4 | -68.8 |
| Sale of investment properties | 19 | 3.1 | 7.0 |
| Net cash used in investing activities | -127.9 | -144.1 | |
| Cash fl ow from fi nancing activities | |||
| Equity contribution from minority shareholders | - | 25.9 | |
| Proceeds from short-term loans | 149.7 | 72.1 | |
| Repayments of short-term loans | -77.1 | -125.8 | |
| Proceeds from long-term loans | 295.1 | 623.3 | |
| Repayments of long-term loans | -273.0 | -473.6 | |
| Dividends and return from the invested unrestricted equity fund | -30.9 | -30.9 | |
| Net cash from fi nancing activities | 63.8 | 90.9 | |
| Net change in cash and cash equivalents | 2.1 | -6.1 | |
| Cash and cash equivalents at period-start | 24 | 16.7 | 24.2 |
| Eff ects of exchange rate changes | 1.0 | -1.4 | |
| Cash and cash equivalents at period-end | 24 | 19.8 | 16.7 |
| Equity att ributable to parent company shareholders | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| EUR million | Share capital |
Share Premium fund |
Fair | Invested | value unrestricted Translation reserve equity fund diff erences |
Retained earnings |
Total | Minority interest |
Total share- holders' equity |
| Balance at 31 Dec. 2007 | 259.6 | 131.1 | 4.9 | 199.3 | -0.3 | 387.3 | 982.0 | 28.9 | 1,010.9 |
| Total comprehensive loss/profi t for the period | -22.6 | -10.0 | -124.1 | -156.8 | -17.8 | -174.5 | |||
| Share subscriptions based on stock options | 0.0 | 0.0 | 0.0 | ||||||
| Recognized gain in the equity arising from convertible bond buybacks | 4.6 | 4.6 | 4.6 | ||||||
| Dividends and return from the invested unrestricted equity fund | -22.1 | -8.8 | -30.9 | -30.9 | |||||
| Share-based payments (Note 30) | 0.3 | 0.3 | 0.3 | ||||||
| Acquisition of minority interests | - | 27.0 | 27.0 | ||||||
| Balance at 31 Dec. 2008 | 259.6 | 131.1 | -17.7 | 177.3 | -10.3 | 259.1 | 799.1 | 38.2 | 837.3 |
| Total comprehensive loss/profi t for the period | -5.0 | 0.8 | -34.3 | -38.4 | -1.4 | -39.9 | |||
| Recognized gain in the equity arising from convertible bond buybacks | 1.1 | 1.1 | 1.1 | ||||||
| Sale of treasury shares | 0.0 | 0.0 | 0.0 | ||||||
| Dividends and return from the invested unrestricted equity fund | -22.1 | -8.8 | -30.9 | -30.9 | |||||
| Share-based payments (Note 30) | 0.2 | 0.2 | 0.2 | ||||||
| Acquisition of minority 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 |
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 offi ce being Pohjoisesplanadi 35 AB, FI-00100 Helsinki. The Board of Directors has approved the fi nancial statements on 9 February 2010.
Citycon has prepared its consolidated fi nancial statements in accordance with the International Financial Reporting Standards (IFRS) and applied the IFRS/IAS standards, eff ective as of 31 December 2009, which refer to the approved applicable standards and their interpretations under European Union Regulation No. 1606/2002. Notes to the consolidated fi nancial 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 fi nancial statements. EPRA is the representative body of the publicly traded real estate sector in Europe, publishing recommendations on the presentation of fi nancial information for the sector.
Citycon has used IFRS as the primary basis of its fi nancial statements preparation from the beginning of 2005. Available-for-sale fi nancial assets, derivative contracts and investment properties, are measured at fair value following their initial recognition. In other respects, the consolidated fi nancial statements are prepared at historical cost. The fi nancial statements are shown in millions of euros.
Preparing the fi nancial statements under IFRS requires that the company's management make certain accounting estimates and assumptions, which have an eff ect 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 that are believed to be reasonable under the circumstances, the results of which form the basis of making management judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may diff er 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 aff ects only that period, or in the period and future periods if the revision aff ects both current and future periods. The section 'Management's judgement in applying the most signifi cant 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 interpretations applied in 2009 The following new standards as well as amendments and interpretations to the existing standards have been adopted in the fi nancial statements 2009:
IAS 1 (Revised), 'Presentation of fi nancial statements' (eff ective from 1 January 2009). The revised standard requires to present 'nonowner changes in equity' in the statement of comprehensive income under other comprehensive income. The group will apply IAS 1 (Revised) from 1 January 2009.
IFRS 8, 'Operating segments' replaces IAS 14, 'Segment reporting'. The new standard requires a 'management approach', under which segment information is presented on the same basis as that used for internal reporting purposes. This has not changed the number of reportable segments presented.
IFRIC 15, 'Agreements for the construction of real estate' (eff ective from 1 January 2009). IFRIC 15 clarifi es which standard (IAS 18, 'Revenue' or IAS 11 'Construction contracts') should be applied to transactions involving agreements for the construction of real estate.
IAS 40 (Amendment), 'Investment property' and consequential amendments to IAS 16 (eff ective from 1 January 2009). Property that is under construction or development is within the scope of IAS 40. These are measured at fair value when applying the fair value model. If the fair value is not reliably measurable, the property is measured at cost until the construction is completed or when the fair value can be measured reliably.
The adoption of IFRS 8 Operating Segments and IAS 1 Presentation of Financial Statements amended the presentation of financial statements and the adoption of IAS 40 Investment Property changed the measurement of development properties. The adoption of IFRS 8 Operating Segments did not change the number or the content of the reported segments. The corporate management follows the segments' direct operating profit. Therefore, direct operating profi t for each segment is presented due to the adoption of IFRS 8. The adoption of IAS 1 Presentation of Financial Statements changed the income statement format and the format of statement of changes in the shareholders' equity. Due to the adoption of IAS 40 Investment Property, Citycon measures its development properties in fair value instead of at cost. Since the development properties are now measured at fair value just like the operative investment properties, Citycon no longer presents development properties separately from investment properties on the statement of fi nancial position.
The following interpretations to published standards are mandatory for accounting periods beginning on or aft er 1 July 2008 but is not relevant to the group's operations:
3.3 Standards, amendments and interpretations to existing standards that are not yet eff ective 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 aft er 1 January 2010 or later periods, but the group has not early adopted them:
IAS 27 (revised), 'Consolidated and separate financial statements', (effective from 1 July 2009). The revised standard requires the eff ects of all transactions with noncontrolling interests to be recorded in equity if there is no change in control and these transactions will
no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is remeasured to fair value, and a gain or loss is recognised in profi t or loss. The group will apply IAS 27 (revised) prospectively to transactions with non-controlling interests from 1 January 2010.
IFRS 3 (Revised), 'Business combinations' (eff ective from 1 July 2009). The revised standard continues to apply the acquisition method to business combinations, with some signifi cant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classifi ed as debt subsequently re-measured through the income statement. 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. All acquisition-related costs should be expensed. The group expects to apply IFRS 3 (revised) prospectively to all business combinations from 1 January 2010.
Other standards, interpretations and amendments not relevant to the Group:
Amendment: IFRS 2 Group cash-settled share-based payment transactions,
IFRIC 17 Distribution of non-cash assets to owners,
The consolidated fi nancial 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 fi nancial and operating policies for the purpose of profi ting from its operations. The consolidated fi nancial 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 profi t allocation are eliminated in the consolidated fi nancial statements.
Mutual real estate companies refer to jointly controlled assets included in the consolidated fi nancial 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 diff erences resulting from currency translation are entered under fi nancial 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 fi nancial period and balance sheets using the exchange rate quoted on the balance sheet date. Any resulting exchange rate diff erence is recognised as a translation diff erence under shareholders' equity. Translation diff erences resulting from the elimination of the historical cost of foreign subsidiaries and items included in shareholders' equity following their acquisitions 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 the investment properties are subject to a fair value model valuation, which is conducted by an external appraiser for the fi rst 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 refl ects 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, 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 2009 and 2008, Citycon had its properties valued by an external appraiser on a quarterly basis.
A ten-year cash fl ow 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 lease 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-specifi c yield requirements. Yield requirements are determined for each property in view of property-specifi c and market risks. The total value of the property portfolio is calculated as the sum of the individual properties based on the cashfl ow 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. Due to the amendment to IAS 40 Investment Property (eff ective from 1 January 2009), properties that are under construction or being extended, are within the scope of IAS 40 and measured at fair value instead of at cost. Citycon changed its accounting policy as of 1 January 2009, measured its development properties at fair value and recognized the changes in fair value in the statement of comprehensive income. In the comparative period 2008, development properties were value at costs until the project was completed. After completion development properties were reclassifi ed as investment properties and valued at fair value.
The fair value of (re)development projects is determined under IAS 40 and Citycon uses a special project model to measure the fair value of its (re)development projects. This project model is a cash fl ow analysis, which takes 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 considers using the model on a case-by-case basis. As a rule, Citycon makes use of the model as soon as the Board of Directors has made a positive investment decision on the project and the external appraiser considers that suffi cient information required for a reliable valuation is available.
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. Investment property is derecognised when it is disposed of or withdrawn from use permanently and its disposal has no future economic value. When property is under 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 signifi cant risks and rewards of ownership have been transferred to the buyer. If agreed to construct a property, the revenue from disposal is recognized 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.
Property, plant and equipment (PPE) are measured at historical cost less straight-line depreciation and any impairment losses. These assets consist mainly of offi ce machinery and equipment and other tangible assets such as artworks. Machines and equipment leased under fi nance 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, and if any major diff erences occur between the values, the depreciation plan will be revised to correspond to these new values. The following depreciation periods apply:
under finance lease. Such an asset is depreciated over its useful economic life or within the shorter lease term. 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 benefi ts fl ow to the company.
Intangible assets are measured at cost less amortisation and any impairment losses.
These assets include computer software amortised on a straight-line basis over five years.
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.
4.7 Financial assets and liabilities
As required by IAS 39, fi nancial assets are classifi ed into the following categories for measurement purposes: originated loans and other receivables not held for trading, available-forsale assets and financial assets at fair value through profi t or loss. The classifi cation of a fi nancial 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 fi nancial assets which the company has created by providing money, goods or services directly to the debtor. Initially recognised at cost, these assets under short-term and long-term financial assets are carried at amortised cost. Their balance sheet value is impaired by the amount of any credit loss.
Investments intended to be held for an indefinite period are classified as availablefor-sale assets, which can be sold at the time deemed appropriate. These financial assets are carried at fair value subsequent to their initial recognition. 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.
Citycon concludes derivative contracts for hedging purposes only. Derivative contracts not fulfi lling the criteria set for hedge accounting or for which Citycon has decided not to apply hedge accounting, are classifi ed as fi nancial assets or liabilities at fair value through profi t or loss.
Financial liabilities are classifi ed as fi nancial liabilities at fair value through profi t or loss or as other liabilities. Non-derivative debt contracts concluded for purposes other than trading are classifi ed as other fi nancial liabilities.
Financial assets and liabilities are recognised in the balance sheet on the basis of the sett lement date. They are initially measured at cost, and are recognised at amortised cost using the eff ective yield method.
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.
4.7.2 Derivative contracts and hedge accounting 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 fl ow risk. These interest rate swaps hedge against volatility in future interest payment cash fl ows (cash fl ow hedging) resulting from interest rate fl uctuations, 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 fi nancial instruments' fair value change stemming from effective hedging is recognised under other comprehensive income, whereas the amount stemming from ineff ective hedging is recognised in the statement of comprehensive income under fi nancial income and expenses. The amount in the fair value reserve is recognised in the statement of comprehensive income during the period when the cash fl ow from the hedged item is realised and aff ects earnings. If the criteria for hedge accounting are not met, changes in fair value are recognised in full through profi t or loss.
Interest payments based on interest rate swaps are included in interest expenses. Changes in fair value through profi t or loss are recognised as fi nancial 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 longterm liabilities in the statement of financial position. The fair value of interest rate swaps is based on the present value of estimated future cash fl ows.
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 fi nancial 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 fi nancial 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 fi nancial asset measured at amortised cost is impaired, this resulting impairment loss must be recognised in the statement of comprehensive income. If the amount of impairment loss decreases during a subsequent fi nancial period and this fall can be regarded as relating to an event aft er the date of impairment recognition, the asset's impairment will be reversed.
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outfl ow of resources will be required to sett le the obligation and a reliable estimate of the amount of this obligation can be made.
Long-term provisions shown in the fi nancial statements are based on net present values.
Borrowing costs are usually expensed as incurred. However, borrowing costs, such as interest expenses and arrangement fees, directly att ributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. Capitalisation commences when the refurbishment of a property, 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 att ributable to a construction project multiplied by the capitalisation rate. The capitalisation rate is the weighted average cost of Citycon's borrowings for the fi nancial year. Borrowing costs arising from the purchase cost of a land are also capitalized on the development project, but only when activities necessary to prepare the asset for development are in progress on the purchased land.
Loan-related transaction expenses clearly associated with a specifi c loan are included in the loan's cost on an accrual basis and recognised as interest expenses using the eff ective interest method.
Income taxes include taxes based on 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 diff erences arising between
the tax bases of assets and liabilities and their carrying amounts. A major temporary diff erence may arise between the fair value and taxable value of investment properties. In such a case, taxes are calculated on the diff erence between 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 property disposal does not lead to tax implications, due to the ownership structure.
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 profi t will be available against which the temporary diff erences 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.
Citycon's income consists mainly of rental income from investment properties. Rental income is recognised in the income statement on a straight-line basis over the term of the lease. 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. 4.12 Lease incentives
Citycon uses alteration work on leased premises as lease incentives. On behalf of the lessee, Citycon performs alteration work on premises rented by the lessee and charges the lessee for the resulting costs in terms 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.
Citycon has also leases that involve rentfree periods or rent reductions. These kinds of incentives are spread evenly over the lease term, even if the rent payments are not made on such a basis.
Leases based on Citycon as a lessor renting out investment properties are not classifi ed as fi nance leases.
Leases, for which Citycon acts as a lessee, are classifi ed as fi nance 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 classifi ed 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 fi nancial 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 fi nancial liabilities.
Leases are classifi ed 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 classifi ed into two categories: defi ned contribution plans and defi ned benefi t plans. Where contributions under defi ned contribution plans are recognised in the income statement for the period during which such contributions are made, defi ned benefi t pension plans are based on actuarial calculations.
Defi ned benefi t schemes' assets are measured at fair value, their obligations at discounted present value and any net surplus or defi cit is recognized in the balance sheet. Service cost is spread systematically over working life. Professional actuaries perform the calculations using projected credit method.
Citycon has applied IFRS 2 Share-based Payment to its stock options granted aft er 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 sharebased 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 optionpricing model to measure the fair value of stock options.
The preparation of the fi nancial statements in accordance with IFRS requires management to make estimates and assumptions. When accounting policies are applied, also judgement is required from management. These may aff ect the reported assets and liabilities, recognition of income and expense for the period and other information such as presentation of contingent liabilities. Even though these estimates base on management's best knowledge and current information available, the actual results may diff er from the estimates.
5.1 Fair value of investment properties Measuring the fair value of investment property forms one of the most signifi cant accounting policy aspects, which 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, whose measurement involves the management's judgement and assumptions.
Citycon uses a net rental income based cash fl ow analysis to measure the fair value of its investment properties. Net rental income and the yield requirement of each property must be defi ned for the cash fl ow 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 fl ow analysis are the following items:
• Market rents, which aff ect rental income in the cash fl ow analysis, are determined by market supply and demand. The external appraiser defi nes the market rents for each property.
Other variables involving judgment and assumptions are the current leases' extension probability, the duration of vacant areas, investments, the infl ation rate and the rental growth assumptions.
Citycon uses a special project model to measure the fair value of its development projects. This project model is a cash fl ow analysis, which takes account of capital expenditure on the development project and the property's future cash flows according to the development project's schedule. Although the model applies principles similar to those used in the cash fl ow analysis measuring the investment property's fair value, it is bett er suited to modelling changes, in many cases signifi cant ones, in premises and contracts during the development project. In the project model, the property can be divided into diff erent parts and the current leases, future leases, project schedules and capital expenditure can be defi ned for each of these parts, which may comprise the various fl oors, areas or a larger space within the building. In addition, risks associated with the development project and the property's future use can be defi ned for the yield requirement for development projects. Following this, each part is subject to the cash fl ow analysis and the parts' combined cash fl ow constitutes the development project's fair value.
The use of a special project model in the valuation of development projects requires the management's judgement or assumptions about future investments, rental agreements and the project's timetable.
Deferred tax assets and liabilities are calculated on temporary diff erences arising from the diff erence between carrying amounts used for fi nancial reporting purposes and amounts used for taxation purposes. The tax rate used is the rate enacted on the balance sheet date in each jurisdiction.
The most signifi cant temporary diff erence relates to the diff erence between the fair value and taxable value of investment properties. Other main temporary diff erences relate to unused tax losses and fi nancial instruments.
When recognizing deferred tax assets, management exercises judgement, as the deferred tax asset is recognized only to the extent it is considered probable that future taxable income will be available against which the deductible temporary diff erence can be utilized.
No deferred tax is recognized on subsidiaries' retained earnings to the extent that such difference is considered unlikely to be discharged in the future.
5.3 Business acquisitions and asset acquisitions
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's management exercises judgement in assessing whether the purchase of an investment property or an investment property portfolio is classifi ed 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's management assesses each investment property purchase on a case-by-case basis.
When investment properties are sold, Citycon's management exercises judgement in assessing whether the sale is classifi ed as a real estate sale or sale of a business. In the case of real estate sale, IAS 40 Investment Property or IAS 2 Inventory based accounting treatment is applied. In case of sale of a business, IFRS 5, Noncurrent Assets Held for Sale and Discontinued Operations based accounting treatment is applied. Non-current assets (or disposal groups) are classifi ed 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. For the sale to be highly probable:
Individual investment properties are also reported in the manner described above when the set criteria are met.
| EUR million | 2009 | 2008 |
|---|---|---|
| Gross rental income (excl. | ||
| straight-lining of lease incentives) 176.8 | 173.0 | |
| Straight-lining of lease incentives | 1.0 | - |
| Gross rental income | 177.8 | 173.0 |
| Service charge income | 8.5 | 5.3 |
| Other operating income | 0.0 | 6.1 |
| Fair value gains on investment property 5.5 | 15.3 | |
| Investment property disposal proceeds 2.8 | 7.7 | |
| Total | 194.6 | 207.4 |
Total revenues disclosure is in accordance with the EPRA Recommendations.
| EXPENSES | ||
|---|---|---|
| EUR million | 2009 | 2008 |
| Property operating expenses | 60.2 | 56.3 |
| Other expenses from leasing operations 0.7 | 0.2 | |
| Administrative expenses | 17.8 | 16.9 |
| Fair value losses on | ||
| investment property | 102.9 | 231.4 |
| Carrying value of investment | ||
| property disposals | 2.7 | 7.6 |
| Total | 184.3 | 312.5 |
Total expenses disclosure is in accordance with the EPRA Recommendations.
Total revenues deducted by total expenses equals to operating profi t/loss in the consolidated statement of comprehensive income.
The presentation of segment information is based on the Group's geographical business units. These geographical business units are based on the Group's organisational structure and internal fi nancial reporting. Furthermore, the Group's profi t 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 follow property-specifi c net rental income.
Segment assets and liabilities consist of operating items which the segment uses in its operations or which, on a reasonable basis, can be allocated to the segment. Unallocated items include tax and fi nancial 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 fi nancial 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.
Principal customers include five biggest tenants whose one's share of gross rental income exceeds 10 per cent. For these tenants proportion of gross rental income and their segment is specifi ed. Proportion of gross rental income is based on rent roll at 31 Dec. 2009.
Geographical segments are Finland, Sweden and the Baltic countries. Other segment includes mainly the administrative expenses arising from the Group's headquarter.
Citycon is Finland's largest company in the shopping-centre business. It owns 22 shopping centres in addition to 45 other retail properties. 32 out of Finnish properties are located in the Helsinki Metropolitan Area and 35 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. 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 profi t | 86.3 | 20.0 | 8.8 | -7.4 | 107.7 |
| Indirect administrative expenses | - | 0.1 | - | - | 0.1 |
| Indirect other operating income and expenses | - | - | - | - | - |
| Net fair value losses/gains on investment property | -65.1 | -19.6 | -12.7 | 0.0 | -97.4 |
| Profi t on disposal of investment property | 0.1 | - | - | - | 0.1 |
| Operating profi t/loss | 21.2 | 0.3 | -3.8 | -7.4 | 10.3 |
| Net fi nancial income and expenses | -47.7 | -47.7 | |||
| Income tax expense | 0.6 | 0.6 | |||
| Loss for the period | -36.9 | ||||
| Allocated assets | |||||
| Investment properties | 1,442.0 | 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 fi nancial 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 | |||
| Derivative fi nancial instruments | 33.0 | 33.0 | |||
| 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 |
| EUR million 1 Jan.-31 Dec. 2008 | Finland | Sweden | Baltic countries |
Other | Total |
|---|---|---|---|---|---|
| Gross rental income | 122.5 | 41.1 | 9.3 | - | 173.0 |
| Service charge income | 4.3 | 0.7 | 0.3 | 0.0 | 5.3 |
| Turnover | 126.8 | 41.9 | 9.6 | 0.0 | 178.3 |
| Property operating expenses | 35.8 | 17.7 | 2.8 | - | 56.3 |
| Other expenses from leasing operations | 0.1 | 0.1 | 0.0 | 0.0 | 0.2 |
| Net rental income | 90.9 | 24.1 | 6.8 | 0.0 | 121.8 |
| Administrative expenses | 5.5 | 3.2 | 0.6 | 7.2 | 16.5 |
| Other operating income and expenses | 0.0 | 0.1 | 0.0 | 0.0 | 0.1 |
| Direct operating profi t | 85.4 | 21.0 | 6.2 | -7.2 | 105.3 |
| Indirect administrative expenses | 0.0 | - | - | 0.4 | 0.4 |
| Indirect other operating income and expenses | 5.9 | - | - | 0.1 | 6.0 |
| Net fair value losses/gains on investment property | -154.3 | -70.1 | 8.3 | - | -216.1 |
| Profi t on disposal of investment property | 0.1 | 0.0 | - | - | 0.1 |
| Operating loss/profi t | -62.9 | -49.1 | 14.4 | -7.4 | -105.0 |
| Net fi nancial income and expenses | -57.3 | -57.3 | |||
| Income tax expense | 23.4 | 23.4 | |||
| Loss for the period | -138.9 | ||||
| Allocated assets | |||||
| Investment properties | 1,494.0 | 462.4 | 155.3 | - | 2,111.6 |
| Other allocated assets | 10.3 | 4.5 | 0.9 | 24.4 | 40.1 |
| Unallocated assets | |||||
| Deferred tax assets | 6.8 | 6.8 | |||
| Derivative fi nancial instruments | 19.8 | 19.8 | |||
| Assets | 1,504.2 | 466.9 | 156.3 | 51.1 | 2,178.5 |
| Allocated liabilities | |||||
| Trade and other payables | 10.4 | 7.9 | 1.1 | 34.8 | 54.3 |
| Unallocated liabilities | |||||
| Interest-bearing liabilities | 1,199.5 | 1,199.5 | |||
| Deferred tax liabilities | 57.1 | 57.1 | |||
| Derivative fi nancial instruments | 29.6 | 29.6 | |||
| Other unallocated liabilities | 0.8 | 0.8 | |||
| Liabilities | 10.4 | 7.9 | 1.1 | 1,321.8 | 1,341.2 |
| Capital expenditure | 69.2 | 65.6 | 22.7 | 0.3 | 157.9 |
| EUR million | 2009 | 2008 |
|---|---|---|
| Retail -Shopping centres | 155.4 | 146.3 |
| Retail -Supermarkets and shops | 30.9 | 31.9 |
| Total | 186.3 | 178.3 |
Proportion of gross rental income is based on rent roll at 31 Dec. 2009.
| EUR million | 2009 | 2008 |
|---|---|---|
| Heating and electricity | 20.2 | 19.4 |
| Maintenance expenses | 20.1 | 18.4 |
| Property personnel expenses | 0.5 | 0.6 |
| Administrative and management fees | 2.5 | 2.9 |
| Marketing expenses | 4.4 | 2.5 |
| Property insurances | 0.7 | 0.7 |
| Property taxes | 4.7 | 4.9 |
| Repair expenses | 6.9 | 6.7 |
| Other property operating expenses | 0.1 | 0.2 |
| Total | 60.2 | 56.3 |
| EUR million | 2009 | 2008 |
|---|---|---|
| Total | 0.7 | 0.2 |
|---|---|---|
| Credit losses | 0.6 | 0.1 |
| expenses and commissions | 0.1 | 0.1 |
| Tenant improvement |
Signifi cant tenant improvements are recognized as investments.
Credit losses include credit loss provisions of EUR 0.3 million (EUR 0.0 million). Credit loss provisions are presented in the note 23. Trade and other receivables .
| EUR million | 2009 | 2008 |
|---|---|---|
| Personnel expenses | 10.5 | 9.3 |
| Consulting fees, advisory fees | ||
| and outside services | 2.1 | 2.9 |
| Offi ce and other administrative expenses 4.5 | 4.3 | |
| Depreciation and amortization | 0.7 | 0.5 |
| Total | 17.8 | 16.9 |
Consulting and advisory fees in the administration expenses include the following audit fees and services from audit fi rm Ernst&Young:
| EUR million | 2009 | 2008 |
|---|---|---|
| Audit fees | 0.2 | 0.2 |
| Other advisory services | 0.1 | 0.2 |
| Total | 0.3 | 0.4 |
| EUR million | 2009 | 2008 |
|---|---|---|
| Salaries and emoluments of management | ||
| CEO | 0.4 | 0.3 |
| Management committ ee | 0.9 | 0.8 |
| Board | 0.6 | 0.6 |
| Other wages and salaries | 6.3 | 5.8 |
| Pension charges: | ||
| defi ned contribution plans | 1.1 | 1.1 |
| Pension charges: defi ned benefi t plans 0.1 | - | |
| Social charges | 1.2 | 1.0 |
| Expense of share based payments | 0.4 | 0.3 |
| Total | 11.1 | 9.9 |
Personnel expenses of EUR 0.5 million (EUR 0.6 million) is included in property operating expenses and EUR 10.5 million (EUR 9.3 million) in administrative expenses.
Defi ned benefi t plans are described in the note 30. Employee benefi ts in the section C) Retirement benefi t obligation and the share-based payment plans are described in the note 30. Employee benefi ts.
| Average Group staff during period | 2009 | 2008 |
|---|---|---|
| Finland | 77 | 75 |
| Sweden | 32 | 27 |
| The Baltic Countries | 8 | 7 |
| Total | 117 | 109 |
Information on management benefi ts are presented in the notes to the consolidated fi nancial statements in the note 33. Related party transactions.
Depreciation and amortization of EUR 0.7 million (EUR 0.5 million) on machinery and equipment as well as on intangible assets is included in the administrative expenses.
| EUR million | 2009 | 2008 |
|---|---|---|
| Other operating income | 0.0 | 6.5 |
| Other operating expenses | 0.0 | -0.3 |
| Total | 0.0 | 6.1 |
In 2008, other operating income included EUR 5.9 million compensation from city of Helsinki relating to early termination of land lease agreement in Myllypuro retail premises.
A) Recognized in the income statement
| EUR million | 2009 | 2008 |
|---|---|---|
| Interest income | 0.3 | 0.8 |
| Foreign exchange gains | 50.0 | 68.7 |
| Fair value gain from derivatives | - | 0.4 |
| Other fi nancial income | 0.6 | 2.4 |
| Financial income, total | 50.8 | 72.3 |
| Interest expenses | 52.8 | 60.6 |
| Foreign exchange losses | 49.9 | 68.9 |
| Fair value loss from derivatives | 0.1 | 3.5 |
| Development interest capitalized | -7.7 | -7.1 |
| Other fi nancial expenses | 3.4 | 3.8 |
| Financial expenses, total | 98.5 | 129.6 |
| Net fi nancial income and expenses | 47.7 | 57.3 |
| Of which att ributable to | ||
| fi nancial instrument categories: |
| Net fi nancial income and expenses | 47.7 | 57.3 |
|---|---|---|
| Other liabilities and receivables | 0.3 | 0.1 |
| Derivative fi nancial instruments | 13.8 | -20.8 |
| Finance lease liabilities | 0.0 | 0.0 |
| and receivables | 33.6 | 77.9 |
| Interest-bearing loans |
In 2009, foreign exchange losses of EUR 0.7 million (gains of EUR 21.0 million) were recognised in the statement of comprehensive income from foreign exchange derivative agreements.
Interest on development expenditure is capitalized at a rate of 4.47% as at 31 December 2009 (5.12% as at 31 December 2008).
Citycon's interest expenses in the statement of comprehensive income statement contain interest expenses from interest-bearing debt and in addition also all interest expenses arising from derivative fi nancial instruments which are used in hedging purposes. Additional information on Citycon's derivative fi nancial instruments, their fair values and hedge accounting treatment can be found in note 27. Financial Instruments.
B) Recognized in the other comprehensive income
| EUR million | 2009 | 2008 |
|---|---|---|
| Losses/gains arising during | ||
| the period from cash fl ow hedges | -20.6 | -27.1 |
| Less: interest expenses | ||
| recognized in the income | ||
| statement on cash fl ow hedges | 13.8 | -3.4 |
| Net losses/gains on cash fl ow hedges -6.7 | -30.5 |
| EUR million | 2009 | 2008 |
|---|---|---|
| Current tax | 6.3 | 6.6 |
| Tax for prior periods | 0.1 | -0.1 |
| Deferred tax | -7.0 | -30.0 |
| Income taxes | -0.6 | -23.4 |
Reconciliation between tax charge and Group tax at Finnish tax rate (26%):
| EUR million | 2009 | 2008 |
|---|---|---|
| Loss/profi t before taxes | -37.5 | -162.3 |
| Taxes at Finnish tax rate | -9.7 | -42.2 |
| Fair value gains and losses | ||
| from subsidiaries owned abroad | 8.4 | 22.2 |
| Diff erence in foreign | ||
| subsidiaries' tax rate | -1.1 | -1.0 |
| Unrecognised tax | ||
| receivables from losses | 2.2 | 3.8 |
| Utilisation of previously | ||
| unrecognised tax losses | 0.1 | 0.1 |
| Other | -0.5 | -6.2 |
| Income taxes | -0.6 | -23.4 |
| Eff ective tax rate | 1.5% | 14.4% |
Due to the nature of Citycon's business and the obligation to apply IFRS, the consolidated statement of comprehensive income includes several items related to non-operating activities. In addition to the consolidated statement of comprehensive income under IFRS, Citycon also presents its loss/ profi t att ributable to parent company shareholders with direct result and indirect result separately specifi ed, in an att empt to enhance the transparency of its operations and to facilitate comparability of reporting periods. Direct result describes the profi tability of the Group's operations during the reporting period disregarding the eff ects of fair value changes, gains or losses on sales, other extraordinary items and other comprehensive income items. Earnings per share calculated based on direct result corresponds to the earnings per share defi nition recommended by EPRA.
| EUR million | 2009 | 2008 |
|---|---|---|
| DIRECT RESULT | ||
| Net rental income | 125.4 | 121.8 |
| Direct administrative expenses | -17.7 | -16.5 |
| Direct other operating income and expenses | 0.0 | 0.1 |
| Direct operating profi t | 107.7 | 105.3 |
| Direct net fi nancial income and expenses | -47.7 | -54.2 |
| Direct current taxes | -6.2 | -4.8 |
| Direct change in deferred taxes | -0.2 | 0.2 |
| Direct minority interest | -2.8 | -2.8 |
| Total | 50.9 | 43.8 |
| Direct result per share, diluted (Diluted EPRA EPS) ¹) | 0.23 | 0.20 |
| EUR million | 2009 | 2008 |
| INDIRECT RESULT | ||
| Net fair value losses/gains on investment property | -97.4 | -216.1 |
| Profi t/loss on disposal of investment property | 0.1 | 0.1 |
| Indirect administrative expenses | -0.1 | -0.4 |
| Indirect other operating income and expenses | 0.0 | 6.0 |
| Movement in fair value of fi nancial instruments | -0.1 | -3.1 |
| Indirect current taxes | -0.3 | -1.8 |
| Change in indirect deferred taxes | 7.3 | 29.7 |
| Indirect minority interest | 5.3 | 17.6 |
| Total | -85.2 | -167.9 |
| Indirect result per share, diluted ¹) | -0.39 | -0.76 |
| Loss/Profi t for the period att ributable to parent company shareholders | -34.3 | -124.1 |
1) Calculation of the number of the shares is presented in the note 18. Earnings per share and net asset value per share
Earnings per share (basic) is calculated by dividing the net profi t att ributable to parent company shareholders by the share issue adjusted weighted average number of shares.
A) Earnings per share calculated from the profi t for the period
| 2009 | 2008 | |
|---|---|---|
| Earnings per share (basic) | ||
| Loss/profi t att ributable to parent company shareholders (EUR million) | -34.3 | -124.1 |
| Issue-adjusted average number of shares (1,000) | 221,035.1 | 220,991.5 |
| Earnings per share (basic) (EUR) | -0.16 | -0.56 |
| Earnings per share, diluted | ||
| Loss/profi t att ributable to parent company shareholders (EUR million) | -34.3 | -124.1 |
| Expenses from convertible loan, the tax eff ect deducted (EUR million) | - | - |
| Loss/profi t used in the calculation of diluted earnings per share (EUR million) | -34.3 | -124.1 |
| Issue-adjusted average number of shares (1,000) | 221,035.1 | 220,991.5 |
| Convertible capital loan impact (1,000) | - | - |
| Adjustments for stock options (1,000) | - | - |
| Adjustments for long-term share-based incentive plan (1,000) | - | - |
| Issue-adjusted average number of shares used in | ||
| the calculation of diluted earnings per share (1,000) | 221,035.1 | 220,991.5 |
| Diluted earnings per share (EUR) | -0.16 | -0.56 |
The incremental shares from assumed conversions or any income or cost related to dilutive potential shares are not included in calculating year 2009 and 2008 diluted per-share amounts because the profi t att ributable to parent company shareholders was negative.
B) Earnings per share calculated from the direct result for the period
| 2009 | 2008 | |
|---|---|---|
| Direct result per share, diluted (Diluted EPRA EPS) | ||
| Direct result (EUR million) (Note 3) | 50.9 | 43.8 |
| Expenses from convertible loan, the tax eff ect deducted (EUR million) | 4.2 | 5.6 |
| Profi t used in the calculation of diluted earnings per share (EUR million) | 55.1 | 49.4 |
| Issue-adjusted average number of shares (1,000) | 221,035.1 | 220,991.5 |
| Convertible capital loan impact (1,000) | 18,466.5 | 25 396.0 |
| Adjustments for stock options (1,000) | - | 835.0 |
| Adjustments for long-term share-based incentive plan (1,000) | 0.5 | - |
| Issue-adjusted average number of shares used in | ||
| the calculation of diluted earnings per share (1,000) | 239,502.1 | 247,222.5 |
| Direct result per share, diluted (Diluted EPRA EPS) | 0.23 | 0.20 |
The diluted earnings per share is calculated adjusting the weighted average number of shares to assume conversion of all dilutive potential shares. The Group has currently 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 shares of the company. Based on the conversion price applicable on the balance sheet date, the dilution from full conversion of the loan nominal is approximately 18.2 million shares. When calculating the dilution eff ect, the loss/profi t for the period is adjusted with the expenses arising from the convertible loan (including the tax eff ect).
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 into account the total number of shares that can be subscribed based on stock options, less the number of shares that group could acquire by using the assets received from the exercise of the stock options.
assigned a per-share value, which is compared against 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 eff ect. In calculation of the dilutive eff ect of the share-based incentive scheme, the number of shares the company would have received if it had used assets in the value of the remaining work performance to acquire treasury shares at fair value is considered a deducting 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 January 2009 | 148 | 220,998,989 |
| 29 May 2009 | 217 | 221,059,735 |
| 365 | ||
| Weighted average (daily) | ||
| number of shares | 221,035,104 |
| 2009 | 2008 | |||||
|---|---|---|---|---|---|---|
| EUR million |
Issue adjusted number of shares (1,000) |
per share, EUR |
EUR million |
Issue adjusted number of shares (1,000) |
per share, EUR |
|
| Equity att ributable to parent | ||||||
| company shareholders | 731.1 | 221,035.1 | 3.31 | 799.1 | 220,991.5 | 3.62 |
| Deferred taxes from the diff erence of fair | ||||||
| value and fi scal value of investment properties 48.7 | 221,035.1 | 0.22 | 56.0 | 220,991.5 | 0.25 | |
| Fair value of fi nancial instruments | 2.2 | 221,035.1 | 0.01 | 2.1 | 220,991.5 | 0.01 |
| Net asset value (EPRA NAV) | 782.0 | 221,035.1 | 3.54 | 857.1 | 220,991.5 | 3.88 |
| Deferred taxes from the diff erence of fair | ||||||
| value and fi scal value of investment properties -48.7 | 221,035.1 | -0.22 | -56.0 | 220,991.5 | -0.25 | |
| The diff erence between the secondary | ||||||
| market price and fair value of | ||||||
| bonds and capital loans | 9.5 | 221,035.1 | 0.04 | 40.8 | 220,991.5 | 0.18 |
| Fair value of fi nancial instruments | -2.2 | 221,035.1 | -0.01 | -2.1 | 220,991.5 | -0.01 |
| EPRA NNNAV | 740.6 | 221,035.1 | 3.35 | 839.9 | 220,991.5 | 3.80 |
Citycon divides its investment properties into two categories: investment properties under construction (IPUC) and operative investment properties. Due to the adoption of amended IAS 40 Investment property -standard, Citycon presents the development properties under the investment properties. Therefore, previously presented properties under redevelopment -category is extended to include also development properties and is called investment properties under construction (IPUC).
At the period end Investment properties under construction (IPUC) - category included the following shopping centres: Liljeholmstorget, Åkersberga Centrum and Lahden Hansa. At 31 December 2008 this category included Liljeholmstorget and Rocca al Mare, as well as extension projects in Åkersberga Centrum and Lippulaiva.
| EUR million 2009 | Investment properties under construction (IPUC) |
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 |
| Capitalized 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 diff erences | 10.6 | 17.3 | 27.9 |
| Transfer between IPUC and operative investment properties and | |||
| transfer into investment properties held for sale | -88.3 | 70.6 | -17.7 |
| At period-end | 269.8 | 1877.6 | 2,147.4 |
| , EUR million 2008 |
Investment properties under construction (IPUC) |
Operative investment properties |
Investment properties total |
| At period-start | 544.5 | 1,704.4 | 2,248.9 |
| Acquisitions during the period | 6.8 | 10.6 | 17.4 |
| Investments during the period | 120.9 | 12.0 | 132.9 |
| Disposals during the period | 0.0 | -7.6 | -7.6 |
| Capitalized interest | 6.8 | 0.0 | 6.8 |
| Fair value gains on investment property | 4.8 | 10.5 | 15.3 |
| Fair value losses on investment property | -44.5 | -186.9 | -231.4 |
| Exchange diff erences | -28.8 | -41.6 | -70.4 |
| Transfer between IPUC and operative investment properties | -338.7 | 338.5 | -0.2 |
| At period-end | 271.8 | 1,839.9 | 2,111.6 |
Under 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 with a net rental income based cash fl ow analysis. Market rents, occupancy rate, operating expenses and yield requirement form the key variables used in the cash fl ow analysis.
Realia Management Oy within Realia Group conducted the valuation of Citycon's properties for the Annual Report 2009 and 2008. The resulting fi xed fees based on the 2009 valuations total EUR 0.1 million (EUR 0.1 million in 2008).
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 haven't been taken into account by the external appraiser 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 | 2009 | 2008 |
|---|---|---|
| Value determined by the external appraiser as at Dec. 31 | 2,162.4 | 2,021.0 |
| Capital expenditure on development projects | 11.0 | 2.6 |
| Transfer into investment properties held for sale | -26.0 | - |
| Development properties (before the amendment of IAS 40) | - | 88,0 |
| Fair value of investment properties as at Dec. 31 | 2,147.4 | 2,111.6 |
The segments' assumptions used by the external appraiser in the cash fl ow analysis were as follows at 31 December 2009 and at 31 December 2008:
| EUR million | Finland | Baltic Sweden Countries |
Average | |
|---|---|---|---|---|
| 1 Jan.-31 Dec. 2009 | ||||
| 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 1) | 21.4 | 22.1 |
| Vacancy during the cash fl ow period (%) | 5.0 | 5.1 | 4.2 | 5.0 |
| Infl ation assumption (%) | 2.00 | 2.00 | 3.00 | - |
| Operating expense growth assumption (%) | 2.25 | 2.25 | 3.25 | - |
| 1 Jan.-31 Dec. 2008 | ||||
| Yield requirement (%) | 6.4 | 6.4 | 7.4 | 6.4 |
| Initial yield (%) | 6.6 | 6.4 | 6.7 | 6.5 |
| Reversionary yield (%) | 6.8 | 6.8 | 8.4 | 6.9 |
| Market rents (€/m²) | 21.9 | 12.3 | 20.2 | 19.9 |
| Vacancy during the cash fl ow period (%) | 4.2 | 5.0 | 3.1 | 4.3 |
| Infl ation assumption (%) | 2.00 | 2.00 | 3.00 | - |
| Operating expense growth assumption (%) | 2.25 | 2.25 | 3.25 | - |
1) Includes the development projects of the Liljeholmstorget and Åkersberga shopping centres.
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 eff ect on the company's profi t for the fi nancial year, they do not have an immediate impact on cash fl ow. 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-fl ow 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 2,162.4 million defi ned by the external appraiser at 31 December 2009 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 15 percent. The value is not as sensitive to changes in long-term vacancy or expenses.
| +10% | |||
|---|---|---|---|
| 1,975.6 | |||
| 2,475.8 | |||
| 2,078.7 | |||
| 2,177.5 | 2,132.3 | ||
| -5% 2,270.6 2,005.7 2,203.8 |
±0% 2,162.4 2,162.4 2,162.4 2,162.4 |
Value of properties (EUR million) +5% 2,064.5 2,318.4 2,121.0 2,147.3 |
Investment properties held for sale comprises buildings rights acquired for the Myllypuro development project, which were sold to three diff erent residential investors through share transactions that took place on 12 January 2010. In addition, investment properties held for sale include 181 residential units in Åkersberga Centrum, which were agreed in July 2009 to be sold to Tegeltornet AB .
| EUR million | 2009 | 2008 |
|---|---|---|
| Acquisition cost Jan. 1 | - | - |
| Investments during the period | 8.3 | - |
| Transfer from investment properties 17.7 | - | |
| Accumulated acquisition cost Dec. 31 26.0 | - |
| EUR million | 2009 | 2008 |
|---|---|---|
| Acquisition cost Jan. 1 | 2.0 | 1.8 |
| Additions during the period | 0.3 | 0.2 |
| Accumulated acquisition cost Dec. 31 2.3 | 2.0 | |
| Accumulated depreciation and | ||
|---|---|---|
| impairment losses, Jan. 1 | 1.3 | 1.0 |
| Depreciation during the period | 0.4 | 0.2 |
| Accumulated depreciation and | ||
| impairment losses, Dec 31. | 1.6 | 1.3 |
| Net carrying amount Jan 1. | 0.8 | 0.9 |
Property, plant and equipment consisted mainly of machinery and equipment.
Net carrying amount Dec 31. 0.7 0.7
Machinery and equipment acquired through financial leases amounted to EUR 0.3 million (EUR 0.3 million).
| EUR million | 2009 | 2008 |
|---|---|---|
| Acquisition cost Jan. 1 | 1.6 | 1.0 |
| Additions during the period | 0.3 | 0.6 |
| Accumulated acquisition cost Dec.3 1 1.9 | 1.6 |
| Accumulated depreciation and | ||
|---|---|---|
| impairment losses, Jan. 1 | 0.6 | 0.4 |
| Depreciation during the period | 0.3 | 0.2 |
| Accumulated depreciation and | ||
| impairment losses, Dec 31. | 1.0 | 0.6 |
| Net carrying amount Jan 1. | 0.9 | 0.5 |
| Net carrying amount Dec 31. | 0.9 | 0.9 |
Intangible assets consisted mainly of computer soft wares.
| EUR million | 2009 | 2008 |
|---|---|---|
| Trade receivables | 4.7 | 2.4 |
| Credit loss provision | -0.3 | - |
| Trade receivables (net) | 4.4 | 2.4 |
| Accrued income and prepaid expenses 2.2 | 1.7 | |
| Tax receivables (incl. VAT-receivables) 37.9 | 10.5 | |
| Other receivables | 1.6 | 7.2 |
| Total | 46.1 | 21.7 |
| Ageing structure of trade receivables: | |||
|---|---|---|---|
| EUR million | 2009 | 2008 | |
| NOT past due nor impaired | 0.7 | 0.4 | |
| Past due, less than 1 month | 1.6 | 1.4 | |
| Past due, 1-3 months | 1.9 | 0.3 | |
| Past due, 3-6 months | 0.2 | 0.1 | |
| Past due, 6-12 months | 0.2 | 0.1 | |
| Past due, 1-5 years | 0.1 | 0.1 | |
| Past due, over 5 years | 0.0 | 0.0 | |
| Total | 4.7 | 2.4 |
| EUR million | 2009 | 2008 |
|---|---|---|
| At the beginning of the year | - | - |
| Charge for the year | -0.3 | - |
| Utilized | 0.0 | - |
| Unused amounts reversed | 0.0 | - |
| Credit loss provision | ||
| at the end of the year | -0.3 | - |
| EUR million | 2009 | 2008 |
|---|---|---|
| Cash in hand and at bank | 13.5 | 16.7 |
| Short-term deposits | 6.4 | - |
| Total | 19.8 | 16.7 |
Cash and cash equivalents comprise in the cash fl ow statement comprise the items presented above.
Trade receivables are non-interest bearing and their payments terms vary between 2-20 days. Rent collaterals equal 2-6 months rents and other payments.
A) The eff ect of the changed number of shares on funds included in the shareholders' equity
| Number of |
Share- capital |
premium fund |
Invested Share unrestricted equity fund shares (EUR million) (EUR million) (EUR million) (EUR million) |
Total | |
|---|---|---|---|---|---|
| 1 Jan. 2008 | 220,981,211 | 259.6 | 131.1 | 199.3 | 590.0 |
| Directed share issue without payment | 7,040 | - | - | - | - |
| Share subscriptions based on stock options | 10,738 | - | - | 0.0 | 0.0 |
| Return from the invested | |||||
| unrestricted equity fund | - | - | - | -22.1 | -22.1 |
| 31 Dec. 2008 | 220,998,989 | 259.6 | 131.1 | 177.3 | 567.9 |
| Directed share issue without payment | 60,746 | - | - | - | - |
| Sale of treasury shares | - | - | - | 0.0 | 0.0 |
| Return from the invested | |||||
| unrestricted equity fund | - | - | - | -22.1 | -22.1 |
| 31 Dec. 2009 | 221,059,735 | 259.6 | 131.1 | 155.2 | 545.8 |
B) Description of funds and reserves included in shareholders' equity
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.
Pursuant to the new Finnish Companies Act, which came into force in 2007, Citycon presents the invested unrestricted equity fund as a separate equity item. 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 2009 and 2008 due to subscriptions under option schemes and a directed share issues without payment.
Translation reserve contains translation diff erences arising from the currency translation of foreign subsidiaries' fi nancial statements.
Fair value reserve contains fair value changes of derivative instruments used to hedge cash fl ows.
A) Breakdown of interest-bearing liabilities
| EUR million | Eff ective interest rate (%) |
Carrying amount 2009 |
Carrying amount 2008 |
|---|---|---|---|
| Long-term interest-bearing liabilities | |||
| Loans from fi nancial institutions | |||
| EUR 435 million term loan facility | EURIBOR + 0.625 | 359.7 | 353.5 |
| EUR 165 million revolving credit facility | EURIBOR + 0.450 | 160.3 | 142.7 |
| EUR 200 million term loan facility | EURIBOR + 0.625 | 199.8 | 194.2 |
| EUR 150 million revolving credit facility | EURIBOR +0.500 | 43.9 | - |
| SEK 500 million bank loan | STIBOR + 0.550 | 48.8 | 46.0 |
| EEK 470 million bank loan | 5.599 | 26.4 | 28.8 |
| LTL 52 million bank loan | VILIBOR + 0.525 | 9.8 | 11.3 |
| EUR 30 million bank loan | EURIBOR + 0.750 | 30.0 | 30.0 |
| EUR 50 million revolving credit facility | EURIBOR + 0.600 | 49.9 | 45.0 |
| Other loans from fi nancial institutions | - | 138.0 | 154.2 |
| Convertible capital loan 1/2006 | 7.580 | 69.3 | 73.3 |
| Subordinated capital loan 1/2005 | 4.700 | - | 70.0 |
| Bond 1/2009 | 5.461 | 39.4 | - |
| Finance lease liabilities | - | 0.2 | 0.1 |
| Total long-term interest-bearing liabilities | 1,175.4 | 1,149.2 | |
| Short-term interest-bearing liabilities | |||
| Loans from fi nancial institutions |
| Total short-term interest-bearing liabilities | 146.3 | 50.3 | |
|---|---|---|---|
| Finance lease liabilities | - | 0.2 | 0.2 |
| Subordinated capital loan 1/2005 | 4.700 | 70.0 | - |
| Other loans from fi nancial institutions | - | 25.5 | 30.0 |
| Current portion of loans from fi nancial institutions | - | 18.0 | 20.1 |
| Commercial papers | - | 32.6 | - |
Carrying amount of term loan facilities, convertible capital loan 1/2006 and bond 1/2009 are stated at amortised cost using the eff ective yield method. The fair values of liabilities are shown in the note 27. Financial Instruments.
The market value of the option component at issue date of the convertible capital loan 1/2006 of EUR 15.1 million is recognized in equity att ributable to parent company shareholders under share premium fund.
| EUR million | 2009 | 2008 |
|---|---|---|
| 1-2 years | 190.9 | 90.7 |
| 2-3 years | 91.0 | 170.6 |
| 3-4 years | 466.3 | 44.6 |
| 4-5 years | 300.0 | 485.0 |
| over 5 years | 127.3 | 358.2 |
| Total | 1,175.4 | 1,149.2 |
| EUR million | 2009 | 2008 |
|---|---|---|
| EUR | 682.0 | 751.5 |
| EEK | 44.3 | 45.5 |
| SEK | 439.2 | 341.6 |
| LTL | 9.8 | 10.6 |
| Total | 1,175.4 | 1,149.2 |
| Total | 146.3 | 50.3 |
|---|---|---|
| LTL | 0.8 | 0.8 |
| SEK | 31.6 | 0.1 |
| EEK | 1.2 | 1.2 |
B) Terms and conditions of subordinated capital loans
Citycon Oyj issued on 17 June 2005 fi ve-year subordinated capital loan 1/2005 of EUR 70 million at a fi xed 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 is 17 June 2010.
maturity date of 17 June 2010, interest on the unpaid loan principal aft er that date is 12-month Euribor plus 5 percentage points. Interest can be paid only if this amount can be allocated to profi t distribution based on the company's and its Group's latest adopted balance sheet.
4) The company has the right to repay the loan's principal in part or in full on each interest-payment date at a rate determined by discounting the remaining cash fl ows up to the repayment date. The interest rate to be used for discounting is the Finnish government reference rate for the same period plus 1.5 percentage points.
Citycon Oyj issued on 2 August 2006 seven-year convertible capital loan 1/2006 of EUR 110 million at a fi xed annual nominal interest rate of 4.50 per cent. After the buyback transactions performed during 2008 and 2009, the outstanding amount was EUR 76.5 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 18,214,285 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.
repaid in full on its maturity date of 2 August 2013, interest on the unpaid loan principal aft er that date is 3-month Euribor plus 5 percentage points. Interest can be paid only if this amount can be allocated to profi t distribution based on the company's and its Group's latest adopted balance sheet. In the event, that the interest is not fully paid in any interest payment date, the interest on the unpaid interest amount aft er the interest payment date is 3-month Euribor plus 5 percentage points.
nominal amount of EUR 33.5 million with a weighted average purchase price of 53.5%. The amount repurchased by Citycon equals approximately 30.5 per cent of the initial nominal amount of the bonds issued. Net fi nancial expenses in the statement of comprehensive income include a one-off gain of EUR 0.6 million for buybacks of the convertiber bonds.
| Maturity of fi nance lease liabilities: | ||||
|---|---|---|---|---|
| Finance lease liabilities | ||||
| - minimum lease payments | ||||
| Not later than 1 year | 0.2 | 0.2 | ||
| 1-5 years | 0.2 | 0.1 | ||
| Over 5 years | 0.0 | 0.0 | ||
| Total | 0.3 | 0.4 | ||
| EUR million | 2009 | 2008 |
|---|---|---|
| Finance lease liabilities - present value of minimum lease payments | ||
| Not later than 1 year | 0.2 | 0.2 |
| 1-5 years | 0.2 | 0.1 |
| Over 5 years | 0.0 | 0.0 |
| Total | 0.3 | 0.4 |
| Future fi nance charges on fi nance leases | 0.0 | 0.0 |
| Total fi nance lease liabilities | 0.3 | 0.4 |
Citycon's fi nance leases mainly apply to computer hardware and machinery and equipment.
A) Carrying amount and fair value of fi nancial assets and liabilities
| EUR million | Note | Carrying amount 2009 |
Fair value 2009 |
Secondary market price 2009 |
Carrying amount 2008 |
Fair value 2008 |
Secondary market price 2008 |
|---|---|---|---|---|---|---|---|
| Financial assets | |||||||
| Cash and cash equivalents | 24 | 19.8 | 19.8 | - | 16.7 | 16.7 | - |
| Investments | 0.0 | 0.0 | - | 0.0 | 0.0 | - | |
| Trade and other receivables | 23 | 46.1 | 46.1 | - | 21.7 | 21.7 | - |
| Derivative fi nancial instruments | 3.7 | 3.7 | - | 19.8 | 19.8 | - | |
| Financial liabilities | |||||||
| Loans from fi nancial institutions | 26 | 1,142.6 | 1,145.2 | - | 1,055.9 | 1,058.1 | - |
| Convertible capital loan 1/2006 | 26 | 69.3 | 76.5 | 66.9 | 73.3 | 82.9 | 48.1 |
| Subordinated capital loan 1/2005 | 26 | 70.0 | 70.0 | 70.1 | 70.0 | 70.0 | 64.0 |
| Bond 1/2009 | 26 | 39.4 | 40.0 | 40.0 | - | - | - |
| Finance lease liabilities | 26 | 0.3 | 0.3 | - | 0.4 | 0.4 | - |
| Trade and other payables and liabilities | 29 | 79.7 | 79.7 | - | 54.3 | 54.3 | - |
| Derivative fi nancial instruments | 33.0 | 33.0 | - | 29.6 | 29.6 | - | |
Citycon applies IFRS valuation principles when determining the fair value of fi nancial instruments. The following presents the principles for determining the fair values of all fi nancial assets and liabilities.
Derivative fi nancial instruments are initially measured at cost in the statement of fi nancial position and subsequently re-measured at their fair value on each balance-sheet date. The fair value of interestrate swaps is calculated using the present value of estimated future cash fl ows. The fair value of a forward agreement is based on the diff erence between the exchange rate of the agreement and the prevailing exchange rate fi xing on each balance-sheet date. The fair value of derivative fi nancial instruments is the estimated amount that the Group would receive or pay to sett le the related agreements.
Fair value of interest rate derivative financial instruments are determined by the counterparty banks using customary valuation techniques used by market participants in the OTC derivative market. The fair value of interest rate derivative fi nancial instruments corresponds to level 2 according to IFRS7p27a. The fair value of foreign exchange derivative contracts are based on quoted market prices.
Citycon's loans from fi nancial institutions are fl oating rate loans which have fair value equal to the nominal amount of the loan. The diff erence between the fair value and carrying amount is the unamortized capitalized arrangement fees of the loans.
Convertible capital loan 1/2006 is a fi xed rate loan which has fair value equal to the nominal amount of
the loan. The diff erence between the fair value and carrying amount is the unamortized capitalized arrangement fees of the loan together with the market value of the option component at issue date.
Subordinated capital loan 1/2005 is a fi xed rate loan which has fair value equal to the nominal amount of the loan. The carrying amount of the loan equals the fair value.
Bond1/2009 is a fi xed rate loan which has fair value equal to the nominal amount of the loan. The diff erence between the fair value and carrying amount is the unamortized capitalized arrangement fees of the loan.
The fair value of fi nance leases is based on discounted future cash fl ows. The discount rate used corresponds to that applied to similar leases.
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.
When calculating the NNNAV in accordance with EPRA's recommendations the shareholders' equity is adjusted using EPRA's guidelines so that the bonds and capital loans are valued based on secondary market prices. The carrying amount and fair value of the bonds and capital loans in accordance with Citycon's accounting principles are diff erent from this secondary market price. Due to this the Subordinated capital loan 1/2005, Convertible capital loan 1/2006 and Bond 1/2009 have been in calculation of this key fi gure valued using price from the secondary market on the balance sheet date which can be seen in the table above. The secondary market price for Subordinated capital loan 1/2005 was 100.08 per cent, for Convertible capital loan 1/2006 87.50 per cent and for Bond 1/2009 100.00 per cent as of 31 December 2009.
B) Group's derivative fi nancial instruments
| EUR million | Nominal amount 2009 |
2009 | Fair value Nominal amount 2008 |
Fair value 2008 |
|---|---|---|---|---|
| Interest rate derivatives | ||||
| Interest rate swaps | ||||
| Maturity: | ||||
| less than 1 year | 48.8 | -1.2 | 86.0 | 1.4 |
| 1-2 years | 70.0 | 1.0 | 46.0 | -1.5 |
| 2-3 years | 60.0 | -3.0 | 70.0 | 3.5 |
| 3-4 years | 262.9 | -14.5 | 41.8 | -1.9 |
| 4-5 years | 198.0 | -7.3 | 228.8 | -10.1 |
| over 5 years | 97.9 | -4.0 | 119.0 | -8.9 |
| Subtotal | 737.6 | -29.0 | 591.7 | -17.5 |
| Forward agreements | ||||
|---|---|---|---|---|
| Maturity: | ||||
| less than 1 year | 22.0 | -0.2 | 23.1 | 7.6 |
| Total | 759.7 | -29.2 | 614.8 | -9.8 |
Interest on fl oating-rate loans is mainly fi xed every six months and the interest-rate swaps have been concluded for the same days to ensure the optimum interest cash fl ow hedging.
Citycon uses interest rate swaps to hedge the interest rate cash fl ow risk. The Group applies hedge accounting to majority of its interest rate swaps, under IAS 39, according to which the amount of fi nancial instruments' fair value change stemming from eff ective hedging is recognised under other comprehensive income.
The fair value of derivative fi nancial instrument represent the market value of the instrument with prices prevailing on the balance sheet date. Derivative fi nancial instruments are used in hedging the interest rate risk of the interest bearing liabilities and foreign currency risk.
The fair values include foreign exchange gain of EUR 3.5 million (EUR 16.2 million) which is recognized in the statement of comprehensive income.
Hedge accounting is applied for interest rates swaps which have nominal amount of EUR 713.2 million (EUR 568.7 million).
The average fi xed interest rate of the interest rate swaps as at 31 December, 2009 was 3.79 per cent (4.20%).
| Cash fl ow hedging | ||||
|---|---|---|---|---|
| EUR million | 2009 | 2009 | 2008 | 2008 |
| Interest rate | ||||
| derivatives | Assets Liabilities Assets Liabilities | |||
| Fair value | - | -30.6 | 0.0 | -23.9 |
Citycon's cash fl ow hedges consist of interest rate and cross-currency swaps which are used to protect against exposure of changes in Citycon's interest expense cash outfl ow for variable rate interest bearing debt. Hedged instruments consist of long term fl oating rate debt and short term fl oating rate debt which is expected to be refi nanced at 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 eff ective portions of derivatives designed as cash fl ow hedges. Gains and losses are initially recognized under other comprehensive income and are transferred to the statement of comprehensive income when the forecast cash fl ows aff ect the statement of comprehensive income.
At 31 December 2009 and at 31 December 2008, interest rate derivatives assigned as cash fl ow hedges were assessed to be highly eff ective. The fair values (net of taxes) of these derivatives were EUR -22.7 million (EUR -17.7 million) and the change of these fair values (net of taxes) EUR -5.0 million (EUR -22.6 million) is recognized under other comprehensive income taking account the tax eff ect.
Citycon uses a holistic Enterprise Risk Management (ERM) programme. The objective of the risk management is to ensure that Citycon will reach its business targets and identify the key risks which may threaten the ability to meet the targets before they realize.
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 is subject to updating in order to take into account changes in the 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 ERM process includes identifi cation of existing and planning of new risk mitigation plans in the event that current action are not deemed suffi cient for each risk identifi ed. Successful risk management decreases the likelihood of risk realizing and mitigate the negative eff ects from realized risks.
Risk management under ERM in Citycon comprises of three main elements, namely 1) risk management implemented into the main business processes 2) risk reporting and 3) continuous improvement of risk management.
Citycon has analyzed and identifi ed fi ve main business processes during the implementation of ERM which are property acquisitions, takeover of acquired properties, shopping centre management, property development and planning and control. Each main process has been carefully analyzed from a risk management angle and a detailed process description has been prepared for each process determining the target state of the process aft er implementation of improvement measures and taken into account risk management requirements. The implementation of these common best practices into the daily operations forms an essential part of the daily risk management throughout the whole organization is to adhere to these practices.
Risk reporting process gathers analytical data on risks and the respective mitigation plans which are used when risks are reported to the Board of Directors. During the risk reporting period each business unit and legal and fi nance units independently define their near term targets, risks threatening these targets and mitigation plans which relate to the risks. In order to evaluate the importance of each risk, an estimate on the loss associated with the risk is determined together with probability of risk realization and eff ectiveness of each mitigation plan on the loss and/or probability. Additional feature of the risk reporting is for each business unit to report the potentially realized risks during the previous year and mitigation plans which have been put into effect during the period. Risk data is inputt ed into one group wide risk register from which the business unit risk reports are prepared to the Board of Directors and Audit Committ ee. In addition, from the risk register also a consolidated Citycon Group risk report and analysis is prepared which aims to recognize the group level risk concentrations cross the business units. Risk reports to the Board of Directors and Audit Committ ee are prepared in conjunction with budgeting during Autumn and strategy review during Spring. Risk management and business unit risk reports are additionally discussed four times a year in Corporate Management Committ ee.
Citycon aims to a continuous evaluate and develop its ERM process and risk management in general. Four times a year a risk management supervisory group meets and its tasks include the acceptance of the risk reports, evaluate annually the suffi ciency of the risk management measures taken in the light of the identifi ed risks, monitor the progress in implementation of the mitigation plans and annually asses the adequacy of the risk management capabilities of Citycon.
Each business unit and legal and fi nance units have a dedicated person responsible for the ERM process who is in charge of the reporting the risks and mitigation plans and follow-up on the implementation of the plans. Group Treasurer prepares the risk report to the Board of Directors and Audit Committee. Members of the risk management supervisory group are CEO, CFO, Head of Legal Aff airs, Group Treasurer and business unit directors or the dedicated risk management person from each business unit.
Financial risks have been defi ned to be business critical risks for Citycon. Financial risk of Citycon arises from fi nancial instruments which are mainly used to raise fi nancing for operations. The group also has interest rate and foreign exchange derivatives which are used in used to manage the interest rate and currency risks arising from the operations and fi nancing sources. The Board of Directors has approved a Treasury Policy which defi nes the objectives, responsibilities and risk management indicators applicable for interest rate, foreign exchange, counterparty, liquidity and electricity risk management. The execution of interest rate risk management is done by the Group Treasurer under the supervision of the CFO. Group Treasurer reports the 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 fl ow, liquidity risk, credit risk and foreign currency risk. These risks are summarised below.
Citycon's key fi nancial risk is the interest rate risk of its interest bearing liabilities where the changes in money market interest rates lead to fl uctuations in future interest cash fl ows on fl oating rate borrowings. Interest rate risk management aims to reduce or eliminate the adverse eff ect of interest rate fl uctuations on the company's profi t and cash fl ow. The company aims to a loan portfolio which has a right mix between fi xed and variable rate debts. Under the company's interest rate risk management policy, the target debt portfolio is such where a minimum of 70 and a maximum of 90 per cent of the interest bearing liabilities are based on fi xed interest rates.
The company uses interest rate swaps to manage its interest rate risks and to convert fl oating rate loans into fi xed rate loans. Portion of the hedges can also be done using infl ation derivatives. The interest sensitivity of Citycon's loan portfolio at the end of 2009 is depicted by the fact that a one-percentage point rise in money market interest rates would increase its interest expenses for 2010 by EUR 2.7 million, while a fall of one-percentage point in money market interest rates would decrease them by EUR 2.7 million in 2010.
The following table shows the interest expenses sensitivity to a 100 basis point change in short term interest rates assuming all other variables constant. The impact is shown as a change in interest expenses resulting from changes in interest rate which relate to fl oating rate debt.
| EUR million | 2009 | 2008 | |
|---|---|---|---|
| Euro | 0.7 | 1.2 | |
| Swedish krona | 1.7 | 1.3 | |
| Other currencies | 0.3 | 0.3 | |
| Total | 2.7 | 2.8 |
The following table shows the consolidated shareholders' equity's sensitivity to a 100 basis point change in short term interest rates assuming all other variables constant. The impact is shown as a change in shareholders' equity resulting from changes in interest rate which relate to interest rate derivatives under hedge accounting treatment.
| EUR million | 2009 | 2008 |
|---|---|---|
| Euro | 9.6 | 8.4 |
| Swedish krona | 7.0 | 5.2 |
| Total | 16.5 | 13.6 |
Given that Citycon's strategy is to expand in Finland, the Baltic countries and Sweden, the company will need both equity capital and borrowings. The minimum shareholders' equity is determined by the company's loan covenants. The Group uses cash-fl ow forecasts to continuously assess and monitor fi nancing required for its business. The goal is to arrange fi nancing on a long term basis and avoid large concentration of due dates of the loan agreements. Citycon aims to guarantee the availability and fl exibility of fi nancing through unused credit limits and by using several banks and fi nancing methods as sources of fi nance.
Citycon's fi nancing policy states that company's commited credit limits or liquid assets should cover all approved and on-going investments. In addition, available liquidity should provide a suffi cient buff er for unexpected payments based on the assesment of the management and the company arranges committ ed back-up limits for all funds drawn under commercial paper programmes. On 31 December 2009, unused credit limits amounted to EUR 185.8 million.
Table below summarizes the maturity profile of the Group's fi nancial liabilities based on contractual payments. The table includes both interest and principal fl ows of loans and payments arising from derivative fi nancial instruments. Future interest payments of fl oating rate loans have been determined based on the interest rate applicable on balance sheet date and are not discounted. The future interest payments of derivative financial instruments are based on discounted net present values and the future interest rates are obtained through interpolation from the yield curve prevailing on the balance sheet date.
| EUR million | Less than 1 month |
1 to 12 months |
1-5 years | Over 5 years |
Total |
|---|---|---|---|---|---|
| 31 December 2009 | |||||
| Loans from fi nancial institutions | 13.6 | 84.0 | 1,005.7 | 145.9 | 1,249.2 |
| Convertible capital loan 1/2006 | - | 3.4 | 86.8 | - | 90.3 |
| Subordinated capital loan 1/2005 | - | 73.3 | - | - | 73.3 |
| Bond 1/2009 | - | 2.0 | 48.2 | - | 50.2 |
| Finance lease liabilities | - | 0.2 | 0.2 | - | 0.3 |
| Derivative fi nancial instruments | 0.1 | 19.9 | 16.5 | -0.3 | 36.3 |
| Trade and other payables (excl. interest liabilities) | 13.4 | 56.9 | - | - | 70.3 |
| 31 December 2008 | |||||
| Loans from fi nancial institutions | 3.5 | 92.3 | 793.1 | 413.3 | 1,302.3 |
| Convertible capital loan 1/2006 | - | 3.7 | 97.8 | - | 101.6 |
| Subordinated capital loan 1/2005 | - | 3.3 | 73.3 | - | 76.6 |
| Finance lease liabilities | - | 0.2 | 0.1 | 0.0 | 0.4 |
| Derivative fi nancial instruments | -4.9 | -1.1 | 15.7 | 3.2 | 12.8 |
Citycon's rent revision procedures, long leases and high occupancy ratio generate a stable long term cash fl ow profi le. Citycon expects to meet its liabilities shown in the table above from this stable cash fl ow and undrawn committ ed credit facilities. In a long term debt refi nancings and disposals of investment properties can be considered. The table below shows the maturity profi le of the undrawn committ ed credit facilities.
Trade and other payables (excl. interest liabilities) 38.8 5.8 - - 44.6
| EUR million | Less than 1 month |
1 to 12 months |
1-5 years | Over 5 years |
Total |
|---|---|---|---|---|---|
| 31 December 2009 | |||||
| Undrawn committ ed credit facilities | - | - | 185.8 | - | 185.8 |
| 31 December 2008 | |||||
| Undrawn committ ed credit facilities | - | 15.0 | 172.0 | - | 187.0 |
The above mentioned credit facilities are freely available to Citycon based on group's fi nancing needs.
The Group's most signifi cant credit-risk concentration relates to receivables from Kesko Group. Citycon controls its receivables within the framework of the given credit limits and does not currently identify any major credit risk associated with them. Credit-risk management caters for tenant-risk management, which is aimed at minimising the adverse eff ect of any unexpected changes in the customers' fi nancial standing on Citycon's business and fi nancial results. Customer-risk management focuses 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 23. Trade and other receivables.
Credit risk arising from cash and cash equivalents and certain derivative agreements relate to a default of the 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 which participate in Citycon's credit agreements. Citycon's fi nancing policy also sets forth the approved fi nancial instruments in which the company can invest in and includes counterparty limits for those investments.
Citycon's entry into counties outside the eurozone 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 fi nance its foreign investments mainly in the local currency. The company uses foreign exchange derivatives to manage the transaction risk on committ ed 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 relates mainly to fl uctuations in the euro/ Swedish krona exchange rate.
The following table shows the sensitivity in the statement of comprehensive income to a fi ve percent change in foreign exchange rates assuming all other variables constant. The impact is att ributable to a change in fair value of fi nancial instruments given the assumed change in foreign exchange rates.
| EUR million | 2009 | 2008 |
|---|---|---|
| Swedish krona | -0.2 | 0.5 |
| Other currencies | - | - |
| Total | -0.2 | 0.5 |
Other currencies comprise of currencies in Estonia and Lithuania. The foreign exchange rate in these countries is tied to euro with a fi xed peg.
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. Company's capital structure is managed in an active manner and the capital structure requirements are taken into consideration when considering various fi nancing alternatives. The company can adjust the capital structure by deciding on issuance of new shares, raising debt fi nancing or making adjustments to the dividend.
The long term equity ratio target of the company is 40 per cent and the 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 IFRS equity ratio by, among other things, adding the capital loan and convertible capital loan issued by the company to the shareholders' equity. The company's equity ratio as of 31 December 2009 stood at 34.2 per cent and the equity ratio as defi ned in the loan agreement was around 40.6 per cent.
Changes in deferred tax assets and liabilities in 2009:
| Recognized Recognized 2009 EUR million 1 Jan. statement |
in other income |
Recognized directly in equity |
2009 31 Dec. |
|
|---|---|---|---|---|
| 0.0 | ||||
| 0.0 | ||||
| 8.6 | ||||
| 6.8 | 0.0 | 1.8 | - | 8.6 |
| 48.7 | ||||
| - | ||||
| 1.3 | ||||
| - | ||||
| 57.1 | -7.0 | - | - | 50.0 |
| 0.1 - 6.8 56.0 - 1.1 - |
0.0 0.0 0.0 -7.2 - 0.2 - |
in income comprehensive - - 1.8 - - - - |
- - - - - - - |
Changes in deferred tax assets and liabilities in 2008:
| EUR million | Recognized Recognized 2008 in income comprehensive 1 Jan. statement |
in other income |
Recognized directly in equity |
2008 31 Dec. |
|
|---|---|---|---|---|---|
| Deferred tax assets | |||||
| Tax losses | 0.2 | -0.1 | - | - | 0.1 |
| Measurement of interest-rate swaps at fair value | -1.7 | 0.5 | 7.9 | - | 6.8 |
| Deferred tax assets, total | -1.5 | 0.4 | 7.9 | - | 6.8 |
| Off set against deferred tax liabilities | 1.5 | - | - | - | - |
| Deferred tax assets, total | 0.0 | 0.4 | 7.9 | - | 6.8 |
| Deferred tax liabilities | |||||
| Measurement of investment property at fair value | 84.8 | -28.8 | - | - | 56.0 |
| Measurement of interest-rate swaps at fair value | 0.4 | -0.4 | - | - | - |
| Temporary diff erence in fi nancial expenses | 1.3 | -0.2 | - | - | 1.1 |
| Temporary diff erence in provisions | 0.2 | -0.1 | - | 0.0 | - |
| Deferred tax liabilities, total | 86.6 | -29.5 | - | 0.0 | 57.1 |
| Off set against deferred tax assets | 1.5 | - | - | - | - |
| Deferred tax liabilities, total | 88.1 | -29.5 | - | 0.0 | 57.1 |
Citycon's deferred taxes mainly arise from changes in the fair value of investment properties. In 2009, deferred taxes resulting from the changes in the investment properties' fair value recognised in the income statement totalled EUR 7.2 million (EUR 28.8 million).
The fair value of an investment property refl ects 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 would recognize the deferred taxes from the changes in fair values in subsidiaries owned abroad, the tax impact would have been EUR 8.4 million in 2009 (EUR 22.2 million) (See the Note 16. Income tax expense).
On the contrary, divesting a property in Finland through an asset or share sale does have tax implications and, therefore, Citycon recognises deferred taxes arising from the fair value changes of its investment properties located in Finland. Deferred taxes are calculated on the diff erence 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 the investment properties is measured in accordance with IFRS (International Financial Reporting Standards). The provisions of the Finnish accounting and tax legislation aff ect 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 2009, Group companies had confi rmed losses for which tax assets of EUR 13 million (EUR 6 million in 2008) were not recognised since these Group companies are unlikely to record taxable profi t, before the expiration of carry forwards of these losses, against which loss carry forwards can be utilised.
| EUR million | 2009 | 2008 |
|---|---|---|
| Trade payables | 17.2 | 23.5 |
| Advanced received | 8.3 | 5.1 |
| Accrued expenses | 17.8 | 20.9 |
| Other short-term payables | 36.4 | 4.7 |
| Total | 79.7 | 54.3 |
Aging structure of future payments of trade and other payables:
| EUR million | 2009 | 2008 |
|---|---|---|
| Due in less than 1 month | 15.6 | 41.4 |
| Due in 1-3 months | 62.5 | 5.4 |
| Due in 3-6 months | 1.5 | 0.8 |
| Due in 6-12 months | -0.1 | 5.9 |
| Due in 1-2 years | 0.2 | 0.2 |
| Due in 2-5 years | 0.0 | 0.0 |
| Due in over 5 years | 0.1 | 0.5 |
| Total | 79.7 | 54.3 |
| in accrued expenses: | |
|---|---|
| -- | ---------------------- |
| Interest liabilities | 9.3 | 9.7 |
|---|---|---|
| Other liabilities | 8.4 | 11.2 |
| Total | 17.8 | 20.9 |
Share-based payments
Citycon Group has had stock option schemes in place since 1999. The Group has applied IFRS 2 Sharebased Payment to its stock options granted aft er 7 November 2002 and not vested before 1 January 2005. Stock options granted before 7 November 2002 have not been expensed.
In 2004, the AGM decided to grant a maximum of 3,900,000 stock options. By the end of the reporting year, 345,075 option rights had been exercised for share subscription. If an employee left the Group prior to 1 September 2008, (s)he forfeited his/her right to exercise stock options for which the share subscription period had not begun on the date of the termination of his/her employment/executive contract. However, the Board of Directors could specifi cally decide that the stock-option holder retained
.
his/her stock options or some of them. Subsequently, changes in the number of granted stock options took place before the said date. The forfeited stock options are held by Veniamo-Invest Oy, a wholly-owned subsidiary of Citycon Oyj, which, however, is not entitled to subscribe for its parent company's shares. The number of granted stock options can no longer change, since the share subscription period of all stock options has commenced.
Stock options entitle their holders to subscribe for company shares at the price and within the period specifi ed in the terms and conditions of the stock options. The subscription period with the 2004 A stock option rights expired on 31 March 2009. The number of 2004 stock options as well as the subscription ratios and subscription prices are specifi ed in the enclosed table. The terms and conditions of the 2004 stock option scheme in their entirety are available on the company's website at www.citycon.fi /options. No shares were subscribed exercising the stock options during the reporting period.
Citycon uses the Black & Scholes option-pricing model to measure the fair value of stock options at the grant date and reports them under personnel expenses in the statement of comprehensive income allocated over the instrument's vesting period. In 2009, the expense recognised in the statement of comprehensive income totalled EUR 0.0 million (EUR 0.2 million in 2008). The expected volatility is determined by calculating the company share price's historical volatility.
Summary of the stock-option scheme 2004 on 31 December 2009:
| 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 | - | 210,000 | 250,000 |
| Subscription ratio, stock option/share | 1:1,2127 | 1:1,2127 | 1:1,2127 |
| Subscription price/share, EUR | 2.2732 | 2.5908 | 4.2913 |
| 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 | - | - |
| Number of subscribed shares | 386,448 | - | - |
| No. of options available for share subscription | - | 1,090,000 | 1,050,000 |
| No. of shares that can be subscribed | - | 1,321,843 | 1,273,335 |
The maximum number of shares that can be subscribed for by exercising the outstanding 2004 option rights totals 2,595,178. The subscription of shares will not result in an increase in the company's share capital, since the entire subscription price is recognised under invested unrestricted equity fund.
The initial subscription prices of the shares to be subscribed for by exercising the 2004 stock options were determined on the basis of the trade-weighted average price of Citycon share quoted on the Helsinki exchange as follows:
| 2004A | during 1-30 April 2004 |
|---|---|
| 2004B | during 1-30 April 2005 |
| 2004C | during 1-30 April 2006 |
added with 20%. The share subscription prices will be reduced by 50 per cent of the amount of the per-share dividends and per-share equity returns paid before share subscription. The share subscription prices have been changed also due to the rights issues carried out in 2006 and 2007.
The following table provides additional information on the 2004 stock option scheme:
| 2004B stock options | 2004C stock options | |
|---|---|---|
| Share-based options, granted to all staff |
Share-based options, granted to all staff |
|
| Type of scheme | Granted stock options | Granted stock options |
| Grant date | 13 Sept. 2005 | 27 April 2006 |
| No. of instruments granted initially |
1,195,000 | 1,250,000 |
| Exercise price at grant date, EUR | 2.91 | 4.62 |
| Share subscription price at grant date, EUR |
2.48 | 3.86 |
| Vesting period as per agreement (No. of days) |
1,660 | 1,799 |
| Vesting conditions | Employment during vesting period. In case of prior employment termination, stock options forfeited. |
Employment during vesting period. In case of prior employment termination, stock options forfeited. |
| Exercise | In terms of shares | In terms of shares |
| Expected volatility, % | 31.18 | 27.84 |
| Expected vesting period at grant date (No. of days) |
943 | 856 |
| Risk-free interest rate, % | 2.58 | 3.79 |
| Expected dividend/share, EUR | 0,05* | 0,07* |
| Expected personnel reduction (at grant date), % |
0 | 0 |
| Instrument fair value determined at grant date, EUR |
0.96 | 0.75 |
| Option-pricing model | Black&Scholes | Black&Scholes |
* Expected dividend is EUR 0.10 for stock options 2004B and EUR 0.14 for stock options 2004C. EUR 0.05 (for 2004B stock options) and EUR 0.07 (for 2004C stock options) are used in the option-pricing model, based on the distributed dividends' and equity returns' reducing eff ect on the subscription price.
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):
| 2009 weighted average, EUR/share |
2008 Exercise price, Exercise price, weighted average,, EUR/share |
2009 No. of stock options |
2008 No. of stock options |
|
|---|---|---|---|---|
| At period-start | 3.20 | 3.28 | 2,834,925 | 2,883,280 |
| New stock options granted | - | - | - | - |
| Forfeited stock options | - | 4.38 | - | -40,000 |
| Exercised stock options | - | 2.27 | - | -8,355 |
| Lapsed stock options | 2.20 | - | -694,925 | - |
| At period-end | 3.43 | 3.20 | 2,140,000 | 2,834,925 |
| Exercisable stock options at period-end | 2,140,000 | 2,834,925 |
No stock options were exercised during the fi nancial year. (The per-share exercise price of the stock options exercised during 2008 averaged EUR 2.2732 and these were exercised in April and July of 2008. The stock options exercised during 2008 brought in EUR 0.0 million, which were recognised in invested unrestricted equity fund.)
Exercise prices and lapse periods of outstanding stock options on the balance sheet date were as follows:
| Year of lapse | Exercise price, EUR |
2009 (No. of shares, 1,000) |
2008 (No. of shares, 1,000) |
|---|---|---|---|
| 2010 | 2.59 | 1,322 | 1,322 |
| 2011 | 4.29 | 1,273 | 1,273 |
The Board of Directors decided on 26 April 2007 on a long-term share-based incentive plan for key personnel of the Citycon Group. The aim of the plan is to encourage the key personnel to sustained eff orts to increase shareholder value and to strengthen their commitment to the development of the Group's operations. The potential incentive is determined on the basis of Citycon's consolidated adjusted net cash-fl ow from operations per share and net rental income. The incentive plan is divided into three incentive periods of 2007, 2008 and 2009.
The incentives will be granted to the key personnel during the years 2008-2012 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 sett ing of the incentive goals. 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 fi rst quarter of each period. The incentives paid in shares are charged to administration expenses and recognized as an increase in shareholders' equity, and incentives paid in cash are charged to administration expenses and recognized as liabilities. In 2009, the expense recognised in the statement of comprehensive income amounted to EUR 0.4 million (EUR 0.1 million in 2008).
The following table presents additional information on the share-based incentive plan:
| Incentive period 2009 |
Incentive period 2008 |
Incentive period 2007 |
|
|---|---|---|---|
| Grant date | 22 April 2009 | 15 May 2008 | 26 April 2007 |
| No. of key personnel at the end of the period | 27 | 23 | 15 |
| Maximum number of shares to be granted at grant date | 221,600 | 82,200 | 38,700 |
| Shares granted in 2008 | - | - | 4,293 |
| Shares granted in 2009 | - | 20,109 | 4,288 |
According to the terms and conditions of the incentive plan, a participant can also choose to receive shares instead of the cash component meant for paying the income tax. In addition to shares granted as presented above, 16,349 shares were granted in 2009 instead of the cash component (2,747 shares in 2008).
Changes in present value of obligation and in fair value of pension assets
| EUR million | 2009 | 2008 |
|---|---|---|
| Present value of obligation 1.1. | 0.2 | - |
| Interest cost | 0.0 | - |
| Current service cost | 0.0 | - |
| Present value of obligation 31.12. | 0.3 | - |
| Fair value of plan assets 1.1. | 0.2 | - |
| Expected return on P/A | 0.0 | - |
| Contributions | 0.0 | - |
| Fair value of plan assets 31.12. | 0.2 | - |
| Present value of obligation | 0.3 | - |
| Fair value of plan assets | -0.2 | - |
| Liability recognized in balance sheet | 0.1 | - |
| Current service cost | 0.0 | - |
| Interest cost | 0.0 | - |
| Expected return on pension assets | 0.0 | - |
| Expense recognized in | ||
| income statement | 0.0 | - |
| Actual return on plan assets | ||
| Expected return on plan assets | 0.0 | - |
| Actuarial gain (loss) on plan assets | 0.0 | - |
| Actual return on plan assets | 0.0 | - |
| EUR million | 2009 | 2008 |
|---|---|---|
| Actuarial assumptions used | ||
| Discount rate at start of year | 5% | - |
| Expected rate of return on | ||
| pension assets at start of year | 4.5% | - |
| Current service cost | 0.0 | - |
| Benefi ts paid | 0.0 | - |
| Contribution paid | 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 | 2009 | 2008 |
|---|---|---|
| Profi t before tax | -37.5 | -162.3 |
| Adjustments for: | ||
| Depreciation and amortisation | 0.7 | 0.5 |
| Net fair value losses (+) / gains (-) | ||
| on investment property | 97.4 | 216.1 |
| Investment property disposal | ||
| proceeds | -2.8 | -7.7 |
| Carrying value of investment | ||
| property disposals | 2.7 | 7.6 |
| Share-based payment | 0.4 | 0.3 |
| Other non-cash income | -0.4 | -5.9 |
| Foreign exchange losses (+) | ||
| / gains (-) in fi nancing expenses | 0.0 | 0.1 |
| Fair value changes of derivatives | 0.1 | 3.1 |
| Interest and other fi nancing income -0.8 | -3.2 | |
| Interest and other | ||
| fi nancing expenses | 48.5 | 57.2 |
| Changes in working capital | ||
| Trade and other receivables | -22.5 | 3.2 |
| Trade and other payables | 33.2 | -5.3 |
| Cash generated from operations | 119.0 | 103.7 |
In 2008, other non-cash operating income included EUR 5.9 million compensation from city of Helsinki relating to early termination of land lease agreement in Myllypuro retail premises. This compensation has been received during 2009.
A) Other leases -Group as lessee
The future minimum lease payments under non-cancellable other leases are as follows:
| EUR million | 2009 | 2008 | |
|---|---|---|---|
| Not later than 1 year | 1.1 | 1.2 | |
| 1-5 years | 1.7 | 1.9 | |
| Over 5 years | 0.1 | 0.0 | |
| Total | 2.9 | 3.1 |
Other leases category include mainly premises and cars. Average period of agreements are three years.
The future minimum lease payments receivable under non-cancellable leases are as follows:
| EUR million | 2009 | 2008 | |
|---|---|---|---|
| Not later than 1 year | 54.4 | 53.1 | |
| 1-5 years | 104.5 | 90.2 | |
| Over 5 years | 24.6 | 28.2 | |
| Total | 183.4 | 171.5 |
The majority of Citycon's leases falls into the category of valid-until- further-notice agreements, whereby the rental rate is determined by the absolute net lease tied to the cost-of-living index, and the maintenance rent. The maintenance rent, charged separately from the lessee, covers operating expenses incurred by the property owner due to property maintenance while enabling the provision any additional services requested by the lessee. The Shopping Centres division also has leases tied to turnover generated by retailers, these accounting for roughly 36 per cent (24 per cent) of Citycon's lease portfolio. The share of the leases tied to the lessee's turnover will increase in the future.
C) Pledges and other contingent liabilities EUR million 2009 2008
| Loans, for which mortgages | ||
|---|---|---|
| are given in security and shares pledged | ||
| Loans from fi nancial institutions | 33.0 | 31.3 |
| Contingent liabilities for loans | ||
| Mortgages on land and buildings | 42.9 | 40.6 |
| Bank guarantees | 45.4 | 45.6 |
| Capital commitments | 44.0 | 13.0 |
| VAT refund liabilities | 46.2 | 21.3 |
Capital commitments relate mainly to 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 realize if the investment property is sold or transferred to non-VAT-liability use within 5 years.
Changes in the VAT Act has become in force as of 1st of January 2008 in Finland. This change in the Act applies to VAT deduction of new investments that have been completed on the 1st of January 2008 or later. A 10 year review period applies to these investments from the day of completion. Transfer period rules apply to investments that have been completed prior to year 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 the equity ratio, the shareholders' equity includes the capital loans and excludes non-cash valuation gain/loss from derivative contracts recognized 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 fi nancial expenses.
Accordingly, equity ratio on 31 December 2009 stood at around 40.6 per cent and interest coverage ratio at around 2.3 (2008: equity ratio was around 45.1 per cent and interest coverage ratio around 2.0).
Citycon Group's related parties comprise the parent company, subsidiaries, associated companies, minority companies, Board members, CEO, Corporate Management Committ ee members and Gazit-Globe Ltd., whose shareholding in Citycon Oyj accounted for 47.0% on 31 December 2009 (31 December 2008: 43.42% ).
| Group companies | Country | Group holding, % |
Parent company holding, % |
|---|---|---|---|
| Parent company: Citycon Oyj | Finland | ||
| Asolantien Liikekiinteistö Oy | Finland | 100.0 | 100.0 |
| Asunto Oy Helsingin Kivensilmänkuja 3 | Finland | 100.0 | 100.0 |
| Asunto Oy Helsingin Myllypiha | Finland | 100.0 | 100.0 |
| BHM Centrumfastigheter AB | Sweden | 100.0 | - |
| Citycon AB | Sweden | 100.0 | 100.0 |
| Citycon Centrum Sverige AB | Sweden | 100.0 | - |
| Citycon Estonia OÜ | Estonia | 100.0 | - |
| Citycon Göteborg AB | Sweden | 100.0 | - |
| Citycon Sverige AB | Sweden | 100.0 | - |
| Coport 202 AB | Sweden | 100.0 | - |
| Espoon Asemakuja 2 Koy | Finland | 100.0 | 100.0 |
| Forssan Hämeentie 3 Koy | Finland | 100.0 | 100.0 |
| Jakobsbergs 565 Fastighets AB | Sweden | 100.0 | - |
| Jakobsbergs Centrum Fastighets AB | Sweden | 100.0 | - |
| Jakobsbergs Centrum Galleria AB | Sweden | 100.0 | - |
| Jyväskylän Forum Koy | Finland | 100.0 | 100.0 |
| Jyväskylän Kauppakatu 31 Koy | Finland | 100.0 | 100.0 |
| Järfalla 7055 Fastighets AB | Sweden | 100.0 | - |
| Helsingin Kiviparintien asumisoikeusasunnot Oy | Finland | 100.0 | 100.0 |
| Kaarinan Liiketalo Koy | Finland | 100.0 | 100.0 |
| Karjaan Ratakatu 59 Koy | Finland | 100.0 | 100.0 |
| Karjalan Kauppakeskus Koy | Finland | 100.0 | 100.0 |
| Kauppakeskus Columbus Koy | Finland | 100.0 | 100.0 |
| Kauppakeskus Isokarhu Oy | Finland | 100.0 | 100.0 |
| Kivensilmänkuja 1 Koy | Finland | 100.0 | 100.0 |
| Kotkan Keskuskatu 11 Koy | Finland | 100.0 | 100.0 |
| Kouvolan Valtakadun Kauppakeskus Koy | Finland | 100.0 | 100.0 |
| Kuopion Kauppakatu 41 Koy | Finland | 100.0 | 100.0 |
| Kuusankosken Kauppakatu 7 Koy | Finland | 100.0 | 100.0 |
| Kuvernöörintie 8 Koy | Finland | 100.0 | 100.0 |
| Lahden Hansa Koy | Finland | 100.0 | 100.0 |
| Lahden Kauppakatu 13 Koy | Finland | 100.0 | 100.0 |
| Lappeenrannan Villimiehen Vitonen Oy | Finland | 100.0 | 100.0 |
| Lentolan Perusyhtiö Oy | Finland | 100.0 | 100.0 |
| Liljeholmsplan Bostadsfastigheter AB | Sweden | 100.0 | - |
| Liljeholmsplan Fastighets AB | Sweden | 100.0 | - |
| Liljeholmsplan Hotellfastigheter AB | Sweden | 100.0 | - |
| Group companies | Country | Group holding, % |
Parent company holding, % |
|---|---|---|---|
| Liljeholmstorget Development Services AB | Sweden | 100.0 | - |
| Lillinkulma Koy | Finland | 100.0 | 100.0 |
| Lintulankulma Koy | Finland | 100.0 | 100.0 |
| Lippulaiva Koy | Finland | 100.0 | 100.0 |
| Magistral Kaubanduskeskuse OÜ | Estonia | 100.0 | - |
| Martinlaakson Kivivuorentie 4 Koy | Finland | 100.0 | 100.0 |
| Minkkikuja 4 Koy | Finland | 100.0 | 100.0 |
| Montalbas B.V. | The Netherlands | 100.0 | 100.0 |
| Myllypuron Ostoskeskus Oy | Finland | 100.0 | 100.0 |
| Myyrmanni Koy | Finland | 100.0 | 100.0 |
| Naantalin Tullikatu 16 Koy | Finland | 100.0 | 100.0 |
| Oulun Galleria Koy | Finland | 100.0 | 100.0 |
| Porin Asema-Aukio Koy | Finland | 100.0 | 100.0 |
| Porin Isolinnankatu 18 Koy | Finland | 100.0 | 100.0 |
| Riddarplatsen Fastigheter HB | Sweden | 100.0 | - |
| Rocca al Mare Kaubanduskeskuse AS | Estonia | 100.0 | - |
| Runeberginkatu 33 Koy | Finland | 100.0 | 100.0 |
| Sinikalliontie 1 Koy | Finland | 100.0 | 100.0 |
| Sverige 7059 Fastighets AB | Sweden | 100.0 | - |
| Säkylän Liiketalo Koy | Finland | 100.0 | 100.0 |
| Talvikkitie Koy 7-9 | Finland | 100.0 | 100.0 |
| Tampereen Hatanpää Koy | Finland | 100.0 | 100.0 |
| Tampereen Hermanni Koy | Finland | 100.0 | 100.0 |
| Tampereen Suvantokatu Koy | Finland | 100.0 | 100.0 |
| Tenrot Fastighets AB | Sweden | 100.0 | - |
| Tumba Centrumfastigheter AB | Sweden | 100.0 | - |
| UAB Citycon | Lithuania | 100.0 | - |
| UAB Prekybos Centras Mandarinas | Lithuania | 100.0 | - |
| Ultima Oy | Finland | 100.0 | 100.0 |
| Valkeakosken Torikatu 2 Koy | Finland | 100.0 | 100.0 |
| Vantaan Kivivuorenlaki As Oy | Finland | 100.0 | 100.0 |
| Vantaan Laajavuorenkuja 2 Koy | Finland | 100.0 | 100.0 |
| Varkauden Relanderinkatu 30 Koy | Finland | 100.0 | 100.0 |
| Wavulinintie 1 Koy | Finland | 100.0 | 100.0 |
| Veniamo-Invest Oy | Finland | 100.0 | 100.0 |
| Vaakalintu Koy | Finland | 95.8 | 95.8 |
| Lahden Trio Koy | Finland | 89.7 | 89.7 |
| Linjurin Kauppakeskus Koy | Finland | 88.5 | 88.5 |
| Mäntyvuoksi Koy | Finland | 86.8 | 86.8 |
| Lappeenrannan Brahenkatu 7 Koy | Finland | 84.5 | 84.5 |
| Tikkurilan Kauppakeskus Koy | Finland | 83.8 | 83.8 |
| Koskikeskuksen Huolto Oy | Finland | 81.7 | 81.7 |
| Lappeen Liikekeskus Koy | Finland | 80.2 | 80.2 |
| Orimatt ilan Markkinatalo Oy | Finland | 77.3 | 77.3 |
| Strömpilen AB | Sweden | 75.0 | - |
| Group companies | Country | Group holding, % |
Parent company holding, % |
|---|---|---|---|
| Åkersberga Centrum AB | Sweden | 75.0 | - |
| Fastighets AB Fartyget i Åkersberga | Sweden | 75.0 | - |
| Hervannan Liikekeskus Oy | Finland | 74.6 | 74.6 |
| Myyrmäen Kauppakeskus Koy | Finland | 74.0 | 74.0 |
| Stenungs Torg Fastighets AB | Sweden | 70.0 | - |
| Kirkkonummen Liikekeskus Oy | Finland | 66.7 | 66.7 |
| Espoontori Koy | Finland | 66.6 | 66.6 |
| Heikintori Oy | Finland | 65.3 | 65.3 |
| Tampereen Koskenranta Koy | Finland | 63.7 | 63.7 |
| Myyrmäen Autopaikoitus Oy | Finland | 62.7 | - |
| Vantaan Säästötalo Koy | Finland | 61.2 | 61.2 |
| Espoontorin Pysäköintitalo Oy | Finland | 60.1 | - |
| Big Apple Top Oy | Finland | 60.0 | - |
| Manhatt an Acquisition Oy | Finland | 60.0 | - |
| Tullintori Koy | Finland | 57.4 | 57.4 |
| Espoon Asematori Koy | Finland | 54.1 | 54.1 |
| Laajasalon Liikekeskus Oy | Finland | 50.4 | 50.4 |
| Retail Park Oy | Finland | 50.0 | 50.0 |
| Espoon Louhenkulma Koy | Finland | 48.9 | 48.9 |
| Pihlajamäen Liiketalo Oy | Finland | 42.7 | 42.7 |
| Länsi-Keskus Koy | Finland | 41.4 | 41.4 |
| Hakunilan Keskus Oy | Finland | 41.1 | 41.1 |
| Otaniemen Liikekeskus Oy | Finland | 39.2 | 39.2 |
| Kontulan Asemakeskus Koy | Finland | 34.8 | 34.8 |
| Puijonlaakson Palvelukeskus Koy | Finland | 31.3 | 31.3 |
| Salpausseläntie 11 Koy | Finland | 31.3 | 31.3 |
| Valtakatu 5-7 Koy | Finland | 31.3 | 31.3 |
| Jyväskylän Ydin Oy | Finland | 29.0 | 21.5 |
| Soukan Itäinentorni As Oy | Finland | 27.3 | 27.3 |
| Valkeakosken Liikekeskus Koy | Finland | 25.4 | 25.4 |
| Lautt asaaren Liikekeskus Oy | Finland | 23.7 | 23.7 |
| Hakucenter Koy | Finland | 18.7 | 18.7 |
| Helsingin Autotalo Oy | Finland | 8.9 | 8.9 |
| Tapiolan Alueen Kehitys Oy | Finland | 7.7 | 7.7 |
| Partnerships for taxation purposes: | |||
| Hakarinne 4 | Finland | 55.6 | 55.6 |
Group companies have paid to each other a.o. maintenance and fi nancial charges, interest expenses, loan repayments and other administrative service charges.
Parkeringshuset Väpnaren Sweden 64.0 -
This income and these expenses have been eliminated in the consolidated fi nancial statements. There has been no other related party transactions between the group companies.
Management benefi ts
| EUR million | 2009 | 2008 |
|---|---|---|
| Personnel expenses for corporate management committ ee | ||
| Wages and salaries | 1.3 | 1.2 |
| Pensions: defi ned contribution plans | 0.3 | 0.3 |
| Social charges | 0.1 | 0.1 |
| Total | 1.7 | 1.5 |
| EUR | 2009 | 2008 |
| Remuneration | ||
| CEO | 409,977 | 342,549 |
| Board members | ||
| Ashkenazi Ronen (Board member as of 1 Dec. 2009) | 13,000 | - |
| Bernstein Amir (Board member until 30 Nov. 2009) | 36,500 | 47,000 |
| Bolotowsky Gideon | 52,000 | 48,100 |
| Gal Amir (Board member until 13 March 2008) | - | - |
| Korpinen Raimo | 53,000 | 50,200 |
| Lähdesmäki Tuomo | 74,300 | 68,300 |
| Nordman Carl G. (Board member until 13 March 2008) | - | 1,200 |
| Ott osson Claes | 47,000 | 45,800 |
| Segal Dor J. | 49,000 | 47,200 |
| Wernink Thomas W. | 179,300 | 174,200 |
| Westin Per-Håkan | 52,000 | 47,500 |
| Zochovitzky Ariella (Board member as of 18 March 2009) | 50,500 | - |
| Total | 606,600 | 529,500 |
The CEO is entitled to retire upon turning 62, provided that he will remain in the company's employ until that date. Both the CEO and the company may terminate the CEO's executive contract at six months' notice. If the company terminates the contract for a reason not att ributable to the CEO, it will pay the CEO lump-sump compensation equalling his 18-month salary in cash, in addition to the salary.
Based on his executive contract, the CEO was granted 1,500,000 stock options under the 1999 stockoption scheme in 2002, and, under the 2004 stock-option scheme, 150,000 2004A stock options in 2004, 140,000 2004B stock options in 2005, and 140,000 2004C stock options in 2006.
On 31 December 2009, the CEO held 100,000 2004B stock options and 140,000 2004C stock options. Related to the company's share-based incentive scheme the CEO was granted 11,730 shares in 2009 (1,012 shares in 2008). Board members do not participate in the company's share-based incentive schemes.
The company's main shareholder, Gazit-Globe Ltd, holding approximately 47 per cent of the shares in the company, has announced that it applies International Financial Reporting Standards (IFRS) in its fi nancial reporting starting from the year 2007. According to IFRS one company may exercise a controlling interest in another company even if its shareholding it that company does not exceed 50 per cent. Gazit-Globe Ltd. holds the view that it exercises controlling interest, as defi ned 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 fi gures into its own IFRS fi nancial statements.
| AB Coport 202, |
|---|
| increase of ownership by 100% |
| Asunto Oy Helsingin Kivensilmänkuja 3 |
|---|
| Asunto Oy Helsingin Myllypiha |
| Helsingin Kiviparintien asumisoikeusasunnot Oy |
| Keijutie 15 Koy, |
|---|
| sold ownership of 100% |
Initiated development projects In the beginning of January, the company announced the start of two planned development projects.
A new shopping centre will be built in Myllypuro in 2010-2012 to replace the current retail centre, and 255 new privately fi nanced rental and right-ofoccupancy fl ats will be built adjacent to it, as well as an underground parking hall for 270 cars. The total value of the project is over EUR 60 million, of which EUR 20 million will pay for the shopping centre and parking hall to be owned by Citycon. At the beginning of 2009, Citycon sold all apartments to be built within the shopping centre, as well as the three companies incorporated by it to manage their ownership. Residential investors are responsible for the building development and the leasing of their own apartments. The leasable area of the new shopping centre will be about 7,300 square metres. Currently, over 60 per cent of the premises have been leased.
Citycon's shopping centre Espoontori in Espoo will be thoroughly redeveloped in 2010. The entire shopping centre of 10,400 square metres and the adjacent parking hall will be renovated and modernised to fi t the requirements of today's clientele. Citycon's investment in this project will total EUR 18 million.
In February, the company announced that shopping centre Forum in Jyväskylä, Finland, will be redeveloped completely. The company's investment in this project will total EUR 16 million.
Citycon's total investment in these three projects amounts to approximately EUR 54 million.
Subscription of shares with option rights A total of 356,558 new Citycon shares were subscribed for at a per-share subscription price of EUR 2.5908 exercising stock options B under the company's 2004 stock option scheme at the start of the year. The share subscription price of EUR 923,770.47 was recognised under the invested unrestricted equity fund. The new shares are expected to be registered in the Trade Register on 15 February 2010. Following the registration, the number of registered Citycon shares will amount to 221,416,293 shares. The unexercised 2004 B stock options entitle their holders to subscribe for additional 965,285 new shares.
| 1) Consolidated key fi gures and ratios for fi ve years | ||||||||
|---|---|---|---|---|---|---|---|---|
| -- | --------------------------------------------------------- | -- | -- | -- | -- | -- | -- | -- |
| EUR million | Formula | 2009 | 2008 | 2007 | 2006 | 2005 |
|---|---|---|---|---|---|---|
| Statement of comprehensive income data | ||||||
| Turnover | 186.3 | 178.3 | 151.4 | 119.4 | 92.2 | |
| Other operating income and expense | 0.0 | 6.1 | 0.5 | 0.6 | 0.3 | |
| Operating profi t/loss | 10.3 | -105.0 | 298.7 | 196.5 | 105.2 | |
| Loss/profi t before taxes | -37.5 | -162.3 | 253.5 | 165.6 | 74.2 | |
| Loss/profi t att ributable to parent company shareholders | -34.3 | -124.1 | 200.3 | 124.9 | 59.2 | |
| Statement of fi nancial position data | ||||||
| Investment properties | 2,147.4 | 2,111.6 | 2,248.9 | 1,447.9 | 956.6 | |
| Current assets | 91.8 | 52.4 | 48.1 | 33.1 | 25.5 | |
| Equity att ributable to parent company shareholders | 731.1 | 799.1 | 982.0 | 565.3 | 356.6 | |
| Minority interest | 36.8 | 38.2 | 28.9 | 15.0 | 3.6 | |
| Interest-bearing liabilities | 1,321.7 | 1,199.5 | 1,154.0 | 814.0 | 580.5 | |
| Total liabilities | 1,485.3 | 1,341.2 | 1,297.7 | 906.1 | 622.9 | |
| Total liabilities and shareholders' equity | 2,253.2 | 2,178.5 | 2,308.6 | 1,486.4 | 983.1 | |
| Key performance ratios | ||||||
| Equity ratio, % | 1 | 34.2 | 38.5 | 43.9 | 39.1 | 36.7 |
| Equity ratio for bank, % | 40.6 | 45.1 | 50.1 | 49.8 | 40.8 | |
| Gearing, % | 2 | 169.5 | 141.3 | 111.8 | 136.6 | 156.8 |
| Return on equity, % (ROE) | 3 | -4.7 | -15.0 | 23.3 | 25.8 | 22.5 |
| Return on investment, % (ROI) | 4 | -0.5 | -1.5 | 16.3 | 16.8 | 13.5 |
| Quick ratio | 5 | 0.4 | 0.5 | 0.3 | 0.2 | 0.3 |
| Gross capital expenditure, EUR million | 134.6 | 157.9 | 603.9 | 436.4 | 178.5 | |
| % of turnover | 72.2 | 88.6 | 398.9 | 365.5 | 193.6 | |
| Per-share fi gures and ratios | ||||||
| Earnings per share, EUR | 6 | -0.16 | -0.56 | 1.00 | 0.76 | 0.46 |
| Earnings per share,diluted, EUR | 7 | -0.16 | -0.56 | 0.91 | 0.73 | 0.45 |
| Net cash from operating activities per share, EUR | 8 | 0.30 | 0.21 | 0.20 | 0.20 | 0.19 |
| Equity per share, EUR | 9 | 3.31 | 3.62 | 4.44 | 3.30 | 2.39 |
| Net asset value (EPRA NAV) per share, EUR | 10 | 3.54 | 3.88 | 4.82 | 3.52 | 2.46 |
| EPRA NNNAV per share, EUR | 11 | 3.35 | 3.80 | 4.42 | 3.14 | 2.40 |
| P/E (price/earnings) ratio | 12 | -19 | -3 | 3 | 7 | 7 |
| Return from invested unrestricted equity fund per share, EUR | 0.10 1) | 0.10 | 0.10 | - | - | |
| Dividend per share, EUR | 0.04 1) | 0.04 | 0.04 | 0.14 | 0.14 | |
| Dividend and return from invested unrestricted equity fund per share total, EUR | 0.14 1) | 0.14 | 0.14 | 0.14 | 0.14 | |
| Dividend and return of equity per earnings, % | 13 | -90.2 | -24.9 | 13.9 | 18.4 | 30.7 |
| Eff ective dividend and return of equity yield, % | 14 | 0.0 | 0.1 | 4.3 | 2.8 | 4.5 |
| Operative key ratios | ||||||
| Net rental yield, % | 15 | 6.1 | 5.8 | 5.8 | 7.1 | 8.4 |
| Occupancy rate, %, EUR | 17 | 95.0 | 96.0 | 95.7 | 97.1 | 97.2 |
| Citycon's GLA, sq.m. | 961,150 | 937,650 | 923,980 | 739,020 | 595,973 | |
| Personnel (at the end of the period) | 119 | 113 | 102 | 73 | 57 |
1) Board proposal
Formulas are available on pages 53-54.
2) Consolidated direct and indirect result for fi ve years
| EUR million | Formula | 2009 | 2008 | 2007 | 2006 | 2005 |
|---|---|---|---|---|---|---|
| Direct result | 18 | |||||
| Net rental income | 125.4 | 121.8 | 103.4 | 82.8 | 67.0 | |
| Direct administrative expenses | -17.7 | -16.5 | -16.5 | -12.3 | -8.3 | |
| Direct other operating income and expenses | 0.0 | 0.1 | 0.5 | 0.6 | 0.3 | |
| Direct operating profi t | 107.7 | 105.3 | 87.4 | 71.1 | 59.0 | |
| Direct net fi nancial income and expenses | -47.7 | -54.2 | -44.7 | -32.0 | -25.6 | |
| Direct current taxes | -6.2 | -4.8 | -3.4 | -5.5 | -4.6 | |
| Direct change in deferred taxes | -0.2 | 0.2 | -0.2 | -3.0 | -2.8 | |
| Direct minority interest | -2.8 | -2.8 | -0.9 | -0.3 | -0.3 | |
| Total | 50.9 | 43.8 | 38.3 | 30.4 | 25.7 | |
| Direct result per share (diluted), (diluted EPRA EPS), EUR | 20 | 0.23 | 0.20 | 0.19 | 0.19 | 0.19 |
| Indirect result | 19 | |||||
| Net fair value losses/gains on investment property | -97.4 | -216.1 | 211.4 | 120.1 | 45.9 | |
| Profi t/loss on disposal of investment property | 0.1 | 0.1 | -0.1 | 5.9 | 0.3 | |
| Indirect administrative expenses | -0.1 | -0.4 | 0.0 | -0.6 | 0.0 | |
| Indirect other operating income and expenses | 0.0 | 6.0 | 0.0 | - | - | |
| Indirect one-off fi nancial income and expenses (net) | - | - | - | -0.9 | -5.5 | |
| Movement in fair value of fi nancial instruments | -0.1 | -3.1 | -0.6 | 2.0 | - | |
| Indirect current taxes | -0.3 | -1.8 | 0.0 | -1.9 | 1.3 | |
| Change in indirect deferred taxes | 7.3 | 29.7 | -46.0 | -28.8 | -8.3 | |
| Indirect minority interest | 5.3 | 17.6 | -2.7 | -1.3 | -0.4 | |
| Total | -85.2 | -167.9 | 162.1 | 94.5 | 33.5 | |
| Indirect result per share, diluted, EUR | -0.39 | -0.76 | 0.71 | 0.54 | 0.25 | |
| Loss/profi t for the period att ributable to parent company shareholders | -34.3 | -124.1 | 200.3 | 124.9 | 59.2 |
Formulas are available on pages 53-54.
3) Consolidated direct and indirect result quarterly
| EUR million | Formula | Q4/2009 | Q3/2009 | Q2/2009 | Q1/2009 | Q4/2008 | Q3/2008 | Q2/2008 | Q1/2008 |
|---|---|---|---|---|---|---|---|---|---|
| Direct result | 18 | ||||||||
| Net rental income | 31.6 | 32.5 | 31.0 | 30.3 | 30.2 | 31.5 | 30.5 | 29.7 | |
| Direct administrative expenses | -5.3 | -3.9 | -3.9 | -4.6 | -4.6 | -3.9 | -4.2 | -3.8 | |
| Direct other operating income and expenses | 0.0 | 0.0 | 0.0 | 0.0 | 0.1 | 0.0 | 0.0 | 0.0 | |
| Direct operating profi t | 26.3 | 28.6 | 27.1 | 25.7 | 25.6 | 27.6 | 26.2 | 25.9 | |
| Direct net fi nancial income and expenses | -11.9 | -11.7 | -12.1 | -12.0 | -11.7 | -14.6 | -14.1 | -13.8 | |
| Direct current taxes | -1.2 | -2.0 | -1.5 | -1.4 | -1.4 | -1.0 | -1.2 | -1.2 | |
| Direct change in deferred taxes | -0.1 | 0.1 | -0.2 | 0.0 | 0.0 | 0.2 | 0.0 | -0.1 | |
| Direct minority interest | -0.6 | -0.7 | -0.7 | -0.7 | -0.7 | -0.9 | -0.7 | -0.4 | |
| Total | 12.5 | 14.2 | 12.6 | 11.6 | 11.8 | 11.3 | 10.2 | 10.4 | |
| Direct result per share (diluted), (diluted EPRA EPS), EUR | 20 | 0.06 | 0.06 | 0.06 | 0.05 | 0.05 | 0.05 | 0.05 | 0.05 |
| Indirect result | 19 | ||||||||
| Net fair value losses/gains on investment property | -38.6 | -1.2 | -26.0 | -31.6 | -59.3 | -71.7 | -85.5 | 0.5 | |
| Profi t/loss on disposal of investment property | - | - | - | 0.1 | 0.0 | 0.0 | 0.0 | 0.1 | |
| Indirect administrative expenses | -0.1 | - | - | - | -0.1 | 0.0 | -0.2 | -0.2 | |
| Indirect other operating income and expenses | 0.0 | - | - | - | 5.9 | - | - | 0.1 | |
| Movement in fair value of fi nancial instruments | -0.1 | 0.0 | 0.3 | -0.3 | -1.4 | -0.6 | 0.2 | -1.4 | |
| Indirect current taxes | - | - | - | -0.3 | -0.8 | - | - | -1.1 | |
| Change in indirect deferred taxes | 1.4 | -0.4 | 4.7 | 1.5 | 7.5 | 8.2 | 11.6 | 2.4 | |
| Indirect minority interest | 1.1 | 0.7 | 1.4 | 2.2 | 5.6 | 6.8 | 7.0 | -1.8 | |
| Total | -36.3 | -0.9 | -19.5 | -28.4 | -42.5 | -57.3 | -66.8 | -1.3 | |
| Indirect result per share, diluted, EUR | -0.16 | 0.00 | -0.09 | -0.13 | -0.19 | -0.26 | -0.30 | -0.01 | |
| Loss/profi t for the period att ributable to parent company shareholders | -23.8 | 13.3 | -7.0 | -16.8 | -30.7 | -46.0 | -56.6 | 9.1 |
4) Quarterly segment information
| EUR million | Q4/2009 | Q3/2009 | Q2/2009 | Q1/2009 | Q4/2008 | Q3/2008 | Q2/2008 | Q1/2008 |
|---|---|---|---|---|---|---|---|---|
| Turnover | ||||||||
| Finland | 32.7 | 32.4 | 32.6 | 33.5 | 32.0 | 31.9 | 31.6 | 31.4 |
| Sweden | 12.4 | 9.9 | 9.5 | 9.3 | 10.1 | 10.5 | 10.6 | 10.7 |
| Baltic Countries | 3.8 | 3.6 | 3.5 | 3.1 | 3.1 | 2.1 | 2.1 | 2.2 |
| Total | 48.9 | 45.9 | 45.6 | 45.9 | 45.2 | 44.6 | 44.2 | 44.3 |
| Net rental income | ||||||||
| Finland | 23.0 | 23.4 | 22.9 | 23.1 | 22.6 | 23.4 | 22.5 | 22.3 |
| Sweden | 6.1 | 6.4 | 5.6 | 5.2 | 5.3 | 6.5 | 6.4 | 5.8 |
| Baltic Countries | 2.5 | 2.7 | 2.5 | 2.1 | 2.2 | 1.5 | 1.5 | 1.6 |
| Other | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Total | 31.6 | 32.5 | 31.0 | 30.3 | 30.2 | 31.5 | 30.5 | 29.7 |
| Direct operating profi t | ||||||||
| Finland | 21.4 | 22.0 | 21.4 | 21.5 | 21.0 | 22.1 | 21.2 | 21.1 |
| Sweden | 5.1 | 5.7 | 4.8 | 4.4 | 4.5 | 6.0 | 5.4 | 5.0 |
| Baltic Countries | 2.2 | 2.5 | 2.2 | 1.9 | 2.0 | 1.4 | 1.4 | 1.5 |
| Other | -2.3 | -1.6 | -1.4 | -2.0 | -1.9 | -1.9 | -1.7 | -1.6 |
| Total | 26.3 | 28.6 | 27.1 | 25.7 | 25.6 | 27.6 | 26.2 | 25.9 |
| Operating profi t/loss | ||||||||
| Finland | 6.8 | 17.4 | 1.0 | -4.0 | -21.7 | -22.9 | -37.4 | 19.0 |
| Sweden | -12.0 | 4.4 | 0.1 | 7.8 | -16.9 | -23.3 | -15.7 | 6.7 |
| Baltic Countries | -4.9 | 7.2 | 1.5 | -7.7 | 12.6 | 4.0 | -4.5 | 2.3 |
| Other | -2.3 | -1.6 | -1.4 | -2.0 | -2.0 | -1.9 | -1.9 | -1.6 |
| Total | -12.4 | 27.4 | 1.1 | -5.8 | -27.9 | -44.1 | -59.5 | 26.4 |
| EUR million | Note | 1 Jan. -31 Dec. 2009 | 1 Jan. -31 Dec. 2008 |
|---|---|---|---|
| Gross rental income | 104.1 | 100.8 | |
| Service charge income | 3.9 | 3.4 | |
| Turnover | 2 | 108.1 | 104.2 |
| Property operating expenses | 51.0 | 50.6 | |
| Other expenses from leasing operations | 3 | 0.2 | 0.1 |
| Net rental income | 56.9 | 53.5 | |
| Administrative expenses | 4, 5 | 18.0 | 21.7 |
| Other operating income and expenses | 6 | 2.3 | 5.6 |
| Operating profi t | 41.2 | 37.3 | |
| Financial income | 90.1 | 118.2 | |
| Financial expenses | -105.2 | -134.5 | |
| Net fi nancial income and expenses | 7 | -15.1 | -16.4 |
| Profi t before taxes | 26.1 | 21.0 | |
| Income tax expense | 8 | 7.5 | 6.9 |
| Profi t for the period | 18.5 | 14.1 |
| EUR million | Note | 31 Dec. 2009 | 31 Dec. 2008 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Intangible assets | 9 | 10.5 | 11.4 |
| Tangible assets | 10 | 34.0 | 32.1 |
| Investments | |||
| Shares in subsidiaries | 11 | 830.3 | 826.4 |
| Shares in associated companies | 12 | 34.8 | 34.8 |
| Other investments | 13 | 864.8 | 746.6 |
| Total investments | 1,729.9 | 1,607.8 | |
| Total non-current assets | 1,774.4 | 1,651.3 | |
| Current assets | |||
| Short-term receivables | 15 | 28.5 | 43.1 |
| Cash and cash equivalents | 6.6 | 0.7 | |
| Total current assets | 35.1 | 43.9 | |
| Total assets | 1,809.5 | 1,695.1 |
| EUR million | Note | 31 Dec. 2009 | 31 Dec. 2008 |
|---|---|---|---|
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||
| Shareholders' equity | 16 | ||
| Share capital | 259.6 | 259.6 | |
| Share premium fund | 133.1 | 133.1 | |
| Invested unrestricted equity fund | 157.0 | 179.0 | |
| Retained earnings | 8.9 | 3.7 | |
| Profi t for the period | 18.5 | 14.1 | |
| Total shareholders' equity | 577.1 | 589.4 | |
| Liabilities | 17 | ||
| Long-term liabilities | |||
| Subordinated capital loan 1/2005 | - | 70.0 | |
| Convertible capital loan 1/2006 | 69.3 | 73.3 | |
| Bond 1/2009 | 39.4 | - | |
| Other long-term liabilities | 955.7 | 860.6 | |
| Total long-term liabilities | 1,064.4 | 1,003.9 | |
| Short-term liabilities | |||
| Subordinated capital loan 1/2005 | 70.0 | - | |
| Other short-term liabilities | 98.0 | 101.8 | |
| Total short-term liabilities | 168.0 | 101.8 | |
| Total liabilities | 1,232.4 | 1,105.7 | |
| Total liabilities and shareholders' equity | 1,809.5 | 1,695.1 |
| EUR million | 1 Jan. -31 Dec. 2009 1 Jan. -31 Dec. 2008 | |
|---|---|---|
| Cash fl ow from operating activities | ||
| Profi t before taxes | 26.1 | 21.0 |
| Adjustments: | ||
| Depreciation and impairment loss | 4.2 | 3.0 |
| Non-cash property operating expenses | 20.6 | 21.7 |
| Net fi nancial income and expenses | 15.1 | 16.4 |
| Other adjustments | -1.1 | -4.1 |
| Cash fl ow before change in working capital | 64.8 | 57.9 |
| Change in working capital | -10.8 | 1.0 |
| Cash generated from operations | 54.0 | 58.8 |
| Interest expense and other fi nancial expenses paid | -46.7 | -64.8 |
| Interest income and other fi nancial income received | 14.2 | 19.8 |
| Realized exchange rate gains and losses | 11.8 | 5.1 |
| Income tax paid/received | -9.3 | 0.6 |
| Net cash fl ow from operating activities | 24.0 | 19.6 |
| Cash fl ow from investing activities | ||
| Investment in tangible and intangible assets | -4.8 | -2.1 |
| Proceeds from sale of tangible assets | - | 0.7 |
| Loans granted | -154.5 | -399.5 |
| Repayments of loans receivable | 82.9 | 510.7 |
| Increase of subsidiary shares | -6.2 | -101.9 |
| Sale of subsidiary shares | 3.1 | 4.3 |
| Purchase of minority and associate company shares | - | -0.7 |
| Sale of associate company shares | - | 0.6 |
| Net cash used in/from investing activities | -79.5 | 12.1 |
| Cash fl ow from fi nancing activities | ||
| Proceeds from short-term loans | 148.5 | 72.0 |
| Repayments of short-term loans | -75.9 | -125.8 |
| Proceeds from long-term loans | 293.9 | 516.8 |
| Repayments of long-term loans | -270.8 | -469.3 |
| Dividends paid and return from the invested unrestricted equity fund | -30.9 | -30.9 |
| Net cash from/used in fi nancing activities | 64.8 | -37.2 |
| Net change in cash and cash equivalents | 9.3 | -5.5 |
| Cash and cash equivalents at period-start | -10.9 | -6.8 |
| Eff ects of exchange rate changes | - | 1.4 |
| Cash and cash equivalents at period-end 1) | -1.5 | -10.9 |
1) Cash and cash equivalents of Citycon Oyj were negative as at 31 December 2009 and as at 31 December 2008 due to group cash pool in which the parent company's bank account can have a negative balance. Cash pool balance of EUR -8.1 million as at 31 December 2009 and EUR -11.6 million as at 31 December 2008 has been recognized in the parent company's balance sheet under short-term liabilities.
The parent company's fi nancial 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 leased premises' changes, 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 diff erences resulting from currency translations are recognized as exchange rate diff erences in the income statement.
The subordinated loan and convertible capital loan are shown as separate items in liabilities.
Taxes are recognized on an accrual basis.
Individual fi gures and sum totals presented in the fi nancial statements have been rounded to the nearest million euros; this may cause minor discrepancies between the sum totals and the sums of individual fi gures as given.
| EUR million | 2009 | 2008 |
|---|---|---|
| Turnover by business segments: | ||
| Shopping centres | ||
| Helsinki metropolitan area | 33.4 | 34.0 |
| Other areas in Finland | 45.6 | 40.4 |
| Other retail properties | 29.1 | 29.8 |
| Total | 108.1 | 104.2 |
Geographically the parent company's turnover is generated in Finland. Parent company turnover includes the following property management and administrative fees received from Group companies:
| EUR million | 2009 | 2008 |
|---|---|---|
| 1.2 | 1.1 | |
| 3. OTHER EXPENSES FROM | ||
| LEASING OPERATIONS | ||
| EUR million | 2009 | 2008 |
| Tenant improvements |
| Total | 0.2 | 0.1 |
|---|---|---|
| Credit losses | 0.2 | 0.1 |
| and commissions | 0.1 | 0.1 |
| EUR million | 2009 | 2008 |
|---|---|---|
| Average number of employees | ||
| during period | 77 | 75 |
| Personnel expenses | ||
| Wages and salaries | 6.4 | 5.8 |
| Pension charges | 1.0 | 0.9 |
| Other social charges | 0.5 | 0.5 |
| Total | 7.9 | 7.2 |
| EUR million | 2009 | 2008 | ||
|---|---|---|---|---|
| Personnel expenses include management | ||||
| salaries and emoluments | ||||
| CEO's salary and emoluments | 0.4 | 0.3 | ||
| Board salaries and emoluments | 0.6 | 0.6 | ||
| Total | 1.0 | 1.0 | ||
The following depreciation and amortization as well as impairments are included in the administrative expenses: Amortization on intangible assets 2.9 2.1 Depreciation on buildings and constructions 0.5 0.5 Depreciation on machinery and equipment 0.4 0.4 Impairment of shares in subsidiaires 0.4 5.0
| EUR million | 2009 | 2008 |
|---|---|---|
| Profi t on disposal of shares | ||
| in subsidiaries and other investments | 1.1 | 4.1 |
| Property management fees | ||
| from Group companies | 1.2 | 1.3 |
| Other operating income | 0.0 | 0.2 |
| Total | 2.3 | 5.6 |
| 2009 | 2008 |
|---|---|
| 0.1 | |
| 0.0 | 0.0 |
| 0.1 | 0.1 |
| 39.3 9.4 |
|
| 68.7 | |
| 0.7 | |
| 90.1 | 118.1 |
| 118.2 | |
| 0.1 37.7 Gain from convertible bond buybacks 2.3 50.0 0.1 90.1 |
| EUR million | 2009 | 2008 |
|---|---|---|
| Interest and other fi nancial expenses | ||
| To Group companies | 12.4 | 13.1 |
| Foreign exchange losses | 49.9 | 68.9 |
| Interest and other fi nancial expenses 42.9 | 52.5 | |
| Total fi nancial expenses | 105.2 | 134.5 |
| Total net fi nancial | ||
| income and expenses | -15.1 | -16.4 |
| 8. INCOME TAX EXPENSE EUR million |
2009 | 2008 |
| Taxes for the period | -7.5 | -6.9 |
| 9. INTANGIBLE ASSETS | ||
| EUR million | 2009 | 2008 |
| Intangible rights | ||
| Acquisition cost 1 Jan. | 1.4 | 0.9 |
| Additions during the period | 0.3 | 0.5 |
| Accumulated acquisition costs 31 Dec. 1.7 | 1.4 | |
| Accumulated depreciation 1 Jan. | -0.6 | -0.5 |
| Depreciation for the period | -0.2 | -0.2 |
| Accumulated depreciation 31 Dec. | -0.9 | -0.6 |
| 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 |
| Other non-current assets | ||
| Acquisition cost 1 Jan. | 16.6 | 9.6 |
| Additions during the period | 1.7 | 7.0 |
| Transfer between items | 0.0 | 0.0 |
| Accumulated acquisition costs 31 Dec. 18.4 | 16.6 |
| Total intangible assets 31 Dec. | 10.5 | 11.4 |
|---|---|---|
| Net carrying amount 31 Dec. | 9.5 | 10.4 |
| Accumulated depreciation 31 Dec. | -8.9 | -6.2 |
| Depreciation for the period | -2.7 | -1.9 |
| Accumulated depreciation 1 Jan. | -6.2 | -4.3 |
| EUR million | 2009 | 2008 |
|---|---|---|
| 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. | 68.6 | 68.3 |
| Additions during the period | 0.1 | 0.4 |
| Transfer between items | 0.0 | - |
| Accumulated acquisition costs 31 Dec. 68.7 | 68.6 | |
| Accumulated depreciation 1 Jan. | -43.6 | -43.1 |
| Depreciation for the period | -0.5 | -0.5 |
| Accumulated depreciation 31 Dec. | -44.1 | -43.6 |
| Machinery and equipment | ||
|---|---|---|
| Acquisition cost 1 Jan. | 5.3 | 4.9 |
| Additions during the period | 0.2 | 0.4 |
| Accumulated acquisition costs 31 Dec. 5.5 | 5.3 | |
| Accumulated depreciation 1 Jan. | -3.9 | -3.5 |
| Depreciation for the period | -0.4 | -0.4 |
| Accumulated depreciation 31 Dec. | -4.3 | -3.9 |
Net carrying amount 31 Dec. 1.2 1.4
Net carrying amount 31 Dec. 24.6 25.0
| Machinery and equipment also include | |
|---|---|
| technical equipment in buildings. |
| 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 |
| EUR million | 2009 | 2008 |
|---|---|---|
| Construction in progress | ||
| Acquisition cost 1 Jan. | 2.4 | 1.7 |
| Additions during the period | 2.6 | 1.4 |
| Reductions during the period | 0.0 | -0.7 |
| Transfer between items | 0.0 | 0.0 |
| Net carrying amount 31 Dec. | 4.9 | 2.4 |
| Total tangible assets 31 Dec. | 34.0 | 32.1 |
| EUR million | 2009 | 2008 |
|---|---|---|
| Acquisition cost 1 Jan. | 826.4 | 733.8 |
| Additions during the period | 6.2 | 101.9 |
| Impairment | -0.4 | -5.0 |
| Reductions during the period | -2.0 | -4.3 |
| Net carrying amount 31 Dec. | 830.3 | 826.4 |
| 12. SHARES IN ASSOCIATED COMPANIES | ||
|---|---|---|
| EUR million | 2009 | 2008 |
| Acquisition cost 1 Jan. | 34.8 | 34.7 |
| Additions during the period | - | 0.7 |
| Reductions during the period | - | -0.6 |
| Net carrying amount 31 Dec. | 34.8 | 34.8 |
| Minority holdings | ||
|---|---|---|
| Acquisition cost 1 Jan. | 3.7 | 3.7 |
| Net carrying amount 31 Dec. | 3.7 | 3.7 |
| Loan receivables from | ||
| Group companies | 857.3 | 742.9 |
| Other receivables from | ||
| outside the Group | 3.8 | 0.0 |
| Total other investments 31 Dec. | 864.8 | 746.6 |
| Total investments 31 Dec. | 1,729.9 | 1,607.8 |
Parent company's subsidiaries and associated companies are presented in the notes to the consolidated fi nancial statements under note 33. Related party transactions.
| EUR million | 2009 | 2008 |
|---|---|---|
| Receivables from outside the Group | ||
| Trade receivables | 1.2 | 0.7 |
| Derivative fi nancial instruments | - | 19.8 |
| Other receivables | 0.1 | 0.2 |
| Total other receivables | 0.1 | 20.0 |
| Accrued income and | ||
| prepaid expenses | 0.4 | 0.2 |
| Total | 1.7 | 20.9 |
| Receivables from Group companies | ||
|---|---|---|
| Trade receivables | 2.1 | 0.9 |
| Loan receivables | 0.8 | 5.8 |
| Maintenance charge receivables 3.8 | 4.2 | |
| Other receivables | 9.1 | 0.8 |
| Total other receivables | 13.7 | 10.8 |
| Interest receivables | 10.9 | 10.4 |
| Other accrued income | ||
| and prepair expenses | 0.1 | 0.1 |
| Total accrued income and | ||
| prepaid expenses | 11.0 | 10.5 |
| Total | 26.8 | 22.3 |
| Total short-term receivables | 28.5 | 43.1 |
| EUR million | 2009 | 2008 |
|---|---|---|
| Share capital 1 Jan. | 259.6 | 259.6 |
| Share capital 31 Dec. | 259.6 | 259.6 |
| Share premium fund 1 Jan. Share premium fund 31 Dec. |
133.1 133.1 |
133.1 133.1 |
| Invested unrestricted equity fund 1. Jan |
179.0 | 201.1 |
| Stock options | - | 0.0 |
| Sale of treasury shares | 0.0 | - |
| Return from the invested | ||
| unrestricted equity fund | -22.1 | -22.1 |
| Invested unrestricted | ||
| equity fund 31 Dec. | 157.0 | 179.0 |
| Retained earnings 1 Jan. | 17.8 | 12.6 |
| Dividends | -8.8 | -8.8 |
| Net profi t for the period | 18.5 | 14.1 |
| Retained earnings 31 Dec. | 27.5 | 17.8 |
| Total shareholders' equity 31 Dec. 577.1 | 589.4 | |
| 17. LIABILITIES | ||
| A) Long-term liabilities | ||
| EUR million | 2009 | 2008 |
| Fixed-rate loans | ||
|---|---|---|
| Subordinated capital | ||
| loan 1/2005 1) | - | 70.0 |
| Convertible capital | ||
| loan 1/2006 1) | 69.3 | 73.3 |
| Bond 1/2009 | 39.4 | - |
| Floating-rate loans, which are | ||
|---|---|---|
| converted into fi xed rates | ||
| through interest-rate swaps | 737.6 | 609.8 |
| tied to market interest rates | 195.1 | 239.6 |
| Total | 932.7 | 849.4 |
| Current portion of | ||
| long-term loans | -18.0 | -18.0 |
| Total | 914.7 | 831.4 |
| EUR million | 2009 | 2008 |
|---|---|---|
| Long-term loans | ||
| Loans from fi nancial institutions | 914.7 | 831.4 |
| Loans from Group companies | 41.0 | 29.2 |
| Total long-term liabilities | 955.7 | 860.6 |
| Loans maturing later than 5 years | 17.5 | 270.7 |
| B) Short-term liabilities | ||
| EUR million | 2009 | 2008 |
| Short-term interest-bearing liabilities | ||
| Subordinated capital loan 1/2005 | 70.0 | - |
| Commercial papers | 32.6 | - |
| Loans from fi nancial institutions | 18.0 | 48.0 |
| Loans from Group companies | 18.3 | 18.9 |
| Total | 138.9 | 66.9 |
| Short-term non interest-bearing liabilities | ||
| Payables to outside the Group | ||
| Advances received | 0.3 | 0.2 |
| Accounts payable | 0.7 | 0.9 |
| Tax liability | 1.4 | 3.1 |
| VAT liability | 1.1 | 1.2 |
| Derivative fi nancial instruments | 0.2 | 3.6 |
| Other payables | 0.1 | 0.0 |
| Total other payables | 2.8 | 7.9 |
| Interest liability | 7.8 | 8.3 |
| Other accruals | 2.3 | 2.1 |
| Total accruals | 10.1 | 10.3 |
| Total | 13.9 | 19.4 |
| Payables to Group companies | ||
| Accounts payable | 0.0 | 0.4 |
| Charge-for-fi nancial | ||
| cost payables | 12.3 | 12.3 |
| Other payables | 1.9 | 1.6 |
| Total other payables | 14.2 | 13.9 |
| Accruals | 1.1 | 1.1 |
| Total | 15.2 | 15.4 |
| Total short-term liabilities | 168.0 | 101.8 |
| Total liabilities | 1,232.4 | 1,105.7 |
1) The terms and conditions of subordinated loan and convertible capital loan are presented in the notes to the consolidated fi nancial statements under note 26. Interest-bearing liabilities.
All derivative fi nancial instruments in Citycon are executed by the parent company Citycon Oyj. The fair values of derivative fi nancial instruments are presented in the notes to the consolidated fi nancial statements under note 27. Financial instruments.
The parent company doesn't have any mortgages nor given securities.
A) Lease liabilities
| EUR million | 2009 | 2008 |
|---|---|---|
| Payables on lease commitments | ||
| Maturing next fi nancial year | 1.0 | 1.1 |
| Maturing later | 1.0 | 1.1 |
| Total | 2.0 | 2.2 |
Citycon's fi nance leases mainly apply to computer hardware, machinery and equipment, cars and offi ce premises.
B) Guarantees given
| EUR million | 2009 | 2008 |
|---|---|---|
| Bank guarantees | 45.4 | 45.6 |
| On behalf of group companies | 5.4 | 5.4 |
C) VAT refund liabilities
| EUR million | 2009 | 5 year review period 2008 |
2009 | 10 year review period 2008 |
||
|---|---|---|---|---|---|---|
| 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 has been deducted | 0.3 | 0.3 | 0.1 | 0.1 | ||
| Annual amount under review | 0.1 | 0.1 | 0.0 | 0.0 | ||
| VAT refund liability 31 Dec. | 0.0 | 0.1 | 0.0 | 0.1 |
| Name | Number of shares |
% of shares and votes |
|---|---|---|
| Ilmarinen Mutual Pension Insurance Company | 1,868,914 | 0.85 |
| Investment Fund Aktia Capital | 1,400,000 | 0.63 |
| Odin Finland | 1,276,111 | 0.58 |
| OP-Finland Value Fund | 1,188,401 | 0.54 |
| Bnp Paribas Arbitrage | 720,995 | 0.33 |
| SR Danske Invest Finnish Equity | 659,287 | 0.30 |
| Nordea Fennia Fund | 503,000 | 0.23 |
| The State Pension Fund of Finland | 500,000 | 0.23 |
| von Fieandt Johan | 480,000 | 0.22 |
| Tudeer Lauri | 466,920 | 0.21 |
| 10 major, total | 9,063,628 | 4.10 |
| Number of owners |
Percentage of owners |
Number of shares |
Percentage of shares and voting rights |
|
|---|---|---|---|---|
| Financial and insurance corporations | 39 | 1.05 | 202,969,133 | 91.82 |
| Corporations | 257 | 6.89 | 2,631,912 | 1.19 |
| Households | 3,372 | 90.32 | 9,279,146 | 4.20 |
| General government | 5 | 0.13 | 2,524,814 | 1.14 |
| Foreign | 35 | 0.94 | 3,181,775 | 1.44 |
| Non-profi t institutions | 25 | 0.67 | 472,955 | 0.21 |
| Total | 3,733 | 100.00 | 221,059,735 | 100.00 |
| of which nominee-registered | 10 | 196,309,544 | 88.80 | |
| Issued stock, total | 221,059,735 | |||
| Nominee-registered shares | ||
|---|---|---|
| Sampo Bank Plc | 104,361,526 | 47.21 |
| Skandinaviska Enskilda Banken AB | 43,078,941 | 19.49 |
| Nordea Bank Finland Plc | 30,726,617 | 13.90 |
| Svenska Handelsbanken AB (publ.) Filialverksamheten i Finland | 15,590,123 | 7.05 |
| Other nominee-registered shares | 2,552,337 | 1.15 |
| Nominee-registered shares, total | 196,309,544 | 88.80 |
| Others | 15,686,563 | 7.10 |
| Shares, total | 221,059,735 | 100.00 |
Gazit-Globe Ltd. has informed the company that the number of shares held by it on 31 December 2009 totalled 105,791,279 shares accounting for 47.0 per cent of the shares and voting rights in the company at the yearend of 2009. Gazit-Globe Ltd.'s shareholding is nominee-registered.
| BREAKDOWN OF SHAREHOLDERS AS AT 31 DECEMBER 2009 BY NUMBER OF SHARES | ||
|---|---|---|
| Number of shareholders |
Percentage of owners |
Number of shares |
Percentage of shares and voting rights |
|
|---|---|---|---|---|
| 1 - 100 | 378 | 10.12 | 23,000 | 0.01 |
| 101 - 1,000 | 1,734 | 46.45 | 872,533 | 0.40 |
| 1,001 - 5,000 | 1,166 | 31.24 | 2,768,957 | 1.25 |
| 5,001 - 10,000 | 211 | 5.65 | 1,551,514 | 0.70 |
| 10,001 - 50,000 | 184 | 4.93 | 4,022,659 | 1.82 |
| 50,001 - 100,000 | 22 | 0.59 | 1,538,419 | 0.70 |
| 100,001 - 500,000 | 25 | 0.67 | 6,372,067 | 2.88 |
| 500,001 - 1,000,000 | 4 | 0.11 | 2,683,170 | 1.21 |
| 1,000,001 - | 9 | 0.24 201,227,416 | 91.03 | |
| Total | 3,733 | 100.00 221,059,735 | 100.00 | |
| of which nominee-registered | 10 | 196,309,544 | 88.80 | |
| Issued stock, total | 221,059,735 | |||
| Shareholder | Date of change in holding |
New holding, No of shares |
% of shares and votes on the date of change |
|---|---|---|---|
| AXA S.A. and its subsidiaries | 10 Dec. 2009 | 10,070,707 | 4.56 |
| AXA S.A. and its subsidiaries | 9 Dec. 2009 | 11,089,353 | 5.02 |
| AXA S.A. and its subsidiaries | 25 Nov. 2009 | 10,828,321 | 4.90 |
| AXA S.A. and its subsidiaries | 7 Aug. 2009 | 11,105,522 | 5.02 |
| Perennial Investment Partners Limited | 12 March 2009 | 7,770,418 | 3.52 |
| Formula | 2009 | 2008 | 2007 | 2006 | 2005 | |
|---|---|---|---|---|---|---|
| Share price, transactions, EUR | ||||||
| Low | 1.30 | 1.26 | 3.24 | 3.02 | 2.36 | |
| High | 3.16 | 4.28 | 6.09 | 5.09 | 3.50 | |
| Average | 21 | 1.99 | 2.94 | 4.76 | 3.86 | 2.95 |
| Market capitalisation, EUR million | 22 | 649.9 | 371.3 | 806.6 | 844.3 | 424.1 |
| Share trading volume | ||||||
| No. of shares traded as of year-start, 1,000 | 149,340 | 150,852 | 153,696 | 51,193 | 40,695 | |
| Percentage of total | 67.0 | 68.3 | 69.6 | 30.6 | 29.8 | |
| Issue-adjusted average number of shares, 1,000 | 221,035 | 220,991 | 199,404 | 163,339 | 129,903 | |
| Issue-adjusted average number of shares, diluted, 1,000 | 239,502 | 247,223 | 227,122 | 175,345 | 132,427 | |
| Issue-adjusted number of shares on 31. Dec., 1,000 | 221,060 | 220,999 | 220,981 | 171,233 | 149,029 |
| Shareholders' equity | |||
|---|---|---|---|
| 1) | Equity ratio, % | Balance sheet total - advances received | X 100 |
| Interest-bearing liabilities - cash and cash equivalents | |||
| 2) | Gearing, % | Shareholders' equity | X 100 |
| Profi t/loss for the period | |||
| 3) | Return on equity (ROE), % | Shareholders' equity (weighted average) | X 100 |
| Profi t/loss before taxes + interest and other fi nancial expenses | |||
| 4) | Return on investment (ROI), % | Balance sheet total (weighted average) - (non-interest-bearing liabilities | X 100 |
| on the balance sheet date + opening balance of non-interest-bearing liabilities)/2 | |||
| Current assets | |||
| 5) | Quick ratio | Short-term liabilities | |
| Profi t/loss for the period att ributable to parent company shareholders | |||
| 6) | Earnings per share (EPS), EUR | Issue-adjusted average number of shares for the period | X 100 |
| Profi t/loss for the period att ributable to parent company shareholders | |||
| 7) | Earnings per share, diluted, EUR | Diluted, issue-adjusted average number of shares for the period | X 100 |
| 8) | Net cash from operating | Net cash from operating activities | |
| activities per share, EUR | Issue-adjusted average number of shares for the period | X 100 | |
| Equity att ributable to parent company shareholders | |||
| 9) | Equity per share, EUR | Issue-adjusted number of shares on the balance sheet date | |
| 10) Net asset value | Equity att ributable to parent company shareholders | ||
| (EPRA NAV) per share, EUR | +/- Deferred taxes from the diff erence of fair value | ||
| and fi scal value of investment properties | |||
| +/- Fair value of fi nancial instruments | |||
| Issue-adjusted number of shares on the balance sheet date | |||
| 11) EPRA NNNAV per share, EUR | Net asset value (EPRA NAV) | ||
| -/+ Deferred taxes from the diff erence of fair value | |||
| and fi scal value of investment properties | |||
| +/- The diff erence between the secondary market price and fair value of bonds and capital loans | |||
| -/+ Fair value of fi nancial instruments | |||
| Issue-adjusted number of shares on the balance sheet date | |||
| 12) P/E ratio (price/earnings) | Issue-adjusted closing price at year-end | ||
| EPS | |||
| 13) Dividend and return of | Dividend per share | ||
| equity per earnings, % | EPS | X 100 |
| 14) Eff ective dividend | Dividend per share | |
|---|---|---|
| and return of equity yield, % | Issue-adjusted closing price at year-end | X 100 |
| 15) Net rental yield, % | Net rental income (last 12 months) Average fair value of investment property |
X 100 |
| 16) Occupancy rate, %, sq.m. | Leased space Leasable space |
X 100 |
| 17) Occupancy rate, %, EUR | Rental income as per leases Estimated market rent of vacant premises + rental income as per leases |
X 100 |
| 18) Direct result, EUR million | Net rental income - Direct administrative expenses +/- Direct other operating income and expenses - Direct net fi nancial income and expenses - Direct current taxes -/+ Change in direct deferred taxes - Direct minority interest |
|
| 19) Indirect result, EUR million | Net fair value gains/losses on investment property +/- Profi t/loss on disposal of investment property - Indirect administrative expenses +/- Indirect other operating income and expenses - Indirect one-off fi nancial income and expenses - Movement in fair value of fi nancial instruments - Indirect current taxes -/+ Change in indirect deferred taxes - Indirect minority interest |
|
| 20) Direct result per share, diluted, EUR Direct result + expenses from convertible loan, the tax eff ect deducted Diluted, issue-adjusted average number of shares for the period |
||
| 21) Average share price, EUR | Value of shares traded (EUR) Average number of shares traded |
|
| 22) Market capitalisation | Number of shares x closing price for the period excl. treasury shares | |
| 23) Net interest-bearing debt (fair value), EUR million |
Fair value of interest-bearing debts - cash and cash equivalents |
Signatures to the Financial Statements 1 January - 31 December 2009
Amsterdam, 9 February 2010
Thomas W. Wernink Tuomo Lähdesmäki
Raimo Korpinen Claes Ott osson
Ariella Zochovitzky
Petri Olkinuora CEO
We have today submitt ed the report on the conducted audit.
Amsterdam, 9 February 2010
Ernst & Young Oy Authorized Public Accountants
Tuija Korpelainen Authorized Public Accountant
Ronen Ashkenazi Gideon Bolotowsky
Dor J. Segal Per-Håkan Westin
CITYCON OYJ FINANCIAL STATEMENTS 2009 55
We have audited the accounting records, the fi nancial statements, the report of the Board of Directors, and the administration of Citycon Oyj for the year ended on 31 December 2009. The fi nancial statements comprise the consolidated balance sheet, income statement, cash fl ow statement, statement of changes in equity and notes to the consolidated fi nancial statements, as well as the parent company's balance sheet, income statement, cash flow statement and notes to the fi nancial statements.
The Board of Directors and the Managing Director are responsible for the preparation of the fi nancial statements and the report of the Board of Directors and for the fair presentation of the consolidated fi nancial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, as well as for the fair presentation of the parent company's fi nancial statements and the report of the Board of Directors in accordance with laws and regulations governing the preparation of the fi nancial 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 fi nances, and the Managing Director shall see to it that the accounts of the company are in compliance with the law and that its fi nancial aff airs have been arranged in a reliable manner.
Our responsibility is to perform an audit in accordance with good auditing practice in Finland, and to express an opinion on the parent company's fi nancial statements, on the consolidated fi nancial statements and on the report of the Board of Directors based on our audit. Good auditing practice requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the fi nancial statements and the report of the Board of Directors are free from material misstatement and whether the members of the Board of Directors and the Managing Director have complied with the Limited Liability Companies Act.
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 of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances. 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 fi nancial statements and the report of the Board of Directors.
The audit was performed in accordance with good auditing practice in Finland. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion on the consolidated fi nancial statements
In our opinion, the consolidated fi nancial statements give a true and fair view of the fi nancial position, fi nancial performance, and cash fl ows of the group in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.
Opinion on the company's fi nancial statements and the report of the Board of Directors
In our opinion, the fi nancial statements, together with the consolidated fi nancial statements included therein, and the report of the Board of Directors give a true and fair view of the fi nancial performance and fi nancial position of the company in accordance with the laws and regulations governing the preparation of the fi nancial 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 fi nancial statements.
Amsterdam, 9 February 2010
Ernst & Young Oy Authorized Public Accountants
Tuija Korpelainen Authorized Public Accountant
| Property | Address | Built in / renovated in | Holding, % | Citycon's GLA, sq.m. |
Occupancy rate, %, sq.m. 1) |
Occupancy rate, %, EUR 1) |
||
|---|---|---|---|---|---|---|---|---|
| FINLAND | ||||||||
| HELSINKI METROPOLITAN AREA | ||||||||
| 1 | Asolantien Liikekiinteistö Oy | Asolanväylä 50 | 01360 VANTAA | 1986 | 100% | 1,900 | 55.1 | 59.4 |
| 2 | Columbus | 21,000 | 98.6 | 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 | 17,300 | 95.4 | 95.7 | ||||
| Espoon Asemakuja 2 Koy | Asemakuja 2 | 02770 ESPOO | 1991 | 100% | 6,300 | |||
| Espoon Asematori Koy | Kamreerintie 5 | 02770 ESPOO | 1989 | 54% | 1,900 | |||
| Espoontori Koy | Kamreerintie 3 | 02770 ESPOO | 1987 | 67% | 9,100 | |||
| 5 | Hakarinne 4 | Hakarinne 4 | 02120 ESPOO | 1985 | 56% | 380 | 100.0 | 100.0 |
| 6 | Hakunilan Keskus | 3,780 | 88.6 | 87.1 | ||||
| Hakucenter Koy | Laukkarinne 6 | 01200 VANTAA | 1986 | 19% | 780 | |||
| Hakunilan Keskus Oy | Laukkarinne 4 | 01200 VANTAA | 1982 | 41% | 3,000 | |||
| 7 | Heikintori | 5,800 | 89.9 | 95.2 | ||||
| Heikintori Oy | Kauppamiehentie 1 | 02100 ESPOO | 1968 | 65% | ||||
| 8 | Helsingin Autotalo Oy | Salomonkatu 17 | 00100 HELSINKI | 1958 | 9% | 1,300 | 79.3 | 85.9 |
| 9 | Iso Omena | 60,400 | 98.0 | 98.6 | ||||
| Big Apple Top Oy | Piispansilta 9 | 02230 ESPOO | 2001 | 60% | ||||
| 10 Isomyyri | 10,900 | 56.7 | 61.3 | |||||
| Myyrmäen Kauppakeskus Koy | Liesitori 1 | 01600 VANTAA | 1987 | 74% | ||||
| 11 Kirkkonummen Liikekeskus Oy | Asematie 3 | 02400 KIRKKONUMMI | 1991 | 67% | 5,000 | 100.0 | 100.0 | |
| 12 Kontulan Asemakeskus Koy | Keinulaudankuja 4 | 00940 HELSINKI | 1988/2007 | 35% | 4,500 | 100.0 | 100.0 | |
| 13 Laajasalon Liikekeskus | 2,660 | 90.6 | 91.8 | |||||
| Laajasalon Liikekeskus Oy | Yliskyläntie 3 | 00840 HELSINKI | 1972/1995 | 50% | 2,300 | |||
| Kuvernöörintie 8 Koy | Kuvernöörintie 8 | 00840 HELSINKI | 1982 | 100% | 360 | |||
| 14 Lautt asaaren Liikekeskus Oy | Lautt asaarentie 28-30 | 00200 HELSINKI | 1970 | 24% | 1,500 | 100.0 | 100.0 | |
| 15 Lippulaiva | 23,400 | 99.7 | 99.8 | |||||
| Lippulaiva Koy | Espoonlahdenkatu 4 | 02320 ESPOO | 1993/2007 | 100% | ||||
| 16 Länsi-Keskus Koy | Pihatörmä 1 | 02210 ESPOO | 1989 | 41% | 8,600 | 100.0 | 100.0 | |
| 17 Martinlaakson Kivivuorentie 4 Koy | Kivivuorentie 4 | 01620 VANTAA | 1976 | 100% | 3,800 | 100.0 | 100.0 | |
| 18 Minkkikuja 4 Koy | Minkkikuja 4 | 01450 VANTAA | 1989 | 100% | 2,300 | 100.0 | 100.0 | |
| 19 Myllypuron Ostoskeskus | 1,400 | 100.0 | 100.0 | |||||
| Kivensilmänkuja 1 Koy | Kivensilmänkuja 1 | 00920 HELSINKI | 1988 | 100% | 1,400 | |||
| Myllypuron Ostoskeskus Oy | Kiviparintie 2 | 00920 HELSINKI | Building demolished in 2009 | 100% | ||||
| Asunto Oy Helsingin Myllypiha | Kiviparintie 2 | 00920 HELSINKI | lot | 100% | ||||
| Asunto Oy Helsingin Kivensilmänkuja 3 | Kivensilmänkuja 1-3 | 00920 HELSINKI | lot | 100% | ||||
| Helsingin Kiviparintien asumisoikeusasunnot Oy | Kiviparintie 2 A | 00920 HELSINKI | lot | 100% | ||||
| 20 Myyrmanni | 40,300 | 96.3 | 97.0 | |||||
| Myyrmanni Koy | Iskoskuja 3 | 01600 VANTAA | 1994/2007 | 100% | ||||
| 21 Otaniemen Liikekeskus Oy | Otakaari 11 | 02150 ESPOO | 1969 | 39% | 340 | 0.0 | 0.0 | |
| 22 Pihlajamäen liiketalo Oy | Meripihkatie 1 | 00710 HELSINKI | 1970 | 43% | 1,700 | 75.6 | 75.5 | |
| 23 Salpausseläntie 11 Koy | Salpausseläntie 11 | 00710 HELSINKI | 1973 | 31% | 600 | 100.0 | 100.0 | |
| 24 Sampotori | Heikintori, Kauppamiehentie 1 | 02100 ESPOO | lot | 100% | 50 | 100.0 | 100.0 | |
| 25 Sinikalliontie 1 Koy | Sinikalliontie 1 | 02630 ESPOO | 1964/1992 | 100% | 15,700 | 93.7 | 97.1 |
| Property | Address | Built in / renovated in | Holding, % | Citycon's GLA, sq.m. |
Occupancy rate, %, sq.m. 1) |
Occupancy rate, %, EUR 1) |
|
|---|---|---|---|---|---|---|---|
| 26 Soukan Itäinentorni As Oy | Soukantie 16 | 02360 ESPOO | 1972 | 27% | 1,600 | 100.0 | 100.0 |
| 27 Talvikkitie 7-9 Koy | Talvikkitie 7-9 | 01300 VANTAA | 1989 | 100% | 9,800 | 100.0 | 100.0 |
| 29 Tikkuri | 10,700 | 90.1 | 94.5 | ||||
| Tikkurilan Kauppakeskus Koy | Asematie 4-10 | 01300 VANTAA | 1984/1991 | 84% | |||
| 29 Ultima Oy | Äyritie 1 | 01510 VANTAA | lot | 100% | |||
| 30 Vantaan Laajavuorenkuja 2 Koy | Laajavuorenkuja 2 | 01620 VANTAA | 1976 | 100% | 2,000 | 100.0 | 100.0 |
| 31 Vantaan Säästötalo Koy | Kielotie 20 | 01300 VANTAA | 1983 | 61% | 3,800 | 98.1 | 98.7 |
| 32 Wavulinintie 1 Koy | Wavulinintie 1 | 00210 HELSINKI | 1950/1992 | 100% | 1,700 | 29.5 | 13.0 |
| OTHER AREAS IN FINLAND | |||||||
| 33 Forssan Hämeentie 3 Koy | Hämeentie 3 | 31100 FORSSA | 1978 | 100% | 4,500 | 1.9 | 2.3 |
| 34 Forum | 17,500 | 97.1 | 97.5 | ||||
| Jyväskylän Forum Koy | Asemakatu 5 | 40100 JYVÄSKYLÄ | 1953/1972/1980/1991 | 100% | |||
| 35 Galleria | 3,500 | 91.1 | 94.3 | ||||
| Oulun Galleria Koy | Isokatu 23 | 90100 OULU | 1987 | 100% | |||
| 36 Isokarhu | 14,800 | 89.3 | 94.2 | ||||
| Kauppakeskus IsoKarhu Oy | Yrjönkatu 14 | 28100 PORI | 1972/2001/2004 | 100% | |||
| 37 IsoKristiina | 18,700 | 90.0 | 93.7 | ||||
| Karjalan Kauppakeskus Koy | Brahenkatu 3 | 53100 LAPPEENRANTA 1987 | 100% | 8,400 | |||
| Lappeen Liikekeskus Koy | Brahenkatu 5 | 53100 LAPPEENRANTA 1987 | 80% | 6,600 | |||
| Lappeenrannan Brahenkatu 7 Koy | Brahenkatu 7 | 53100 LAPPEENRANTA 1993 | 84% | 3,700 | |||
| 38 Isolinnankatu 18 Koy | Isolinnankatu 18 | 28100 PORI | 1986 | 100% | 5,300 | 80.4 | 75.9 |
| 39 Jyväskeskus | 5,800 | 96.3 | 97.8 | ||||
| Jyväskylän Kauppakatu 31 Koy | Kauppakatu 31 | 40100 JYVÄSKYLÄ | 1955/1993 | 100% | |||
| 40 Kaarinan Liiketalo Koy | Oskarinaukio 5 | 20780 KAARINA | 1979/1982 | 100% | 9,200 | 90.2 | 93.2 |
| 41 Karjaan Ratakatu 59 Koy | Ratakatu 59 | 10320 KARJAA | 1993 | 100% | 3,100 | 100.0 | 100.0 |
| 42 Duo | 13,000 | 92.9 | 94.2 | ||||
| Hervannan Liikekeskus Oy | Insinöörinkatu 23 | 33720 TAMPERE | 1979 | 75% | 4,700 | ||
| Tampereen Hermanni Koy | Pietilänkatu 2 | 33720 TAMPERE | 2007 | 100% | 8,300 | ||
| 43 Koskikara | 5,800 | 92.5 | 94.4 | ||||
| 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 | ||
| 44 Koskikeskus | 26,300 | 94.9 | 96.4 | ||||
| Tampereen Koskenranta Koy | Hatanpään valtatie 1 | 33100 TAMPERE | 1988/1995 | 64% | 10,700 | ||
| Tampereen Hatanpää Koy | Hatanpään valtatie 1 | 33100 TAMPERE | 1988 | 100% | 7,200 | ||
| Tampereen Suvantokatu Koy | Hatanpään valtatie 1 | 33100 TAMPERE | 1988 | 100% | 8,400 | ||
| 45 Kotkan Keskuskatu 11 Koy | Keskuskatu 11 | 48100 KOTKA | 1976 | 100% | 4,300 | 100.0 | 100.0 |
| 46 Kuopion Kauppakatu 41 Koy | Kauppakatu 41 | 70100 KUOPIO | 1977 | 100% | 11,200 | 96.7 | 98.4 |
| 47 Kuusankosken Kauppakatu 7 Koy | Kauppakatu 7 | 45700 KUUSANKOSKI | 1980 | 100% | 2,100 | 100.0 | 100.0 |
| 48 Lahden Kauppakatu 13 Koy | Kauppakatu 13 | 15140 LAHTI | 1971 | 100% | 8,600 | 100.0 | 100.0 |
| 49 Lentolan Perusyhtiö Oy | Mäkirinteentie 4 | 36220 KANGASALA | 2007 | 100% | 11,900 | 86.1 | 85.0 |
| 50 Lillinkulma Koy | Jännekatu 2-4 | 20760 PIISPANRISTI | 2007 | 100% | 7,400 | 100.0 | 100.0 |
| Property | Address | Built in / renovated in | Holding, % | Citycon's GLA, sq.m. |
Occupancy rate, %, sq.m. 1) |
Occupancy rate, %, EUR 1) |
||
|---|---|---|---|---|---|---|---|---|
| 51 Linjuri | 9,300 | 88.5 | 88.5 | |||||
| Linjurin Kauppakeskus Koy | Vilhonkatu 14 | 24100 SALO | 1993/2007 | 89% | ||||
| 52 Mäntyvuoksi Koy | Vuoksenniskantie 50 | 55800 IMATRA | 1974 | 87% | 1,300 | 100.0 | 100.0 | |
| 53 Naantalin Tullikatu 16 Koy | Tullikatu 16 | 21100 NAANTALI | 1985 | 100% | 3,100 | 17.3 | 19.9 | |
| 54 Orimatt ilan Markkinatalo Oy | Erkontie 3 | 16300 ORIMATTILA | 1983 | 77% | 3,500 | 100.0 | 100.0 | |
| 55 Porin Asema-aukio Koy | Satakunnankatu 23 | 28130 PORI | 1957/1993 | 100% | 18,900 | 78.8 | 86.6 | |
| 56 Puijonlaakson Palvelukeskus Koy | Sammakkolammentie 6 | 70200 KUOPIO | 1971 | 31% | 1,500 | 100.0 | 100.0 | |
| 57 Runeberginkatu 33 Koy | Runeberginkatu 33 | 06100 PORVOO | 1988 | 100% | 6,300 | 100.0 | 100.0 | |
| 58 Sampokeskus | 14,000 | 76.5 | 80.8 | |||||
| Rovaniemen Sampotalo | Maakuntakatu 29-31 | 96200 ROVANIEMI | 1990 | 100% | 12,000 | |||
| Lintulankulma Koy | Rovakatu 28 | 96200 ROVANIEMI | 1989/1990 | 100% | 2,000 | |||
| 59 Säkylän Liiketalo Koy | Pyhäjärventie | 27800 SÄKYLÄ | 1969 | 100% | 1,200 | 100.0 | 100.0 | |
| 60 Torikeskus | Kauppatori 1 | 60100 SEINÄJOKI | 1992/2007 | 100% | 11,500 | 86.2 | 89.6 | |
| 61 Trio | 45,700 | 90.2 | 94.6 | |||||
| Lahden Hansa Koy | Kauppakatu 10 | 15140 LAHTI | 1992 | 100% | 10,700 | |||
| Lahden Trio Koy | Aleksanterinkatu 20 | 15140 LAHTI | 1977/1985-1987 /1992/2007/2008 | 90% | 35,000 | |||
| 62 Tullintori | 10,300 | 74.4 | 75.0 | |||||
| Tullintori Koy | Hammareninkatu 2 | 33100 TAMPERE | 1930/1990 | 57% | ||||
| 63 Vaakalintu Koy | Keskuskatu 15 | 11100 RIIHIMÄKI | 1980 | 96% | 6,700 | 100.0 | 100.0 | |
| 64 Valtakatu 5-7 Koy | Valtakatu 5-7 | 37600 VALKEAKOSKI | 1938/1992 | 31% | 460 | 51.2 | 44.6 | |
| 65 Valtari | 7,600 | 85.6 | 90.6 | |||||
| Kouvolan Valtakadun Kauppakeskus Koy | Valtakatu 15 | 45100 KOUVOLA | 1971-1975 /1994-2002 | 100% | ||||
| 66 Varkauden Relanderinkatu 30 Koy | Relanderinkatu 28-34 | 78200 VARKAUS | 1990 | 100% | 8,200 | 100.0 | 100.0 | |
| 66 FINLAND TOTAL | 587,650 | 91.2 | 94.6 | |||||
| THE BALTIC COUNTRIES | ||||||||
| ESTONIA | ||||||||
| 1 | Rocca al Mare | 53,500 | 98.8 | 99.3 | ||||
| Rocca al Mare Kaubanduskeskuse AS | Paldiski mnt. 102 | 13522 TALLINN | 1998 / 2000/2007/2008/2009 | 100% | ||||
| 2 | Magistral | 9,500 | 100.0 | 100.0 | ||||
| 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 | 71,000 | 99.1 | 99.4 |
| Property | Address | Built in / renovated in | Holding, % | Citycon's GLA, sq.m. |
Occupancy rate, %, sq.m. 1) |
Occupancy rate, %, EUR 1) |
||
|---|---|---|---|---|---|---|---|---|
| SWEDEN | ||||||||
| STOCKHOLM AREA AND UMEÅ | ||||||||
| 1 | Åkersberga Centrum | 30,500 | 97.4 | 97.2 | ||||
| Åkersberga Centrum AB | Storängsvägen | 18430 ÅKERSBERGA | 1985 / 1995 / 1996 | 75% | ||||
| 2 | Åkermyntan Centrum | Drivbänksvägen 1 | 16574 HÄSSELBY | 1977 | 100% | 8,400 | 91.0 | 92.3 |
| 3 | Kallhäll | Skarprätt arvägen 36-38 | 17677 JÄRFALLA | 1991 | 100% | 3,500 | 100.0 | 100.0 |
| 4 | Jakobsbergs Centrum | 69,300 | 92.5 | 94.1 | ||||
| Jakobsberg Centrum Fastighets AB | Tornérplatsen 30 | 17730 JÄRFALLA | 1959 / 1993 | 100% | ||||
| Jakobsberg Centrum Galleria AB | Tornérplatsen 30 | 17730 JÄRFALLA | 100% | |||||
| Jakobsberg 565 Fastighets AB | Tornérplatsen 30 | 17730 JÄRFALLA | 100% | |||||
| 5 | Fruängen Centrum | Fruängsgången | 12952 HÄGERSTERN | 1965 | 100% | 14,600 | 89.8 | 92.1 |
| 6 | Liljeholmstorget | 40,700 | 92.4 | 91.3 | ||||
| Liljeholmsplan Fastighets AB | Liljeholmstorget 7 | 11763 STOCKHOLM | 1973 / 1986/2007/2008/2009 | 100% | ||||
| 7 | Strömpilen | 27,000 | 87.4 | 95.9 | ||||
| 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 | 31,300 | 98.8 | 98.5 | ||||
| Tumba Centrumfastigheter Aktiebolag | Tumba Torg 115 | 14730 BOTKYRKA | 1954 / 2000 | 100% | ||||
| GOTHENBURG AREA | ||||||||
| 10 Stenungs Torg | 36,400 | 95.9 | 96.0 | |||||
| Stenungs Torg Fastighets AB | Östra Köpmansgatan 2-16, 18A-C 44430 STENUNGSUND 1967 / 1993 | 70% | ||||||
| 11 Backa | Backavägen 3-5 | 41705 GOTHENBURG | 1990 | 100% | 7,800 | 87.3 | 88.4 | |
| 12 Floda | Rurik Holms väg | 44830 FLODA | 1960 / 1990 | 100% | 11,400 | 89.9 | 91.8 | |
| 13 Hindås | Hindås Stationväg 41-47 | 43063 HINDÅS | 1978 / 1999 | 100% | 1,700 | 93.8 | 95.1 | |
| 14 Landvett er | Bratt åsvägen | 43832 LANDVETTER | 1975 / 1988 / 1999 | 100% | 4,800 | 100.0 | 100.0 | |
| 15 Lindome | Almåsgången | 43730 LINDOME | 1974 | 100% | 7,800 | 97.9 | 98.1 | |
| SWEDEN TOTAL | 302,500 | 93.7 | 94.7 | |||||
| 84 TOTAL ALL | 961,150 | 92.6 | 95.0 |
1) Formulas are available on pages 53-54.
Realia Management Oy has made a valuation of Citycon's property portfolio as at 31st of December 2009. The valuation was carried out as a cash fl ow analysis of the net operating income for a period of 10 years. For undeveloped plots, and for properties subject to signifi cant town plan alterations, market values for the relevant assets are determined by the amount of building right in the existing town plan.
The properties have been inspected by Realia Management Oy originally during 2007. Re inspection of properties is carried out as needed, giving emphasising to the most important assets, such as newly acquired properties and development projects. Other properties are selected at random for inspection. During the fourth quarter of 2009, the following assets were re-inspected: Iso Omena, Lippulaiva, Columbus, Rocca Al Mare, Myyrmanni, IsoMyyri, IsoKristiina, Trio, Myllypuro shopping centre and Otaniemi shopping centre.
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 Eff ective Gross Rental Income. Eff ective 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 bott om level cash fl ow 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 specifi ed 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 fi rst uneasy steps towards an economic recovery, widely anticipated in the markets, have essentially been taken during the autumn of 2009. While the fear of a double dip recession has seemingly subsided, it has been replaced by a concern for a long-run market lethargy as a rapid economic recovery and the return to precrisis levels of GDP growth look increasingly unlikely. The extensive Europe-wide government and central bank interventions have steered the fi nancial markets away from the brink, but at a cost; the now increasingly debt-laden European governments are likely to cause new volatility in the global fi nance markets in yet unforeseen ways, and are unlikely or unable to actively prop up market confi dence and demand much longer. Thus, the European economy as a whole is set to face a prolonged period of near-zero growth or, at best, a period of modest growth lacking the bullish sentiments observed before the fi nancial crisis.
The return to robust growth in the world economy is now largely dependent on increasing economic activity in Asia and increased demand in the US, but for Europe, and especially for the Nordic countries with sizeable investments in the Baltic region, the instability of the Eastern European and Baltic markets remain a serious risk on the road to recovery. In addition, the Russian economy has been badly hit and even moderate increases in oil and gas prices, its main export products, are unlikely to bring about a solid recovery, eff ectively limiting the importance of Russia as a trading partner. According to Eurostat, the eurozone grew by 0.4% in the third quarter (+0.3% for EU27) compared to the previous quarter and -4.1% when compared to a year earlier ( 4.3% for EU27).
The ECB has kept its benchmark rate at the record low level of 1.0%, where it is expected to remain during the fi rst half of 2010 due to weak economic fundamentals. Some of the most drastic actions by the ECB, such as considerable liquidity injections at fi xed rates, have not yet been met by a backlash in the form of excessive infl ation. The ECB, however, is likely to refrain from further emergency measures for fear of creating speculative bubbles e.g. in the property and commodity markets, although the precarious debt situation of some of the sovereign EU nations may warrant future intervention. While the contraction of broad money supply (M3) and bett er than expected private credit figures are giving mixed signals, they suggest a fragile financial market no longer constrained by liquidity.
According to Statistic Finland, the Finnish economy contracted by 9.1 percent year-on-year during the third quarter of 2009. The economy expanded by 0.3 percent in the third quarter when compared to the prior quarter. The Finnish export industry has been particularly badly hit by the world recession as demand for traditional Finnish export goods, such as heavy machinery and shipbuilding, has faltered. Year-on-year change in exports was negative 26.6 percent in the third quarter, while there was sequential growth of 0.3 % from the previous quarter. Investments were also hit, down 20.0 percent year-on-year (7.9 % quarter-on-quarter) while private consumption decreased by a more moderate 1.1 percent year-on-year and increased by 0.3 percent quarter-on-quarter. Finland's economy is widely expected to start recovering by the end of 2010, and estimates for change in gross domestic product during 2009 have gradually been revised, shifting the brunt of the remaining recessionary period from the beginning of 2010 to the end of 2009. However, the economic growth in the coming years is expected to be moderate and far from the strong expansion experienced before the recession took hold. The year-on-year harmonised infl ation rate was -1.3 percent in November 2009, a monthly change of +0.2 percent.
The Swedish economy is expected to contract by 4.5 percent in 2009 and expand by 2.7 percent in 2010 according to figures revised in December by the central bank of Sweden. While Sweden has also suff ered from dwindling exports and rocketing unemployment, Sweden has nevertheless fared bett er throughout the recession than Finland. A weak
recovery appears to be underway and the Swedish central bank Riksbanken is likely to keep its benchmark rate at 0.25 percent until autumn 2010 when the economic recovery is expected to begin to solidify. The seasonally adjusted unemployment rate, according to Eurostat, has increased to 8.9 percent in November, a rise of 0.3 percentage points compared to three months back and a rise of 2.1 percentage points from a year ago. There is also some additional currency risk concerning the Swedish Krona. Further problems in the Baltic economies may very well have ripple eff ects on the value of the Krona due to heavy exposure of Swedish companies and banks to the Baltic markets. Some of the risk is, however, mitigated by active EU and IMF involvement.
The economic outlook in the Baltic countries remains bleak although a full economic meltdown has thus far been avoided. Estonia has, however, reached a budget surplus for the third quarter and despite otherwise grim fi gures, the overall sentiments have become noticeably optimistic. Latvia's economy, in the worst shape of the 27 EU countries, is now largely dependent on the support by the EU and the IMF. Of the Baltic countries, Latvia and Lithuania have large budget deficits, increasingly high unemployment rates, double-digit GDP contractions and unwilling to devalue to the heavy exposure to euro loans. Were one of the currencies suddenly forced to devalue, it would have a detrimental effect on the value of foreign direct investments in the country and spread economic havoc and uncertainty around the Baltic area. The situation has remained volatile and currency risk remains a considerable factor.
1.3 Property Market Analysis
Year 2009 has been a period of calm when measured in property transactions volumes. Both in Finland and across the whole of Europe transaction volumes remained at their lowest levels since the start of the 21st century. Investor activity was barely observed during the fi rst three quarters of 2009 while signs of increased activity and markets reviving have been observed, especially in the major property markets in the UK and France, towards the end of the year. These major markets have also seen falling yield levels, although one should keep in mind that the upward shift in yields during 2007-2008 was very drastic when compared e.g. to the Nordic countries.
In Finland, transaction volumes have also begun to increase during the last quarter of 2009. During the final quarter, transactions were completed for approximately EUR 700 million, while for the previous three quarters transactions totalled approximately EUR 1 billion. For the whole of 2009, a transaction level of EUR 1.7 billion is expected for Finland. Despite the markets picking up pace towards the end of the year, the fi gures are still far lower than what was considered normal in previous years and still below the levels seen during the fi rst years of the 21st century.
While the Finnish property market is showing signs life, no changes for the bett er have been observed in yield or prices levels. Increased investor activity towards the end of the year merely suggests that the sellers and purchasers have come to a mutual understanding of the current price level. So far, the purchasers have yet to compromise their yield requirements to a great degree. Before year change, there are always transactions that stem from strategic and fi nancial statement needs, but in Finland, distressed sales have been observed in very limited quantities. The transactions that have taken place have not included prime properties in the Helsinki Metropolitan Area. In the provincial cities, yield levels for good commercial property assets have, by and large, sett led at around a yield level of 7-8 percent.
The domestic investors have been prominent players in the property market during the past year. Since autumn 2008 and throughout 2009 the most active commercial property purchasers by far have been domestic pension and insurance institutions. This trend is the result of tighter bank credit terms, which, in turn, has resulted in deteriorated operating environment for investors relying on borrowed capital giving the capital-intensive institutional operators a competitive edge and a chance to improve their market positioning. Correspondingly, smallscale local investors have been observed to raise their profi le in the Finnish property market. The large national and international investors have either entirely halted the purchasing of, or increased their risk premiums for properties located in the provinces, subsequently creating good investment opportunities for those well acquainted with local markets.
Nonetheless, there is still foreign demand and capital looking for suitable property investments in the Finnish and Nordic property markets. These parties are, however, above all looking for prime Helsinki Metropolitan Area properties that, by and large, have not been available. In addition, increased cross-border investor caution and the strong increases in yield requirements for investment grade properties in provincial cities have resulted in the completion of very few deals in the past year.
The increases in yield requirement, nevertheless, have levelled off towards the end of the year, especially for prime properties. Currently, the most pertinent issue concerning investment properties are the rental markets. Thus far, rental levels and occupancy levels for retail space in particular have remained quite steady, while e.g. in the Helsinki Metropolitan area the market for offi ce space has been challenging. Spring 2010 will no doubt give an indication of how the retail space market has fared throughout the recession. It is feared that the increased unemployment will negatively aff ect consumer preferences and consumption, resulting in pressure on rental levels for retail premises.
Shopping centre and grocery store sales have held rather steady throughout 2009 and no signifi cant changes from the 2008 sales fi gures have been observed. On the other hand, for the space intensive retail sectors, such as car, furniture and white goods, the change in sales volume has been sharply negative. In these sectors, vacancy rates and the number of obscure lease terminations have also increased.
Due to the recession, construction of new retail space has slowed considerably. Kesko and S-group have nevertheless been active in expanding their grocery chains. There are also some pending redevelopment projects of old suburb shopping malls and shopping centres. However, no new large shopping centres are under construction at this time.
Some development projects were valued using a special project model. This model is only used in a project accompanied by: 1) a Citycon's board decision, and 2) enough information for a reliable valuation. Such information includes e.g. an extensive project plan, several new rental agreements, future investments, etc. The appraiser makes the fi nal decision on the use of the model.
The project model is a 10-year cash flow model, which also takes the projects' future investments and changing cash fl ows into consideration. It includes present cash fl ows up to the end of the development phase and future cash fl ows aft er the development.
The project model was used in the valuation of one property in this valuation. The property in question was the shopping centre Åkersberga Centrum in Sweden. In other assets, valuation was based on the regular cash fl ow analysis adjusted for small-scale development projects on the property. Properties were evaluated based on the current rental situation and current allocation of premises. If necessary, future development potential has been taken into account in the value of unused building right or in the form of expected cash fl ow increase while including necessary development costs as investment costs in the calculations.
All undeveloped plots or those under development are evaluated based on their current plan and the amount of unused building right. If there is an ongoing official plan alteration process, and the property's purpose of use and att ributes are substantially changed, the altered plan can be taken into account in valuation through the value of unused building right. Prerequisite for the valuation 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 fl ow and demolition costs are also considered in the valuation.
Citycon Oyj owns 72 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 90 diff erent properties. The property portfolio is very heterogeneous both in quality and in value. The body of the holding is formed by 30 shopping centre properties, although the portfolio also includes occasional small commercial buildings, development properties in the demolishing stage and, for example, one unbuilt lot.
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 portfolio has been further regrouped geographically based on the locations of the properties.
Citycon 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 percent). Especially in Finland, Citycon has a strong position in the shopping centre market by owning fi ve of the 20 largest shopping centres and in total, by owning 22 properties that are classifi ed as shopping centres.
Citycon has announced that its strategic focus is the development of existing properties. For example in the Helsinki region Citycon owns several of the old suburb shopping centres and retail premises. In these properties, major development is also expected in conjunction with reworking of town plans. These properties are always evaluated on a case-by-case basis. In case a new, updated town plan is enforced and as a result, a schedule for the development project is determined, the building right can be taken into consideration in valuation, or, if necessary, the valuation will be done through the so-called development model analysis (where also the outcome of development project is included in valuation). Myllypuro shopping centre is now valued through building right aft er a lot purchase by Citycon Oyj.
Several retail properties, both in Finland and Sweden, either have development plans underway or potential for development. These properties include e.g. Tumba Centrum and Åkersberga Centrum in Sweden, as well as Trio, Iso Omena and Isokristiina in Finland. The development of these properties is always considered case-by-case, oft en advancing in phases. Development is taken into account in valuation when credible plans exist and there is evidence of high likelihood for lett ing. In appraisal, the development potential signifi es a potential increase in rental income either through an increase in average rent or through an increase in the lett able area or average rent, requiring investment for realisation in addition to a feasible construction or development time.
The aggregated market value of the whole portfolio has been valued at approximately EUR 2.162 billion. The aggregated value of portfolio has increased quarter-on-quarter by approximately EUR 8 million (EUR 2.154 billion in Q3 2009). The change in relative terms is approximately +0.4% overall. The positive change in value is largely caused by the progression of major development projects Liljeholmstorget and Åkersberga Centrum. The market value of the properties has increased as construction has advanced, construction costs materialised and the lett ing progressed. In addition, Myllypuro shopping centre has increased considerably in value aft er the inclusion of Citycon Oyj's property transaction with the city of Helsinki in the valuation. For the fourth quarter, the change in market value for these three properties amounts to over EUR 26 million. If the development projects are left out from the analysis, the value of the property portfolio decreased by
The weighted average yield requirement of the portfolio has remained at 6.6 percent (6.6% Q3 2009).
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 simplifi ed model intended to facilitate understanding of the eff ect 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 percent increase in value. Correspondingly, a ten percent increase in rental income increases the value by approximately 15 percent.
The value is not particularly sensitive to changes in the levels of expenses or long-term vacancy. A ten percent increase in the expenses decreases the market value of the property portfolio by approximately four percents. It should also be noted that in retail premises, the rental income and property expenses are oft en 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 eff ects 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 fi ve or ten percents at a time, as is the case in other parameters. Still, the eff ect 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 less than two percent.
Fruängen Centrum Stockholm Citycon's gross
leasable area 14,600 sq.m. Built in 1965.
Österåker Citycon's gross leasable area 30,500 sq.m. Built in 1985. Extended and/or renovated in 1995/1996.
Tallinn Citycon's gross leasable area 9,500 sq.m. Built in 2000.
Liljeholmstorget Stockholm Citycon's gross leasable area
Åkermyntan
40,700 sq.m. Built in 1973. Extended and/ or renovated in 2009.
Tumba Centrum
area 31,300 sq.m. Built in 1954. Extended and/or renovated in 2000.
Botkyrkan
Citycon's gross leasable
Stenungsund Citycon's gross leasable area 36,400 sq.m. Built in 1967. Extended and/or renovated in 1993.
UMEÅ
Umeå Citycon's gross leasable area 27,000 sq.m. Built in 1927. Extended and/or renovated in 1997.
Tallinn Citycon's gross leasable area 53,500 sq.m. Built in 1998. Extended and/or renovated in 2009.
Centrum Hässelby Citycon's gross leasable area 8,400 sq.m. Built in 1977.
LITHUANIA
Vilnius Citycon's gross leasable area 8,000 sq.m. Built in 2005.
Jakobsbergs
POHJOISESPLANADI 35 AB FI-00100 HELSINKI, FINLAND TEL. +358 (0)207
664
400 [email protected] WWW.CITYCON.COM
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