Annual Report • Feb 17, 2012
Annual Report
Open in ViewerOpens in native device viewer
ANNUAL AND SUSTAINABILITY REPORT 2011
| PROMISE |
|---|
| CEO'S REVIEW 1 |
| CITYCON IN BRIEF 2 |
| STRATEGY 4 |
| BUSINESS ENVIRONMENT 10 |
| CITYCON AS AN INVESTMENT 12 |
| GREETINGS FROM BUSINESS UNITS 16 | |
|---|---|
| LEASING OPERATIONS 18 | |
| CITYCON IN FINLAND 20 | |
| CITYCON IN SWEDEN 22 | |
| CITYCON IN THE BALTIC COUNTRIES 24 | |
| PROPERTY PORTFOLIO 28 | |
| REDEVELOPMENT PROJECTS 34 | |
| GREETINGS FROM VP, SUSTAINABILITY 42 |
|---|
| ENVIRONMENTAL RESPONSIBILITY 43 |
| MATERIALITY ASSESSMENT 44 |
| STAKEHOLDERS 46 |
| ENVIRONMENTAL RESPONSIBILITY 48 |
| ECONOMIC RESPONSIBILITY 54 |
| SOCIAL RESPONSIBILITY 58 |
| CORPORATE GOVERNANCE 65 |
| RISKS AND RISK MANAGEMENT 73 |
| GREETINGS FROM EXEC. VP, CFO 76 | ||
|---|---|---|
| PROFIT PERFORMANCE | ||
| AND FINANCIAL POSITION 77 | ||
| KEY INDICATOR TABLES 79 | ||
| COMPARISON OF THE REPORT WITH THE | ||
| GUIDELINES OF THE GLOBAL REPORTING INITIATIVE 94 | ||
| GLOSSARY 97 |
Some statements in this Annual and Sustainability Report are not historical facts and are "forward-looking". Words such as "believes", "expects", "estimates", "may", "intends", "will", "should", or "anticipates" and similar expressions or their negatives frequently identify forward-looking statements. Forwardlooking 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.
We focused on updating the strategy
My fi rst year with Citycon has been very exciting and ing the business. In short, we made our organization
During the year, the company has strengthened redevelopment projects. In May, Citycon acquired
proximately 28,600 square metres of leasable retail area. The shopping centre development project in Martinlaakso opened late in 2011 and in Myllypuro in Helsinki the fi rst phases were opened during the year. In Tallinn, Estonia, the shopping centre Magistral is currently being redeveloped and extended. Also some non-core properties have been sold and these disposals will be continued.
In 2011, a clear distinction was made between asset classes of diff erent quality. This general trend refl ects in Citycon's property performance and valuation. Overall, demand for the best properties is solid and their fair values remain stable, whereas non-prime properties show an opposite trend.
The year 2011 was a period of solid performance: the company's net rental income grew by 13.4 cent, the shopping centre footfall grew by 3 per cent Galleria in Sweden improved during the year.
During the year we launched the "Project Now!", payout already for the year 2011 in order to un-
Cost benefi ts are pursued also with the help of
Currently, Citycon is a market leader in the Finnish shopping centre business. While the company intends to retain this position, it also aims to increase the relative importance of other countries included in its fi ve year strategy. In addition to Finland, the company owns shopping centres in Sweden, Estonia and Lithuania. Going forward, the plan is to own shopping centres also in Norway, Denmark and Latvia. Citycon will concentrate on competitive shopping centres located in winning cities. The key rationale for our expansion plan is to further improve our retail space off ering and to bett er serve retailers.
The winners in the shopping centre industry will be those who are able to select best locations and combine them with best tenant mix and customer services. Citycon will certainly be one of them, aim-
CEO'S REVIEW
Citycon can also be seen as a double-focused real
folio. Their tasks include enhancing the exchange of Baltic countries. Going forward, management will eCommerce. We have already accelerated the leas-
Therefore leasing and marketing are the true cornerstones of our success and this retail knowledge secures solid cash fl ow.
I would like to give thanks to our skillful employees and stakeholders for a solid year 2011 and hope for a prosperous 2012!
Helsinki, 8 February 2012
Marcel Kokkeel CEO
Citycon's new CEO as of 24 March 2011 is Mr Marcel Kokkeel (born 1958). Mr Kokkeel has close to 30 years of experience in the retail property business. He joined Citycon from the Dutch Multi Corporation. As a member of the Executive Board he was in charge of the company's West European business as well as the Chairman of Multi Mall Management.
On 2 May 2011, Citycon acquired the Kristiine shopping centre in Tallinn for a purchase price of EUR 105 million. Kristiine is Tallinn's second-largest shopping centre aft er Rocca al Mare, already owned by Citycon, and has a gross leasable area of 42,700 square metres. The acquisition strengthened Citycon's position in Tallinn, where the company now has a gross leasable area of over 100,000 square metres.
On 4 May 2011 Citycon announced its intention to launch an extensive redevelopment project at the Koskikeskus centre in Tampere. Completion of the project is scheduled for November 2012. The project will be carried out in stages and Koskikeskus will remain open during the whole time. The interior of the shopping centre, the entrances, facades and all the technical systems will be thoroughly renewed. Aft er the redevelopment project, the total leasable retail area of Koskikeskus will be approximately 28,600 square metres.
| JANUARY | FEBRUARY | MARCH | APRIL | MAY | JUNE |
|---|---|---|---|---|---|
| − Redesigned website opened − Liljeholmstorget Galleria was nominated one of the three candidates for the Retail Awards' Shopping Centre of the Year competition |
− Iso Omena and Forum were named fi nalists in the Shop ping Centre of the Year 2011 competition organised by the Finnish Council of Shopping Centres − Citycon joined the Energy Effi ciency agreement − The Kämp Galleria shopping centre owned by Ilmarinen to be managed by Citycon |
− New Chief Executive Offi cer joined the company ➊ − New Executive Vice President for Finnish Operations joined the company − Personnel survey was con ducted − Citycon's toy collection campaign won Marketing Act of the Year in 2011 Retail Awards − All Citycon shopping centres participated in the WWF Earth Hour campaign |
− Citycon personnel were named in positions of trust in the Finnish Association of Building Owners and Construction Clients (RAKLI) − Citycon representative was ap pointed Chairman of the Finnish Council of Shopping Centres − Shopping centre Rocca al Mare's redevelopment and extension project shortlisted for British Retail & Leisure magazine's RLI Shopping Centre Renovation of the Year Award − Rocca al Mare named fi nalist for the ICSC (International Council of Shopping Centres) Shopping Centre Awards 2011 in the Large Refurbishments and Expansions -category |
− Kristiine shopping centre in Tallinn was acquired ➋ − A sizeable redevelopment project initiated at the Koskikeskus shopping centre in Tampere ➌ − Citycon signs a EUR 330 mil lion fi ve-year credit facility − Högdalen Centrum shopping centre in Stockholm was acquired ➍ |
− Citycon's Swedish-language website at citycon.se opened − Responsibilities reassigned in the retail property organisa tion for Finnish operations |
| KEY FIGURES | 2011 | 2010 |
|---|---|---|
| Turnover, EUR million | 217.1 | 195.9 |
| Operating profi t, EUR million | 81.8 | 157.7 |
| % of turnover | 37.7% | 80.5% |
| Profi t before taxes, EUR million | 19.7 | 102.8 |
| Profi t for the period, EUR million | 21.3 | 90.4 |
| EPRA operating profi t, EUR million | 117.4 | 105.0 |
| EPRA Earnings, EUR million | 53.3 | 47.3 |
| Fair value of investment properties, EUR million | 2,522.1 | 2,367.7 |
| Earnings per share (basic), EUR | 0.05 | 0.34 |
| Earnings per share (diluted), EUR | 0.05 | 0.34 |
| EPRA earnings per share (basic), EUR | 0.21 | 0.21 |
| Dividend and return from invested unrestricted equity fund per share total, EUR | 0.15 * ⁾ |
0.14 |
| Net cash from operating activities per share, EUR | 0.25 | 0.09 |
| Equity per share, EUR | 3.25 | 3.47 |
| Net asset value (EPRA NAV) per share, EUR | 3.62 | 3.79 |
| EPRA NNNAV per share, EUR | 3.29 | 3.49 |
| Equity ratio, % | 36.0 | 37.1 |
| Gearing, % | 151.4 | 153.1 |
| Net interest-bearing debt (fair value), EUR million | 1,463.5 | 1,386.0 |
| Net rental yield, % | 6.0 | 5.8 |
| Average net yield requirement by external appraiser, % | 6.4 | 6.4 |
| Occupancy rate (economic), % | 95.5 | 95.1 |
| Personnel (average for the period) | 131 | 123 |
| Personnel at the end of the period | 136 | 129 |
| Energy consumption, kWh/GLA (sq.m.) | 256 | 321 |
| Carbon footprint, kgCO2e/GLA (sq.m.) | 70.0 | 71.0 |
| Average water consumption, l/visitor/year | 4.3 | 4.0 |
| Average recycling rate, % | 77.6 | 77.1 |
*) The fi gure includes a per-share dividend of EUR 0.04 and a return of equity from invested unresticted equity fund of EUR 0.11 per share.
| JULY | AUGUST | SEPTEMBER | OCTOBER | NOVEMBER | DECEMBER |
|---|---|---|---|---|---|
| − Strategy update – target is to become the shopping centre industry leader in the Nordic and Baltic countries − A directed share issue of ap proximately EUR 100 million was completed − 41 apartments sold in Sweden |
− Finland's shopping centre organisation was rearranged − Citycon signed a EUR 75 million seven-year loan − The business improve ment and cost reduction programme Project Now was launched |
− New General Counsel joined the company − Capital Markets Day held in Helsinki − Rocca al Mare and Kristiine chosen as best shopping centers in the Estonian capital and the Harjumaa region by TNS Emor shopping centers market research |
− Citycon published its Code of Conduct and Whistleblowing Policy and Procedure in-house − New Vice President of Swedish Operations joined the company − Äripäev named Citycon the best real estate company in Estonia − Tullintori shopping centre in Finland was divested |
− The Martinlaakson Ostari shopping centre was opened − 57 apartments and two retail properties were sold in Sweden |
shopping centre in Stockholm
4 Acquisition of the Högdalen Centrum On 31 May 2011, Citycon acquired the Högdalen Centrum shopping centre in Stockholm and on 13 July 2011 Kungsleden Imröret AB, a company that owns the adjacent retail property. The aggregate value of the acquisitions is SEK 256.2 million (approx. EUR28.5 million). The total gross leasable area of the shopping centre and the retail property comes to approximately 19,200 square metres, with retail premises accounting for 16,000 square metres.
Citycon redefi ned its strategy, mission and vision.
To become bett er, stronger and bigger in order to achieve a leading position in the shopping centre business in the Nordic and Baltic regions.
Citycon's vision is to double the value of the property portfolio under its management in fi ve years.
A key part of Citycon's clarifi ed strategy is improving the direct result from operations (EPRA Earnings). Costs will be controlled even more closely and the company will strive for stronger rental growth. Marketing has a key role in this eff ort for stronger rental growth. The company will further focus on improving the occupancy rates by implementing appealing marketing programmes and by bringing in new retailers.
The clarifi ed strategy includes divestment of non-core assets and acceleration of planned redevelopments of its existing strategic shopping centres. Citycon also seeks acquisitions that allow value addition by active shopping centre management.
While Citycon intends to retain its market leadership in Finland, it also aims to increase the relative importance of other countries included in its strategy. In addition to Finland, Citycon also owns shopping centres in Sweden, Estonia and Lithuania. Going forward, the company intends to own shopping centres also in Norway, Denmark and Latvia. Citycon will concentrate on competitive shopping centres located in winning cities.
Reduction of greenhouse gas emission by 20 per cent by year 2020 from the 2009 level
Reduction of energy consumption (electricity, heating and cooling) by 9 per cent by 2016 from 2009 level
Improvements in energy effi ciency
Identifying solution that utilise renewable energy
Lowering water consumption to an average level of less than 3.5 litres per visitor
Shopping centre waste recycling rate to be raised to at least 80 per cent by 2015
Reduction of landfi ll waste to a maximum of 20 per cent of total waste by 2015
All development projects to be implemented in accordance with environmental classifi cation principles
Development projects are located in built-up environments, within reach of good public transport connections
Citycon's objective is to invest in winning shopping centres in winning cities. An att ractive shopping centre has a strong share of the local market, and off ers opportunities for increasing rental income. In its revised fi ve-year strategy, Citycon divided all of its properties into the strategic segments shown here, according to their strategic fi t with the position Citycon is seeking. Prime shopping centres in winning cities will be further developed and kept at the core of the company's shopping centre portfolio. A case in point is the Koskikeskus shopping centre in Tampere. Redevelopment has already been carried out in some of the centres, for instance in the Åkersberga Centrum. These shopping centres will be kept in Citycon's property portfolio and developed to ensure their vitality and competitiveness.
The largest and highly established shopping centres, such as Iso Omena, will also represent the core of the property portfolio, but joint venture partners may be accepted as coowners. This helps to untie capital for the development of other properties in the shopping centre portfolio.
The objective is to sell non-core properties, if feasible in the prevailing market conditions. These include apartments connected to shopping centres in Sweden, and supermarket and shop properties in Finland, as well as some smaller shopping and commercial centres.
CITYCON OYJ ○ ANNUAL AND SUSTAINABILITY REPORT 2011 ○ PROMISE 5
| Strat. Objectives |
Bett er | Stronger | Bigger |
|---|---|---|---|
| Strat. Activities |
• Improve profi tability |
• Divest and recycle capital • Strenghten the balance sheet |
• Execute selective property acquisitions and accelerate (re)development |
| Key Performance Indicators |
• Like-for-like NRI growth • Occupancy rate • Rent/sq. m. • Specialty leasing income • OPEX recoverability • Administration expenses growth versus portfolio size growth |
• Divestment amount annually • Value of the non-core properties (resi dential in Sweden and supermarkets and shops)in the statement of fi nancial position • Long-term equity ratio level • Debt portfolio's hedge ratio • Average loan maturity |
• Fair value of properties under management (properties owned fully, partially or via JVs) • Annual acquisition amount • EPS impact of acquisitions • Investments in (re)development projects |
| KPIs in 2011 |
• Like-for-like NRI growth: 3.8%. • Occupancy rate: 95.5%, shopping centres 97.1% and supermarkets and shops 86.4% • Rent/sq. m.: EUR 19.7/sq.m. • Specialty leasing income: EUR 2.0 million • OPEX recoverability: less than 100% • Administration expenses growth more than portfolio size due to one-off s |
• Divestments in 2011: EUR 18.1 million • Value of the non-core properties in the statement of fi nancial position on 31 Dec 2011: EUR 300 - 400 million • Equity ratio: 36.0% • Debt portfolio's hedge ratio: 81.3% • Average loan maturity: 2.9 years |
• Fair value of properties under manage ment: EUR 2.5 billion • Property acquisitions of EUR 140 million executed in 2011 • Investments on (re)development projects: EUR 75.0 million |
| 5 Year Targets for KPIs |
• Like-for-like NRI growth above CPI • Average occupancy rate for shopping centres above 98% |
• Divestments during the next 5 years: EUR 300-400 million, of which substantial part executed during the next 2 years |
• Fair value of properties under management (either owned fully, partially or via JVs) aft er 5 years: EUR 5.0 billion |
• Equity ratio 40% over the cycle • Hedge ratio between 70% - 90% • Loan maturity on average 4 years • EPS impact of acquisitions accretive • Investments in (re)development projects: 125M€-150M€ p.a. on average
growth
• Rent/sq. m. growth above CPI • Specialty leasing income doubled • OPEX recoverability aimed at 100% • G&A growth clearly less than portfolio size The aim is to increase the shopping centre occupancy rate to 98%
• Other investments * ⁾ *) Includes the investments in jointly controlled entities
| Like-for-like net rental income by segments | Like for-like turnover |
|||||
|---|---|---|---|---|---|---|
| EUR million | Finland | Sweden | The Baltic Countries |
Other | Total | Citycon total |
| Actual 2009 | 92.4 | 23.2 | 9.8 | 0.0 | 125.4 | 186.3 |
| (Re)Developments | -4.6 | 3.5 | 2.2 | - | 1.0 | 6.1 |
| Divestments | -0.3 | -1.2 | - | - | -1.6 | -2.3 |
| Like-for-like | -0.6 | 0.6 | -0.2 | - | -0.2 | 1.3 |
| Other (incl. exchange rate diff .) | 0.0 | 2.6 | 0.0 | 0.0 | 2.5 | 4.5 |
| Actual 2010 | 86.7 | 28.7 | 11.8 | 0.0 | 127.2 | 195.9 |
| Acquisitions | 0.1 | 0.8 | 6.0 | - | 7.0 | 10.3 |
| (Re)Developments | 4.2 | 1.4 | -0.3 | - | 5.3 | 6.5 |
| Divestments | 0.1 | -0.9 | - | - | -0.8 | -1.8 |
| Like-for-like | -0.7 | 3.8 | 0.9 | - | 4.0 | 3.2 |
| Other (incl. exchange rate diff .) | -0.1 | 1.6 | 0.1 | 0.0 | 1.6 | 3.0 |
| Actual 2010 | 90.5 | 35.4 | 18.4 | 0.0 | 144.3 | 217.1 |
a shopping centre targeted especially for families, distinguishing itself from the fashion focused Kristiine, which Citycon acquired in 2011.
On the whole, the fi rst half of 2011 was positive in Citycon's operating countries, with strong consumer confi dence and growing retail sales. Aft er the summer, economic sentiment turned negative, particularly due to the sovereign debt crisis in the euro area. While this change was primarily visible on the fi nancial market and impacted on consumer confi dence, it had no major impacts on consumer behaviour during the year.
Retail sales growth and the infl ation rate are key drivers for Citycon's business and have a direct impact on rents from business premises. Almost all of the company's leases are tied to the cost-of-living index. A signifi cant number of leases also feature a turnover-linked component. Consumer prices continued to rise during the year in all of Citycon's operating countries. In December, the annual infl ation rate was 2.9 per cent in Finland, 2.3 per cent in Sweden, 5.0 per cent in Estonia and 3.4 per cent in Lithuania. ¹⁾²⁾³⁾⁴⁾⁵⁾
Household consumer confi dence remained strong until last summer, but deteriorated sharply in the fi nal months of the year in all operating countries. In Finland and Sweden, the household consumer confi dence indicator was still positive, unlike in Estonia and Lithuania. ⁵⁾
In Finland and Sweden, unemployment is lower than the European Union average: at the end of December, the unemployment rate in Finland was 7.4 per cent and in Sweden 7.1 per cent. In Estonia, the unemployment rate remains high; 10.9 per cent at the end of September. However, adoption of the euro has had a positive impact on the Estonian economy, through tourism and foreign investment. Relatively low unemployment and reasonably strong consumer confi dence, combined with low interest rates, is having a positive eff ect on retail sales despite the market uncertainty. ¹⁾²⁾³⁾
The instability of the fi nancial market in Europe deepened towards the year-end, aff ecting the cost and availability of fi nancing. Citycon's long-term relationship with banks has been a key factor in fi nancing decisions. Citycon's fi nancial position remained good throughout the year. More detailed information on Citycon's profi t performance and fi nancial position can be found on pages 77-78 of this Annual Report.
During 2011, changes in real economy trends impacted on retail trade. Retail sales grew in both Finland and Sweden. The total retail sales growth rate in 2011 was 5.3 per cent in Finland, 1.2 per cent in Sweden, 4.0 per cent in Estonia and 8.8 per cent in Lithuania. December sales increased in Finland by 4.3 per cent, in Sweden by 1.5 per cent, in Estonia by 5.0 per cent and by 12.1 per cent in Lithuania compared with the year 2010.
Grocery sales continued to grow in Finland and Sweden. In both countries, large retail units such as hypermarkets and supermarkets continue to grow their sales. In January-November, hypermarket sales grew by 8.2 per cent in Finland. Similarly, in Estonia grocery sales grew during the year. ⁶⁾
Of Finnish retailers, the S Group was able to further strengthen its market share of the grocery trade, accounting for more than 44 per cent of the national grocery retail market. With its 35 per cent market share, the Kesko Group is the second-biggest grocery retailer in Finland. Of other retailers, Suomen Lähikauppa Oy's (previously Tradeka) market share was approximately nine per cent. ⁷⁾
In Sweden, ICA is the grocery market leader, with a market share of more than 40 per cent. COOP held some 18 per cent and Axfood some 16 per cent of the market. ⁸⁾ In Estonia, the largest grocery retailers include Rimi, owned by ICA; Prisma, part of the S Group; Selver, the subsidiary of Tallinna Kaubamaja; local co-operative ETK and the Lithuanian Maxima. In Lithuania, the local Maxima holds nearly 50 per cent of the market. Other larger retailers are Rimi and the local IKI.
In accordance with its strategy, Citycon focuses on shopping centres with a grocery store or a retailer of daily necessities as the anchor tenant. Grocery retailers represent 21 per cent of Citycon's shopping centre tenants.
Leasable retail premises in Finland total approximately 7.8 million square metres, approximately
half of these are located in Helsinki. Property transaction levels remained low, because prime properties att ractive to investors were not for sale. In general, the most active players in the property markets included institutions and property funds. Foreign investors accounted for around a third of all investments. ⁹⁾¹⁰⁾¹¹⁾
In Sweden, leasable commercial premises amount to about 18 million square metres, approximately one fourth of these in the Stockholm area. International investor interest in the Swedish shopping centre markets grew signifi cantly during 2011. Investors are mainly interested in prime properties, but due to the shortage of interested sellers liquidity has been weak. As a result, prime properties in major regional centres and in the suburbs of the three largest cities have also att racted interest. ¹⁰⁾
In Estonia, transaction volumes were clearly higher in the fi rst half than a year earlier, but overall volumes in 2011 were low. Besides Citycon, active players included other foreign and a few local operators. In Lithuania, transaction volumes reached an all-time low. New projects are in the pipeline in Tallinn for the near future, but no major projects were launched in 2011. No signifi cant new projects are underway in Lithuania either, except for IKEA's plans to open their fi rst store in Lithuania in 2013. ¹¹⁾
Online shopping has grown in popularity in Citycon's operating areas. In Sweden, one out of three people buy something on the internet every month, while in Finland one out of ten do so. Scarcity of Finnish online stores has inhibited growth in Finland. The average Finnish consumer still relies on domestic suppliers, although the younger generation mainly shops in international online stores. Key reasons for the popularity of online shopping are its simplicity, ease and quick access, wider selection and aff ordable prices. Statistics Finland valued online shopping in Finland at around EUR 5.1 billion for 2011, which is equivalent to the total combined sales of shopping centres in 2010. ¹⁾²⁾
Online shopping poses a challenge to traditional retailers, but can also be seen as an opportunity. A shopping centre's location and role are growing in importance in the everyday lives of customers. In its shopping centre marketing and communications, Citycon is focusing more on social media and online messaging. People come to a shopping centre not only to buy things, but also to have a good time, enjoy a meal and meet other people, participate in various events, or use recycling facilities. A shopping centre is the modern version of a village or town centre.
In the future, commerce will take place through multiple channels. New concepts have diff erent space requirements to traditional stores, and the main focus is on service and the purchase experience. However, one key criterion remains unchanged: location. ³⁾
1) Nord Posten 2011 2) Statistics Finland 3) Deloitt e, 2009
C itycon Oyj is a real estate company listed on the NASDAQ OMX Helsinki Ltd (Helsinki Stock Exchange) since 1988 (OMXH: CTY1S) that combines property investment with shopping centre business. Citycon owns, leases, develops and manages shopping centres, hypermarkets and retail centres in Finland, Sweden and the Baltic countries. An investment in Citycon provides an investor with the opportunity to invest in retail properties.
Citycon's largest shareholder is Gazit-Globe Ltd., a company listed on the Tel Aviv Stock Exchange (TASE: GLOB) and the New York Stock Exchange (NYSE: GZT). Both directly and through subsidiaries and affi liates, Gazit-Globe Ltd. owns retail properties, particularly shopping centres, in Israel, diff erent parts of Europe, North America and Brazil. Gazit-Globe Ltd. has been a shareholder since 2004 and currently owns approximately 48 per cent of Citycon's shares (source: Gazit-Globe).
Citycon's second largest shareholder is the Ilmarinen Mutual Pension Insurance Company. Ilmarinen participated in the directed share issue arranged by Citycon in July, as a result of which its shareholding in Citycon rose to nearly nine per cent.
Citycon has been able to maintain its investor attraction; a EUR 99 million share issue arranged by the company in July, covering 33 million shares, was completed in just a few hours over closing price. Citycon's market capitalisation at the end of 2011 was EUR 641.7 million compared to EUR 753.3 million at the end of 2010. The decline in market capitalisation refl ects the general market uncertainty, which also translated into share price fl uctuations during the year. Citycon is one of the companies with the most international ownership base on the Helsinki Stock Exchange. International, predominantly nominee registered shareholders owned 82.9 per cent of company shares at the year-end, and the company had 4,276 (4,409) registered shareholders.
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, which consists of the 250 most liquid real estate companies worldwide. In 2011, 97.5 million (115.0 million) Citycon shares were traded on the Helsinki Stock Exchange for a total value of EUR 270.7 million (EUR 326.4 million).
The Board of Directors has set the following fi nancial targets for the company:
in dividends, the company will pay out a minimum of 50 per cent of the profit for the period aft er taxes, excluding fair value changes in investment properties.
the company's long-term equity ratio target is 40 per cent.
The profit distribution for 2010 totalled EUR 0.14 per share, consisting of a dividend of EUR 0.04 per share and an equity return of EUR 0.10 per share from the invested unrestricted equity fund. Citycon has had a very stable dividend policy, paying its shareholders a per-share dividend of EUR 0.14 since 2003, even though the number of the company shares has almost tripled.
The equity ratio at year-end stood at 36.0 per cent.
The Board of Directors proposes that a dividend of EUR 0.04 per share be paid for the year 2011, and that EUR 0.11 be returned from the invested unrestricted equity fund.
The primary objective of Citycon's investor relations is to increase interest in the company's shares as an investment. The company aims to support shareholder value by providing more transparent investor information and by strengthening the company's business profi le, as well as by maintaining a continuous dialogue on communications and reporting with investors and analysts. Investor communications fo-
| Financial Statement Release, Financial Statements, | |
|---|---|
| Report by the Board of Directors and Corporate | |
| Governance Statement for the fi nancial year | |
| 1 January–31 December 2011 | 8 February 2012 at approx. 9.00 a.m. |
| Annual and Sustainability Report 2011 | 17 February 2012 |
| Notice of AGM | 21 February 2012 |
| AGM record date | 9 March 2012 |
| Last day for pre-registration for the AGM | 16 March 2012 |
| AGM | 21 March 2012 at 2.00 p.m., Finlandia Hall, Helsinki |
| Ex-dividend date | 22 March 2012 |
| Record date for dividend payment | 26 March 2012 |
| Dividend payment date | 4 April 2012 |
| Interim Report for January-March 2012 | 25 April 2012 at approx. 9.00 a.m. |
| Interim Report for January-June 2011 | 11 July 2012 at approx. 9.00 a.m. |
| Interim Report for January-September 2012 | 10 October 2012 at approx. 9 a.m. |
cuses on long-term value creation rather than shortterm returns.
The principle behind Citycon's investor communications is to continuously provide the market with accurate, consistent, transparent and up-to-date information on the company in order to give an open and clear picture, which allows markets to make informed assessments of the company's securities. In its investor communications, Citycon adheres to the principle of objectivity and simultaneousness.
Citycon was again internationally recognised for its excellent investor relations. In its annual conference, EPRA cited Citycon's 2010 Annual and Corporate Social Responsibility Report as one of the best in the sector for the second year in a row. Each year, EPRA evaluates the annual reports and financial statements of 80 listed European real estate companies, acknowledging the best of them. This year, the gold award was given to nine companies.
Citycon actively meets with investors both in and outside Finland. In 2011, investors were particularly keen to meet the new CEO and learn about other changes in management, and about the strategic reforms announced in the summer. Company executives gave presentations on Citycon as an investment at approximately 45 events, and met with some 100 institutional investors in either oneon-one or small-group meetings. In addition, the The key channel for Citycon's investor communications is the corporate website, where all stock exchange releases and press releases, fi nancial statements, interim reports, annual reports and notices of general meetings are published. Also available on the website are the executive presentations on the fi nancial results, webcast recordings of these events, as well as the presentation material for regular investor meetings. Web access to the company's fi nancial results presentation events and possible Capital Markets Days is enabled. Investor information material published by Citycon can be ordered from the corporate website at www.citycon.com/materialrequest, by e-mail from [email protected] or by phone at +358 20 7664 400.
company's representatives meet investors in seminars arranged by various associations and banks, at broader public events and during tours of the company's shopping centres.
In September, Citycon organised a Capital Markets Day for investors, analysts and the media in Helsinki. The presentations focused on Citycon's strategy update, its business effi ciency enhancement programme and (re)development projects. Participants were also given a tour of the shopping centres located in the Helsinki region. All presentations could be followed online in real time, and webcasts are still available on the corporate website. Citycon aims to make the Capital Markets Day a regular event held at least every two years.
The company's register of shareholders is available for public review at Euroclear Finland Ltd's customer service outlet, Urho Kekkosen katu 5 C, Helsinki, Finland.
Shareholders are requested to notify their book-entry account manager of any changes in their name or address. This will automatically update information in the company's shareholders' register maintained by Euroclear Finland Ltd.
Executive Vice President and CFO Mr Eero Sihvonen Tel. +358 20 766 4459 or +358 50 557 9137 [email protected]
Vice President, IR and Communications Ms Hanna Jaakkola Tel. +358 20 766 4421 or +358 40 566 6070 [email protected]
Vice President, Sustainability Ms Kirsi Borg Tel. +358 20 766 4408 or +358 40 557 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. The list may not include all providers of such investment analysis. Analysts monitor Citycon on their own initiative and can choose to cease doing so whenever they wish. Recommendations issued by analysts are available on Citycon's website under "Consensus estimates". Citycon is not responsible for analysts' comments and statements.
ABG Sundal Collier Tel. +46 8 566 294 78 Box 7269 SE-103 89 Stockholm Sweden
ABN Amro Tel. +31 20 383 7728 Gustav Mahlerlaan 10 NL-1082 PP Amsterdam The Netherlands
F-75002 Paris France
Danske Bank A/S, Helsinki Tel. +358 10 236 4867 Hiililaiturinkuja 2
FI-00180 Helsinki Finland
DnB NOR Tel. +47 22 94 88 45 Stranden Aker Brygge NO-0021 Oslo Norway
Edge Capital Tel. +47 22 01 01 08 St Olavsgate 12 NO-0130 Oslo Norway
Evli Pankki Oyj Tel. +358 9 476 690 Aleksanterinkatu 19 A, 3rd fl oor FI-00101 Helsinki Finland
FIM 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
Handelsbanken Tel. +46 8 701 80 16 Blasieholmstorg 11 SE-106 70 Stockholm Sweden
Inderes Oy Independent Equity Research Tel. +358 50 3738027 Itälahdenkatu 21 FI-00210 Helsinki Finland
Kempen & Co N.V.
Tel. +31 20 348 8000 Beethovenstraat 300 NL-1070 AR Amsterdam The Netherlands
Tel. +358 9 1651 Aleksis Kiven katu 9, Helsinki FI-00020 Nordea Finland
Pohjola Pankki Oyj Tel. +358 10 252 7390 Teollisuuskatu 1b, PL 362 FI-00101 Helsinki Finland
Royal Bank of Scotland
Tel. +31 20 383 6786 Gustav Mahlerlaan 10 NL-1000 EA Amsterdam The Netherlands
SEB Enskilda Equities
Tel. +358 9 616 28726 Unioninkatu 30 FI-00101 Helsinki Finland
Swedbank AB, Finnish Branch
Tel. +358 20 746 9158 Mannerheimintie 14 B FI-00101 Helsinki Finland
UBS Investment Research
Tel. +44 20 7568 4415 1 Finsbury Avenue London EC2M 2PP United Kingdom
Michael Schönach and Johan Elfstadius started as heads of Finnish and Swedish operations, respectively
Citycon wants to become the preferred partner for tenping centre owner in the Nordic and Baltic countries. In possible new acquisitions. For Sweden and the Baltic We have also included Denmark, Norway and Latvia into
Even if Northern Europe is currently somewhat less affected by the general economic turbulence compared with some other European regions, the outlook is still characterised by economic uncertainty. Long-term planning in general is impeded by shorter economic cycles and thus reduced predictability. Also the undoubted
Because of these changes in the environment, we just shopping to also experiences and entertainment. our strategy of changing centres into hubs of daily in-
Shopping Centre Management Programme targets that
New brands provide consumers a variety of options tries. International chains seeking growth in Europe previously had their eyes mainly on the UK, Central Europe and Mediterranean countries, but the Nordic and Baltic countries, due to our stable economies, have become
countries and then to Finland. In the future we aim to
Urbanisation continues in Finland, sett ing the fundaand maybe a few other cities with strong growth. In the Baltic countries we have emphasis on the capital cities Tallinn, Vilnius and Riga.
Harri Holmström, Baltic operations Michael Schönach, Finnish operations
CITYCON OYJ ○ ANNUAL AND SUSTAINABILITY REPORT 2011 ○ BUSINESS UNITS AND PROPERTY PORTFOLIO 17
Grocery and fashion stores are strongly represented in Citycon's tenant base. Other major sectors include restaurants and cafés, banking and insurance, and various public services.
Major tenants in Finland include diff erent retail chains operating under Kesko, such as grocery retail chains Citymarket and K-market, as well as specialty stores such as the Intersport sporting goods chain or the Musta Pörssi home electronics chain. Kesko accounts for 28.6 per cent (30.7%) of Citycon's total rental income in Finland. The S Group is another major tenant. In addition to these two, signifi cant players include fashion store chains, the biggest of these being Lindex, KappAhl, Seppälä and H&M.
Citycon's tenant base in Swedish and Finnish shopping centres is very similar. The biggest names in grocery retail in Sweden are ICA, COOP and Axfood. In specialty retail, the same brands are strong in Sweden and Finland alike, which is refl ected in Citycon's tenant base.
Citycon's biggest shopping centres in the Baltic countries, Rocca al Mare and Kristiine, both have a strong focus on specialty retail, particularly fashion. Tenants include several well-known international brands. The largest individual tenant, however, is the S Group's Prisma hypermarket chain, which has large stores in Rocca al Mare and in Kristiine. In the two smaller local centres operating in the Baltic countries, the off ering is focused more on daily shopping and other daily consumer needs. Their anchor tenant is the RIMI grocery store, which is part of the Swedish ICA Group.
A thriving shopping centre att racts customers and creates success for tenants. Citycon aims to maintain its shopping centres att ractive and dynamic for both customers and tenants. The tenant mix is an essential element here. To ensure the right tenant mix, a diversifi ed and effi ciently manageable lease portfolio is required.
The type and duration of a new lease depends for example on the type of premises to be leased and on the tenant. With anchor tenants, the company typically signs long-term leases of ten years, whereas leases for smaller retail premises are chiefl y negotiated for a term of 3 to 5 years, in order to ensure active development of shopping centres.
As a main rule, new leases are signed for a fi xed period. The only exception to this are residential leases, which for legislative reasons are signed until further notice, as well as leases for storage facilities and individual parking spaces. Lease agreements in eff ect until further notice and signed during the year represented about 2 per cent of Citycon's property portfolio.
Leases in eff ect until further notice represent about 12 per cent (14%) of Citycon's property portfolio, 82 per cent (83%) of these agreements being concluded in Finland, 15 per cent (16%) in Sweden and 2 per cent (1%) in the Baltic countries. 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 initial 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 17 per cent (18%) of the total lease portfolio. The typical notice period for these leases ranges from 3 to 12 months. In spite of their short notice period, the actual term of leases in eff ect until further notice can be very long. At yearend, more than 33 per cent of the current leases in eff ect until further notice were signed before 2000; the oldest ones were signed more than 30 years ago.
In Finnish operations, the share of leases in eff ect until further notice is relatively high because such leases were earlier a characteristic feature of the Finnish market. In some cases, a lease in eff ect until further notice or a lease signed for a short fi xed term isalso prefereed by Citycon. For example, it may not be in Citycon's interest to sign long-term lease agreements before a planned (re)development project.
In Finland, Citycon normally signs long-term leases of ten years or more with anchor tenants. With chain operators, Citycon mainly negotiates contracts with a term ranging from 5 to 7 years. Fashion retailers in particular are keen to sign leases for longer terms than before.
In Sweden, leases are typically signed for a term of 3-5 years, aft er which the lessor may terminate the lease or propose new lease terms. Tenants may appeal
to the lease board (Hyresnämden) if they feel the raise in rents is above the area's current market rate. In the event of a dispute, the lessor must be able to present evidence, such as recent lease agreements, to prove that the market rent level for similar premises in the area has risen.
In the Baltic countries, major anchor tenants have lease terms of at least ten years; for smaller players they are approximately three years. The number of fi veyear leases increased in 2011. At the turn of the year, the average remaining length of the lease portfolio was 3.4 years (3.2 years). The increase in the average remaining length was mostly due to the renewed leases in Iso Omena.
Local management at Citycon's shopping centres handles tenant-related risks. Most of the tenants are obliged to report their monthly sales fi gures to the shopping centre management. If the tenant's annual rent in relation to its sales (Occupancy cost ratio, OCR) is clearly diff erent from the average of other similar businesses in the shopping centre, or if sales per square metre are too low, management will take immediate action. In 2011, the occupancy cost ratio for like-for-like shopping centre properties was 8.9 per cent.
Citycon makes determined eff orts to enhance property maintenance, since costs are creating pressure to increase tenants' maintenance fees. With comparable exchange rates, the operating expenses increased by 4.1 per cent from the previous year mainly due to completed (re)development projects and acquisitions. Likefor-like property operating expenses instead decreased by 1.0 per cent due to ao. lower marketing costs.
Citycon's gross rents are close to the market rent level. Citycon has intentionally increased the portion of lease agreements with a turnover-linked component, but prefers them with a fi xed minimum rent close to market rental levels, wherefore turnover based rent is not a signifi cant source of additional rental income. At the end of the year, turnover-based lease agreements accounted for 49 per cent (43%) of Citycon's lease portfolio, while approximately two per cent (1%) of rental income came from the turnover-based part of leases.
The average remaining lease term of the lease portfolio 3.4 years
LEASING OPERATIONS
At the year-end Citycon owned 23 shopping centres and 37 other properties in Finland, and acted as the commercial manager of two shopping centres owned by investors. Strategy implementation requires determined property portfolio optimisation in Finland. For this reason Citycon is preparing to invest more in strong properties with good ( re)development potential, while divesting some of its non-core properties.
During the year, the fi rst phase of the Myllypuron Ostari shopping centre and the Martinlaakso Ostari in its entirety were opened. An extensive redevelopment project for the Koskikeskus shopping centre was launched in Tampere city centre (more information: Development projects, p. 36). During the autumn, Citycon sold three other retail properties and the Tullintori shopping centre in Tampere (more information: Property portfolio, p. 28). Divestment of non-core properties is expected to continue in 2012.
Citycon's shopping centres in Finland att racted 80.8 million customers (79.0 million). The number of visitors increased from the previous year by 2 per cent. Particularly in the best-performing shopping centres rent levels rose signifi cantly, and the number of vacant premises decreased. In other properties the situation was more challenging. By the year-end, the threat of recession had not signifi cantly slowed down tenants´ leasing decisions.
For Citycon, 2011 was a year of major changes for Finnish operations. Michael Schönach, the new Executive Vice President, Finnish Operations, joined Citycon at the beginning of March. During the year, there was a strong focus on business development and building leadership.
The organisation in Finland was restructured during the year. All shopping centres and the responsible shopping centre managers and property managers were placed under the leadership of two Centre Management Directors. They are responsible for both the operational management of shopping centres and for reaching property-specifi c fi nancial targets.
Investments made last year involved performance enhancements in leasing operations and personnel increases. In addition, a new Marketing Director, who joined Citycon in the autumn, was hired to boost marketing. In this context, the marketing strategy was updated and actions under the new strategy will continue in 2012. The objective is to streamline the marketing cost structure and upgrade the quality of marketing.
Citycon was able to meet its annual objective of bringing new international retail chain stores to the Finnish markets again this year. The French fashion chain Promod opened its fi rst Nordic store in the Koskikeskus
During the year, Citycon introduced a new business model, when it took charge of the commercial management, marketing and retail premise leasing of the Kämp Galleria in Helsinki city centre. The property continues to be owned by Ilmarinen Mutual Pension Insurance Company, but is managed by Citycon. This is the fi rst shopping centre managed by Citycon but owned by another party.
Kämp Galleria is a strategically important property for Citycon as it is located right at the heart of Helsinki, on the main shopping street. This strategic position allows Citycon to off er a premier location, in central Helsinki, to new retail chains seeking to establish a presence in Finland.
Kämp Galleria's owner, Ilmarinen, is ablue-chip institutional, and the alliance signed with Citycon proves its confi dence in Citycon's extensive commercial competence.
shopping centre in Tampere in August. The Swedish low-price shoe retailer Skopunkten opened stores in Koskikeskus and in Myyrmanni, Vantaa, in the autumn.
The Cubus chain, part of the Norwegian Varner Group, opened its fi rst Finnish store in Myyrmanni in April. In the second half, further Cubus stores were opened at Koskikeskus, at Sampokeskus in Rovaniemi, at IsoKarhu in Pori and at Iso Omena in Espoo.
Finland's fi rst Karen Millen concept store, as well as Kiehl's and Face Stockholm skin care stores, were opened at the Kämp Galleria in Helsinki.
Finnish legislation governing retail construction was amended in spring 2011. The Land Use and Building Act, which was amended for environmental and community policy reasons, now places more restrictions on the construction of commercial centres outsideurban areas. Following the amendment, stricter regulations now also apply to space-intensive commercial units. In practice, this means large retail units can no longer be built outside population centres. All Citycon's shopping centres are located at the heart of existing community structures, which makes Citycon's strategy perfectly aligned with the legislative changes. This is expected to further cement the company's position in the shopping centre markets.
Legislation governing Sunday opening hours for retail changed in Finland on 1 December 2009, signifi cantly increasing the number of Sunday trading days. Sunday opening hours are specifi ed separately for each shopping centre, but most shopping centres have been open for business on every trading day. For Citycon, the guiding principle is to have consistent opening hours for all stores operating in the shopping centre, for customer experience and service commitment reasons.
Marketing was at the core of development eff orts in Citycon's Finnish business. Under the supervision of the new marketing director hired in the autumn, Citycon's marketing strategy was fully updated. At the same time, the roles and responsibilities of the entire marketing personnel were re-arranged. In connection with the marketing overhaul, a competitive tendering process was conducted in the company's strategic partner network. The objective is to enhance the quality and cost-effi ciency of marketing.
One of the major changes in marketing was the decision to reject the cluster-based approach. Instead, each shopping centre's marketing will be built around specifi c plans and objectives, which are based on the shopping centre's market positioning. In major shopping centres, extensive qualitative market studies have been carried out as part of positioning eff orts, and these will continue in 2012.
In late 2011, determined steps were taken in shopping centre marketing, to increase involvement in social media. Systematic Facebook marketing was launched at the turn of the year. In 2012, Facebook will become an increasingly important marketing channel, particularly in Citycon's biggest shopping centres in Finland.
Development of international marketing practices will continue in 2012 in all of Citycon's operating countries.
C itycon is strongly focused on the environs of the Swedish capital, Stockholm, and the Gothenburg area. There, Citycon owns eight shopping centres and six other retail properties. The company also owns one shopping centre and a retail property in Umeå. Citycon is Sweden's 11th largest shopping centre operator (source: Fastighetsvärlden).
The performance of the retail market was solid during the fi rst six months of the year. The last months showed a slow and cautious market environment due to the down-turn and weakened sales. However Citycons' shopping centres did not suff er signifi cantly from the market changes due to the centres' defensive tenant mix.
It was an active year in lease renegotiations: there were over 200 new lease agreements signed in 2011 and over 50 renegotiations. The year was labelled with some delays in gett ing leases signed, but the leases that have been signed tend to be longer, as many retailers are willing to sign longer leases in the current economic situation.
Åkersberga Centrum's second phase opening in April, with key tenants such as H&M, MQ and Esprit, was well received among the catchment area's consumers. Answering a clear need a large restaurant was opened in the centre in December. It was well greeted by Åkersberga residents. Åkersberga Centrum is now heading towards its third phase of development where it will become a full centre of community with completed functions. This was confi rmed with Team Sportia signing a lease agreement, according to which it will open shop in March 2012.
Liljeholmstorget has in 2011 had the best increase in sales of all the shopping centres in Stockholm. The tenant mix development has proceeded well and according to plan. Main focus has been on responding to clients' needs in creating more space for grocery stores, as demand has been extremely high. With the help of refurbishments, it was possible to extend the ICA store and provide space for four new cash registers, which eased off the queues and pressure on the whole Liljeholmstorget to the benefi t of clients. The restaurants are now fully operational and sales have exceeded expectations.
There have been several measures taken in order to lower maintenance costs and a unique heating system concept has been taken into use in Fruängen Centrum in September. The concept aims at achieving clear savings in both energy and money. Cost effi ciency has also been a theme in Tumba Centrum, which led to expected results in 2011.
New milestones have been set for refurbishment projects in Stenungs Torg, Åkermyntan Centrum and Fruängen Centrum. These will be executed in 2012- 2013.
As in Finland, Swedish operations' main emphasis was put in developing operations and leadership in 2011.
Citycon's main target for 2011 in Sweden was to open
Åkersberga Centrum's second phase while at the same time selling residential apartments and other non-core assets. There were several strategic divestments during the year in Sweden supporting Citycon's strategic decision to sell non-core properties:
The Högdalen Centrum shopping centre in Stockholm was acquired in May. Högdalen Centrum is located in southern Stockholm, roughly fi ve kilometres from the
city centre. Högdalen Centrum is an important centre for Stockholm, where densifi cation of residential and expanded retail space is a priority. As Citycon has several centres of similar character and good references from municipalities, this was seen as a strategically important acquisition.
In July, Citycon acquired all the shares in Kungsleden Imröret. The company owns an adjacent retail property to Högdalen Centrum with gross leasable area of 5,200 square metres.
The new head of Swedish operations, Johan Elfstadius, started his work at the end of the year, in November, replacing Ulf Att ebrant, in charge of the Swedish operations since 2007.
The Swedish shopping centre market is expected to remain stable. Citycon's shopping centres have seen few tenant bankruptcies and rental rebates are practically never requested for fi nancial reasons. Rent levels have held fi rm and demand for premises is stable.
There were no substantial changes in the legal environment during the year that aff ected operations.
When Citycon signed the deal on acquiring Högdalen Centrum in Stockholm in May, tenants were informed during the signing day with a fun campaign. The Citycon team introduced themselves to tenants by walking around the centre with Citycon pink t-shirts and handed out practical information on the acquisition. All tenants were also invited to a tenants' meeting the same day for questions and answers. In addition a weekly information and discussion meeting was held every Friday at a local café for a month aft er the acquisition.
Other activities on the acquisition day included:
"This was a nice way to let the tenants know who we are and at the same time identify the centre as a part of Citycon. The tenants gave us positive feedback and we plan to use this type of launch plans also in the future." Comments Magnus Bergman, Centre Management Director at Citycon in Sweden.
CITYCON IN THE BALTIC COUNTRIES
Citycon acquired Tallinn's second largest shopping centre Kristiine in May
C itycon owns four shopping centres in the Baltic Countries. In Estonia, it owns Rocca al Mare, Tallinn's largest shopping centre, the Kristiine shopping centre acquired in spring 2011, and the smaller Magistral. In Vilnius, Lithuania, Citycon owns Mandarinas, a shopping centre off ering daily necessities. With its three shopping centres, Citycon is the market leader in Tallinn's shopping centre business. It is also the leading property investment company in Estonia specialising in retail premises.
The economic situation during the year was slightly more positive than a year earlier, with demand showing slight growth. However, the growth of rental income remained moderate. Vacancy rate remained low.
Citycon acquired the Kristiine shopping centre in May. Kristiine is Tallinn's second-largest shopping centre aft er the Citycon-owned Rocca al Mare. It is located on one of the arterial roads to Tallinn city centre and has an extensive catchment area. The acquisition gave a strong boost to Citycon's position in Tallinn.
Kristiine's anchor tenants include the Finnish Prisma hypermarket chain and the international retail chains Marks & Spencer, New Yorker, Zara and Benett on, and the Jysk interior decoration store. Kristiine was constructed in two stages in 1999 and 2002, and was extended in autumn 2010.
The redevelopment and extension of the Magistral shopping centre in Tallinn began in September. The shopping centre will be extended and its interior will be given a complete overhaul. Completion of the project is scheduled for spring 2012. The entire shopping centre will be closed during the renovation and extension work. Naturally this affected the rental income from Baltic operations during the latt er part of the year.
Rocca al Mare and Kristiine were almost fully leased throughout the year. There was some tenant turnover, and temporary rental rebates were granted, as retailers struggled across the year with fi nancing diffi culties. Rebates were primarily granted to good local tenants, to help them weather the recession. Rental rebates decreased from last year, representing 10 of gross rental income (15% in 2010).
As in previous years, both traditional marketing methods and various types of event marketing were used to market Rocca al Mare. It has been a nominee and prize winner in several industry competitions. In December, it ranked number two in the "Profi t margin TOP" competition arranged by the Äripäev business magazine. In November, Äripäev named Citycon the best real estate company in Estonia.
Consumption by Finnish visitors in Estonia grew by 11 per cent in 2010. The most popular items included adult and children's clothing, accessories and footwear. Travel and tourism are predicted to show further growth in the next few years (source: Federation of Finnish Commerce, 5/2011). There are some 1.5 million Finnish tourists visiting Estonia yearly and during challenging times the euros tourists bring in have an even bigger role for shopping centres. Replacing the Estonian kroons with euro in the beginning of the year has eased shopping for Finns and thus also increased sales from tourists. Locally the beginning of the year was tough though, as Estonians were afraid of price increases and the new currency seemed expensive in comparison to the old kroons. In the end the euro brought less change than anticipated and by the end of the year the currency was already part of normal life.
Finnish tourists have found their way also to Rocca al Mare. Marketing eff orts target cruise passengers arriving from Finland, and free bus transport to Rocca al Mare from the ferry terminal and the city centre is available to tourists all year. In 2011, approximately 10 per cent of the centre's customers were Finnish and Finnish customers accounted for some 15-20 per cent of its sales.
The Mandarinas shopping centre in Vilnius is a wellestablished provider of local services. The anchor tenant is the Rimi grocery store. In addition, the centre houses a bank and a post offi ce; this is a vital local service in the Baltic countries as it is used for a number of services, including pension payment. Demand for the services offered by a local centre remains largely unchanged, even in a recession, since the decline in purchasing power is not aff ecting consumers' daily purchases as much as specialty retail.
Although Estonia boasts the EU's highest retail sales fi gures, purchasing power has declined due to uneven development in infl ation and earnings. Meanwhile in Lithuania, purchasing power actually increased slightly during the year.
• Cafes and Restaurants 4% • Health and Beauty 6% • Other Specialty Stores 1% • Services and Offi ces 4% • Clothes and Fashion 39% • Groceries 18%
• Leisure, Home Supplies 27%
Surprisingly few forced sales of shopping centre properties have occurred in the Baltic capitals, since strong banks involved in fi nancing have had no interest in initiating such procedures. Centres off ered for sale have mainly comprised very high-risk properties.
There is a clear oversupply of shopping centres, particularly in the Lithuanian market. For this reason, some large fashion-oriented centres that opened just before the recession now face vacancy problems. Tallinn's shopping centre oversupply will even out in time, with the infl ow of new supply coming to a halt. No new shopping centre projects are under construction in Tallinn and Vilnius, and only one was underway in Riga during the entire year. However, some major projects are in the pipeline, particularly in Tallinn.
According to the strategy update published in the summer of 2011, Citycon's eff orts over the next few years will be focused on att racting new brands to the Nordic and Baltic markets. Movement within these regions will be encouraged and assisted, for instance by off ering retail chains with operations in Tallinn or Stockholm the chance to establish a presence in the Finnish markets.
Within the next fi ve years, Citycon aims to achieve leadership in the Baltic and Nordic shopping centre business. This role involves becoming a trendsett er and introducing new brands to the markets.
Citycon att ends the annual Mapic exhibition and conference held in Cannes, France. This event brings together European retail and real estate leaders. Citycon also att ends the Retail Connections; a similar event held annually in London.
In addition to these events, Citycon co-operates with several embassies. Last year, Citycon and the commercial department of the French Embassy, Ubifrance, co-hosted an event at which ten French retail and catering chains interested in the Finnish markets were off ered the opportunity to learn more about these markets and meet potential local business partners.
Last year, Citycon also worked with Finpro, an organisation that supports the internationalisation of Finnish companies. Finpro and Citycon co-hosted events in Denmark, Norway and Sweden designed to activate local retail chains into extending their operations to Citycon's operating countries.
Citycon plans to continue allocating resources to new business in the future. To support these eff orts, a new cross border level director in charge of bringing in new customers was appointed in the summer of 2011.
has in 2011 had the best increase in sales of all the shopping centres in Stockholm.
CITYCON OYJ ○ ANNUAL AND SUSTAINABILITY REPORT 2011 ○ BUSINESS UNITS AND PROPERTY PORTFOLIO 27
C itycon owns a total of 36 shopping centres: 23 in Finland, nine in Sweden, three in Estonia and one in Lithuania. In addition to shopping centres, Citycon owns 43 other retail properties, 36 of them in Finland and seven in Sweden. Citycon also owns one undeveloped lot in Finland.
Besides owning shopping centres, Citycon is also responsible for the commercial management of two shopping centres in Finland. In February, Citycon signed an agreement with Ilmarinen on the commercial management of the Kämp Galleria shopping centre located in the heart of Helsinki. In November, Citycon sold the Tullintori shopping centre located in Tampere to Eläke-Fennia pension insurance company, but signed an agreement to continue the commercial management of the property. In both Kämp Galleria and Tullintori, Citycon is responsible for the leasing of retail premises, in addition to shopping centre management. These are the fi rst two properties to be commercially managed by Citycon but owned by other parties.
At year-end, the fair value of Citycon's property portfolio was EUR 2,522.1 million, an increase of EUR 154.4 million on the previous year. The value increase was mainly due to property acquisitions and investments committ ed to (re)development projects. The average yield requirement for the total property portfolio remained at 6.4 per cent but increased for supermarkets and shops by 10bps in Finland. During the year, the polarisation of the property market continued: while the demand for the prime properties was strong, the market position for secondary properties got weaker. This market change was also seen in the fair value development of Citycons property portfolio presented as fair value change.
Fair value change, i.e. the change in market values excluding investments and foreign exchange rate diff erences, was EUR -35.3 million during the financial year. Fair value gains recorded for the year totalled EUR 39.8 million for 20 properties, while fair value losses came to EUR 75.1 million for 60 properties. Fair value gains were recorded for the shopping centre properties while fair value losses were recorded for the supermarket and shop properties in particular. The aggregate net impact of changes in the statement of comprehensive income was therefore EUR -35.3 million.
In May, Citycon acquired the Kristiine shopping centre in Tallinn, Estonia, from ProKapital for a sale price of EUR 105 million. Kristiine is located a few kilometres from Tallinn city centre and has a gross leasable area of 42,700 square metres. Major extension work was carried out in Kristiine in autumn 2010.
In May, Citycon acquired the Högdalen Centrum shopping centre in Stockholm, Sweden, for SEK 207.5 million (approximately EUR 23.1 million) from Centeni AB, controlled by The Royal Bank of Scotland. In July, Citycon also acquired an adjacent retail property with a gross leasable area of 5,200 square metres on Kungsleden for a sale price of SEK 48.7 million (approx. EUR 5.4 million). The aggregate gross leasable area of the shopping centre is approximately 19,200 square metres, of which approximately 16,000 square metres are retail premises. Located in southern Stockholm, roughly fi ve kilometres from the city centre and next to a metro station, Högdalen Centrum is the hub of a densely populated residential area.
In Finland, Citycon increased its holdings in three properties in which the company was already a shareholder: shares in Hervannan Liikekeskus Oy were bought for EUR 1.2 million, in Asunto Oy Tikkurilan Kassatalo for EUR 2.6 million and shares in Heikintori Oy for EUR 0.5 million. At the year-end,Citycon's holdings in these properties were 79.4 per cent, 59.7 per cent and 68.7 per cent, respectively.
In June, Citycon continued with divestments of its residential portfolio in Sweden by selling 41 apartments connected to the shopping centre Tumba Centrum for SEK 48 million (approx. EUR 5 million). The apartments were sold to a newly founded owners association called Tumba Torg.
In Finland, Citycon sold four non-core retail properties for a total of EUR 2.3 million. These properties were MREC Kiinteistö Oy Naantalin Tullikatu 16, Hakarinne, MREC Kiinteistö Oy Mäntyvuoksi and Otaniemen Liikekeskus Oy.
In November, Citycon sold its entire 57.4 per cent holding in the Tullintori shopping centre in Tampere, Fin-
land, to the co-owner of the property, Eläke-Fennia Mutual Pension Insurance Company, for a sale price of EUR 6.1 million. The Tullintori property features a signifi cant proportion of non-retail area, such as offi ce space. This means that the divestment is in line with Citycon's strategic decision to focus on shopping centres.
In December, Citycon continued to divest properties in Sweden. Citycon sold 57 apartments in Jakobsbergs Centrum located in Järfälla municipality for approximately SEK 51.0 million (approx. EUR 5.6 million) to Bostadsrätt sförening BRF Tornerplatsen. The area of the divested property is approximately 4,600 square metres. In addition, Citycon agreed to sell the retail property Landvett er, located in the Härryda municipality, for approximately SEK 50.5 million (approx. EUR 5.5 million) to Tornstaden. The gross leasable area of the Landvett er property is approximately 4,800 square metres. This transaction was closed in January this year.
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, the valuation has been conducted on a quarterly basis. The most recent valuation statement as per year-end 2011 is available on page 64 in the enclosed Financial Statements. For the fi rst time, the valuation of Citycon's property for these fi nancial statements was conducted by the global property specialist Jones Lang LaSalle, appointed by Citycon as its new appraiser at the end of last year. Citycon has changed its independent external appraiser at regular intervals. For the fi rst three quarters of 2011, property valuation was conducted by Realia Management Oy, which has served as Citycon's appraiser for over four years.
The valuation statement includes a description of the valuation process and factors contributing to the valuation, as well as the results of the valuation and a sensitivity analysis. Such valuation has principally been conducted using a cash-fl ow method for a period of ten years. For vacant lots, market values have been determined according to the building rights available under the currently valid local detailed plan. Development properties have been appraised using a cash flow model which accounts for project investments and the property's future cash fl ows in the project schedule. Further
information on the valuation methods is also provided in said valuation statement. Jones Lang LaSalle evaluated the average yield requirement for Citycon's property portfolio at 6.4 per cent at the year-end. The net yield requirement for Citycon's properties in Finland stood at 6.3 per cent, in Sweden at 5.9 per cent and in the Baltic countries at 8.0 per cent.
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 financial 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 profit impact, and this is reported as a separate item in the company's financial reports, as part of the operating profit and, consequently, the profit for the period.
The fair value of investment properties recognised in Citycon's the statement of financial position includes:
Helsinki Citycon's gross leasable area 20,900 sq.m. Anchor tenants K-citymarket, S-market, Lindex, Seppälä, Alko, pharmacy
Citycon's gross leasable area 13,500 sq.m. Anchor tenants S-market, K-supermarket, Lidl, Alko, Posti
Espoontori Espoo Citycon's gross leasable area 17,100 sq.m. Anchor tenants K-supermarket, Tarjoustalo, Posti
Citycon's gross leasable area 16,500 sq.m. Anchor tenants Seppälä, Vero Moda, Tokmanni, K-supermarket
Pori Citycon's gross leasable area 14,900 sq.m. Anchor tenants H&M, Intersport, Muksumassi, Vero Moda, Only, Jack&Jones, Gina Tricot
Lappeenranta
Citycon's gross leasable area 19,400 sq.m. Anchor tenants Antt ila, K-market, Alko, Jim&Jill, Voglia
Isomyyri
Citycon's gross leasable area 10,800 sq.m. Anchor tenants S-market
Espoo Citycon's gross leasable area 60,600 sq.m. Anchor tenants K-citymarket, Prisma, library,
Finnkino, H&M
Citycon's gross leasable area 5,800 sq.m. Anchor tenants H&M, KappAhl, Finnkino, Mc Donald's, Elosen Konditoria, Seppälä
Valkeakoski
Citycon's gross leasable area 5,800 sq.m. Anchor tenants S-market, Alko, Vapaa Valinta, Seppälä
Tampere Citycon's gross leasable area 28,000 sq.m. Anchor tenants Intersport Megastore, Gina Tricot, Seppälä, Vapaa Valinta, Lindex
Salo Citycon's gross leasable area 9,200 sq.m. Anchor tenants Pharmacy, Alko, Antt ila, K-market, Posti
Espoo Citycon's gross leasable area 18,500 msq.m. Anchor tenants Alko, Antt ila, Pharmacy, K-supermarket, Lidl, Posti, Skybowl
Citycon's gross leasable area 7,400 sq.m. Anchor tenants S-market, Lidl, Sampo Pankki, pharmacy
Helsinki
Citycon's gross leasable area 6,600 sq.m. Anchor tenants S-market, K-supermarket, media library, pharmacy
Citycon's gross leasable area 39,700 sq.m. Anchor tenants K-citymarket, H&M, Antt ila, pharmacy, Alko, Suomalainen Kirjakauppa, Stadium
Citycon's gross leasable area 13,700 sq.m. Anchor tenants Dressmann, Jack&Jones, MODA, Gina Tricot, Pentik, Vero Moda, Vila, Duett o
Seinäjoki
Citycon's gross leasable area 11,500 sq.m. Anchor tenants H&M, Aleksi 13, KappAhl, Lindex, Pentik
Vantaa Citycon's gross leasable area 13,300 sq.m. Anchor tenants Valintatalo, Nordea, Dressmann, Aleksi 13, Seppälä
Citycon's gross leasable area 45,700 sq.m. Anchor tenants H&M, K-supermarket, Gina Tricot, Kekäle, Cumulus, Post Offi ce
Citycon's gross leasable area 7,600 sq.m. Anchor tenants Eurokangas, Nordea, Sport Center FunFit
Citycon's gross leasable area 11,700 sq.m. Anchor tenants Tiger of Sweden, Maranello, Gant Store, Della Marga, Marimekko, M-Boxi, Oscar Jacobson Shop
Tampere Citycon's gross leasable area 10,000 sq.m. Anchor tenants Eurokangas, Vapaa Valinta, pharmacy
Stockholm Citycon's gross leasable area 14,700 sq.m. Anchor tenants library, Systembolaget, Läkarhuset
Anchor tenants ICA Kvantum, Willy's, H&M, Systembolaget, SATS, Claes Ohlson, MQ, Lindex
Citycon's gross leasable area 36,400 sq.m. Anchor tenants KappAhl, Hemtex, Systembolaget, Coop
Citycon's gross leasable area 26,800 sq.m. Anchor tenants ICA Maxi, Elgiganten, Lindex, H&M
Österåker
Citycon's gross leasable area 27,500 sq.m. Anchor tenants ICA, KappAhl, Lindex, library, Systembolaget
Hässelby Citycon's gross leasable area 8,400 sq.m. Anchor tenants ICA, Coop, pharmacy, Lidl
Tallinn
Citycon's gross leasable area 53,300 sq.m. Anchor tenants Prisma, Marks&Spencer, NewYorker, Lindex, Rademar
Tallinn Citycon's gross leasable area 42,700 sq.m. Anchor tenants Prisma, Zara, NewYorker, Marks&Spencer, JYSK
Citycon's gross leasable area 9,500 sq.m. Anchor tenants Rimi, Koduekstra, Rademar, Tiimari, Seppälä
Vilnius Citycon's gross leasable area 7,900 sq.m. Anchor tenants Rimi, Swedbankas, Čili pica, TopShop
CITYCON OYJ ○ ANNUAL AND SUSTAINABILITY REPORT 2011 ○ BUSINESS UNITS AND PROPERTY PORTFOLIO 33
34 CITYCON OYJ ○ ANNUAL AND SUSTAINABILITY REPORT 2011 ○ BUSINESS UNITS AND PROPERTY PORTFOLIO
MYYRMANNI BECAME A CE
NTRE FOR STYLE MYYRMANNI OPENS A The refurbishment of the second-fl oor premises in the Myyrmanni shopping centre located in Myyrmäki, Vantaa, was completed in 2011. With this project, Myyrmanni's commercial concept was developed towards an emphasis on fashion and style. The modernisation project became possible upon the Antt ila department store moving to smaller premises. Fashion stores opened in Myyrmanni during the autumn include H&M's new concept store, as well as Cubus and Skopunkten, both of which arrived in Finland in autumn 2011. In addition, the hardware and electronics chain Clas Ohlson opened a store in Myyrmanni in December 2011. Citycon's investment in the Myyrmanni
refurbishment project totalled EUR 6.5 million.
C itycon has made a strategic decision to focus its operations on central locations in winning cities and in regional centres. Shopping centre properties in these locations are under active development. The objective of development projects is to increase the commercial att ractiveness and competitiveness of shopping centres and thereby generate stronger rental growth while consolidating market value.
The fi nancial potential of each project is carefully assessed when planning redevelopment projects. A careful analysis of the expected return on capital invested in the project, comparison of fi nancial expenses, and an assessment of the current leasing and permit and planning situations are carried out before an investment decision is made.
Preparations for projects are usually lengthy, a great deal of information being analysed to support decisionmaking. For its redevelopment projects, Citycon studies the land use plans of the municipality involved and adjacent areas, surveys the commercial catchment area of the project and prepares a consumer profi le of the area's inhabitants, and conducts a thorough assessment of the existing and future competitive environment.
Citycon's strengths in project development include substantial commercial competence and ongoing relations with retail players already engaged or seeking to establish themselves in Citycon's operating area. This allows Citycon to keep its fi nger on the pulse, in terms of potential tenants' interest in expanding their operations into shopping centres subject to development plans. Citycon is directly responsible for running its shopping centres. Its shopping centre managers work on the spot in its business locations. In this way, project planning can benefi t from each shopping centre manager's local knowledge.
In May, Citycon launched a major redevelopment project at the Koskikeskus shopping centre in Tampere. Involving an investment of approximately EUR 38 million, this is currently the company's largest redevelopment project. Construction of the Martinlaakso and Myllynpuron Ostari shopping centres began in 2010 with the opening of Martinlaakson Ostari at the beginning of December 2011, and the opening of the fi rst phase of Myllypuron Ostari in June. The Myllypuron Ostari shopping centre will reach full completion by spring 2012. Also fi nalised this year was a modernisation project for the Vantaa Myyrmanni shopping centre, which has a focus on fashion and style.
Involving a complete overhaul of the older section of the shopping centre, the second phase of the Åkersberga Centrum redevelopment project in Sweden's Stockholm Metropolitan Area was completed in April. A newly constructed extension of Åkersberga Centrum was opened in autumn 2010. With its completion scheduled for spring 2012, the refurbishment and extension of the Magistral shopping centre in Tallinn was launched in July.
More information about (re)development projects is available on pages 37-40 and in the tables on pages 85-87.
The entire Åkersberga Centrum shopping centre, located in the municipality of Österåker in the Stockholm Metropolitan Area, was opened in April 2011 aft er major extension and redevelopment. Although the 13,000-square-metre extension was opened in autumn 2010, the project on the original part of the shopping centre continued into 2011. The shopping centre was fully renovated and its off ering was signifi cantly diversifi ed.
Åkersberga Centrum now off ers a gross leasable area of 27,500 square metres and houses approximately 70 shops and services. The anchor tenant is ICA Kvantum, but the off ering also includes public services and an extensive selection of fashion industry outlets, such as KappAhl and Lindex.
Åkersberga Centrum is ideally located in the centre of Österåker town, next to the train station. The area has strong purchasing power, and the off ering of the refurbished Åkersberga Centrum meets local demand.
The total investment of the project is approximately SEK 467 million, or around EUR 52.4 million. Citycon owns 75 per cent of the shopping centre and was equally responsible for the costs of the redevelopment project.
In May 2011, Citycon launched a major redevelopment project at the Koskikeskus shopping centre in central Tampere, involving the complete overhaul of the shopping centre's interior, including its entrances, facades and all technical systems. Due to alteration work on the interior premises, the shopping centre's gross leasable area will increase by around 1,000 square metres. Aft er the project, Koskikeskus' gross leasable retail area will be 28,600 square metres.
Besides its overall appearance and technical systems, Koskikeskus's commercial concept will be modernised to bett er meet the expectations of customers shopping in the city centre. The retail mix will be diversifi ed, with a stronger focus on fashion and food services.
Modernisation also includes the installation of a new environmentally friendly cooling system, based on the cooling power of the nearby Tammerkoski rapids.
Although the redevelopment project extends to late 2012, the shopping centre will remain open during the entire time. Citycon's investment in the project is approximately EUR 38 million. Aft er the renovation, the number of tenants will grow from the current 80 to almost a hundred retail outlets and service providers.
The redevelopment project will consolidate the position of Koskikeskus as the leading shopping centre in central Tampere.
38 CITYCON OYJ ○ ANNUAL AND SUSTAINABILITY REPORT 2011 ○ BUSINESS UNITS AND PROPERTY PORTFOLIO
At the beginning of December, Citycon opened a new shopping centre in Vantaa's Martinlaakso, with an off ering focused on local, everyday services. The new Martinlaakson Ostari rose in the place of an old business complex, which was severely outdated in terms of both its building technology and commercial concept. The new 7,400-square metre shopping centre was constructed in 2010–2011. The fl oors above the shopping centre house owner-occupied apartments, which have already been sold.
Martinlaakson Ostari is located at the centre of a bustling and densely populated residential area of Vantaa, next to the local bus terminal and railway station. On its opening day, the new shopping centre greeted customers with 23 shops and services. The centre's anchor tenants are two grocery stores. Other services frequently used by today's consumers, such as a fi tness centre, are also available.
Citycon's investment in the Martinlaakso Ostari project to-
Citycon is building a new neighbourhood shopping centre off ering local daily services in Myllypuro, Helsinki. Myllypuron Ostari has an excellent and central location right next to a busy metro station. Adjacent to Myllypuron Ostari is a densely built residential area, which will be supplemented with more than 240 new rental and right-of-residence apartments to be built on top of the shopping centre. At the beginning of the project, Citycon sold the building rights to these apartments to three residential investors. With the City of Helsinki planning to locate the campus of a university of applied sciences in the region, active development will continue in the Myllypuro district for some years.
An old business complex was demolished in late 2009 to make way for Myllypuron Ostari. This shopping centre will be completed in stages, with the fi rst opening in summer 2011. All services of the shopping centre will be available in late spring 2012. Its off ering focuses on local, everyday services. The leasable area will be 7,300 square metres and Citycon's investment in the project totals EUR 21.3 million.
Magistral's anchor tenant, the RIMI grocery store chain, will open a new store in the modernised premises. The project also involves the construction of a rooft op car park. Citycon's investment in the redevelopment project totals EUR 7.0 million.
Refurbishment of the Åkersmyntan Centrum shopping centre in Stockholm began in the late summer. The project involves full modernisation of the shopping centre and its parking facilities and improvements in energy effi ciency. The gross leasable area will grow by some 1,600 square metres and the tenant mix will be strengthened to bett er meet local demand. The project investments amount to approximately EUR 6.9 million and completion is scheduled for late 2012.
Citycon is planning to launch an extension and redevelopment project in the IsoKristiina shopping centre in Lappeenranta. As a university town located in the vicinity of the Russian border, Lappeenranta off ers signifi cant potential and purchasing power. Tax free sales to Russian customers have grown considerably in Lappeenranta in recent years, and the trend is expected to continue. The value of tax free sales is currently almost as high in Lappeenranta as it is in Helsinki.
The plans involve placing Lappeenranta's new city theatre in the shopping centre's extension and building more than 7,000 square metres of new business premises. Bringing the city theatre into the shopping centre would create a new urban space, enabling a fascinating mix of commercial and cultural services. The IsoKristiina redevelopment project would require an investment of EUR 65-75 million.
Plans to extend the Iso Omena shopping centre in Espoo proceeded on schedule in 2011. Iso Omena is located above the future Matinkylä metro terminus of the Helsinki region's western metro line. Citycon and NCC Property Development have been granted a planning reservation for land use involving the above-ground premises of the future metro station, a feeder bus terminal and the extension of the Iso Omena shopping centre. The planned extension would add almost 50 per cent more leasable area to Iso Omena, bringing the total leasable area to more than 70,000 square metres. Citycon's estimated total investment is approximately EUR 140 million. Citycon intends to proceed with the shopping centre extension in sync with the metro line construction.
Citycon and the Oulu-based cooperative enterprise Osuuskauppa Arina signed a co-operation agreement in June 2011, on the redevelopment of the Galleria block in the heart of Oulu. In December, Citycon and Arina signed a land use agreement with the City of Oulu regarding the Galleria block. The agreement also covers the Oulun Pysäköinti Oy parking facility owned by the City of Oulu.
This extensive project involves the construction of a shopping centre of approximately 25,000 fl oor square metres within the block, plus offi ce space and around 120 apartments. The total value of the planned investment is approximately EUR 140 million, with Citycon's share representing some EUR 110 million. Oulu is a growing city with strong purchasing power, and clearly the regional capital of Northern Finland. This new shopping centre would signifi cantly strengthen the commercial services available in Oulu city centre, and make the city centre more att ractive. The planned project launch is scheduled for 2013.
40 CITYCON OYJ ○ ANNUAL AND SUSTAINABILITY REPORT 2011 ○ BUSINESS UNITS AND PROPERTY PORTFOLIO
and strategy in 2011 emphasised the role sustainability
Our sustainability work is progressing at full speed: the GRESB puts us clearly above average in our benchmark group, but we still have some way to go before we reach the "Green Stars" international leadership level. In my opinion, Citycon has full potential to achieve a leading position in sustainability issues by reaching the targets set for the period. We will develop our management practices, result monitoring and support day-to-day eff orts to promote sustainability. The challenges in 2012 are to rapidly implement energy saving actions, spread the successful practices and commit the whole personnel to work for achieving the targets. The company's att itude promotes and encourages sustainability and I will personally drive actions needed for achieving the targets.
During the year, I was actively involved in the international working groups creating and developing reporting and com-Reporting Initiative published sustainability reporting guide-
report will meet the expectations of stakeholders and increase our transparency.
Kirsi Borg Vice President, Sustainability
The Citycon Code of Conduct lays the foundation for business operations, environmental issues, human rights and relations with our employees and stakeholders. The Code of Conduct guides Citycon's management and personnel towards ethical business practices and compliance with the laws and regulations in eff ect in each country.
The importance of the Code has been emphasised through internal communication and training. Citycon requires its management and employees to fully embrace and act according to these principles. Citycon's employees are encouraged to bring up issues related to the Code and to report on any possible compliancy problems. This procedure is described in a document called 'Whistleblowing Procedure in Citycon Group'. Within its sphere of infl uence, Citycon aims to ensure that its partners and subcontractors also adhere to Citycon's ethical principles. This is the foundation of all of Citycon's new and existing business relationships.
Read more at:
www.citycon.com/sustainability/code_of_conduct/
Most of the environmental responsibility objectives were reached
YMPÄRISTÖVASTUUN STRATEGISET TAVOITTEET
| Targets for 2011 | Results of 2011 ☺ | Targets for 2012 | ||
|---|---|---|---|---|
| Climate Change | ||||
| Reduction of greenhouse gas emission by 20 per cent by year 2020 from the 2009 level |
2-3% In l-f-l shopping centres: -0.8 % |
2-3% | ||
| Energy | ||||
| Reduction of energy consumption (electricity, heating and cooling) by 9 per cent by 2016 from 2009 level |
2-3% In l-f-l shopping centres: -2.4 % |
☺ | 2-3% | |
| Identifying solution that utilise renewable energy | - | in progress | feasibility study in (re)develop ment projects |
|
| Water | ||||
| Lowering water consumption to an average level of less than 3.5 litres per visitor |
3.8 l/visitor | 4.3 l/visitor / | 4.0l/visitor | |
| Waste | ||||
| Shopping centre waste recycling rate to be raised to at least 80 per cent by 2015 |
78% | 78% ☺ | 78% | |
| Reduction of landfi ll waste to a maximum of 20 per cent of total waste by 2015 |
22% | 22% ☺ | 22% | |
| Landuse and Sustainable Construction | ||||
| All development projects to be implemented in accordan ce with environmental classifi cation principles |
All projects on going in 2011 assessed with LEED criterias |
achieved | ☺ | All projects on going in 2012 assessed with LEED criterias |
| Development projects are located in built-up environ ments, within reach of good public transport connections |
100% | achieved ☺ | 100% |
T he content of this integrated Annual and Sustainability Report has been determined on the basis of an assessment of the materiality of the reported items, issues identifi ed in dealings with stakeholders, sustainability context and and the principles determining completeness of reporting.
Every eff ort has been made to include all key themes associated with the most signifi cant economic, social and environmental impacts of Citycon's operations, or themes that are suffi ciently important to materially aff ect the choices made by Citycon's stakeholders. The objective of reporting is to increase openness and transparency and thereby to make stakeholders bett er equipped to assess Citycon's operations and to make decisions.
The materiality of reported items was assessed for the fi rst time in 2009, and the materiality assessment was re-discussed by the extended Corporate Management Committ ee during 2011. Other factors contributing to the materiality assessment include risk analysis conducted within the framework of Citycon's Enterprise Risk Management (ERM) programme.
Materiality is also assessed against the policies defi ned in Citycon's strategy and mission, according to which Citycon's objective is to achieve profi table growth and to consolidate its position as the industry leader. Fulfi lment of this objective will further increase Citycon's signifi cance to its stakeholders.
In the context of the materiality assessment, changes in the internal and external operating environments were analysed. In addition, a benchmark analysis of other players in the industry was conducted to identify the key industry drivers.
Various stakeholder group studies were conducted and informal discussions with local communities were arranged, to fi nd out which issues stakeholders considered material. Similarly, account was taken of stakeholder feedback received through other channels.
The results of the materiality assessment aff ect the content and focus of Citycon's sustainability objectives. The GRI indicators used in this report were selected on the basis of materiality assessment results. Topics considered material are discussed in this report at varying length, depending on their importance.
Signifi cance to Citycon's business
+ ++ +++
+
+ + +
+ +
Signifi cance to stakeholders
Stakeholders which are aff ected by the issue (in parenthesis above):
A Consumers, B Tenants, C Co-operation partners, D Shareholders, lenders and analysts, E Employees,
F Authorities and local communities, G Media, industry associations and non-governmental organisations
According to Citycon's defi nition, stakeholders include parties that are or may be signifi cantly aff ected by Citycon's operations and that may affect the fulfi lment of Citycon's objectives.
A good working relationship between Citycon and its stakeholders:
Citycon aims to further explore ways of improving interaction and taking consideration of issues identifi ed in dealings with stakeholders. An extensive and systematic stakeholder group study will be launched in 2012, as a continuation of the round of in-depth interviews conducted with stakeholders in 2010. Other channels of interaction between Citycon and its stakeholder groups include annual and interim reports, stock exchange and press releases, presentation material, general meetings, the company website, the portal service, customer satisfaction surveys, events at shopping centres, market research, consumer surveys, press conferences and informal discussions.
Other forms of stakeholder engagement include appearances by company representatives in various events, meetings with media representatives, road shows, local co-operation, informal everyday interaction, participation in the work of industry associations, as well as employee performance reviews and personnel satisfaction surveys.
Citycon is an active owner and long-term developer of shopping centres, creating success for retailing. Its retail properties serve both consumers and retailers. As far as possible, the company aims to take account of environmental aspects and well-being in the areas surrounding its retail properties. Thus, Citycon has diverse impacts on stakeholders and society:
providers, suppliers, contractors)
industry associations and NGOs. In property (re)development projects, local communities represent project-type
off ering att ractive retail properties to tenants
The impacts of sustainability on various stakeholder groups are also discussed under the assessment of materiality on page 45.
Citycon's operations have an economic impact on several stakeholders such as tenants, personnel, partners and authorities. The impacts of economic responsibility on various stakeholders are described in more detail on pages 55 and 92.
The opportunities that sustainability off ers relate to profitable and energy-effi cient operations. Lower energy and waste costs improve profi tability and make properties more att ractive and competitive.
Implementation of the EU-wide and national climate, energy and waste policies will aff ect future energy solutions, energy prices and taxation. Growing price pressure eff ectively motivates people to save energy. Energy pricing is also a useful incentive for more effi cient use of renewable energy sources. So far, use of renewable energy sources in properties has been scarce in Citycon's line of business and operating regions. This could be att ributed to expensive investments, long repayment periods, and relatively new technological solutions for which experience-based feedback is not yet available. In connection with project planning, Citycon employs an active approach to utilising renewable energy sources.
Waste taxes associated with waste management and landfi ll fees have increased and will continue to increase substantially in the short term. Price increases encourage the sorting and reduction of waste.
The signifi cance of sustainability to various stakeholder groups has been emphasised in the last few years. By applying sustainable business principles, Citycon wants to achieve a reputation as an industry leader, which will further strengthen its business image.
Through its environmental programme Citycon aims to curb climate change, improve energy effi ciency, reduce water consumption, enhance waste management and promote sustainable construction and land use. Citycon's objectives related to environmental responsibility and actions taken are discussed on pages 43, 48-53.
The risks associated with climate change will aff ect Citycon's business environment in the long term. Diff erent sources and scenarios predict a rise of 2 to 6 degrees Celsius in average temperatures in Citycon's operating regions, over several decades. Global warming will increase the frequency of extreme weather conditions, such as violent storms, fl oods and snowfalls. Extreme weather conditions will increase maintenance costs and erode profi tability.
Land use and construction involve the threat of disrupting biodiversity. In most cases, an environmental impact assessment, including a biodiversity assessment, is conducted in connection with zoning and major projects. Within the next few years, biodiversity may became a widely addressed topic in both political debates and legislation.
As a property investment fi rm and shopping centre operator, and as a public company, Citycon has several stakeholder groups. Many of these take an interest in Citycon's sustainability issues, the related management practices and results. Due to the diverse needs of stakeholder groups, communications related to sustainability represents a challenge. Failure to reach the related objectives, or unsuccessful communications, could pose a risk to the company's reputation.
In an expert organisation like Citycon, the company relies heavily on its personnel for success. To reduce personnel risk, Citycon invests strongly in employee wellbeing and career development opportunities. The annual employee satisfaction survey is an important tool for HR development eff orts. HR measures are discussed on pages 58-61.
In the long term, as global warming continues, so-called climate refugees from densely populated areas will be forced to relocate to other countries and continents. In their host countries, some of these refugees will end up in relatively low-skilled and low-wage jobs. Citycon's supply chain includes these kinds of positions, such as cleaning, assistant construction work and property maintenance. The hiring of people for these jobs may involve risk factors related to working conditions and human rights. Citycon seeks to eliminate these risk factors by preparing codes of ethics for its supply chains, and by requiring its subcontractors to act ethically and responsibly.
Citycon's environmental management is based on and guided by the company's strategy, its longterm objectives and environmental policy.
Citycon's management and personnel are committ ed to meeting the company's environmental objectives and targets.
To achieve its environmental targets, Citycon applies the following principles:
Actions Citycon is taking to fi ght climate change:
Properties generate approximately 30 per cent of all greenhouse gas emissions worldwide. For this reason, the real estate and construction sector can signifi cantly contribute to the prevention and reduction of emissions (source: UNEP Common Carbon Metric). The best ways of cutt ing greenhouse gas emissions in the sector are by improving the energy effi ciency of buildings, reducing energy consumption, and increasing the use of renewable energy sources in energy production and procurement for properties.
The built environment accounts for 40 per cent of energy consumption, 30 per cent of raw material consumption, 25 per cent of water consumption, 25 per cent of solid waste and 12 per cent of land use. The built environment also has an impact on ecosystems. (Source: UNEP Common Carbon Metric).
There is no shortage of water supply in Citycon's operating areas, nor are any restrictions on water consumption or water supply in sight. However, the increasing scarcity of water in some EU regions may push the price of water up. Reduction of water consumption in shopping centres promotes cost-effi ciency and diminishes the risks associated with water price development.
In shopping centres, well-organised waste disposal and recycling are key operational priorities. Both taxation and legislation on waste disposal have lately become much more stringent. Price increases encourage sorting and the reduction of waste.
As a shopping centre developer, Citycon's responsibility also extends to its projects. Land use and construction involve the threat of disrupting biodiversity. Energy ef-
In 2007, Citycon took the strategic decision to pursue sustainable development. As a result of climate change and its consequences, legislation on energy and emissions has become much stricter, as has the related taxation. Similarly, energy prices and material costs have risen. Properties with high energy consumption do not att ract tenants and investors. By enhancing energy effi ciency in shopping centres and by reducing energy consumption and its carbon footprint, Citycon is seeking cost savings, in order to make its properties more att ractive to various stakeholders today and in the future.
fi ciency, effi cient water use, materials selected, building regulations on indoor air quality and Citycon's own instructions and guidelines are taken into account in project planning.
Citycon's sustainability programme is designed to help the company fi ght climate change, improve energy effi ciency, reduce water consumption, enhance waste management and promote sustainable building and land use.
The company's objective is to include actions promoting environmental sustainability in all of its operations, and to integrate them into daily activities as part of standard procedure. The Green Shopping Centre Management programme is a tool developed by Citycon for advancing sustainable development in all of the company's shopping centres. The programme involves an annual assessment of shopping centre management in the following areas:
In connection with the assessment in 2011, the environmental results of each shopping centre were reviewed and an action plan was prepared for each shopping centre, to help them meet their environmental responsibility objectives. A Green Index was developed for the assessment of the Green Shopping Centre Management programme results, in order to facilitate a comparison of the 2011 results with past performance. The average Green Index improved by 11.1 per cent from the previous year.
The long-term strategic objective is a 20 per cent reduction in greenhouse gas emissions by 2020, from the baseline level of 2009. The carbon footprint reduction target in 2011 was 2-3 per cent.
Citycon's carbon footprint in 2011 totalled 69,413 tonnes of carbon dioxide equivalents.The carbon footprint
The location of a shopping centre has a crucial impact on the carbon footprint generated by visitors. Use of private cars generates considerable carbon dioxide emissions. For this reason, good public transport connections and a convenient, central location for shopping centres help minimise visitors' carbon footprint. All of Citycon's shopping centres off er easy access by public transport and by pedestrian and bicycle routes.
Citycon has used surveys to study the means of transport used by its shopping centre customers in Finland, and their daily travel distances. According to the latest survey, ordered by Citycon in 2009, the Tikkuri shopping centre in Vantaa had the highest share of public transport users. Meanwhile, the Iso Omena in Espoo and the Sampokeskus in Rovaniemi had the highest share of customers using private cars. Visitors travelled an average of 3.1 kilometres to shop in for example Sampokeskus.
*A shopping centre located outside the dense community infrastructure. The shopping centre is located within a 10-kilometre distance of a population centre, and customers primarily use their own car to access the centre (75% of customers).
reported by Citycon covers the energy and water consumption in properties, waste logistics and the emissions generated by the Citycon organisation. Energy consumption in properties constitutes 98.8 per cent of the carbon footprint. The carbon footprint grew by 10.6 per cent compared to the baseline year 2009. The growth in carbon footprint is mainly caused by changes in the property portfolio, i.e. carbon emissions of new shopping centres Kristiine and Högdalen Centrum. The carbon footprint of like-for-like shopping centres decreased by 0.8 per cent and 11.6 per cent per visitor. The annual target for reducing the carbon footprint was not att ained. In addition to carbon dioxide emissions, other major greenhouse gas emissions include sulphur and nitrogen oxides released in energy production, which, for example, cause the acidifi cation of waters, slow down plant growth and corrode buildings. With respect to energy used by Citycon, it is estimated that acidifying emissions total 395 tonnes of sulphur dioxide equivalents. Since electricity traders are under no statutory obligation to disclose nitrogen oxide or sulphur dioxide emissions arising from 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 this calculation. Electricity purchased by Citycon based on nuclear power generated a total of 102 kilograms of radioactive waste.
Citycon's long-term strategic objective is to reduce energy consumption by nine per cent by 2016, from the baseline
level of 2009. In 2011, the objective was to reduce consumption by 2-3 per cent and to fi nd ways of improving energy effi ciency and the utilisation of renewable energy. Energy consumption in Citycon's properties is mostly indirect consumption, in other words procured energy. Only one shopping centre is equipped with a heating plant, and the fuel it uses is reported as direct energy consumption.
Citycon procured a total of 181.1 GWh of electricity in 2011. Consumption was 3.2 per cent higher compared to 2009 levels. This increase could be att ributed to changes in the property portfolio and to higher energy consumption by tenants. Total electricity consumption (incl. tenants' electricity) in like-for-like shopping centres decreased by 2.5 per cent from 2009. Electricity consumption in common areas (excl. electricity used by tenants) amounted to 110.6 GWh, showing an increase of two per cent from 2009 due to changes in the property portfolio and increased consumption in supermarket and shop properties. In like-for-like shopping centres electricity consumption in common areas decreased by 4.9 per cent.
Heating energy consumption came to 136.2 gigawatt hours. Due to the exceptionally cold weather at the beginning of the year but a mild autumn and early winter, heating energy consumption fell by 2.4 per cent from 2009. Weather-adjusted consumption, 142.1 gigawatt hours, rose by one per cent. Heating energy consumption in like-for-like shopping centre properties decreased by 2.2 per cent.
Citycon's total energy consumption (incl. electricity consumption in common areas, heating and cooling) amounted to 246.6 gigawatt hours. The consumption decreased by 0.6 per cent compared to the 2009 level. In shopping centres, energy consumption per visitor decreased by 14.4 per cent and energy consumption per sales fell by 21.2 per cent. Also, energy consumption per gross leasable area fell by 6.7 per cent. Total energy consumption in like-for-like shopping centre properties decreased by 2.4 per cent, which means Citycon was able to reach the targeted annual 2–3 per cent reduction in energy consumption.
The total consumption of primary energy in Citycon was 1,985 terajoules. The primary sources of total energy consumption are illustrated in the enclosed graph.
High-level decisions and actions made in 2011 to improve energy effi ciency:
Citycon has set its long-term water consumption target at 3.5 litres per visitor per year. For 2011, the average target for water consumption at shopping centres was 3.8 litres per visitor.
Citycon's total water consumption in 2011 was 638,851 cubic metres. This includes water consumed by the real estate company and tenants. Tenant water consumption is highest in grocery stores, restaurants and cafés, hair salons, laundries and car wash facilities. Water consumption in a property includes water used in public facilities such as customer toilets, and water used for cleaning, property maintenance and watering plants.
Water consumption showed a marked increase of 18.1 per cent in 2011. This increase could be att ributed to changes in the Estonian and Swedish property portfolios, and positive development in grocery as well as café & restaurant sales. Water consumption in like-for-like shopping centre properties rose by 13.4 per cent. Water consumption proportionate to sales decreased by 5.8 per cent compared to the 2009 level. The long-term water consumption target has been set at 3.5 litres per visitor per year. In 2011, water consumption per visitor in shopping centres was 4.3 litres and 4.6 litres in likefor-like shopping centres, which means the target for reducing water consumption per visitor was not met in 2011.
High-level decisions made
in 2011 to reduce water consumption:
• The objective in property-specifi c action plans is to install more water meters allowing the monitoring of user-specifi c consumption.
The long-term objectives set for waste management in 2009 were redefi ned in 2010, as the original objectives had already been met at the time. Citycon's objective is to reach a recycling rate of at least 80 per cent in shopping centres by 2015. The share of landfi ll waste may not exceed 20 per cent of the total waste volume. The recycling rate target for 2011 was 78 per cent and the target for landfi ll waste as a proportion of total waste was no more than 22 per cent.
Citycon's operating countries show major diff erences in terms of waste management. In Finland, the primary purpose of the Waste Act is waste prevention. Any waste generated should primarily be recycled as materials and secondarily be utilised as energy. Non-recyclable materials must be disposed of safely. For waste sent to landfi ll, the originator must pay waste tax. The increase in waste tax is a further encouragement to recycle and reuse. In Sweden, waste incineration is much more common and much less pre-sorting is necessary when waste is delivered for incineration. The proportion of landfi ll waste is therefore very small. In the Baltic region, recycling is signifi cantly less advanced than in the company's other countries of operation, but continued eff orts are being made to enhance the recycling of materials.
Properties managed by Citycon generated 15,361 tonnes of waste, of which 14,596 tonnes were collected from shopping centres and 765 tonnes from other properties. The recycling rate in shopping centres improved slightly to 77.6 per cent. The Baltic countries saw their recycling rate improve dramatically to 82.1 per cent, from
34.3 per cent a year earlier. Waste volumes have been rising in all operating countries from previous years, including in like-for-like shopping centres. In 2011, waste volumes rose by 14.5 per cent from the previous year. Similarly, the waste volume proportionate to sales showed an increase. Citycon's annual targets set for waste processing and recycling were achieved.
Property waste management and sorting in Citycon's properties is organised in accordance with country-specifi c waste legislation and other local regulations.
High-level decisions made in 2011 to increase waste sorting:
Careful planning and implementation can considerably reduce the environmental impacts of property development projects. In project implementation, compliance with the principles set out in environmental certifi cation systems contributes to sustainable development. The most widely recognised environmental certifi cation systems are LEED (Leadership in Energy and Environmental Design), originally developed in the United States, and BREEAM (Building Research Establishment Environmental Assessment Method), which is widely used in Europe.
All of Citycon's three LEED pilot projects have been awarded the LEED certifi cate. The redevelopment of the Trio shopping centre in Lahti was awarded the fi rst LEED certifi cate in the Nordic Countries in June 2009. The extension and redevelopment project for the Rocca al Mare shopping centre in Tallinn received a silver-level LEED certifi cate in February 2010. The Liljeholmstorget shopping centre development project in Stockholm achieved the highest, platinum level LEED certifi cate, in March 2010.
Citycon carries out all (re)development projects in accordance with environmental classifi cation principles. The development project of the Martinlaakso Ostari shopping centre, opened in December 2011, is registered for LEED application. This project is striving for the gold LEED certifi cate, which is expected to be verifi ed during the spring of 2012.
Citycon has strategic environmental responsibility policies, according to which properties must be located in a built environment and easily accessible by public transport. Good examples of such properties are the Kristiine shopping centre in Tallinn and the Högdalen Centrum in Stockholm acquired in 2011.
Since all land use and construction operations include a threat to biodiversity, Citycon aims to avoid construction projects in unbuilt areas, where changes could have a negative impact on biodiversity and ecosystems. All of Citycon's shopping centres are located in a built environment.
In most cases, an environmental impact assessment, including a biodiversity assessment, is conducted in connection with zoning and major projects. Where an environmental impact assessment is not required by law, Citycon evaluates the need for an assessment of its own, on a case-by-case basis. Location of shopping centres in builtup environments with excellent public transport connections reduces their ecological impact and the threat they represent to biodiversity.
Citycon's properties are not situated on protected land areas, although the Rocca al Mare shopping centre is located next to a protected area.
Refrigerants are used in cooling and ventilation equipment in grocery stores and properties, as well as in heat pumps. In grocery stores located in Citycon properties, the tenants are primarily responsible for any refrigeration units.
The use of CFC compounds in refrigeration equipment is prohibited in Finland. Use of HCFC compounds, which currently replace CFCs, will be banned as of the beginning of 2015. To replace harmful compounds, methods and substances have been developed that do not damage the ozone layer or aff ect climate change.
Citycon has set up a centralised refrigerant database, which contains information on all refrigeration equipment and refrigerants used in its properties. Ozone depleting refrigerants will be abandoned by the statutory deadline, at the latest.
C itycon's operations have a fi nancial impact on several stakeholders such as tenants, personnel, suppliers and subcontractors. The fi nancial impact on each stakeholder group is assessed below, based on cash fl ows between Citycon and its stakeholders.
Citycon's turnover consists of rental income, service income and utility charges. Turnover totalled EUR 217.1 million (EUR 195.9 million) in 2011. Citycon charges reasonable market-level rents. The average rent at the end of 2011 was EUR 19.7 per square metre (EUR 18.7 per square meter), showing an increase of 5.3 per cent from the previous year. Part of Citycon's lease agreements contain a turnover-linked component. In 2011, additional rent from turnover based rental agreements amounted to 2% (1%) in proportion to gross rental income.
Wages and salaries paid to Citycon employees totalled EUR 10.5 million (EUR 8.0 million), pension costs EUR 1.5 million (EUR 1.3 million) and other social charges EUR 1.3 million (EUR 1.1 million). Approximately 71 per cent (72%) of the wages and salaries were paid in Finland, 26 per cent (25%) in Sweden, and 3 per cent (3%) in the Baltic Countries. Citycon spent approximately EUR 0.1 million (EUR 0.2 million) on personnel training.
Purchases related to property maintenance totalled EUR 62.8 million (EUR 58.8 million). Maintenancerelated purchases are made locally by each Citycon business unit. In Finland, Citycon continues centralised partnership contract with ISS Palvelut Oy for property maintenance, security guard services and cleaning. Finland's share of property maintenance related purchases was approximately 61 per cent. In Sweden and Baltic Countries, Citycon purchases services separately for property maintenance, security guard services and cleaning. Sweden accounted for 30 per cent of the maintenance-related purchases, while the Baltic countries represented 9 per cent.
Of purchases, EUR 24.2 million (EUR 22.0 million) was paid to suppliers of electricity and heating and EUR 23.3 million (EUR 23.0 million) to maintenance service providers. EUR 7.5 million (EUR 6.5 million) was spent on property repairs. In addition, marketing and property management services were purchased for EUR 7.8 million (EUR 7.3 million).
In each property development project, Citycon's business units arrange competitive bidding processes in line with the project goals. Citycon's capital expenditure totalled EUR 216.7 million (EUR 133.7 million), with property development accounting for EUR 75.0 million (EUR 125.3 million) and new property acquisitions and agreed purchase price adjustments related to property acquisitions concluded earlier accounting for EUR 140.0 million (EUR 6.8 million). Another EUR 1.7 million (EUR 1.7 million) was spent on other investments. Finland accounted for 29.1 per cent of Citycon's investments, Sweden 21.0 per cent and the Baltic countries 49.9 per cent. Cash fl ow from operations and existing fi nancing arrangements were used to fi nance these investments.
Budgeting is a regular management activity at Citycon and comprises annual planning and target sett ing. Through the budget process, fi nancial and non-fi nancial targets are set for Citycon personnel annually. Group level targets are set fi rst and converted into business unit targets, from which employee level targets for the period are derived. Incentives are designed to direct the Group at all levels, in order to achieve the set targets
In 2011, the targets set for the business units were based on each unit's budgeted EPRA operating profi t, while the Group's targets were based on the budgeted EPRA Earnings per share (EPRA EPS). The Citycon Group, Finland and the Baltic Countries were able to meet their targets in 2011, while Sweden did not reach its targets.
See page 92 for exact cash fl ows in euros.
56 CITYCON OYJ ○ ANNUAL AND SUSTAINABILITY REPORT 2011 ○ RESPONSIBILITY
LOPS KÄMP GALLERIA Citycon took charge of commercial management, marketing and retail premise leasing of the Kämp Galleria, owned by Ilmarinen, in Helsinki city centre.
C itycon is a multi-disciplinary working community that brings together professionals from various fi elds of expertise. When successfully managed by its skilled personnel, Citycon's North European shopping centres can off er unique services to players in the retail sector. What makes Citycon special is its ability to off er comprehensive services in a centralised manner, while also taking full advantage of local expertise. To successfully execute its mission, Citycon relies on its personnel's competence in shopping centre management, leasing, customer relationship management, property development and fi nancing and property transactions. The special requirements involved in leading a multidisciplinary group of specialists have been taken into consideration in Citycon's human resources strategy, where one of the key priorities is building and strengthening employee cooperation. Another focus area is the development of the leadership culture to bett er support specialist work.
The structures of leadership and co-operation were actively renewed last year. The change of the company CEO in March set off other changes in Group management. During the year, the Executive Vice Presidents of the two biggest operating areas, Finland and Sweden, changed, as did the company's General Counsel. Several organisational units were modifi ed to bett er meet the growth needs outlined in the strategy. The structure of the Corporate Management Committ ee remained unchanged, but the meeting schedules were adjusted to become more frequent and dynamic. In addition, the extended Corporate Management Committ ee, featuring representatives of key Group support functions such as fi nancing, accounting, sustainable business, communications and human resources, met regularly. Shared in-house development guidelines were defi ned for Citycon, which were discussed and formulated by the extended Corporate Management Committ ee and by the entire personnel. One of the key themes discussed was the building of one Citycon, i.e. more effi cient utilisation of the synergies between diff erent operating areas, among other things. To pursue this goal, a new Programme Runner role was created in Citycon. This means directors in charge of a specifi c area lead joint eff orts in all operating countries. This operating model will be further developed in the future.
More emphasis was placed on specialist leadership. In practice, this meant trusting more in personnel's competence by giving them more latitude in their fi eld of expertise and engaging them more actively in day-to-day innovations.
At the end of 2011, the number of Citycon employees stood at 136 (129 at the end of 2010). The number of Citycon employees in Finland was 90 (84), in Sweden 35 (37), in Estonia 9 (7), in Lithuania 1 (1), and in Holland 1 (0). Most employment contracts at Citycon are full-time and permanent. At the year-end, there were 130 permanent employees and six temporary employees on a fi xed-term contract. Excepting two contracts, these employment contracts were full-time. Citycon has signed a legal employment contract with all of its employees.
Citycon employees feel that their work is meaningful and duties interesting – Personnel Survey 2011
Considering the size of its property portfolio, Citycon employs a relatively small number of personnel. This is because Citycon indirectly employs a large number of people through the procurement of various services. Its personnel group distribution shows that various managerial and supervisory positions are rather dominant, as these people manage projects and co-ordinate operations involving a large number of non-Citycon players and partners.
During the year, Citycon signed 26 new employment contracts, including short-term substitutions. The majority of these contracts (18) were signed in Finland, two in Sweden, fi ve in Estonia and one in Holland. One of the key objectives writt en into the HR strategy is to be an appreciated and att ractive employer among the sector's professionals. In 2011, Citycon continued to receive a large number of applications for vacant positions. Citycon recruits people to positions about to become vacant, as well as to entirely new positions created in the context of organisational renewal. In 2011, ten new positions became vacant.
People joining Citycon are typically experienced professionals in their fi eld, seeking enhanced competencies and additional professional skills through their new duties. The past year also presented more opportunities to recruit employees at the early stages of their career path. Today, Citycon is a diverse working community, including in terms of the age and work experience of its employees. The average age of personnel is 42 years. During the year, Citycon did not employ any personnel under the age of 18. Approximately half of these employees have worked for Citycon for more than four years and the other half for less than four years. During the year, 18 permanent employees left Citycon, 11 of these were Finnish, four were Swedish and three were Estonian.
In Citycon, recruitment is based on off ering new development opportunities to our existing employees. When a new position is created or when a successor is needed in a certain position, opportunities for internal job rotation are explored fi rst and the job is off ered for application by company employees. During the year, 14 Citycon employees changed jobs within the company. In addition, the job descriptions of several employees were revised. One of Citycon's core HR
• Finland • Sweden • Estonia • Lithuania • Netherlands • Employees in total
practices is to arrange employee performance reviews, in order to learn more about employees' development needs. The objective is to conduct the review discussions with each employee twice a year. Depending on the timing of these discussions, they may also involve an assessment of the last review period, sett ing targets for the future period, and preparing a development plan for the next period and for the longer term. The records for the past year highlight the challenges created by personnel changes: only 77.2 per cent (92.6%) of employees had a performance review discussion with their supervisor at least once during the year and 42.1 per cent (48.4%) twice during the year.
At Citycon, professional competence is based on extensive training. Most Citycon employees have an educational background in commercial studies or engineering. To increase the skills base of its experts, Citycon encourages on-the-job learning and job rotation, long-term self-development through further or advanced studies, and employee skills updating through courses. In 2011, Citycon employees completed 563 (437) full-day training sessions, or 4.3 (3.6) days per employee. In-house training provided during the year focused particularly on new employee induction. Several induction training days were arranged during the year, as well as individual induction sessions for new employees.
Every eff ort is made at Citycon to promote open dialogue and informal communication between company management and employees. The relatively small size of the organisation and low hierarchy make this easier. In Finland, statutory negotiations between the employer and employees take place within a co-operation group, comprising six employee representatives and two employer representatives, which convenes when necessary. Employee representatives are elected for a term of two years at a time. The group discusses matt ers aff ecting the entire personnel, such as new policies and processes. Once a year, it also discusses issues such as the human resources plan and the equal opportunities scheme. In expert organisations such as Citycon, employees are seldom organised, even though the employer fully accepts unionisation. Membership in a professional association for people with a certain educational or professional background is more common.
Another co-operative body in Finland that meets regularly is the occupational safety committ ee consisting of four employee representatives, one employer representative and the contact person in charge of occupational health care services as an expert consultant. Matt ers discussed by the occupational safety committ ee include various issues related to occupational safety and well-being in the workplace. The committ ee also discusses current issues in the fi eld of occupational health and safety. In occupational health activities, the main focus is on preventive action, for example ergonomics and ways of maintaining work capacity. Employees are off ered the opportunity to have an occupational physiotherapist inspect their workstation to ensure proper ergonomics, and routine medical check-ups are off ered from the age of 35 onwards. To help personnel stay in good physical condition, Citycon supports the recreational activities of its employees. Citycon also off ers an extensive range of health care services. During the year,
the number of sick days at Citycon was 409 (296) or 3.1 (2.4) days per employee. The absentee rate was 1.6 (1.2). Due to the nature of the work carried out by Citycon personnel, work-related accidents are infrequent. During the year, there were two accidents resulting in absence.
Common HR practices in Citycon include an annually conducted group-wide personnel survey and the joint Citycon Day event. The personnel survey conducted in the spring is a key workplace well-being indicator at Citycon. It helps to assess employees' job satisfaction, motivation and commitment compared to other European expert organisations. The response rate in the personnel survey has traditionally been quite high. This was also true in 2011, as the response rate was 88.1 per cent (88.2%).
In general terms, the results of the personnel survey remained largely unchanged from the previous year. The overall job satisfaction index was 62.0 (63.2), the management index was 72.9 (71.2) and the employee commitment index was 72.9 (72.3). The biggest positive change was seen in supervisory work. Supervisors put in much eff ort to support their subordinates' professional development and improve the fl ow of information within the company. The best scores in the survey were awarded to the company's future outlook. The results showed that personnel felt their work was meaningful and that the company's values and objectives were worth pursuing. Duties and assignments were considered interesting and inspiring, and supervisors off ered support to employees seeking to achieve their goals and personal development. Criticism was voiced on issues typical of an organisation in transition. The results showed that the only negative developments had to do with the company's decision-making methods. Similarly, the unclear division of responsibilities and slow decisionmaking were criticised. The results suggested that there is room for improvement in the relations between diff erent units. They also provided the new management with a good outline of the thoughts and hopes of employees in various operating areas, and off ered a sound framework for planning development actions.
Arranged in the spring, the traditional Citycon Day event is an important entry in every Citycon employee's calendar. Presentations given during the last Citycon Day addressed current themes in all Citycon operating countries. It is customary to invite non-Citycon expert consultants to speak at the event. Citycon Day also provided the new CEO with an excellent opportunity to introduce himself and become acquainted with Citycon people. Joint events continued throughout the year, through webcasts during which participants were also able to ask questions and make comments.
Citycon feels strongly about promoting and maintaining equal opportunities in the work community. Each individual must be respected and treated fairly and equally, regardless of gender, belief, age or other similar factors. An equal opportunities scheme is annually updated in co-operation with employee representatives. This involves assessing the current state of the areas identifi ed for equal opportunities work and discussing any actions required to improve the situation, particularly from the perspective of gender equality. These areas include job allocation and recruitment, rewarding and benefi ts, moving up the career ladder and professional development, balancing work and family, and work environment and working conditions. The equal opportunities scheme is available on the company intranet and all new employees are introduced to it as a part of their induction training. No discrimination incidents were reported during the year.
Citycon has a zero-tolerance policy towards corruption and bribery. Citycon employees must avoid situations involving a confl ict of interest, and employees must never accept any forms of bribery. The appropriate travel and representation practices are specifi ed in the company's travel and representation guidelines, which are available on the intranet. The guidelines are included in the induction training for all new employees. Travel and representation expenses must always be approved by a superior and the relevant documentation must be recorded in Citycon's
The Trio shopping centre in Lahti launched co-operation with the city's youth services, by off ering premises for young people at the shopping centre. These premises were altered in line with the wishes expressed by young people, to ressemble a cafeteria where you can bring your own food and get together with friends. A youth worker is also available on the premises. Furthermore, young people were asked to co-operate with the entrepreneurs working in the shopping centre by suggesting ways of developing the shopping centre's operations, visitor comfort and safety.
At the Forum shopping centre in Jyväskylä, young people organised a "Young Forum" evening, which included events such as a fashion show organised together with the shopping centre and the stores operating within it. The event was att ended by nearly 400 young people. In the Jyväskeskus shopping centre in Jyväskylä, premises that had been vacant for some time were made available, free of charge, to local youth services, until a tenant would be found for the premises. Here, too, young people worked together with the Jyväskeskus entrepreneurs, to organise a fashion show.
In the Columbus shopping centre in Helsinki, a local youth event, DONKKAA Columbukseen, was arranged for the second time. The objective was to get young people involved in a positive way, to introduce them to local recreational activities and local hobby organisations, and to make the area more pleasant. The event was co-organised by the City of Helsinki Youth Department, Social Services Department, Sports Department, City Library, congregation, and local sports clubs and organisations.
travel and expense accounting system. No corruption incidents were reported during the year.
Citycon does not support the operations of any political parties or groups. In connection with the company's development projects, Citycon's representatives have att ended meetings of local political bodies in their capacity as shopping centre operations specialists. Citycon's objective is to engage in healthy, open dialogue with regional offi cials and political decision-makers. Citycon wants to provide information on planned development projects to decision-makers, and receive information from local decision-makers on how they would like to see the area developed.
Citycon's shopping centres may be used by political parties to host election campaign events, subject to the company's standard leasing terms. In 2011, many of Citycon's shopping centres in Finland hosted events related to the parliamentary elections, to which representatives of all major parties were invited. At each event, representatives nominated by the parties had the opportunity to talk about their election programme and participate in a panel discussion. Premises were made available for this purpose free of charge.
Citycon's shopping centres are an integral part of the local community. Existing shopping centres work in close co-operation with local players and residents. Some of Citycon's shopping centres have off ered for example local hobby organisations the opportunity to use their premises for introductory events, and invited charity organisations to host campaigns and exhibitions on their premises. Some Citycon shopping centres have been engaged in co-operation with the police and other security authorities, city youth services, and schools and day care centres.
Citycon contributes to local community development by improving the availability of local services and by compacting the urban structure. For example, the new Ostari shopping centres in Martinlaakso, Vantaa, and in Myllypuro, Helsinki, were built to replace the previous, commercially outdated retail centres, and are conveniently located in the immediate vicinity of public transport stations. The number of small households without a car is growing, which makes local, easily accessible services all the more important.
Availability of a wide range of services enhances resident well-being and helps things run smoothly every day. Not all tenants in Citycon's shopping centres are commercial operators; some properties also house public service points, libraries, health care centres, home care units and chapels.
Citycon makes ongoing eff orts to improve the accessibility of its shopping centres, by developing traffi c solutions in co-operation with the local authorities. To this end, co-operation with the local traffi c planning authorities was carried out as necessary in 2011 too.
In connection with its development projects, Citycon has arranged briefi ngs and discussions with local residents and other concerned parties, to allow them to express their views and to ask questions. These events have been perceived as an important and eff ective method of communicating with the local community. Most frequently asked questions before a project launch concern noise and other disruptions caused by construction. Typical concerns involve damage caused to the environment, traffi c fl ow, and changes to access routes and parking arrangements. Local residents and other operators usually have a positive att itude towards development projects, because they brighten up local centres and improve the availability of services.
Citycon conducts various studies and surveys to monitor consumer and tenant satisfaction. Analysing the results obtained from these studies is one form of self-assessment, designed to help continuously improve operations.
To monitor consumer satisfaction, Citycon uses tools such as catchment area and business image surveys. These are designed to measure recognition of diff erent shopping centres, to quantify the business visitors conduct within them, and to clarify the opinions held by the region's consumers on the shopping centres being surveyed.
In 2011 in Finland, a catchment area survey was conducted in the areas around ten shopping centres: Tikkuri, Lippulaiva, Myyrmanni, Espoontori, Koskikeskus, Trio, IsoKarhu, Jyväskeskus, Forum and Sampokeskus. Furthermore, to monitor its business image development in Finland, Citycon regularly takes part in an image survey targeting shopping centres in the Helsinki region ("Shopping centres in the Greater Helsinki area"). In Sweden, catchment area and business image surveys were conducted in four shopping centres: Åkersberga Centrum, Stenungs Torg, Tumba Centrum and Jakobsberg Centrum, and in two shopping centres in Estonia: Rocca al Mare and Kristiine.
In Finland and Sweden alike, the surveyed shopping centres were generally perceived as familiar, safe and easy to use. In Estonia, Citycon's shopping centres were considered trendy and cosy places for family leisure that stand out from other shopping centres in a positive way. In addition, the location of the shopping centres along daily travel routes and close to home was regarded as a major factor boosting att raction, as were easy parking and good public transport connections. The location of shopping centres along customers' daily routes is also in line with Citycon's environmental objectives. While the range of shops and services available in shopping centres was often considered good, it was also mentioned as an area in need of development. This goes to show that consumers need and appreciate very diff erent things. A good grocery store is also a major factor determining which shopping centre consumers choose to visit.
In addition to the catchment area and business image surveys, separate qualitative studies were conducted of Kämp Galleria, Iso Omena, Lippulaiva and Myyrmanni, located in the Helsinki Metropolitan Area, and Jyväskylä-based Forum. The studies were conducted as small group interviews, in the hope that they would contribute to deeper customer understanding and thereby enable Citycon to bett er meet consumer needs in the future.
Training arranged in 2011 for shopping centre personnel covered waste management, safety and security and fi rst aid, as well as training on customer service skills and the promotion of well-being. Training related to the introduction of the communication portal shared by tenants and shopping centre management was also given. The content of training sessions varied, depending on the country and shopping centre. Training will continue in 2012.
To ensure the safety of shopping centre personnel and customers, Citycon acquires the services of security guards and security offi cers from its partners. In all of Citycon's operating countries, the security guards must complete a training programme where issues such as risky situations and liaising with minority groups are discussed.
In 2011, waste management training was organised for tenants in Citycon's shopping centres in Finland. This included theoretical studies as well as hands-on training in waste sorting. The purpose of this training was to increase awareness of the importance of sorting from the cost and sustainability perspective, and to make sorting more effi cient.
During the training programme, sorting points were equipped with clear, illustrated sorting instructions, and with new recycling containers where necessary. Participants were also asked to off er ideas on how to improve operations. Some of the suggested improvements were implemented straight away, demonstrating that the feedback had an immediate impact on operations.
Waste management training was arranged in 11 shopping centres by ISS Palvelut and HFT Network Oy.
Repeated surveys have been carried out to study tenant satisfaction. With these surveys, Citycon seeks to explore its tenants' opinions of its operations, services provided and the quality of co-operation. Open questions were also asked, to gather feedback on areas in need of development. The surveys were conducted online, and in some shopping centres as a phone interview with selected customers. Tenants' views have also been regularly surveyed aft er major marketing or price campaigns. The objective is to make tenant feedback collection and feedback processing a smoothly-running process, and to put the feedback to more effi cient use.
According to the results of the tenant satisfaction surveys, Citycon's strengths include well functioning retail properties, availability of contact persons, ability to solve problems, and an active approach. The areas in most need of development were maintenance of premises, communication, rents, and the fl exibility of operations.
Citycon interacts with its tenants in a number of ways. In most shopping centres, regular meetings with tenants are arranged; in others interaction is less formal. Many shopping centres use an internal monthly bulletin. The portal system (extranet) used in Citycon's shopping centres enables interactive exchange of messages between tenants and the shopping centre management.
Consumers can provide feedback using a feedback form available on the website of each shopping centre. The contact information of the shopping centre management is also available on the website. General feedback on Citycon can be provided using the feedback form on the company website. Feedback is checked regularly, and persons offering feedback are contacted at their request. Several of Citycon's shopping centres feature digital info kiosks, where customers can search for information regarding shops and services in the shopping centre and provide feedback.
About one third of Citycon's shopping centres are engaged in social media through their own Facebook pages. For example, the Koskikeskus shopping centre in Tampere quickly received thousands of fans aft er sett ing up its own Facebook pages. Meanwhile, the Iso Omena shopping centre has used the ideas of a customer panel recruited from Facebook to increase user comfort and functionality in the centre. Citycon has also conducted a follow-up survey to analyse conversations taking place in social media. This survey involved following various discussion forums for a certain period, to see if Citycon's Finnish shopping centres came up in conversations. Similarly, discussions related to sustainability and environmental aspects were followed. The survey revealed that, during the follow-up period, consumers did not signifi cantly discuss topics related to Citycon or its shopping centres in social media. The followup survey could be conducted again later.
In its marketing communications, Citycon complies with the law and good practice. Citycon's marketing targets both tenants and consumer customers.
The text in italics describes the regulatory background of the issue in question.
C itycon Oyj is a Finnish public limited liability company listed on the NASDAQ OMX Helsinki Ltd (the Helsinki Stock Exchange). Consequently, the company's administration and decision-making are based on the Finnish Limited Liability Companies Act and the Securities Market Act, Citycon's Articles of Association, rules and regulations issued by the Helsinki Stock Exchange and the Finnish Financial Supervisory Authority, and the Finnish Corporate Governance Code.
As prescribed by the Finnish Limited Liability Companies Act, Citycon's business operations and administration are under the responsibility of the following bodies: the general meeting of shareholders, the Board of Directors and the CEO. The general meeting of shareholders elects members to the Board of Directors, and the Board elects the CEO. In managing the company's business operations, the CEO is assisted by the Corporate Management Committ ee whose members are appointed, upon the CEO's proposal, by the Board of Directors. The Board of Directors' work is enhanced by four Board committ ees. The work of the Board of Directors and its committ ees, the CEO and the Corporate Management Committ ee is governed by the Corporate Governance Guidelines approved by the Board of Directors, which contains charters for the Board and its committ ees, guidelines for the division of duties between the decision-making bodies, as well as guidelines for the arrangement of internal control and risk management.
During the year, the Board of Directors paid special attention to governance issues and wanted to emphasise their weight even further by expanding the Nomination Committ ee's role to cover governance-related issues too. Simultaneously, the Committ ee was renamed the Nomination and Governance Committ ee, and its duties were redefi ned. The company's Corporate Governance Guidelines were amended accordingly and they were also otherwise updated where deemed necessary. In addition, the Board of Directors approved Citycon's Disclosure Policy in July. The policy defi nes the general principles concerning communications intended for the capital markets, as well as areas of responsibility in communications and investor relations. The essential parts of the updated Corporate Governance Guidelines and the Disclosure Policy are available on the corporate website in the Corporate Governance section.
| Time | Matt ers to be decided |
|---|---|
| February | Financial statements and report by the Board of Directors, proposal for profi t distribution and other proposals for the AGM, performance-based bonuses payable for the previous year and bonus criteria and targets for the current year |
| Election of the Chairman and Deputy Chairmen of the Board, election of Committ ee Chairmen and members, | |
| March | assessment of the Board members' independence |
| April | Interim Report |
| July | Interim Report, Strategy Day |
| September | Approval of Registration Document |
| October | Interim Report |
| December | Budget, risk management, Board's self-evaluation |
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. A notice of general meeting of shareholders is published on the corporate website no later than three weeks prior to the general meeting, and includes a proposal for the meeting's agenda, the documents to be presented to the general meeting and the resolution proposals by the Board of Directors and its committ ees.
Citycon uses international service providers to facilitate the participation of its nominee-registered shareholders in general meetings, and makes every eff ort to arrange such meetings in a manner that enables both Finnish and international shareholders to participate and exercise their rights to vote, ask questions and speak in the meeting as extensively as possible.
Citycon's AGM 2011 was held on 23 March in Helsinki, Finland. Notice of the meeting was published on 24 February 2011. A total of 247 shareholders att ended the AGM either personally or through a proxy representative and they represented 70.9 per cent of the company's total share capital and voting rights. The Chairman of the Board of Directors and the CEO att ended the meeting. Apart from one person, other Directors were also present, as were the fi rst-time nominees for the Board of Directors. Similarly, the chief auditor was present at the AGM. Without delay following the AGM, Citycon published the decisions taken by the AGM, as a stock exchange release and on its website. The minutes of the meeting were available on the corporate website within two weeks of the meeting.
More information on the general meeting of shareholders and on shareholders' rights is available on the corporate website at www.citycon.com/gm. This website section also contains summaries of the decisions taken by each general meeting since 2007 and minutes of the general meetings since 2009.
The general meeting of shareholders decides the number of members of the Board of Directors and elects them. Board members' terms of offi ce end at the close of the fi rst AGM following their election. According to the Articles of Association, the Board of Directors consists of a minimum of fi ve and a maximum of ten members. The Articles of Association do not contain other limitations concerning the election of members of the Board of Directors. The Board of Directors elects the Chairman and one or more Deputy Chairmen from among its members.
An eligible Director nominee must have the qualifi cations required for directorship and suffi cient time at his or her disposal to manage his/her Director duties. A majority of the Directors must be independent of the company. In addition, a minimum of two Directors belonging to this majority must be independent of the company's major shareholders. The Board of Directors annually assesses its members' independence. 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 set the number of Board members at ten and decided to re-elect the following Directors: Ronen Ashkenazi, Chaim Katzman, Claes Ott osson, Dor J. Segal, Thomas W. Wernink, Per-Håkan Westin and Ariella Zochovitzky. Roger Kempe, Kirsi Komi and Jorma Sonninen were elected as new members to the Board replacing Gideon Bolotowsky, Raimo Korpinen and Tuomo Lähdesmäki who stepped down from the Board. Directors' personal details and their shareholdings in the company are presented enclosed. Their career histories as well as key positions of trust are available on the corporate website at www.citycon.com/board.
Chaim Katzman was the Chairman of the Board of Directors in 2011, and Ronen Ashkenazi the Deputy Chairman. Thomas W. Wernink served as the other Deputy Chairman of the Board as of 23 March 2011.
According to the Board of Directors' assessment, all Directors are independent of the company, given that none of them has an employment contract, executive contract or other contractual relationship with the company. Furthermore, the Board has assessed that Roger Kempe, Kirsi Komi, Jorma Sonninen, Thomas W. Wernink and Per-Håkan
| Strategy and | ||||
|---|---|---|---|---|
| Audit Committ ee | Nomination and Governance Committ ee (* |
Remuneration Committ ee | Investment Committ ee | |
| Committ ee members 1 January-23 March 2011 | ||||
| Raimo Korpinen (Ch.) | Tuomo Lähdesmäki (Ch.) | Tuomo Lähdesmäki (Ch.) | Ronen Ashkenazi (Ch.) | |
| Gideon Bolotowsky | Chaim Katzman | Gideon Bolotowsky | Raimo Korpinen | |
| Thom Wernink | Claes Ott osson | Chaim Katzman | Dori Segal | |
| Per-Håkan Westin | Thom Wernink | Thom Wernink | Thom Wernink | |
| Ariella Zochovitzky | Per-Håkan Westin | Ariella Zochovitzky | Per-Håkan Westin | |
| Ariella Zochovitzky | ||||
| Committ ee members 24 March-31 December 2011 | ||||
| Ariella Zochovitzky (Ch.) | Kirsi Komi (Ch.) | Chaim Katzman (Ch.) | Ronen Ashkenazi (Ch.) | |
| Ronen Ashkenazi | ||||
| Kirsi Komi | (until 12 July 2011) | Roger Kempe | Dori Segal | |
| Jorma Sonninen | Chaim Katzman | Claes Ott osson | Jorma Sonninen | |
| Thom Wernink | Roger Kempe | Per-Håkan Westin | Thom Wernink | |
| Claes Ott osson | Ariella Zochovitzky | Per-Håkan Westin | ||
| Ariella Zochovitzky (as of 13 July 2011) |
||||
| Number of meetings | 5 | 5 | 2 | 3 |
| Att endance-% | 100 | 88.5 | 100 | 100 |
*) Former Nomination Committ ee
Westin are independent of major shareholders. Since Ronen Ashkenazi, Chaim Katzman and Dor J. Segal are in the employ of Citycon's main shareholder, Gazit-Globe Ltd. or its affi liated companies, they are not independent of major shareholders. Furthermore, Ariella Zochovitzky serves as Gazit-Globe Ltd.'s representative in a company called U. Dori Group Ltd., in which Gazit-Globe Ltd. exercises controlling interest, and is therefore not independent of major shareholders. The Board of Directors also deems Claes Ott osson non-independent of major shareholders due to his sister's family relationship with Dor J. Segal.
The Finnish Limited Liability Companies Act, the Articles of Association and the Corporate Governance Guidelines approved by the Board of Directors prescribe the Board of Directors' duties and responsibilities. The Charters of the Board and Board Committ ees are included in the Corporate Governance Guidelines, and they are available on the corporate website in the Corporate Governance section.
The Board of Directors convenes according to a pre-determined meeting schedule and when deemed necessary. The meeting schedule is based on the company's reporting schedule and the Board of Directors' strategy and budget meetings, as indicated by the Board's enclosed year clock. In addition to regular topics, investment and divestment proposals associated with the company's shopping centre business as well as fi nancing issues are usually discussed at the meetings. Meetings can also take place via telephone, which may sometimes be regarded as even necessary due to the Board of Directors' international composition. Items are discussed in Board meetings based on a pre-prepared agenda. Minutes are kept on each meeting and they will be reviewed and approved in the next meeting.
In 2011, Citycon's Board of Directors held 5 meetings in addition to its original meeting schedule and convened 12 times. Extraordinary Board meetings related to changes in the corporate management, to the directed share issue arranged in July, and to negotiations concerning potential acquisition targets conducted by the company in the ordinary course of its business. The Board also decided on a new long-term key employee incentive programme, i.e. stock option plan 2011. The average att endance rate in Board meetings stood at 95.8 per cent.
The Board of Directors' work is enhanced by the following four Board committ ees: the Audit Committ ee, Nomination and Governance Committ ee, Remuneration Committ ee and Strategy and Investment Committ ee. In Board committ ees, member Directors are able to delve into matt ers in greater detail than the entire Board of Directors. The Corporate Governance Guidelines defi ne the key duties and operating principles of the committ ees.
The Board of Directors elects the Board committ ees' chairmen and members from among the Directors. The committ ee members must have the expertise and experience required by the committ ee's duties. A committ ee always has at least three members. The committ ee's chairman reports on issues discussed by the committ ee to the Board of Directors. In addition, minutes are kept on all committ ee meetings and distributed to all Directors.
The table above contains information on the committ ees' composition, number of meetings and att endance in 2011.
Chairman of the Board Chaim Katzman Director since 2010
LL.B. US and Israeli citizen, born 1949 Independent of the company Main occupation: Norstar Holdings Inc. (former Gazit Inc.), founder, controlling shareholder and Chairman of the Board of Directors since 1991; Gazit-Globe Ltd., Chairman of the Board of Directors since 1998 Citycon shares: 90,000 (through a closely associated party)
Deputy Chairman of the Board Thom Wernink Director since 2005 M.A. (General Economics) Dutch citizen, born 1945 Independent of the company and signifi cant shareholders Main occupation: Non-executive director on a number of property and investment companies based in Europe Citycon shares: 57,500
Director since 2011 LL.M. Finnish citizen, born 1963 Independent of the company and signifi cant shareholders Main occupation: Professional nonexecutive director Citycon shares: -
Deputy Chairman of the Board Ronen Ashkenazi Director since 2009 B.Sc. (Eng.) Israeli citizen, born 1962 Independent of the company Main occupation: Gazit Globe Israel (Development) Ltd. , CEO and minority shareholder since 2005, U. Dori Group Ltd., CEO and member of the Board of Directors since 2011 Citycon shares: -
Director since 2011 M.Sc. (Econ.) Finnish citizen, born 1959 Independent of the company and signifi cant shareholders Main occupation: Oy Fincorp Ab, Managing Director since 2006 Citycon shares: 110,000 (through a closely associated party)
The AGM confi rms the remuneration of the members of the Board of Directors in advance every year.
The AGM of 2011 decided that the Chairman of the Board of Directors be paid an annual fee of EUR 160,000,
| Annual fee, EUR |
Meeting fees, EUR |
Total, EUR | |
|---|---|---|---|
| Chaim Katzman | 160,000 | 10,400 | 170,400 |
| Ronen Ashkenazi | 60,000 | 8,600 | 68,600 |
| Thom Wernink | 60,000 | 11,200 | 71,200 |
| Roger Kempe | 40,000 | 7,500 | 47,500 |
| Kirsi Komi | 40,000 | 9,800 | 49,800 |
| Claes Ott osson | 40,000 | 9,000 | 49,000 |
| Dori Segal | 40,000 | 6,000 | 46,000 |
| Jorma Sonninen | 40,000 | 8,000 | 48,000 |
| Per-Håkan Westin | 40,000 | 9,000 | 49,000 |
| Ariella Zochovitzky | 40,000 | 11,800 | 51,800 |
| Total | 560,000 | 91,300 | 651,300 |
the Deputy Chairmen EUR 60,000 and ordinary members of the Board EUR 40,000. In addition, the AGM decided that the Chairman of the Board and the Chairmen of the Board's committ ees be paid a meeting fee of EUR 700 and other Board and committ ee members EUR 500 per meeting. These fees remained the same as in the three previous years.
Roger Kempe
Annual and meeting fees paid to Citycon's Board members in 2011 are presented in the enclosed table. The fees were paid in cash. Meeting fees include fees paid for both the Board and committ ee meetings. Citycon's Board members are not involved in the company's share-based 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. Information on the number of shares held by the Board members at the end of 2011 is provided enclosed. Up-to-date information on shareholdings and any changes therein can be found on the corporate website at www.citycon.com/insiders.
Claes Ott osson Director since 2004 Electrical Engineer Swedish citizen, born 1961 Independent of the company Main occupation: ICA Kvantum Hovås, Managing Director since 1989 Citycon shares: 23,336
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 as well as the guidelines and directions received from the Board of Directors. The Corporate Governance Guidelines defi ne the key duties of the CEO, and they are presented on the corporate website in the Corporate Governance section.
Citycon's Board of Directors appoints the CEO and decides on the terms and conditions of his/her service agreement, in writing.
On 13 January 2011, the Board of Directors appointed Marcel Kokkeel, a Dutch citizen, Citycon's new CEO, and approved the terms and conditions of his executive contract. The new CEO assumed his duties on 24 March 2011. The Executive Vice President is the company's Chief Financial Offi cer Eero Sihvonen. Their personal details are presented enclosed and their
Director since 2004 High school US citizen, born 1962 Independent of the company Main occupation: Gazit-Globe Ltd., Executive Vice Chairman since 2008; First Capital Realty Inc., President and CEO and member of the Board of Directors since 2000 Citycon shares: 7,174
Per-Håkan Westin Director since 2008 M.Sc. (Civil Engineering) Swedish citizen, born 1946 Independent of the company and signifi cant shareholders Main occupation: Professional nonexecutive director Citycon shares: 10,000
Jorma Sonninen Director since 2011 Dipl. EMC (European Diploma in Marketing) Finnish citizen, born 1962 Independent of the company and signifi cant shareholders Main occupation: Colliers International Oy, Head of Transaction since 2007 Citycon shares: 10,000 (through a closely associated party)
Ariella Zochovitzky Director since 2009 B.A. (Economics and Accounting), CPA (Israel), MBA Israeli citizen, born 1957 Independent of the company Main occupation: C.I.G. Consultants / Capital Investments Group Ltd., General Manager & Partner since 2001; U. Dori Group Ltd., Chairman of the Board of Directors since 2008 Citycon shares: -
meetings. Minutes are kept on the CMC meetings.
career histories and any positions of trust are available on the corporate website at www.citycon.com/ management. The CEO's service agreement has been signed for a
fi xed term and it will expire at the end of February 2015. The company may terminate the agreement even earlier without cause at any time, upon a six months' notice period. In such a case, in addition to the salary payable for the notice period, the CEO will be paid severance pay of 1.5 times the annual base salary at the moment of termination, as well as 1.5 times the most recent annual bonus payment. The CEO's pension benefi ts are determined in accordance with standard Finnish pension laws.
Citycon has a Corporate Management Committ ee (CMC) comprising at least three members. Members of the CMC are appointed by the Board of Directors upon the CEO's proposal. The CEO convenes a CMC meeting whenever he or she deems necessary, and chairs its The Corporate Governance Guidelines defi ne the key duties of the CMC, and they are presented on the corporate website in the Corporate Governance section. As an expert body, the CMC's main duty is to assist the CEO in the management of the company's operative business, to co-ordinate and develop the company's various operative functions and to promote information fl ow and co-operation between diff erent parts of the organisation.
In 2011, several changes took place in the CMC's composition. In addition to the CEO, three new members joined the Committ ee: Michael Schönach, Executive Vice President, Finnish Operations, on 1 March; Anu Tuomola, General Counsel and Head of Legal Aff airs, on 1 September; and Johan Elfstadius, Vice President, Swedish Operations, on 21 November. Members who left the CMC during the year were Petri Olkinuora, CEO; Outi Raekivi, General Counsel and Head of Legal Aff airs; and Ulf Att ebrant, Vice President, Swedish Operations. At the year-end, the CMC had six members. In addition to the CEO, the CMC includes the company's Executive Vice President and Chief Financial Offi cer, the General Counsel and the Vice Presidents of the company's geographical business units. The CMC convenes usually once a month. However, in 2011, the CMC had only six meetings due to several changes that took place in the CMC.
CMC members' personal details and information on their share and stock option holdings at the end of 2011 are presented on the next page. CMC members' career histories and any positions of trust are available on the corporate website at www.citycon.com/management.
The Board of Directors confi rms the CEO's salary and other benefi ts and, upon the CEO's proposal, determines other senior executives' salaries and benefi ts.
Remuneration of the CEO and other CMC members consists of a fi xed yearly or monthly salary and fringe benefi ts, as well as an annual performance bonus. In addition, the CEO and other CMC members are included in the Citycon Group's stock option plan 2011, which the Board of Directors decided on in May 2011. CMC members, except those members who started with the company in 2011, are also included in the long-term share-based incentive plan for key personnel, eff ective in 2007–2010. Incentives under this plan were paid in 2011 and are yet to be paid in 2012 and 2013.
According to his service agreement, the CEO's annual gross base salary amounts to EUR 450,000. At the Board of Directors' discretion, the CEO may be awarded an additional cash bonus up to a maximum amount corresponding to his annual gross base salary. However, the minimum bonus payable for the year 2011 shall be an amount corresponding to not less than 50 per cent of the annual gross base salary. In addition to this, the CEO is entitled to a company car as well as housing, telephone and lunch benefi ts.
Marcel Kokkeel Chief Executive Offi cer (as of 24 March 2011) M.A. (Notary Law) Dutch citizen, born 1958 CMC member since 2011 Citycon shares: - Citycon stock options 2011: 1,000,000
Citycon stock options 2011: 300,000
Senior Vice President, Group Leasing and Baltic Operations M.Sc. (Surveying), Authorised Property Appraiser Finnish citizen, born 1956 CMC member since 2005 Citycon shares: 12,494 Citycon stock options 2011: 300,000
Eero Sihvonen Executive Vice President and Chief Financial Offi cer M.Sc. (Econ.) Finnish citizen, born 1957 CMC member since 2005 Citycon shares: 28,050 Citycon stock options 2011: 750,000
Vice President, Swedish Operations (as of 21 Nov. 2011) M.Phil., B.Sc. Swedish citizen, born 1973 CMC member since 2011 Citycon shares: - Citycon stock options 2011: 300,000
Johan Elfstadius
Related to the company's stock option plan 2011, the CEO has been granted 1,000,000 stock options 2011A– D(I). Other CMC members have been granted 1,250,000 stock options 2011A–D(I), 300,000 stock options 2011A–D(II) and 600,000 stock options 2011A–D(III). In total, the CEO and other members of the Corporate Management Committ ee have 3,150,000 stock options, entitling them to subscribe for an equal number of shares during the years 2012–2018.
Petri Olkinuora served as Citycon Oyj's CEO since
2002 and he left his position following the AGM of 2011 on 23 March. In line with Mr Olkinuora's service contract, he was paid a lump-sum cash compensation equalling his 18-month salary in addition to his regular salary for the notice period, as well as a gratitude bonus equalling his 6-month salary. In July 2011, Mr Olkinuora was issued 30,951 incentive shares related to the company's longterm share-based incentive plan, earned according to the plan but not yet distributed at the end of the contractual relationship. The company has taken out pension insur-
REMUNERATION OF THE CEO AND OTHER CORPORATE MANAGEMENT
| COMMITTEE MEMBERS 1 JAN.–31 DEC. 2011 | Performance | ||||
|---|---|---|---|---|---|
| Annual salary Fringe benefi ts | bonus for year 2010 |
Share-based income ⁽¹ |
Total | ||
| Marcel Kokkeel (CEO as of 24 March 2011) | 416,876.05 | 32,090.67 | - | - | 448,966.72 |
| Petri Olkinuora (CEO until 23 March 2011) ⁽² | 66,697.40 | 3,766.12 | - | - | 70,463.52 |
| Other CMC members ⁽² | 981,106.11 | 48,790.88 | 79,900.00 | 114,456.23 1,224,253.22 | |
| Total | 1,464,679.56 | 84,647.67 | 79,900.00 | 114,456.23 1,743,683.46 |
1) Share-based income refers to the cash component related to the company's long-term share-based incentive plan, paid in order to cover the taxes payable on the incentive shares granted to the plan's participants. A participant can also choose to receive shares instead of the cash component meant for paying the income tax.
2) The fi gures do not include severance pays paid due to termination of employment to CEO Olkinuora and those CMC members whose service contract with the company ended during 2011.
Michael Schönach Executive Vice President, Finnish Operations (as of 1 March 2011) B.Sc. (Finance), MBA Austrian citizen, born 1975 CMC member since 2011 Citycon shares: - Citycon stock options 2011: 500,000
ance to cover Mr Olkinuora's pension plan. Since 2010, this insurance has not incurred and will not incur any additional costs for the company. Due to the termination of CEO Olkinuora's service contract, the company has recognised non-recurring personnel expenses of EUR 0.0 million in 2011 (EUR 1.2 million in 2010).
The salaries, fringe benefi ts and performance bonuses paid to the former and current CEO and other CMC members in 2011 are presented in the enclosed table. Under the share-based incentive plan, the CMC members were issued a total of 25,870 shares for the earning periods 2008–2010.
The company complies with the Guidelines for Insiders issued by the Helsinki Stock Exchange. In addition to this, the company has in place its own Insider Guidelines covering insiders' obligations, disclosure requirements and insider registers, as well as the company's insider administration procedures.
The company's statutory insiders include Board members, the CEO and the chief auditor. Statutory insiders also comprise CMC members, whom the Board of Directors has defi ned as other senior executives 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. Up-to-date information on shareholdings and any changes therein can be found on the corporate website at www.citycon.com/insiders.
In addition to statutory insiders, Citycon also has socalled permanent insiders entered in the company's company-specifi c insider register on the basis of 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 Board members, CEO and CMC members, and those in charge of corporate fi nances and fi nancial reporting, fi nancing, legal aff airs, investment and redevelopment activities, corporate communications, investor relations, IT functions, as well as internal and external audit. The company-specifi c insider register is unavailable for public review. Project-specifi c insider registers are set up and maintained as necessary.
Citycon verifi es the data on its statutory insiders twice a year, by requesting that insiders check the accuracy of the information contained in extracts from the insider register.
According to Citycon's Insider Guidelines, the company's statutory and permanent insiders may not trade in Citycon shares or securities entitling to Citycon shares, for 21 days prior to the release of the company's annual fi nancial statements or interim reports. Insiders are also required to request the opinion of the company's Compliance Offi cer on the legality and compliance 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 internal control and risk management are established in the Corporate Governance Guidelines. Internal audits are conducted to evaluate the effi ciency of internal control and risk management.
Citycon's internal control includes fi nancial and other control. Internal control is carried out not only by the Board of Directors, the CEO and the CMC but also by the rest of the personnel. Citycon uses the internationally known COSO framework as the framework for its internal control.
Internal control is intended to ensure the achievement of any goals and objectives set, the economical and effi cient use of available resources, suffi cient management of risks associated with business, and safeguarding of the company's operations, information and assets. Internal control of financial reporting is intended to guarantee the reliability and accuracy of financial and other management information. The purpose of internal control is also to ensure that the company complies with Finnish law, agreed internal procedures and guidelines and that the company has suffi cient and appropriate data systems and work processes to support its operations.
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 regarding 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 other CMC members are responsible for ensuring compliance with currently valid laws and regulations in the Group's day-to-day business operations, as well as compliance with the company's business principles and decisions of the Board of Directors.
The company has appropriate and reliable accounting and other data systems in place, for monitoring business activities and supervising fi nancial management. The attainment of set targets is monitored by using a planning and reporting system adopted throughout the Group. This system is used to monitor both actual performance and forecasts. The system also serves as a budgeting tool.
Risk management forms part of the company's internal control, its purpose being to ensure that the company meets its business targets. The Board of Directors has approved Citycon's Risk Management Policy, which specifi es the principles of risk management and the risk management process. The risk management process includes the recognition, assessment, measurement, limitation and monitoring of risks arising from or closely associated with the company's business operations. The guidelines also defi ne the monitoring of such a process and the risk management organisation.
Citycon's risk management process is constantly evaluated and developed. The risk management process is carried out annually, and in connection with this process the company's risk map and annual action plan are updated to correspond with the targets of the annual plan, and they are presented to the Board of Directors at the budget meeting in December. The risk map is also updated as part of the strategy process.
The arrangement of Citycon's financial risk management is documented in the company's Treasury Policy and key financial risks are reported on a quarterly basis to the Board of Directors' Audit Committ ee. Furthermore, the Board of Directors regularly monitors risks and uncertainties associated with the company's business operations and gives an assessment on them in the Report by the Board of Directors and in interim reports.
A more thorough presentation on the risk management process and risks associated with the company's business operations can be found on pages 73-74 of this Report, on pages 40-42 of the appended Financial Statements, as well as on the corporate website at www.citycon.com/ riskmanagement.
The purpose of internal audit is to independently and systematically evaluate and improve the company's internal control and risk management. For internal audit purposes, the Audit Committ ee approves an annual audit plan, which forms the basis for the performance of the audit. Internal audit operations are governed by the Internal Audit Charter. Persons responsible for internal audit report the internal audit results to the CEO and the Audit Committee, who must initiate any actions required by the audit fi ndings without delay. The audit conducted by Citycon's auditor also involves auditing the company's corporate governance, on which the auditor reports to the Board of Directors and the CEO.
Citycon's internal audit was in a transition phase in 2011, due to the discontinuation of the company's longterm co-operation with KPMG Oy Ab over internal audit. Internal audit has been subsequently pursued on a project basis, with the assistance of PricewaterhouseCoopers Oy and in-house resources, with a special focus on the Liljeholmstorget Galleria development project completed in Stockholm, Sweden.
For the audit of Citycon's administration and accounts, the general meeting of shareholders 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 give a true and fair view of the Group's fi nancial position, its net profi t and cash fl ows, and that 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 parent company's net profi t and fi nancial position for each fi nancial year.
Citycon's chief auditor att ends the Audit Committ ee's annual financial statements meeting, in order to report on audit findings. The auditor also att ends all other Audit Committ ee meetings based on a decision taken by the Audit Committ ee.
The AGM 2011 re-elected Ernst & Young Oy (a firm of authorised public accountants) the company's auditor, with Tuija Korpelainen (Authorised Public Accountant) acting as the chief auditor appointed by the firm. Ernst & Young Oy has served as the company's auditor since 2006. Tuija Korpelainen has functioned as Citycon's chief auditor since the same year and, prior to that, as the other of the company's two auditors in the financial year 2005.
In 2011, Citycon paid EUR 0.3 million in remuneration to its auditor related to its general audit. In addition, Citycon purchased advisory services related to IFRS, property transactions and taxation for a total of EUR 0.7 million.
The guiding principle of Citycon's communications with the market is to continuously provide accurate, consistent, open and up-to-date information on the company, adhering to the principles of impartiality and simultaneousness. Citycon's communications principles are defi ned in the Disclosure Policy approved by the Board of Directors, which also defi nes the objectives, practices and persons responsible for communications. The essential parts of the Disclosure Policy are available on the corporate website in the Corporate Governance section.
For risk management purposes, Citycon has a holistic Enterprise Risk Management (ERM) programme. The aim of risk management is to ensure that the company meets its business targets. Successful risk management identifi es key risks, reliably analyses their impacts prior to their realisation, and initiates preventive measures in order to lower the probability of an identifi ed risk being realised and to mitigate its impact.
At Citycon, risk management objectives and the company's risk appetite are taken into consideration in the ERM programme. The ERM is designed to generate up-todate and consistent information for the company's senior executives and Board of Directors, on any risks aff ecting business objectives and their estimated impact.
The risk analysis concerning 2012, carried out in connection with annual planning, also covered key sustainability risks aff ecting Citycon's business. Major risks which, if realised, could jeopardise the achievement of Citycon's business targets for 2012, are described below. Risk management is also discussed on pages 40-42 of Citycon's fi nancial statements.
The eff ects of the fi nancial crisis on rent levels for retail premises and on occupancy rates have so far been muted in Citycon's operating areas, but market conditions have become more challenging compared to the pre-crisis situation. Yet, at the same time, rental levels and occupancy rates in prime properties have actually risen. Economic developments, particularly trends impacting on consumer confi dence and consumer behaviour, are aff ecting demand for retail premises. In local property markets, factors determining the performance of properties include availability of alternative retail premises, competition for tenants, zoning decisions, signifi cant new construction activities, and market demand for premises. Citycon actively follows developments in the economy, markets and rental levels, in order to be able to take the necessary action. Typically, in conditions of weak economic growth, rental levels for retail premises will fall and vacancy rates will rise as the slowdown in retail sales reduces demand for retail premises.
Besides other contributing factors, the long period of growth in the retail industry has kept the vacancy rate in Citycon's properties very reasonable over the last few years. The weighted average occupancy rate in Citycon's properties was approximately 95.5 per cent at the end of 2011 (95.1 per cent at the end of 2010), with the occupancy rate in Finland being 94.1 per cent, 97.0 per cent in Sweden and 100.0 per cent in the Baltic countries. Occupancy rates for properties located outside population growth centres, and for supermarket and shop properties, are more susceptible to fl uctuations, whereas occupancy rates for shopping centres located in major cities tend to be fairly stable.
The average rent per square metre in Citycon's properties rose in 2011, despite growing economic uncertainty. The average rent per square metre in Citycon's properties was approximately EUR 19.7 at the end of 2011 (EUR 18.7 at the end of 2010) and totalled approximately EUR 21.0/sq.m. in Finland, EUR 17.2/sq.m. in Sweden and EUR 20.2/sq.m. in the Baltic countries. Factors contributing to the increase in average rent per square metre included exchange rate fl uctuations, completion of development projects and index increases in rents.
Key risks in an environment characterised by slow economic growth are associated with demand for retail premises, vacancy rates and market rent levels. There is no way of guaranteeing that Citycon can meet its objective of higher occupancy rate or at least to maintain the present high occupancy rate and maintain current rent level in its properties. Furthermore, Citycon has several (re)development projects in progress, which means more leasable premises will be available in Citycon's shopping centres next year. Renting these new retail premises as planned is of primary importance to Citycon's ability to meet its business targets. A prolonged period of economic uncertainty may reduce demand for retail premises, weaken tenants' ability to pay rent, limit the possibility to raise rents and raise the vacancy rate in the company's properties.
The refurbishment and redevelopment of retail properties, and generating higher rental income through acquisitions, represent the core of Citycon's growth strategy. Implementation of this strategy requires both equity and debt fi nancing, which means that the risks associated with the availability and cost of fi nancing are of funda-
| Yield requirement | +5% | Ä Fair value EUR 2,395.2 million | |
|---|---|---|---|
| Market rent | +5% | Ä Fair value EUR 2,688.9 million | |
| Vacancy rate | +200 bps Ä Fair value EUR 2,431.1 million | ||
| Operating expenses +5% | Ä Fair value EUR 2,459.3 million | ||
mental importance to Citycon. Following the fi nancial crisis, the banks' loan margins took a sharp upward turn in 2008 and 2009. Banks' appetite to lend money to companies improved in 2010 and in early 2011. In the second half of 2011, the availability of fi nancing declined again and loan margins climbed, which means loan margins have remained high in comparison with the pre-crisis period.
The average interest rate for Citycon's interest-bearing debt has been declining since 2008, despite the rise in loan margins. The average interest rate for 2008 was 4.85 per cent, from which it had fallen to 4.03 per cent for 2011. This decline can be largely att ributed to the marked decrease in market interest rates, which has so far more than compensated for the increase in loan margins.
In the future, tightening regulation governing the banking and insurance sectors (Basel III and Solvency II regulations) is likely to push the costs of debt fi nancing upwards and to limit the availability of long-term bank loans. This will probably raise the cost of Citycon's new bank loans. In 2012 the company does not have major refi nancing needs, whereas the majority of the loan agreements Citycon signed at low margins before the fi nancial crisis will mature by 2014, aft er which the margins applicable to refi nancing will rise. The rise in loan margins is likely to push Citycon's average interest rate up in the future, even if market interest rates remained largely unchanged.
Citycon's current fi nancial position is good and well proportioned to its business. On 31 December 2011, the company's undrawn committ ed credit facilities and cash and cash equivalents amounted to EUR 345.0 million, enabling Citycon to fi nance its ongoing projects in full as planned. If necessary, Citycon's existing fi nancing sources can cover all loans maturing in 2012. However, Citycon's growth strategy will increase the need for additional fi nancing, the availability of which has been hampered by the fi nancial crisis. The sovereign debt issues surfacing in a number of European countries caused stock prices to plummet, which in turn aff ected property company share prices and made equity fi nancing in these companies less att ractive. Meanwhile, weak availability of bank fi nancing is prompting Citycon to seek an increasingly large proportion of its fi nancing from the bond markets. For this reason, Citycon will consider seeking an external credit rating. In addition, Citycon will take steps to continue divesting its non-core properties, and will consider other property fi nancing sources in order to secure the fi nancing required to pursue its growth strategy.
Economic conditions creating major uncertainty about development in the fair value of investment properties
Several factors aff ect the fair value of the investment properties owned by Citycon, such as general and local economic development, interest rate level, foreseeable infl ation, the market rent trend, vacancy rates, property investors' yield requirements and the competitive environment. At the moment, the fair value development of investment properties is characterised by a great deal of uncertainty caused by the sovereign debt crisis and the resulting challenging economic conditions. This uncertainty is most strongly felt in retail properties located outside major cities, or in otherwise less att ractive properties.
Since the inception of the fi nancial crisis, fair values of retail properties have been declining, and in 2008 and 2009 Citycon recognised fair value losses on investment properties. However, in 2010 Citycon recognised fair value gains on its investment properties. In 2011 Citycon again recognised fair value losses of EUR 35.3 million, mainly from its supermarket and shop properties. Yet, at the same time, the fair value of all shopping centres rose in 2011 by a total of EUR 7.3 million.
While changes in investment properties' fair value have an eff ect on the company's profi t for the fi nancial year, they have no immediate impact on cash fl ow. Key variables in the ten-year cash fl ow analysis used to assess the fair value of investment properties are property investors' yield requirements, rental income, vacancy rate and operating expenses. Sensitivity to change in the investment properties' fair value, or the risk associated with fair value, can be tested by altering these key variables one at a time. The sensitivity analysis above uses the investment properties' fair value of EUR 2,515.0 million, as defi ned by the external appraiser on 31 December 2011, as the starting value.
While the company cannot infl uence yield requirement, it strives to impact on other fair value variables through active shopping-centre management, which is one of the cornerstones of Citycon's business. By using its own employees to execute the entire business process, Citycon aims to optimise the profi tability of shopping centres.
Energy costs account for a considerable portion of property maintenance costs. The risk of energy price hikes contributed to more effi cient planning and to actions geared towards energy savings and greater energy effi ciency. These actions involve a risk of miscalculating the savings potential and of mistimed impacts. If these risks materialise, some savings will not be achieved, which will aff ect maintenance costs and profi tability.
For Citycon, 2011 was a year of solid performance, regardless of adverse market developments: our net rental income
Last year, the fi nancial markets were challenging resulting
per-share subscription price of EUR 3.02 was higher than the
fi nd the information they need more easily. It is a matt er of honour for Citycon to report as useful information as possible to investors and all stakeholders. We aim to listen to feedback from our readers and make every eff ort to respond without delay. Our reporting is based on our desire to continuously provide accurate, consistent, transparent and up-todate information on the company, in order to give an open and clear picture of it to the markets and stakeholders. This is the
porting standards (GRI CRESS) for our industry. In 2012, we will focus on improving our IT systems to bett er support our
Report in 2011 was the fi rst Q3 report to be published in Finland.
Eero Sihvonen Executive Vice President, CFO
Rental income from Citycon's retail properties represent the majority of the company's turnover. In 2011, gross rental income accounted for 94.9 per cent of turnover. The company's turnover grew by 10.8 per cent to EUR 217.1 million (2010: EUR 195.9 million).
During the year, Finland's share of total rental income decreased from 68.2 to 62.7 per cent. The decline in Finland's relative share of total income can be att ributed to the shopping centre acquisitions in Estonia and in Sweden. Citycon aims to further decrease Finland's relative share of rental income. Redevelopment projects completed during the year and in the previous year, such as Espoontori, Forum in Jyväskylä and Åkersberga Centrum, generated additional rental income while the divestment of non-core properties in Finland and Sweden decreased it. Net rental income totalled EUR 144.3 million (EUR 127.2 million).
Net rental income for like-for-like properties, in other words properties owned by Citycon throughout the comparison period (two years) and undergoing no redevelopment or extension projects, grew by EUR 4.0 million or 3.8 per cent. This growth can be att ributed to the clearly higher net rental income for Liljeholmstorget Galleria and other shopping centres, as well as lower vacancy rates. In Finland, net rental income development was negative, largely due to two largely vacant supermarket properties, one in the Helsinki region and one in Pori. Like-forlike shopping centre properties showed positive development, with net rental income growing by 7.3 per cent.
The net rental yield of Citycon's property portfolio stood at 6.0 per cent (5.8%).
Operating profi t for the fi nancial year was EUR 81.8 million (EUR 157.7 million). The decrease in operating profi t was mainly due to the negative change in fair value, lower gains on sale than a year earlier, and higher administrative costs. At the same time, however, higher net rental income increased the operating profit. Credit losses remained modest at EUR 0.8 million. A total of EUR 2.4 million worth of temporary rental rebates were granted during the year, almost exclusively in the Baltic countries.
The company's EPRA Earnings was EUR 53.3 million (EUR 47.3 million). Growth in EPRA Earnings was mainly due to higher net rental income. At the same time, however, higher administrative and fi nancial expenses eroded EPRA Earnings. Financial expenses were higher in 2011 than a year earlier due to a larger amount of interest-bearing debt.
Administrative expenses totalled EUR 28.0 million (EUR 23.3 million). The growth in expenses was mainly due to reorganisation costs of EUR 0.9 million, lower capitalisation of the costs of personnel involved in (re)development projects (EUR 0.8 million), non-cash stock option costs (EUR 1.5 million), and a higher headcount. In 2010, more expenses were capitalised as projects that had been planned for several years were started.
At the year-end, Citycon owned 80 properties: 36 shopping centres, 43 other retail properties and one lot. The fair value of the property portfolio was EUR 2,522.1 million. Fair value losses recognised during the year amounted to EUR -35.3 million.
The company's fi nancial position is good. Balance sheet total at the year-end stood at EUR 2,677.7 million (EUR 2,436.5 million). Interest-bearing debt totalled EUR 1,547.9 million (EUR 1,397.7 million). Citycon's total available liquidity was EUR 345.0 million, of which EUR 253.7 million consisted of undrawn, committ ed long-term credit facilities and EUR 91.3 million of cash and cash equivalents. Available liquidity is suffi cient to cover all loans maturing in 2012 (EUR 208.4 million).
The year-to-date weighted average interest rate was 4.03 per cent (4.04%). Citycon's equity ratio was 36.0 per cent (37.1%) and gearing 151.4 per cent (153.1%). Net fi nancial expenses totalled EUR 62.4 million (EUR 54.9 million). This increase was mainly att ributable to increased interest expenses as a result of lower capitalisation of interest expenses and a higher amount of interest-bearing debt.
To strengthen its balance sheet and liquidity, Citycon arranged a directed share issue in July involving the issue of 33 million new shares and raising some EUR 99 million in equity. The shares were off ered to Finnish and international institutional investors, in deviation from the shareholders' pre-emptive rights, through an accelerated book-building process on 13 July 2011. Following the share issue, Ilmarinen raised its holdings in Citycon to almost nine per cent. The net proceeds of the share issue were used to repay the company's interestbearing loans, to strengthen its capital base and to fi nance redevelopment projects and shopping centre acquisitions in accordance with its investment strategy.
3,0
COVENANT DEVELOPMENT, INTEREST COVERAGE RATIO & EQUITY RATIO
ICR (x) Equity ratio (%)
In May, Citycon signed a EUR 330 million long-term unsecured credit facility agreement with a Nordic bank group. The facility consists of a bullet term loan of EUR 220 million and a EUR 110 million revolving credit facility. The loan period is fi ve years. In addition, Citycon strengthened its available liquidity in August by signing a seven-year unsecured term loan facility of EUR 75 million .
The proceeds from the credit facility will be used to fi nance strategic investments, such as shopping centre redevelopment projects, and to refi nance maturing loans.
Almost all of Citycon's interest-bearing loans are unsecured. Consequently, the properties owned by the company are not, as a rule, given as security for the loans. Instead of a real security, Citycon's syndicated loans involve a commitment, or covenant, to maintain the Group's equity ratio above 32.5 per cent and the interest coverage ratio at a minimum of 1.8x. The equity ratio defi ned in the covenants diff ers from the standard presentation of equity ratio. The calculation methods for both covenants are shown on page 45 of the Financial Statements.
In terms of its equity ratio and the interest coverage ratio, Citycon has always, including in 2011, exceeded the levels required by the covenants. The company publishes loan covenant calculations in quarterly investor presentations.
100
for the fi rst time in the company's history
OPERATIONAL KEY INDICATORS
| Fair value of investment properties, EUR million *⁾ |
Share of total portfolio, % |
Number of properties |
|---|---|---|
| over 100 | 55% | 8 |
| 80-100 | 6% | 2 |
| 60-80 | 8% | 3 |
| 40-60 | 8% | 4 |
| 20-40 | 10% | 9 |
| 10-20 | 7% | 13 |
| 5-10 | 4% | 12 |
| 0-5 | 2% | 27 |
The fair market values of Citycon's properties and external appraiser estimates used in the valuations are presented on this page. During the year, the fair market value of Citycon's properties increased by EUR 154.4 million to EUR 2,522.1 million mostly due to property acquisitions and investments committ ed to redevelopment projects. The polarisation of property markets into prime and non-prime assets continued during the year following which Citycon recorded fair value losses of EUR 35.3 million mainly due to Supermarkets and Shops. Again, fair value gains of EUR 7.3 million were recorded in Shopping Centres.
| FAIR VALUE OF INVESTMENT PROPERTIES, 31 DEC. 2011 | Average market | Average operating | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total portfolio *⁾ | Number of properties |
Fair value, EUR million 31 Dec. 2011 |
31 Dec. 2010 | Gains | Fair value change, year 2011, EUR million Losses |
Total | 31 Dec. 2011 | Average yield requirement, % 31 Dec. 2010 |
rent, EUR, sq.m./ month 31 Dec. 2011 |
expences EUR/ sq.m./month 31 Dec. 2011 |
Average initial yield, (%) 31 Dec. 2011 |
Average reversio- nary yield, (%) 31 Dec. 2011 |
| Finland | ||||||||||||
| Shopping centres | 23 | 1,340.1 | 1,293.6 | 27.7 | -30.7 | -3.0 | 6.0 | 6.1 | 26.0 | 6.5 | 5.8 | 6.4 |
| Other retail properties | 37 | 207.3 | 239.4 | 0.0 | -37.3 | -37.3 | 7.9 | 7.8 | 14.2 | 3.9 | 7.2 | 9.3 |
| Finland, total | 60 | 1,547.4 | 1,533.0 | 27.7 | -68.1 | -40.4 | 6.3 | 6.4 | 24.4 | 6.1 | 6.0 | 6.8 |
| Sweden | ||||||||||||
| Shopping centres | 9 | 662.6 | 619.1 | 8.7 | -1.8 | 6.9 | 5.9 | 6.0 | 24.1 | 7.3 | 5.4 | 6.5 |
| 8.2 | ||||||||||||
| 6.6 | ||||||||||||
| 8.4 | ||||||||||||
| Total portfolio | 78 | 2,522.1 | 2,367.7 | 39.8 | -75.1 | -35.3 | 6.4 | 6.4 | 23.8 | 6.1 | 6.1 | 6.9 |
| Other retail properties Sweden, total Baltic Countries Shopping centres |
5 14 4 |
34.5 697.1 277.6 |
49.5 668.6 166.1 |
0.0 8.7 3.4 |
-5.2 -7.0 0.0 |
-5.2 1.7 3.4 |
7.2 5.9 8.0 |
7.4 6.1 8.1 |
13.6 23.6 20.8 |
4.3 7.2 3.6 |
6.5 5.5 8.2 |
*) does not include properties held for sale
| FAIR VALUE OF LIKE-FOR-LIKE PROPERTIES, 31 DEC. 2011 | Average market | Average operating | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Like-for-like portfolio | Number of properties |
31 Dec. 2011 | Fair value, EUR million 31 Dec. 2010 |
Gains | Fair value change, year 2011, EUR million Losses |
Total | 31 Dec. 2011 | Average yield requirement, % 31 Dec. 2010 |
rent, EUR, sq.m./ month 31 Dec. 2011 |
expences EUR/ sq.m./month 31 Dec. 2011 |
Average initial yield, (%) 31 Dec. 2011 |
Average reversio nary yield, (%) 31 Dec. 2011 |
| Finland | ||||||||||||
| Shopping centres | 17 | 871.7 | 868.4 | 19.8 | -27.5 | -7.7 | 6.0 | 6.1 | 26.1 | 6.8 | 5.8 | 6.6 |
| Other retail properties | 35 | 197.0 | 227.2 | 0.0 | -34.5 | -34.5 | 7.9 | 7.8 | 14.1 | 3.9 | 7.2 | 9.3 |
| Finland, total | 52 | 1,068.7 | 1,095.7 | 19.8 | -61.9 | -42.2 | 6.4 | 6.5 | 23.9 | 6.2 | 6.1 | 7.1 |
| Sweden | ||||||||||||
| Shopping centres | 6 | 537.2 | 531.7 | 7.2 | -1.6 | 5.7 | 5.7 | 5.9 | 24.8 | 7.5 | 5.4 | 6.3 |
| Other retail properties | 5 | 34.5 | 36.6 | 0.0 | -4.1 | -4.1 | 7.2 | 7.4 | 13.6 | 4.3 | 6.5 | 8.2 |
| Sweden, total | 11 | 571.6 | 568.3 | 7.2 | -5.7 | 1.6 | 5.8 | 6.0 | 24.2 | 7.3 | 5.4 | 6.4 |
| Baltic Countries | ||||||||||||
| Shopping centres | 2 | 156.9 | 154.0 | 2.9 | 0.0 | 2.9 | 8.0 | 8.0 | 20.2 | 2.6 | 8.0 | 8.0 |
| Like-for-like | ||||||||||||
| properties, total | 65 | 1,797.2 | 1,818.0 | 29.9 | -67.6 | -37.8 | 6.3 | 6.5 | 23.6 | 6.3 | 6.0 | 6.9 |
| SUMMARY OF PROPERTY PORTFOLIO, 31 DEC. 2011 Total portfolio |
Location | Citycon's GLA, sq.m. |
Number of lease agreements |
Fair value, EUR million 31 Dec. 2011 |
31 Dec. 2010 | Occupancy rate, % Economic, EUR 31 Dec. 2011 |
Technical, sq.m. 31 Dec. 2011 |
|---|---|---|---|---|---|---|---|
| Finland | |||||||
| Shopping centres, Helsinki Metropolitan Area | |||||||
| Columbus | Helsinki | 20,900 | 74 | 80.8 | 76.7 | 99.6 | 98.4 |
| Espoontori | Espoo | 17,100 | 46 | 48.6 | 47.7 | 85.7 | 83.3 |
| Heikintori | Espoo | 6,300 | 38 | 7.3 | 8.5 | 89.8 | 76.0 |
| Isomyyri | Vantaa | 10,800 | 17 | 13.2 | 16.6 | 94.3 | 87.5 |
| Iso Omena | Espoo | 60,600 | 192 | 339.5 | 322.4 | 99.8 | 99.7 |
| Lippulaiva | Espoo | 18,500 | 49 | 65.6 | 68.7 | 97.2 | 96.7 |
| Martinlaakso | Vantaa | 7,400 | 26 | 23.7 | 8.7 | 98.5 | 97.6 |
| Myllypuro | Helsinki | 6,600 | 22 | 19.4 | 12.6 | 90.1 | 89.5 |
| Myyrmanni | Vantaa | 39,700 | 114 | 156.2 | 150.1 | 94.7 | 92.3 |
| Tikkuri | Vantaa | 13,300 | 77 | 33.5 | 30.2 | 94.7 | 89.0 |
| Shopping centres, other areas in Finland | |||||||
| Duo | Tampere | 13,500 | 47 | 33.8 | 31.8 | 97.9 | 96.2 |
| IsoKarhu | Pori | 14,900 | 49 | 47.2 | 46.7 | 98.2 | 94.6 |
| IsoKristiina | Lappeenranta | 19,400 | 58 | 36.9 | 35.8 | 94.6 | 89.6 |
| Jyväskeskus | Jyväskylä | 5,800 | 61 | 13.7 | 14.4 | 93.0 | 92.1 |
| Forum | Jyväskylä | 16,500 | 77 | 76.7 | 74.0 | 99.4 | 97.8 |
| Koskikara | Valkeakoski | 5,800 | 36 | 4.4 | 5.3 | 96.9 | 96.3 |
| Koskikeskus | Tampere | 28,000 | 142 | 138.6 | 121.8 | 100.0 | 100.0 |
| Linjuri | Salo | 9,200 | 12 | 14.7 | 15.9 | 96.5 | 96.2 |
| Galleria | Oulu | 3,500 | 37 | 8.6 | 8.2 | 97.3 | 95.0 |
| Sampokeskus | Rovaniemi | 13,700 | 87 | 21.0 | 22.8 | 93.6 | 86.0 |
| Torikeskus | Seinäjoki | 11,500 | 60 | 10.3 | 11.7 | 83.4 | 79.3 |
| Trio | Lahti | 45,700 | 154 | 144.3 | 150.6 | 93.1 | 89.6 |
| Valtari | Kouvola | 7,600 | 19 | 2.0 | 4.6 | 76.5 | 80.1 |
| Shopping centres, Finland, total | 396,300 | 1,494 | 1,340.1 | 1,293.6 | 96.3 | 93.0 | |
| Other retail properties | 181,330 | 205 | 207.3 | 239.4 | 85.0 | 78.2 | |
| Finland, total | 577,630 | 1,699 | 1,547.4 | 1,533.0 | 94.1 | 88.4 | |
| Sweden | |||||||
| Shopping centres, Stockholm area and Umeå | |||||||
| Fruängen Centrum | Stockholm | 14,700 | 98 | 21.6 | 18.8 | 99.8 | 99.6 |
| Högdalen Centrum | Stockholm | 19,200 | 85 | 30.0 | - | 96.0 | 90.3 |
| Jakobsbergs Centrum | Järfälla | 56,300 | 487 | 106.3 | 108.5 | 97.9 | 97.1 |
| Liljeholmstorget | Stockholm | 40,900 | 156 | 241.5 | 239.6 | 98.1 | 99.0 |
| Strömpilen | Umeå | 26,800 | 39 | 48.0 | 47.1 | 98.6 | 98.0 |
| Tumba Centrum | Stockholm | 29,100 | 290 | 58.9 | 62.1 | 99.1 | 99.3 |
| Åkermyntan Centrum | Hässelby | 8,400 | 38 | 14.0 | 13.1 | 99.0 | 98.0 |
| Åkersberga Centrum | Österåker | 27,500 | 144 | 81.4 | 74.3 | 91.3 | 90.7 |
| Shopping centres, Gothenburg area | |||||||
| Stenungs Torg | Stenungsund | 36,400 | 311 | 60.9 | 55.5 | 98.4 | 97.4 |
| Shopping centres, Sweden, total | 259,300 | 1,648 | 662.6 | 619.1 | 97.4 | 96.8 | |
| Other retail properties, total | 44,400 | 170 | 34.5 | 49.5 | 92.6 | 89.6 | |
| Sweden, total | 303,700 | 1,818 | 697.1 | 668.6 | 97.0 | 95.7 | |
| Baltic Countries | |||||||
| Estonia | |||||||
| Kristiine | Tallinn | 42,700 | 182 | 105.9 | - | 100.0 | 100.0 |
| Magistral | Tallinn | 9,500 | - | 14.8 | 12.1 | - | - |
| Rocca al Mare | Tallinn | 53,300 | 196 | 147.0 | 144.4 | 100.0 | 100.0 |
| Lithuania | |||||||
| Mandarinas | Vilnius | 7,900 | 60 | 9.9 | 9.6 | 100.0 | 100.0 |
| Baltic Countries, total | 113,400 | 438 | 277.6 | 166.1 | 100.0 | 100.0 | |
| Total portfolio | 994,730 | 3,955 | 2,522.1 | 2,367.7 | 95.5 | 92.0 |
| Occupancy rate, % | |||||||
|---|---|---|---|---|---|---|---|
| Like-for-like portfolio | Citycon's GLA, sq.m. | Number of lease agreements |
31 Dec. 2011 | Fair value, EUR million 31 Dec. 2010 |
Economic, EUR 31 Dec. 2011 |
Technical, sq.m. 31.Dec.2010 |
|
| Finland | |||||||
| Shopping centres | 278,200 | 1,035 | 871.7 | 868.4 | 96.6 | 92.8 | |
| Other retail properties | 177,330 | 190 | 197.0 | 227.2 | 84.9 | 78.1 | |
| Finland, total | 455,530 | 1,225 | 1,068.7 | 1,095.7 | 93.5 | 87.1 | |
| Sweden | |||||||
| Shopping centres | 204,200 | 1,381 | 537.2 | 531.7 | 98.4 | 98.1 | |
| Other retail properties | 44,400 | 170 | 34.5 | 36.6 | 92.6 | 89.6 | |
| Sweden, total | 248,600 | 1,551 | 571.6 | 568.3 | 97.7 | 96.6 | |
| Baltic Countries | |||||||
| Shopping centres | 61,200 | 256 | 156.9 | 154.0 | 100.0 | 100.0 | |
| Like-for-like portfolio, total | 765,330 | 3,032 | 1,797.2 | 1,818.0 | 95.4 | 91.2 |
| Total portfolio | Average remaining length of lease agreements, years 31 Dec. 2011 |
Average rent, EUR/ sq.m/year 31 Dec. 2011 |
Gross rental income, EUR million Year 2011 |
Net rental income, EUR million Year 2011 |
|---|---|---|---|---|
| Finland | ||||
| Shopping centres | 3.5 | 289 | 104.1 | 75.2 |
| Other retail properties | 3.7 | 157 | 23.2 | 15.2 |
| Finland, total | 3.5 | 251 | 127.3 | 90.5 |
| Sweden | ||||
| Shopping centres | 2.9 | 216 | 51.8 | 32.2 |
| Other retail properties | 3.3 | 143 | 5.6 | 3.2 |
| Sweden, total | 2.9 | 206 | 57.4 | 35.4 |
| Baltic Countries, total | 4.2 | 242 | 21.2 | 18.4 |
| Total portfolio | 3.4 | 236 | 206.0 | 144.3 |
| Like-for-like portfolio | Average remaining length of lease agreements, years 31 Dec. 2011 |
Average rent, EUR/ sq.m/year 31 Dec. 2011 |
Gross rental in come, EUR million Year 2011 |
Net rental income, EUR million Year 2011 |
|---|---|---|---|---|
| Finland | ||||
| Shopping centres | 3.5 | 277 | 71.4 | 51.0 |
| Other retail properties | 3.7 | 155 | 22.5 | 14.9 |
| Finland, total | 3.5 | 234 | 93.9 | 65.9 |
| Sweden | ||||
| Shopping centres | 2.7 | 215 | 42.9 | 27.4 |
| Other retail properties | 3.3 | 143 | 5.6 | 3.2 |
| Sweden, total | 2.7 | 203 | 48.6 | 30.6 |
| Baltic Countries, total | 4.0 | 235 | 13.2 | 11.7 |
| Like-for-like portfolio, total | 3.3 | 223 | 155.7 | 108.2 |
| Average remaining length of lease agreements, years 31 Dec. 2011 |
Average rent, EUR/sq.m/ year 31 Dec. 2011 |
Gross rental income, EUR million Year 2011 |
Net rental income, EUR million Year 2011 |
Fair value, EUR million 31 Dec. 2011 |
Net rental yield, % Year 2011 |
Economic occupancy rate, % 31 Dec. 2011 |
|
|---|---|---|---|---|---|---|---|
| Iso Omena | 4.9 | 31.6 | 22.7 | 17.5 | 339.5 | 5.4 | 99.8 |
| Liljeholmstorget | 3.6 | 27.5 | 13.1 | 8.8 | 241.5 | 3.8 | 98.1 |
| Myyrmanni | 2.3 | 25.9 | 11.3 | 8.3 | 156.2 | 5.6 | 94.7 |
| Rocca al Mare | 4.0 | 20.6 | 12.1 | 10.7 | 147.0 | 7.6 | 100.0 |
| Trio | 1.9 | 23.8 | 10.9 | 8.1 | 144.3 | 5.6 | 93.1 |
| Five largest properties, total | 3.6 | 26.1 | 70.1 | 53.4 | 1,028.5 | 5.4 | 97.6 |
| Number of lease agreements |
Citycon's GLA, sq.m. |
Leased area, sq.m. |
Average rent, EUR/sq.m./ month |
|
|---|---|---|---|---|
| Status 1 Jan. 2011 | 3,765 | 942,280 | 832,693 | 18.7 |
| Leases started: | ||||
| New or extended leases | 699 | -1,400 | 153,924 | 19.1 |
| Leases started due to development | ||||
| projects | 83 | 11,900 | 23,082 | 23.7 |
| New leases, total | 782 | 10,500 | 177,006 | 19.7 |
| Acquisitions | 285 | 64,270 | 60,851 | 18.9 |
| Leases ended | ||||
| Expired leases | 643 | 100 | 153,255 | 19.1 |
| Leases terminated due to development | ||||
| projects | 88 | 16,311 | 16.7 | |
| Divestments | 146 | 22,220 | 16,554 | 10.8 |
| Leases ended, total | 877 | 22,320 | 186,120 | 18.1 |
| Status 31 Dec. 2011 | 3,955 | 994,730 | 884,430 | 19.7 |
| Number of lease agreements |
Citycon's GLA, sq.m. |
Leased area, sq.m. |
Average rent, EUR/sq.m./ month |
|
|---|---|---|---|---|
| Status 1 Jan. 2011 | 1,672 | 579,980 | 497,010 | 20.3 |
| Leases started: | ||||
| New or extended leases | 397 | -1,400 | 117,294 | 19.5 |
| Leases started due to development | ||||
| projects | 73 | 11,900 | 19,824 | 23.9 |
| New leases, total | 470 | 10,500 | 137,118 | 20.2 |
| Acquisitions | 34 | 2,370 | 1,560 | 12.3 |
| Leases ended | ||||
| Expired leases | 394 | 121,406 | 19.8 | |
| Leases terminated due to development | ||||
| projects | 31 | 6,917 | 22.7 | |
| Divestments | 52 | 15,220 | 10,112 | 11.3 |
| Leases ended, total | 477 | 15,220 | 138,435 | 19.4 |
| Status 31 Dec. 2011 | 1,699 | 577,630 | 497,253 | 21.0 |
| Number of lease agreements |
Citycon's GLA, sq.m. |
Leased area, sq.m. |
Average rent, EUR/sq.m./ month |
|
|---|---|---|---|---|
| Status 1 Jan. 2011 | 1,784 | 291,500 | 265,501 | 15.9 |
| Leases started: | ||||
| New or extended leases | 266 | 33,748 | 17.7 | |
| Leases started due to development | ||||
| projects | 10 | 3,258 | 22.5 | |
| New leases, total | 276 | 37,006 | 18.2 | |
| Acquisitions | 69 | 19,200 | 16,633 | 17.8 |
| Leases ended | ||||
| Expired leases | 217 | 29,374 | 15.8 | |
| Leases terminated due to development projects |
||||
| Divestments | 94 | 7,000 | 6,442 | 10.0 |
| Leases ended, total | 311 | 7,000 | 35,816 | 14.8 |
| Status 31 Dec. 2011 | 1,818 | 303,700 | 283,324 | 17.2 |
LEASING ACTIVITY, FINLAND
| Number of lease agreements |
Citycon's GLA, sq.m. |
Leased area, sq.m. |
Average rent, EUR/sq.m./ month |
|
|---|---|---|---|---|
| Status 1 Jan. 2011 | 309 | 70,800 | 70,182 | 17.8 |
| Leases started: | ||||
| New or extended leases | 36 | 2,882 | 18.8 | |
| Leases started due to development projects |
||||
| New leases, total | 36 | 2,882 | 18.8 | |
| Acquisitions | 182 | 42,700 | 42,658 | 19.6 |
| Leases ended | ||||
| Expired leases | 32 | 100 | 2,475 | 20.4 |
| Leases terminated due to development | ||||
| projects | 57 | 9,394 | 12.3 | |
| Divestments | ||||
| Leases ended, total | 89 | 100 | 11,869 | 14.0 |
| Status 31 Dec. 2011 | 438 | 113,400 | 103,853 | 20.2 |
| Finland | Sweden | Baltic Countries |
Total | |
|---|---|---|---|---|
| Number of leases started during the fi nancial year | 470 | 276 | 36 | 782 |
| Total area of leases started, sq.m. | 137,118 | 37,006 | 2,882 177,006 | |
| Occupancy rate at end of the fi nancial year (economic), % | 94.1 | 97.0 | 100.0 | 95.5 |
| Average remaining length of lease portfolio at the end of the fi nancial year, year |
3.5 | 2.9 | 4.2 | 3.4 |
| Finland | Sweden | Baltic Countries |
Total | |
|---|---|---|---|---|
| Citycon's Gross leasable area, sq.m. | 577,630 303,700 113,400 994,730 | |||
| Gross rental income, EUR million | 127.3 | 57.4 | 21.2 | 206.0 |
| Net rental income, EUR million | 90.5 | 35.4 | 18.4 | 144.3 |
| Net rental yield, % | 6.0 | 5.4 | 7.9 | 6.0 |
| Net rental yield, like-for-like properties, % | 6.2 | 5.5 | 7.8 | 6.1 |
| TOP FIVE TENANTS IN FINLAND |
|---|
| ----------------------------- |
| Proportion of rental income based on valid rent roll at 31 Dec. 2011, % |
Average remaining length of lease agreements, years |
|
|---|---|---|
| Kesko | 17.2 % | 4.5 |
| S Group | 5.6 % | 8.2 |
| ICA | 3.4 % | 4.4 |
| Stockmann | 3.1 % | 2.5 |
| Tokmanni | 1.7 % | 4.8 |
| Top 5, total | 31.1 % | 5.0 |
| Proportion of rental income based on valid rent roll at 31 Dec. 2011, % |
Average remaining length of lease agreements, years |
|
|---|---|---|
| Kesko | 28.6 % | 4.5 |
| S Group | 6.8 % | 7.6 |
| Stockmann | 3.6 % | 2.3 |
| Tokmanni | 2.8 % | 4.8 |
| Nordea | 1.9 % | 2.0 |
| Top 5, total | 43.6 % | 4.7 |
| Proportion of rental income based on valid rent roll at 31 Dec. 2011, % |
Average remaining length of lease agreements, years |
|
|---|---|---|
| ICA | 11.2 % | 4.5 |
| Coop | 4.0 % | 6.5 |
| Axfood | 3.9 % | 2.8 |
| Stockholms Läns Landsting | 2.9 % | 3.7 |
| Systembolaget | 2.7 % | 3.6 |
| Top 5, total | 24.6 % | 4.4 |
| Proportion of rental income based on valid rent roll at 31 Dec. 2011, % |
Average remaining length of lease agreements, years |
|
|---|---|---|
| S Group (Prisma) | 13.0 % | 9.5 |
| Kaubamaja Grupp | 3.8 % | 4.6 |
| Marks & Spencer | 3.3 % | 11.3 |
| Stockmann | 3.0 % | 2.5 |
| LPP Retail (fashion) | 2.9 % | 6.1 |
| Top 5, total | 26.0 % | 7.8 |
| 2011 | 2010 | |
|---|---|---|
| Gross rental income, EUR million | 127.3 | 122.1 |
| Turnover, EUR million | 132.5 | 126.5 |
| Net rental income, EUR million | 90.5 | 86.7 |
| Net fair value losses/gains on investment property, EUR million | -40.4 | 24.5 |
| Operating profi t, EUR million | 42.3 | 107.5 |
| Capital expenditure (gross), EUR million | 62.5 | 76.3 |
| Fair market value of investment properties, EUR million | 1,547.4 | 1,533.0 |
| Net rental yield, % | 6.0 | 6.0 |
| Net rental yield, like-for-like properties, % | 6.2 | 6.4 |
| 2011 | 2010 | |
|---|---|---|
| Gross rental income, EUR million | 57.4 | 49.8 |
| Turnover, EUR million | 60.1 | 52.8 |
| Net rental income, EUR million | 35.4 | 28.7 |
| Net fair value gains on investment property, EUR million | 1.7 | 22.8 |
| Operating profi t, EUR million | 32.4 | 46.7 |
| Capital expenditure (gross), EUR million | 45.5 | 50.6 |
| Fair market value of investment properties, EUR million | 697.1 | 668.6 |
| Net rental yield, % | 5.4 | 4.8 |
| Net rental yield, like-for-like properties, % | 5.5 | 4.9 |
| 2011 | 2010 | |
|---|---|---|
| Gross rental income, EUR million | 21.2 | 13.9 |
| Turnover, EUR million | 24.5 | 16.7 |
| Net rental income, EUR million | 18.4 | 11.8 |
| Net fair value gains on investment property, EUR million | 3.4 | 3.5 |
| Operating profi t, EUR million | 20.5 | 14.1 |
| Capital expenditure (gross), EUR million | 108.1 | 6.0 |
| Fair market value of investment properties, EUR million | 277.6 | 166.1 |
| Net rental yield, % | 7.9 | 7.5 |
| Net rental yield, like-for-like properties, % | 7.8 | 7.4 |
The average rent increased from EUR 18.7/sq.m. to EUR 19.7/sq.m. thanks to exchange rate changes, redevelopment projects, property acquisitions and divestments, as well as to index increments.
| Sales, EUR million Number of visitors, million |
|||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Property | Location | 2011 | 2010 ³⁾ | Change, % | 2011 | 2010 | Change, % | Catchment area population ⁴⁾ |
Gross leasable area total, sq.m. |
Retail premises total, sq.m. |
Citycon's Gross Leasable area, sq.m. |
| Finland | |||||||||||
| Helsinki Metropolitan Area | |||||||||||
| Columbus | Helsinki | 98.3 | 96.2 | 2% | 7.0 | 7.8 | -10% | 95,800 | 20,900 | 19,200 | 20,900 |
| Espoontori ¹⁾ | Espoo | 32.1 | 12.5 | 157% | 3.5 | 1.6 | n/a | 58,000 | 23,600 | 11,900 | 17,100 |
| Heikintori | Espoo | 19.5 | 19.8 | -1% | 1.9 | 1.9 | -2% | 138,700 | 9,500 | 7,000 | 6,300 |
| Isomyyri | Vantaa | 22.2 | 22.6 | -2% | 2.0 | 2.0 | -2% | 54,100 | 14,700 | 8,800 | 10,800 |
| Iso Omena | Espoo | 246.9 | 236.8 | 4% | 9.3 | 8.8 | 5% | 148,000 | 60,600 | 48,500 | 60,600 |
| Lippulaiva | Espoo | 91.5 | 90.4 | 1% | 4.0 | 4.2 | -4% | 45,300 | 18,500 | 16,400 | 18,500 |
| Martinlaakso Shopping Centre | Vantaa | n/a | n/a | n/a | n/a | n/a | n/a | 22,000 | 7,400 | 7,300 | 7,400 |
| Myllypuro Shopping Centre | Helsinki | 9.3 | n/a | n/a | n/a | n/a | n/a | 19,000 | 6,600 | 6,400 | 6,600 |
| Myyrmanni | Vantaa | 160.3 | 155.2 | 3% | 7.9 | 7.6 | 4% | 97,600 | 39,700 | 31,100 | 39,700 |
| Tikkuri ²⁾ | Vantaa | 31.2 | 30.8 | 1% | 3.0 | 3.1 | -3% | 133,700 | 15,100 | 8,000 | 10,500 |
| Other areas in Finland | |||||||||||
| Duo | Tampere | 54.2 | 52.4 | 3% | 4.1 | 4.0 | 3% | 38,500 | 15,200 | 11,900 | 13,500 |
| IsoKarhu | Pori | 35.7 | 35.2 | 2% | 3.4 | 3.3 | 3% | 111,000 | 14,900 | 12,500 | 14,900 |
| IsoKristiina | Lappeenranta | 47.7 | 48.7 | -2% | 2.7 | 2.1 | 33% | 58,000 | 19,800 | 14,100 | 19,400 |
| Jyväskeskus | Jyväskylä | 19.5 | 21.5 | -9% | 4.0 | 4.4 | -9% | 141,700 | 12,000 | 7,600 | 5,800 |
| Forum | Jyväskylä | 57.4 | 51.5 | 11% | 5.9 | 6.0 | -3% | 142,200 | 22,000 | 19,000 | 16,500 |
| Koskikara | Valkeakoski | 33.7 | 33.7 | 0% | 2.1 | 2.1 | 1% | 19,900 | 10,400 | 10,000 | 5,800 |
| Koskikeskus | Tampere | 116.5 | 115.5 | 1% | 5.8 | 5.8 | 1% | 342,000 | 30,700 | 25,100 | 28,000 |
| Linjuri | Salo | 36.4 | 35.7 | 2% | 2.9 | 3.0 | -5% | 40,200 | 10,500 | 8,100 | 9,200 |
| Galleria | Oulu | 7.7 | 6.8 | 14% | 1.0 | 0.9 | 6% | 188,300 | 3,500 | 2,600 | 3,500 |
| Sampokeskus | Rovaniemi | 17.1 | 17.1 | 0% | 2.1 | 2.3 | -10% | 53,900 | 13,700 | 7,800 | 13,700 |
| Torikeskus | Seinäjoki | 19.3 | 18.3 | 5% | 1.3 | 1.3 | 1% | 117,600 | 11,500 | 7,200 | 11,500 |
| Trio | Lahti | 78.9 | 77.3 | 2% | 6.7 | 6.4 | 4% | 123,900 | 48,900 | 34,600 | 45,700 |
| Valtari | Kouvola | 3.8 | 4.4 | -14% | 0.4 | 0.5 | -14% | 31,300 | 7,600 | 6,400 | 7,600 |
| Shopping centres, Finland, total | 1,239.0 | 1,182.2 | 5% | 80.8 | 79.0 | 2% | - | 437,300 | 331,500 | 393,500 | |
| Sweden | |||||||||||
| Stockholm area and Umeå | |||||||||||
| Fruängen Centrum | Stockholm | 29.7 | 29.1 | 2% | n/a | n/a | n/a | 60,700 | 14,700 | 6,600 | 14,700 |
| Högdalen Centrum | Stockholm | 41.6 | 40.2 | 4% | n/a | n/a | n/a | 45,600 | 19,200 | 16,000 | 19,200 |
| Jakobsbergs Centrum | Järfälla | 81.7 | 80.8 | 1% | 5.3 | 5.3 | -1% | 419,000 | 56,300 | 27,200 | 56,300 |
| Liljeholmstorget | Stockholm | 139.0 | 111.9 | 24% | 8.3 | 8.1 | 3% | 975,000 | 40,900 | 27,700 | 40,900 |
| Strömpilen | Umeå | 116.4 | 112.9 | 3% | 4.2 | 4.1 | 3% | 91,600 | 26,800 | 23,600 | 26,800 |
| Tumba Centrum | Stockholm | 58.2 | 57.2 | 2% | 3.7 | 3.6 | 3% | 198,200 | 29,100 | 13,700 | 29,100 |
| 6,500 | |||||||||||
| Åkermyntan Centrum | Hässelby | 28.9 | 28.5 | 1% | 1.6 | 1.6 | 1% | 34,500 | 8,400 | 8,400 | |
| Åkersberga Centrum | Österåker | 91.9 | 81.8 | 12% | 5.8 | 4.4 | 32% | 86,800 | 27,500 | 23,400 | 27,500 |
| Gothenburg area | |||||||||||
| Stenungs Torg | Stenungsund | 67.5 | 68.1 | -1% | 3.4 | 3.3 | 1% | 257,900 | 36,400 | 17,600 | 36,400 |
| Shopping centres, Sweden, total | 654.8 | 610.4 | 7% | 32.1 | 30.3 | 6% | - | 259,300 | 162,300 | 259,300 | |
| Baltic Countries | |||||||||||
| Estonia | |||||||||||
| Kristiine | Tallinn | 102.9 | 72.2 | 43% | 7.1 | 5.8 | 22% | 270,000 | 42,700 | 42,700 | 42,700 |
| Magistral | Tallinn | 10.4 | 14.1 | -27% | 2.0 | 3.1 | -36% | 64,000 | 9,500 | 9,400 | 9,500 |
| Rocca al Mare | Tallinn | 122.4 | 112.9 | 8% | 6.4 | 6.4 | 1% | 340,000 | 53,300 | 53,000 | 53,300 |
| Lithuania | |||||||||||
| Mandarinas | Vilnius | 18.8 | 17.1 | 10% | 2.4 | 2.3 | 4% | 50,000 | 7,900 | 7,900 | 7,900 |
| Baltic Countries, total | 254.5 | 216.3 | 18% | 18.0 | 17.6 | 2% | - | 113,400 | 113,000 | 113,400 | |
| Total portfolio | 2,148.3 | 2,008.8 | 7% | 131.0 | 126.9 | 3% | - | 810,000 | 606,800 | 766,200 |
1) Gross leasable area includes Espoon Asemakuja and Espoon Asematori
2) Gross leasable area excludes Asematie 3 and Kassatalo
3) Sales are reviewed and presented in 2011 exchange rate
4) Estimate: in Finland based mainly on interview studies, in Sweden and Estonia based on drive time estimates (5-15 minutes).
| Sales, EUR million | Number of visitors, million | Gross leasable area | Retail premises total, | Citycon's Gross | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Property | Location | 2011 | 2010 | Change, % | 2011 | 2010 | Change, % | Catchment area population *⁾ |
total, sq.m. sq.m. |
Leasable area, sq.m. | |
| Finland | |||||||||||
| Kämp Galleria | Helsinki | 41.8 | 48.7 | -14% | n/a | n/a | n/a | 130,000 | 11,700 | 9,000 | - |
| Tullintori | Tampere | 16.3 | 15.8 | 3% | 2.4 | 2.3 | 3% | 133,000 | 23,400 | 9,000 | - |
*) Estimate
| Property | Location, Country |
Market value, MEUR (31 Dec. 2011) |
Area before the project, sq.m. ²⁾ |
Post-deve lopment area, sq.m. |
Estimated to tal investment, MEUR ³⁾ |
Actual cumula tive CAPEX by the end of the period, MEUR |
Occupancy rate, % |
Expected yield on completion when stabili |
zed, % ⁴⁾ Additional information |
|---|---|---|---|---|---|---|---|---|---|
| Åkersberga Centrum |
Österåker, Sweden |
81.4 | 20,000 | 27,500 | 52.4 ⁶⁾ | 51.6 | 94 | 7.3 Refurbishment and extension of an existing shopping centre in the Greater Stock holm area, northeast of Stockholm. Very good public transportation. The shopping centre was built in 1985 and refurbished/extended in 1995/1996. Minority owner (25%) local real estate company owned by the municipality. Anchor tenants: ICA, H&M, Mq, library, Systembolaget |
|
| Espoontori | Espoo, Finland | 48.6 | 16,500 | 17,100 | 25.8 ⁵⁾ | 21.7 | 85.7 | 6.4 In 2010, Citycon refurbished thoroughly approx. 10 400 sq. m. of retail premises and parking facility. Shopping centre is located in Espoo's administrative centre, next to the vivid railway station. It´s located in the heart of a growing residential and business area. New apartments are being built in its immediate vicinity. Anchor ten ants: K-supermarket, Tarjoustalo, R-kioski, Hesburger, Ravintola Britannia, Nordea, Sampo Bank, Aktia |
|
| Martinlaakso | Vantaa, Finland | 23.7 | 3,800 | 7,400 | 22.9 | 22.9 | 98.0 | 7.4 Building of a new shopping centre replacing the old retail centre next to the Martin laakso railway station and bus terminal. Apartments have been built in connection to the shopping centre, which Citycon has sold. Anchor tenants: S-market, Lidl, Sampo Bank, HOK-restaurants |
|
| Forum | Jyväskylä, Suomi |
76.7 | 17,500 | 16,500 | 16.0 | 15.7 | 100 | 11.2 A year long redevelopment of shopping centre's interior premises (12 000 sq. m.). Accessibility was enhanced by modernised lift s, which now operate between all four fl oors of the shopping centre and the renewed parking hall. Forum´s commercial concept was refreshed and tenant mix was diversifi ed, especially Forum´s fashion and restaurant supply was strengthened. Anchor tenants: Antt ila, Aleksi 13, Vero Moda/Jack&Jones, Gina Tricot, Benett on, K-supermarket, Tiimari |
|
| Hansa (Trio) | Lahti, Finland | 144.3 ⁷⁾ | 11,000 | 11,000 | 8.0 | 6.3 | 71 | 7.2 The refurbishment of Hansa property located next to Trio. The goal was to connect the property bett er and more commercially to Trio. Anchor tenants: Tokmanni (Rob inhood), Manhatt an Steakhouse |
|
| Myyrmanni | Vantaa, Finland | 156.2 | 8,400 | 8,400 | 6.5 ⁸⁾ | 6.5 | 100 | -- New fashion world on the second fl oor has been built. Antt ila moved to smaller premis es and the freed space have been refurbished. At the same time tenant improvement works have been conducted on the ground fl oor. Anchor tenants in renewed premises: Stadium, Clas Ohlson, H&M, Veikon Kone, Suomalainen kirjakauppa, Antt ila, Cubus |
|
| Kirkkonummen liikekeskus (Aseman Ostari) |
Kirkkonummi, Finland |
6.0 | 5,000 | 4,000 | 4.0 | 3.2 | 89.3 | -- Citycon is converting an old supermarket building into a small shopping centre, that will off er daily services. Anchor tenants: Post Offi ce, Nordea, Huoneistokeskus |
|
| Torikeskus | Seinäjoki, Finland |
10.3 | 11,300 | 11,500 | 4.0 | 3.7 | 83.5 | -- Refurbishment of shopping centre's interior premises, new anchor tenant H&M. Other anchor tenants in renewed premises: KappAhl, Aleksi 13, Lindex |
|
| 1) Calculated at end of period exchange rates 2) Leasable area owned by Citycon before the project start. |
5) The estimated total investment of the refurbishment, EUR 18 million, has been exceeded by EUR 2.5 million. In addition, the estimated total project investment includes costs related to the planned extension of Espoontori to adjacent |
3) New capital tied on the project.
4) Yield on completion,% = Expected stabilized (third year aft er completion) net rents incl. possible vacancy / total investment (total capital invested in property by Citycon)
Asemakuja property, such as zoning and land use payments. 7) Refers to entire Trio property 8) The estimated total investment has been raised by EUR 1.7 million.
6) Estimated total investment in SEK has not changed from year end 2009
| Property | Location | Market value, MEUR 31 Dec. |
2011 Area, sq.m. ¹⁾ | Post-deve lopment area, sq.m. |
Total estimated investment, MEUR ²⁾ |
Actual cumula tive CAPEX by the end of the period, MEUR |
Completion target |
Pre-leasing rate,% ³⁾ |
Expected yield on completion when stabili |
zed, % ⁴⁾ Additional information |
|---|---|---|---|---|---|---|---|---|---|---|
| Koskikeskus | Tampere, Finland |
138.6 | 27,700 | 28,600 | 37.9 | 12.0 | 11/2012 | 80 | 6.6 Redevelopment project of shopping centre Koskikeskus in downtown Tampere, where the retail off ering of Koskikeskus will be signifi cantly diversifi ed. The redevelopment project covers all retail premises owned by Citycon.The interior of the shopping centre, the entrances, facades and all the technical systems will be thoroughly renewed. This includes the installation of an environmentally friendly cooling system, which is based on the cooling power of the nearby Tammerkoski rapids. Koskikeskus will remain open during the entire duration of the project. Anchor tenants: Intersport Megastore, Stadium, Lindex, Gina Tricot, Seppälä, Moda Aukia |
|
| Myllypuro | Helsinki, Finland |
19.4 | 7,700 | 7,300 | 21.3 | 21.3 | 5/2012 | 71 | 6.7 Building of a new shopping centre replacing the old retail centre next to the Myllypuro subway station. Underground parking facility will be built in conjunction to the shopping centre. Also rented and right-of residence apartments will be built, that Citycon has sold. The estimated investment need for the whole project totals 60 EUR million. Anchor tenants: S-market, K-supermarket, Pharmacy, Hesburger, City of Helsinki (Media Space), HOK-restaurants |
|
| Iso Omena | Espoo, Finland | 339.5 | 60,600 | 63,000 | 7.6 | 0.6 | 11/2012 | 63 ⁵⁾ | - Extension project of shopping centre Iso Omena. The former parking facility on the roof top will be converted into retail space. Anchor ten ants of the extention area: H&M, Intersport |
|
| Magistral | Tallinn, Estonia | 14.8 | 9,500 | 11,900 | 7.0 | 2.3 | 5/2012 | 80 | 8.3 Redevelopment and extension project of the shopping centre. Mag istral's interior and parking will be totally renewed and the shopping centre will be extended. Magistral will be closed during the entire dura tion of the project. Anchor tenants: Rimi, Takko, Seppälä, Hesburger, Rademar, Koduextra |
|
| Åkermyntan Centrum |
Stockholm, Sweden |
14.0 | 8,500 | 10,100 | 6.9 | 0.2 | 12/2012 | 83 | 6.9 The redevelopment project of shopping centre, where Åkermyntan Centrum and its parking will be renewed and energy effi ciency will be improved and the tenant mix will be strengthened. Anchor tenants: ICA, Lidl, Pharmacy, Legesvisiten |
1) Leasable area owned by Citycon
2) Citycon's share of new capital tied on the project
3) Signed lease agreements, pre-leasing rate in euros
4) Yield on completion,% = expected stabilized (third year aft er completion) net rents incl. possible vacancy / total investment (total capital invested in property by Citycon)
5) Refers to the extension.
Citycon's existing shopping centres off er possibilities for strong organic growth. Citycon can sustainably redevelop and extend its centres with the help of its local knowledge and retail expertise.
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 and/or Citycon (or its partner) has a site reservation.
| Property | Location | Market value, MEUR (31 Dec. 2011) |
Project area, sq.m. ⁽¹ |
Estimated investment need, MEUR ²⁾ |
Target year of project launch |
Target year of | completion Additional information |
|---|---|---|---|---|---|---|---|
| Lippulaiva | Espoo, Finland | 65.6 | 15,000 ⁴⁾ | 30-40 | 2012 | 2014 Extension of the shopping centre. The refurbishment of interior premises completed. Planning of the extension continues. |
|
| Iso Omena ⁵⁾ | Espoo, Finland | 339.5 | 28,000- 30,000 ⁴⁾ |
140 | 2012 ³⁾ | 2015 Planning reservation together with the construction company NCC regarding aboveground premises of the upcoming Matinkylä subway station of western metroline, bus terminal and extension of shopping centre Iso Omena. The goal is to create a subway centre that combines broad range of commercial services and well functioning connections to the future subway and commuter parking. The aim is to proceed with the project at the same pace as the construction of the subway line, which is scheduled to be completed in 2015. |
|
| Myyrmanni | Vantaa, Finland | 156.2 | 12,000- 20,000 ⁴⁾ |
40 | 2013 ³⁾ | 2015 Extension of the shopping centre to two diff erent sides of the centre. The City of Vantaa granted a site reserva tions to Citycon and HOK-Elanto for the former health care centre's and Paalutori's plot. Parking is planned to be transferred underground. Prisma hypermarket and residential units are under planning to be built in connec tion to Myyrmanni. |
|
| Galleria | Oulu, Finland | 8.6 | 25,000 | 110 | 2013 ³⁾ | 2015 Redevelopment of the Galleria block into a shopping centre in co-operation with the block's and the adjacent block's other property owners. In 2011, Citycon signed co-operation and land-use agreements with the block's other main owner retail cooperative Arina. The estimated investment need for the whole project totals 140 EUR million. City of Oulu made a decision to invest and build an underground parking facility. The construction work of the parking facility will start in 2012. |
|
| IsoKristiina | Lappeenranta, Finland |
36.9 | 20,000 | 65-75 | 2012 | 2015 Refurbishment and extension of the existing shopping centre under planning. Co-operation agreement with city of Lappeenranta signed. The city plans to locate its city theatre into the shopping centre's extension part. The commercial concept is under planning. The needed alterations of the city plan are expected to be approved in spring 2012. |
|
| Tikkuri | Vantaa, Finland | 33.4 | 15,000 | 50-60 | 2014³⁾ | 2016 Extension under planning. Citycon has acquired neighbouring properties in order to enable the planned exten sion. |
|
| Strömpilen ⁵⁾ | Umeå, Sweden | 48.0 | 10,000 ⁴⁾ | 18-20 | 2012 | 2014 Extension of the shopping centre and a new commercial concept under planning. Existing zoning includes 45,000 s.qm. of new building rights. |
|
| Tumba Centrum Botkyrka, | Sweden | 58.9 | 6,000 - 8,000 ⁴⁾ |
18-20 | 2012 | 2015 Extension of the shopping centre. Co-operation agreement with City of Botkyrka and project Developer signed (of the Residential part). Planned start for zoning process in 2012. |
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) 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.
| Market value, MEUR |
|||
|---|---|---|---|
| Property | Location | (31 Dec. 2011) | Area, sq.m. Additional information |
| Columbus | Helsinki, Finland | 80.8 | 20,400 Opportunities to expand the shopping centre are reviewed. |
| Forum | Jyväskylä, Finland | 76.7 | 17,500 Bett er commercial linkage of the adjacent property owned by Osuuspankki is reviewed. |
| Espoontori | Espoo, Finland | 48.6 | 17,100 Opportunities to expand the shopping centre together with Capman, owner of the adjacent shopping centre, are reviewed. |
| Högdalen Centrum | Stockholm, Sweden | 30.0 | 5,000 Opportunities to expand the shopping centre is reviewed. |
| Jakobsbergs Centrum Järfälla, Sweden | 106.3 | 12,000 Extension and redevelopment planned to be launched 2012-2014. Building right for additional residential buildings under planning. |
| 2011 | 2010 | |||||
|---|---|---|---|---|---|---|
| tnCO₂e | % | tnCO₂e | % | 2009 tnCO₂e |
% | |
| Scope 1, direct | 189 | 0.3% | 0 | 0.0% | 0 | 0.0% |
| Scope 2, indirect | 68,562 | 98.8% 66,980 | 98.7% 62,111 | 99.0% | ||
| Scope 3, indirect | 662 | 0.9% | 870 | 1.3% | 655 | 1.0% |
| 2010 | 2009 | ||||||
|---|---|---|---|---|---|---|---|
| tnCO₂e | % | tnCO₂e | % | tnCO₂e | % | ||
| Electricity in common areas | 20,515 | 29.6% 16,593 | 24.5% 17,602 | 28.0% | |||
| Tenants' electricity supplied by the landlord ¹⁾ | 23,224 | 33.5% 18,001 | 26.5% 17,705 | 28.2% | |||
| District heating and cooling in properties | 24,951 | 35.9% 32,335 | 47.7% 26,754 | 42.6% | |||
| Electricity and heat in offi ce occupation | 61 | 0.1% | 51 | 0.1% | 50 | 0.1% | |
| Wastewater in properties | 238 | 0.3% | 210 | 0.3% | 202 | 0.3% | |
| Waste in properties | 76 | 0.1% | 67 | 0.1% | 59 | 0.1% | |
| Business travel | 267 | 0.4% | 473 | 0.7% | 286 | 0.5% | |
| Commuting | 78 | 0.1% | 117 | 0.2% | 106 | 0.2% | |
| Paper consumption and mail | 4 | 0.0% | 3 | 0.0% | 3 | 0.0% | |
| Total | 69,413 100.0% 67,850 100.0% 62,766 100.0% | ||||||
| 2011 | 2010 | 2009 | |
|---|---|---|---|
| Building greenhouse gas intensity (kgCO₂e/sq.m.) | 69.7 | 70.7 | 64.1 |
| Building greenhouse gas intensity (kgCO₂e/visitor) | 0.44 | 0.47 | 0.45 |
1) Citycon also reports emissions from tenants' electricity consumption in cases where Citycon is responsible for electricity procurement. When energy procurement is on tenant's responsibility, it has been excluded from reporting.
2) In the calculation of greenhouse gas intensity, the numerator corresponds emissions from electricity in common areas, district heating and cooling.
| 2011 | 2010 | 2009 | GRI | EPRA Sustainability BPR | |
|---|---|---|---|---|---|
| Coverage ¹⁾ | 97.4% | 96.0% | 93.8% | ||
| Electricity consumption in common areas (MWh) |
110,107 104,853 108,409 | EN4 | EPRA Sustainability BPR 3.1 | ||
| Tenants' electricity purchased by landlord (MWh) ²⁾ |
68,951 | 62,200 | 67,123 | EN4 | EPRA Sustainability BPR 3.1 |
| Total electricity consumption (MWh) 179,057 167,052 175,533 | EN4 | EPRA Sustainability BPR 3.1 | |||
| Electricity consumption in Citycon's offi ces and business premises (MWh) |
378 | 303 | 311 | EPRA Sustainability BPR 3.1 | |
| Non-renewable electricity (MWh) | 174,101 161,085 165,989 | EN4 | EPRA Sustainability BPR 3.1 | ||
| Renewable electricity (MWh) | 4,956 | 5,967 | 9,544 | EN4 | EPRA Sustainability BPR 3.1 |
| District heating (MWh) ³⁾ | 134,683 171,342 139,495 | EN4 | EPRA Sustainability BPR 3.2 | ||
| District cooling (MWh) ³⁾ | 1,799 | 1,606 | 243 | EN4 | EPRA Sustainability BPR 3.2 |
| Direct energy consumption | |||||
| Total energy consumption from fuels | |||||
| (MWh) | 936 | 0 | 0 | EN3 | EPRA Sustainability BPR 3.3 |
| Primary energy (TJ) | 1,991 | 2,035 | 1,969 | EN3- EN4 |
EPRA Sustainability BPR 3.1-3.3 |
| Intensity Indicators ⁴⁾ | ||||
|---|---|---|---|---|
| Building energy intensity (kWh/sq.m.) | 256 | 321 | 275 CRE1 | EPRA Sustainability BPR 3.4 |
| Building energy intensity (kWh/visitor) | 1.49 | 1.86 | 1.74 CRE1 | EPRA Sustainability BPR 3.4 |
1) Citycon's reported energy consumption covers shopping centres owned by Citycon and other properties where Citycon's share of ownership is at least 50 per cent.
2) Citycon also reports the tenants' electricity consumption in cases where Citycon is responsible for electricity procurement. When energy procurement is on tenant's responsibility, it has been excluded from reporting.
3) Energy used for heating and cooling is reported in its entirety.
4) In terms of intensity fi gures, Citycon has limited the reported electricity consumption to common areas, where it can directly infl uence. This includes the electricity used for general lighting, ventilation and cooling, as well as lift s and escalators and other building technical systems.
Total energy
ENERGY CONSUMPTION
| MWh | Electricity in common areas |
Heat consumption | Total energy consumption (elect ricity in common areas+ heating + cooling) |
|---|---|---|---|
| 2009 | 70,264 | 83,082 | 153,542 |
| 2010 | 71,945 | 105,275 | 178,698 |
| 2011 | 66,826 | 81,248 | 149,813 |
| Change-% 2011/2010 | -7.1% | -22.8% | -16.2% |
| Change-% 2011/2009 | -4.9% | -2.2% | -2.4% |
| MWh | Electricity consumption in common areas |
Heat consumption |
Total energy consumption (electricity in common areas + heating + cooling) |
consumption (electricity in common areas+ heating + cooling) in like-for-like shopping centres |
|---|---|---|---|---|
| Baltic Countries | ||||
| 2009 | 5,830 | 5,058 | 10,888 | 8,311 |
| 2010 | 6,044 | 5,575 | 11,619 | 9,343 |
| 2011 | 8,783 | 3,912 | 12,695 | 8,513 |
| Change-% 2011/2010 | 45.3% | -29.8% | 9.3% | -8.9% |
| Change-% 2011/2009 | 50.7% | -22.7% | 16.6% | 2.4% |
| Finland | ||||
| 2009 | 76,854 | 104,797 | 181,652 | 102,210 |
| 2010 | 73,156 | 127,478 | 200,634 | 116,899 |
| 2011 | 79,364 | 99,155 | 178,520 | 98,394 |
| Change-% 2011/2010 | 8.5% | -22.2% | -11.0% | -15.8% |
| Change-% 2011/2009 | 3.3% | -5.4% | -1.7% | -3.7% |
| Sweden | ||||
| 2009 | 25,725 | 29,640 | 55,608 | 43,021 |
| 2010 | 25,653 | 38,289 | 65,548 | 52,456 |
| 2011 | 21,959 | 31,616 | 55,374 | 42,906 |
| Change-% 2011/2010 | -14.4% | -17.4% | -15.5% | -18.2% |
| Change-% 2011/2009 | -14.6% | 6.7% | -0.4% | -0.3% |
| ENERGY CONSUMPTION BY PROPERTY TYPE | Total energy consumption |
||
|---|---|---|---|
| MWh | Electricity consumption in common areas |
Heat consumption |
(electricity in common areas + heating + cooling) |
| 2009 | |||
| Shopping centres | 92,217 | 108,966 | 201,378 |
| Other retail properties | 16,193 | 30,529 | 46,769 |
| 2010 | |||
| Shopping centres | 91,596 | 136,142 | 229,217 |
| Other retail properties | 13,256 | 35,200 | 48,584 |
| 2011 | |||
| Shopping centres | 90,756 | 106,682 | 199,178 |
| Other retail properties | 19,350 | 28,002 | 47,411 |
| Change-% in Shopping centres 2011/2010 | -0.9% | -21.6% | -13.1% |
| Change-% in Other retail properties 2011/2010 | 46.0% | -20.4% | -2.4% |
| Change-% in Shopping centres 2011/2009 | -1.6% | -2.1% | -1.1% |
| Change-% in Other retail properties 2011/2009 | 19.5% | -8.3% | 1.4% |
responsibility objectives were achieved:
| m³ | Total water consumption |
Total water consumption in shopping centres |
Total water consumption in like-for like shopping centres |
Water intensity in shopping centres liter/ visitor |
|---|---|---|---|---|
| 2009 | 541,130 | 484,583 | 371,336 | 4.2 |
| 2010 | 562,604 | 487,275 | 390,639 | 4.0 |
| 2011 | 638,851 | 573,288 | 420,979 | 4.3 |
| Change-% 2011/2010 | 13.6% | 17.7% | 7.8% | |
| Change-% 2011/2009 | 18.1% | 18.3% | 13.4% | |
| tn | |
|---|---|
| 2009 | 11,920 |
| 2010 | 13,644 |
| 2011 | 15,361 |
| Change-% 2011/2010 | 12.6% |
| Change-% 2011/2009 | 28.9% |
| tn | |
|---|---|
| 2009 | 11,382 |
| 2010 | 12,973 |
| 2011 | 14,596 |
| Change-% 2011/2010 | 12.5% |
| Change-% 2011/2009 | 28.2% |
| m³ | Total water consumption |
Total water consumption in shopping centres |
Total water consumption in like-for like shopping centres |
Water intensity by business units l/visitor |
|---|---|---|---|---|
| Baltic Countries | ||||
| 2009 | 32,640 | 32,640 | 27,398 | 2.9 |
| 2010 | 39,582 | 39,582 | 34,451 | 3.4 |
| 2011 | 56,761 | 56,761 | 35,928 | 3.2 |
| Change-% 2011/2010 | 43.3% | 43.3% | 4.3% | |
| Change-% 2011/2009 | 73.9% | 73.9% | 31.1% | |
| Finland | ||||
| 2009 | 264,840 | 223,402 | 153,668 | 2.7 |
| 2010 | 277,188 | 226,221 | 157,416 | 2.8 |
| 2011 | 294,730 | 252,763 | 164,344 | 3.0 |
| Change-% 2011/2010 | 6.3% | 11.7% | 4.4% | |
| Change-% 2011/2009 | 11.3% | 13.1% | 6.9% | |
| Sweden | ||||
| 2009 | 243,650 | 228,541 | 190,270 | 9.3* ⁾ |
| 2010 | 245,834 | 221,472 | 198,772 | 6.8* ⁾ |
| 2011 | 287,360 | 263,764 | 220,707 | 6.9* ⁾ |
| Change-% 2011/2010 | 16.9% | 19.1% | 11.1% | |
| Change-% 2011/2009 | 17.9% | 15.4% | 16.0% |
| tn | |
|---|---|
| 2009 | 8,925 |
| 2010 | 10,402 |
| 2011 | 10,964 |
| Change-% 2011/2010 | 5.4% |
| Change-% 2011/2009 | 22.8% |
| tn | |
|---|---|
| Finland | |
| 2009 | 8,830 |
| 2010 | 9,314 |
| 2011 | 10,143 |
| Sweden | |
| 2009 | 2,598 |
| 2010 | 3,734 |
| 2011 | 4,379 |
| Baltic Countries | |
| 2009 | 491 |
| 2010 | 596 |
| 2011 | 839 |
*) excl. Fruängen and Högdalen Centrum where amount of visitors is not collected
| 2011 | 2010 | 2009 | ||||||
|---|---|---|---|---|---|---|---|---|
| tn | % | tn | % | tn | % | |||
| Landfi ll waste | 3,033 | 20.8% | 2,917 | 22.5% | 2,948 | 25.9% | ||
| Energy waste | 3,874 | 26.5% | 3,540 | 27.3% | 2,588 | 22.7% | ||
| Paper | 671 | 4.6% | 440 | 3.4% | 446 | 3.9% | ||
| Plastic | 54 | 0.4% | 44 | 0.3% | 66 | 0.6% | ||
| Cardboard | 3,604 | 24.7% | 3,679 | 28.4% | 3,318 | 29.2% | ||
| Compost | 2,193 | 15.0% | 1,557 | 12.0% | 1,398 | 12.3% | ||
| Metal | 159 | 1.1% | 128 | 1.0% | 125 | 1.1% | ||
| Glass | 384 | 2.6% | 378 | 2.9% | 286 | 2.5% | ||
| Hazardous waste | 24 | 0.2% | 3 | 0.0% | 29 | 0.3% | ||
| Other reused waste | 370 | 2.5% | 236 | 1.8% | 125 | 1.1% | ||
| Other unsorted waste | 230 | 1.6% | 51 | 0.4% | 54 | 0.5% | ||
| Total | 14,596 | 100.0% | 12,973 | 100.0% | 11,382 | 100.0% |
| 2011 | 2010 | 2009 | ||||
|---|---|---|---|---|---|---|
| tn | % | tn | % | tn | % | |
| Landfi ll waste | 2,249 | 20.5% | 2,273 | 21.8% | 2,285 | 25.6% |
| Energy waste | 3,087 | 28.2% | 3,058 | 29.4% | 2,123 | 23.8% |
| Paper | 421 | 3.8% | 374 | 3.6% | 370 | 4.1% |
| Plastic | 44 | 0.4% | 40 | 0.4% | 55 | 0.6% |
| Cardboard | 2,548 | 23.2% | 2,793 | 26.8% | 2,433 | 27.3% |
| Compost | 1,727 | 15.8% | 1,165 | 11.2% | 1,097 | 12.3% |
| Metal | 111 | 1.0% | 110 | 1.1% | 112 | 1.3% |
| Glass | 340 | 3.1% | 346 | 3.3% | 271 | 3.0% |
| Hazardous waste | 8 | 0.1% | 1 | 0.0% | 9 | 0.1% |
| Other reused waste | 261 | 2.4% | 207 | 2.0% | 116 | 1.3% |
| Other unsorted waste | 168 | 1.5% | 35 | 0.3% | 54 | 0.6% |
| Total | 10,964 | 100.0% | 10,402 | 100.0% | 8,925 | 100.0% |
| 2011 | 2009 | |||||||
|---|---|---|---|---|---|---|---|---|
| tn | % | tn | 2010 % |
tn | % | |||
| Landfi ll waste | 3,263 | 22.4% | 2,968 | 22.9% | 3,002 | 26.4% | ||
| Incinerated waste | 3,874 | 26.5% | 3,540 | 27.3% | 2,588 | 22.7% | ||
| Composted waste | 2,193 | 15.0% | 1,557 | 12.0% | 1,398 | 12.3% | ||
| Recycled waste | 4,872 | 33.4% | 4,669 | 36.0% | 4,241 | 37.3% | ||
| Reused waste | 394 | 2.7% | 240 | 1.8% | 153 | 1.3% | ||
| Total | 14,596 | 100.0% | 12,973 | 100.0% | 11,382 | 100.0% |
| 2011 | 2010 | 2009 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| tn | % | tn | % | tn | % | ||||
| Landfi ll waste | 2,417 | 22.0% | 2,308 | 22.2% | 2,339 | 26.2% | |||
| Incinerated waste | 3,087 | 28.2% | 3,058 | 29.4% | 2,123 | 23.8% | |||
| Composted waste | 1,727 | 15.8% | 1,165 | 11.2% | 1,097 | 12.3% | |||
| Recycled waste | 3,464 | 31.6% | 3,663 | 35.2% | 3,241 | 36.3% | |||
| Reused waste | 269 | 2.5% | 208 | 2.0% | 125 | 1.4% | |||
| Total | 10,964 | 100.0% | 10,402 | 100.0% | 8,925 | 100.0% |
| Finland | Sweden | Baltic Countries | |
|---|---|---|---|
| Landfi ll waste | 30.2% | 5.2% | 17.9% |
| Incinerated waste | 12.3% | 58.0% | 33.6% |
| Composted waste | 18.3% | 9.8% | 3.2% |
| Recycled waste | 35.8% | 25.4% | 45.3% |
| Reused waste | 3.4% | 1.6% | 0.0% |
| 2011 | 2010 | |
|---|---|---|
| Direct economic value generated | ||
| a) Revenues | ||
| Turnover | 217.1 | 195.9 |
| Revenues from sale of investment properties * ⁾ |
18.6 | 66.3 |
| Economic value distributed | ||
| b) Operating costs | ||
| Purchases related to property operating costs | -62.8 | -58.8 |
| Investments | -216.7 | -133.7 |
| c) Employee wages and salaries |
||
| Paid wages and salaries | -10.5 | -8.0 |
| Funds used for employee training | -0.1 | -0.2 |
| d) Payments to providers of capital * ⁾ |
||
| Paid dividends and return from invested unrestricted equity fund | -34.3 | -31.2 |
| Loan proceeds | 143.4 | 10.7 |
| Paid and received fi nancial expenses as well as realised exchange rate losses/gains | -61.4 | -78.1 |
| e) Payments to government | ||
| Income taxes received/paid (directly from/to government) * ⁾ |
7.2 | -9.9 |
| Property taxes (payments to government as agent, recharged to tenants) | -6.4 | -6.3 |
*) Items from the cash fl ow.
(EC1)
The following mathematical formula has been used in the Social Responsibility text:
Number of training days per employee = Total full-day training sessions (1 Jan.-31 Dec.) Employees average (1 Jan.-31 Dec.)
92 CITYCON OYJ ○ ANNUAL AND SUSTAINABILITY REPORT 2011 ○ FACTS AND FIGURES
This is Citycon's third combined Annual and Sustainability Report. The aim of this report is to provide a comprehensive description of the business environment and the economic, social and environmental aspects of responsibility. Reporting covers all of Citycon's operations in all operating countries.
In its sustainability reporting, Citycon applies for the fi rst time the construction and real estate sector specifi c (CRESS) guidelines of the Global Reporting Initiative, as well as the guidelines published by EPRA in autumn 2011. Calculation methods have been retroactively revised to comply with the new and revised guidelines. Coverage in terms of GRI's G3.1 reporting recommendations is presented on pages 94-96. Based on Citycon's self declaration report corresponds to GRI Application Level B.
The report is published annually and the information presented in it corresponds to the company's fi nancial year i.e. 1 January - 31 December. The next report will be published during the fi rst quarter of 2013. The key fi nancial fi gures presented are based on audited accounting records and approved annual accounts.
Reported measures related to environmental responsibility covers all shopping centres owned by Citycon and other properties where Citycon's ownership is at least 50 per cent and where it has operational control. This represents 97.4 per cent of the leasable area owned by Citycon.
Even though annual changes in property portfolio due to acquisitions, sales and (re)development do not make reasonable comparisons over years, Citycon still reports total portfolio performance according to the limitations mentioned earlier. Citycon follows in sustainability reporting EPRA's fi nancial Best Practices Recommendations. Properties, which have been consistently in operation, and not under development, during the two full preceding periods, are included in like-for-like portfolio. Sold properties are excluded from likefor-like comparison.
Citycon also reports the tenants' electricity consumption in cases where Citycon is responsible for electricity procurement. In shopping centres, tenants have in most of the cases own electricity meters and purchase agreement and Citycon has no availability to data related to tenants' consumption. In seventeen centres out of thirty six, electricity consumption is partially or totally recharged from tenants. When energy procurement agreement is on tenant's responsibility, it has been excluded from reporting. Energy used for heating and cooling is reported in its entirety.
In terms of intensity fi gures, Citycon has limited the reported electricity consumption to common areas, where it can directly infl uence. This includes the electricity used for general lighting, ventilation and cooling, as well as lift s and escalators and other building technical systems. Based on the case studies, the share of electricity consumption in common areas is 25 - 70 per cent of total electricity consumption depending on heating, lightning and other technical solutions, as well as on level of controllability. Even though a mismatch exists between numerator and denominator of the intensity indicator (kWh/m2), for the denominator is chosen gross leasable area, which still is most feasible of the alternatives. Intensity indicator is calculated also per visitors.
Primary energy use has been estimated based on countryspecifi c energy statistics from the IEA for the year 2009.
In calculating its carbon footprint, Citycon applies the Greenhouse Gas Protocol developed by the World Resources Institute and the World Business Council for Sustainable Development. The emissions factors for energy are based on country-specifi c statistics gathered by the IEA consisting of fi ve year averages (2005-2009) for electricity and heat generation.
In calculation of greenhouse gas intensity from building energy, same principles are applied than in energy intensity calculation.
Used nuclear fuel is calculated on the basis of nuclear fuel use in Finnish and Swedish nuclear power plants and the total electricity generation in the Nordic area. Nuclear fuel amounts are from the Finnish Energy Industries and total electricity generation from Nord Pool Spot AS.
Acidifying emission factors (in SO2-eqv.) are based on historical estimates on country specifi c emissions from energy production.
Reported water covers water consumed in common areas and by tenants. All water comes from municipal waterworks.
The recycling rate indicates recycled, incinerated or reused waste fractions as a share of the total waste volume. Landfi ll waste is not included in recycled items.
Properties in which tenants are responsible for waste management are excluded from reporting, as there is no record available of their waste quantities.
√= Reported ○ = Partly reported — = Not reported Core indicator
| Code | Content | Page | Comments | Code | Content | Page Comments |
||
|---|---|---|---|---|---|---|---|---|
| Strategy and Analysis | EC7 | Procedures for local hiring and proportion of | Not material to Citycon. | |||||
| 1.1-1.2 | CEO's statement, key impacts, risks and opportunities |
√ 1, 16-17, 42, 44-47 | senior management and all direct employees, contractors and sub-contractors hired from the local community |
— | ||||
| Organizational Profi le | Indirect Economic Impacts | |||||||
| 2.1-2.9 | Organizational profi le | √ 3, 7,12-14, 16-25, 28-33, 65-72 | EC8 | Infrastructure investments and services | ||||
| 2.10 | Awards received in the reporting period | √ 2-3 www.citycon.com/Sustainability |
provided primarily for public benefi t | — | ||||
| Report Parameters | EC9 | Signifi cant indirect economic impacts, includ | ||||||
| 3.1-3.11 Report profi le, scope and boundary | √ 44-46, 93 | ing the extent of impacts | — | |||||
| 3.12 | GRI Content Index | √ 94-96 | Environmental Performance Indicators | |||||
| Governance, Commitments and Engagement | Materials | |||||||
| Governance | EN1-EN2 Materials used by weight, value or volume | — | Not material to Citycon. | |||||
| 4.1-4.10 Governance | √ 4-7, 43, 65-72 | and recycled and reused input materials | ||||||
| Commitments to External Initiatives | Energy | |||||||
| 4.11 | Explanation of whether and how the precau tionary approach or principle is addressed |
√ 73-74 | EN3-EN4 Direct and indirect energy consumption by primary energy source |
√ 50-51, 88-89 |
||||
| 4.12 | Externally developed charters, principles, or | Energy Effi ciency Agreement | CRE1 | Building energy intensity | √ 50-51, 88-89 |
|||
| other initiatives | √ | in Finland | EN5 | Energy saved due to conservation and ef | ||||
| 4.13 | Memberships in associations and/or na tional/international advocacy organizations |
√ | www.citycon.com/Sustainability | fi ciency improvements | — | |||
| Stakeholder Engagement | EN6 | Initiatives to provide energy-effi cient or re newable energy based products and services, |
○ | 51, 88-89 | ||||
| 4.14- 4.17 |
List of stakeholder groups, basis for identi fi cation, approaches to stakeholder engage |
44-46 www.citycon.com/Sustainability |
and reductions in energy requirements as a result of these initiatives |
|||||
| ment, key topics raised through stakeholder engagement |
√ | EN7 | Initiatives to reduce indirect energy con sumption and reductions achieved |
— | ||||
| Management Approach and Performance Indicators | Water | |||||||
| Economic responsibility | √ 4-6, 54-55 www.citycon.com/Sustainability | EN8 | Total water withdrawal by source | √ 47, 51-52, | ||||
| Environmental responsibility | √ 43, 48 www.citycon.com/Sustainability |
90 | ||||||
| Social responsibility | √ 58 www.citycon.com/Sustainability |
EN9 | Water sources signifi cantly aff ected by withdrawal of water |
√ | Not material to Citycon, water comes from municipal |
|||
| Economic Performance Indicators | waterworks. | |||||||
| EC1 | Economic Performance Economic value generated and distributed |
√ 92 | Further information can be | EN10 | Percentage and total volume of water recy cled and reused |
√ | Not material to Citycon, water comes from municipal waterworks. |
|
| found in Financial Statements. | CRE2 | Building water intensity | √ 51, 90 | |||||
| EC2 | Financial implications and other risks and op | 47, 73-74 | Biodiversity | |||||
| portunities due to climate change and other sustainability issues. |
√ | EN11 | Location and size of land owned, leased, man aged in, or adjacent to, protected areas |
√ 53 | ||||
| EC3 | Coverage of the organization's defi ned benefi t plan obligations |
√ | The company acts in accordance with legislation, not reported |
separately. | EN12 | Signifi cant impacts of activities on biodiver | √ 53 | |
| EC4 | Signifi cant fi nancial assistance received from | 92 Citycon has not received any |
sity in protected areas | |||||
| government | √ | fi nancial assistance from government. |
EN13 EN14 |
Habitats protected or restored Strategies, current actions, and future plans |
— | |||
| Market Presence | for managing impacts on biodiversity | — | ||||||
| EC5 | Range of ratios of standard entry level wage compared to local minimum wage at signifi - cant locations of operation |
— | EN15 | Number of IUCN Red List species and na tional conservation list species with habitats in areas aff ected by operations, by level of |
— | |||
| EC6 | Policy, practices, and proportion of spending on locally-based suppliers |
√ 54-55 | extinction risk |
| Code | Content | Page | Comments | Code | Content | Page | Comments | ||
|---|---|---|---|---|---|---|---|---|---|
| Emissions, Effl uents and Waste | LA5 | Minimum notice period(s) regarding signifi - | 60 | Citycon complies with local | |||||
| EN16- EN17 |
Total direct and indirect greenhouse gas emissions by weight |
√ 49-50, 88 | cant operational changes, including whether it is specifi ed in collective agreements |
√ | legislation and regulations. | ||||
| CRE3 | Greenhouse gas emissions intensity from | √ 49, 88 | Occupational Health and Safety | ||||||
| buildings | LA6 | Total workforce represented in formal joint | 60 | ||||||
| CRE4 | Greenhouse gas emissions intensity from new construction and redevelopment activity — |
Not material to Citycon. | management-worker health and safety committ ees |
√ | |||||
| EN18 | Initiatives to reduce greenhouse gas emis sions and reductions achieved |
○ 48 | LA7 | Rates of injury, occupational diseases, lost days, and absenteeism, and total number |
√ | 60-61 | |||
| EN19 | Emissions of ozone-depleting substances by weight |
— | of work-related fatalities by region and by gender |
||||||
| EN20 | NOx, SOx, and other signifi cant air emissions by type and weight |
√ 50 | CRE6 | Percentage of the organization operating in verifi ed compliance with an internationally recognized health and safety management |
— | Not material to Citycon. | |||
| EN21 | Total water discharge by quality and destina tion |
√ | Waste water and rain water is led to municipal sewer system. |
LA8 | system Education, training, counselling, prevention, |
Not material to Citycon. | |||
| EN22 | Total weight of waste by type and disposal method |
√ 52, 91 | and risk-control programs in place to assist workforce members, their families, or com |
— | |||||
| EN23 | Total number and volume of signifi cant spills | √ | No such cases in 2011. | munity members regarding serious diseases | |||||
| Land Degration, Contamination and Remediation | LA9 | Health and safety topics covered in formal agreements with trade unions |
— | Not material to Citycon. | |||||
| CRE5 | Land and other assets remediated and in | Training and Education | |||||||
| need of remediation for the existing or intended land use according to applicable legal designations |
— | LA10 | Average hours of training per year per em ployee by gender, and by employee category |
√ 60 | |||||
| Products and Services | LA11 | Programs for skills management and lifelong | |||||||
| EN26 | Initiatives to enhance effi ciency and mitigate environmental impacts of products and services, and extent of impact mitigation |
○ | 43, 48-53 | learning that support the continued employ ability of employees and assist them in managing career endings |
— | ||||
| EN27 | Reclaimed products and packaging materials — | Not material to Citycon. | LA12 | Employees receiving regular performance and career development reviews, by gender |
√ 60 | Company policy: Each employee has annual performance reviews. |
|||
| Compliance | Diversity and Equal Opportunity | ||||||||
| EN28 | Non-compliance with environmental laws and regulations |
√ | No misconducts during 2011. | LA13 | Composition of governance bodies and breakdown of employees per category ac |
58-61 and 91 |
|||
| Transport | cording to gender, age group, minority group | √ | |||||||
| EN29 | Signifi cant environmental impacts of trans porting products, materials and workforce |
√ | 88 | Citycon reports on CO₂e emissions of business travel and commuting. |
membership Equal Remuneration for Women and Men |
||||
| Overall | LA14 | Ratio of basic salary of men to women by employee category |
— | ||||||
| EN30 | Total environmental protection expenditures and investments by type |
— | Investment and Procurement Practices | ||||||
| Social Performance Indicators | HR1-HR2 Investment and procurement practices relat | ○ 43 | Citycon Code of Conduct, www. citycon.com/Sustainability. |
||||||
| Employment | ing to human rights | ||||||||
| LA1-LA2 Total workforce by employment type, employment contract, and region, number |
58-61, 91 | HR3 | Total hours of employee training of human rights |
— | |||||
| and rate of employee turnover by age group, | √ | Non-Discrimination | |||||||
| gender, and region | HR4 | Total number of incidents of discrimination and corrective actions taken |
√ 61 | No such cases in 2011. | |||||
| LA3 | Benefi ts provided to full-time employees that are not provided to temporary or part |
— | Not material to Citycon. | Freedom of Association and Collective Bargaining | |||||
| LA15 | time employees, by major operations Return to work and retention rates aft er |
HR5 | Operations identifi ed in which the right to exercise freedom of association and collec |
No such risks in operating areas in 2011. Citycon Code of |
|||||
| parental leave, by gender | — | tive bargaining may be at signifi cant risk, and | √ | Conduct. | |||||
| Labor / Management Relations | actions taken to support these rights | ||||||||
| LA4 | Percentage of employees covered by collec tive bargaining agreements |
√ 60 | Child Labor HR6 |
Operations identifi ed as having signifi cant | 43, 58 | Citycon Code of Conduct, www. citycon.com/Sustainability. |
| LA5 | Minimum notice period(s) regarding signifi - cant operational changes, including whether it is specifi ed in collective agreements |
√ | 60 | Citycon complies with local legislation and regulations. |
|---|---|---|---|---|
| Occupational Health and Safety | ||||
| LA6 | Total workforce represented in formal joint management-worker health and safety committ ees |
√ | 60 | |
| LA7 | Rates of injury, occupational diseases, lost days, and absenteeism, and total number of work-related fatalities by region and by gender |
√ | 60-61 | |
| CRE6 | Percentage of the organization operating in verifi ed compliance with an internationally recognized health and safety management system |
— | Not material to Citycon. | |
| LA8 | Education, training, counselling, prevention, and risk-control programs in place to assist workforce members, their families, or com munity members regarding serious diseases |
— | Not material to Citycon. | |
| LA9 | Health and safety topics covered in formal agreements with trade unions |
— | Not material to Citycon. | |
| Training and Education | ||||
| LA10 | Average hours of training per year per em ployee by gender, and by employee category |
√ 60 | ||
| LA11 | Programs for skills management and lifelong learning that support the continued employ ability of employees and assist them in managing career endings |
— | ||
| LA12 | Employees receiving regular performance and career development reviews, by gender |
√ 60 | Company policy: Each employee has annual performance reviews. |
|
| Diversity and Equal Opportunity | ||||
| LA13 | Composition of governance bodies and breakdown of employees per category ac cording to gender, age group, minority group membership |
√ | 58-61 and 91 |
|
| Equal Remuneration for Women and Men | ||||
| LA14 | Ratio of basic salary of men to women by employee category |
— | ||
| Investment and Procurement Practices | ||||
| HR1-HR2 Investment and procurement practices relat ing to human rights |
○ 43 | Citycon Code of Conduct, www. citycon.com/Sustainability. |
||
| HR3 | Total hours of employee training of human rights |
— | ||
| Non-Discrimination | ||||
| HR4 | Total number of incidents of discrimination and corrective actions taken |
√ 61 | No such cases in 2011. | |
| Freedom of Association and Collective Bargaining | ||||
| HR5 | Operations identifi ed in which the right to exercise freedom of association and collec tive bargaining may be at signifi cant risk, and actions taken to support these rights |
√ | No such risks in operating areas in 2011. Citycon Code of Conduct. |
|
| Child Labor | ||||
| HR6 | Operations identifi ed as having signifi cant risk for incidents of child labor, and measures taken to contribute to the elimination of child labor |
√ | 43, 58 | Citycon Code of Conduct, www. citycon.com/Sustainability. |
| Code | Content | Page | Comments | Code | Content | Page Comments |
||
|---|---|---|---|---|---|---|---|---|
| Forced and Compulsory Labor | Customer Health and Safety | |||||||
| HR7 | Operations identifi ed as having signifi cant risk for incidents of forced or compulsory labor, and measures to contribute to the |
√ | 43, 58 | Citycon Code of Conduct, www. citycon.com/Sustainability. |
PR1 | Life cycle stages in which health and safety impacts of products and services are as sessed for improvement |
— | |
| elimination of forced or compulsory labor | PR2 | Total number of incidents of non-compliance | No such cases in 2011. | |||||
| HR8 | Security Practices Percentage of security personnel trained in the organization's policies or procedures |
— | Citycon does not employ directly security personnel. |
with regulations and voluntary codes concerning health and safety impacts of products and services |
√ | |||
| concerning relevant aspects of human rights | Product and Service Labeling | |||||||
| Indigenous Rights | PR3 | Type of product and service information | ||||||
| HR9 | Violations involving rights of indigenous people and actions taken |
— | Citycon's operation area does not reach the areas of indigeno us people. |
required by procedures, and percentage of signifi cant products and services subject to such information requirements |
— | |||
| Assessment | CRE8 | Type and number of sustainability certifi ca | 53 | |||||
| HR10 | Percentage and total number of operations that have been subject to human rights reviews and/or impact assessments |
— | tion, rating and labeling schemes for new construction, management, occupation and redevelopment |
√ | ||||
| Remediation | PR4 | Total number of incidents of non-compliance | No such cases in 2011. | |||||
| HR11 | Number of grievances related to human rights fi led, addressed and resolved through formal grievance mechanisms |
√ | No such cases in 2011. | with regulations and voluntary codes concerning product and service information and labeling |
√ | |||
| Local Communities | PR5 | Practices related to customer satisfaction | √ 63-64 | |||||
| Marketing Communications | ||||||||
| SO1 | Impacts of operations on communities, including entering, operating, and exiting |
○ 62-63 | PR6 | Programs for adherence to laws, standards, and voluntary codes related to marketing |
√ | 64 | ||
| SO9 | Operations with signifi cant potential or actual negative and positive impacts on local communities |
○ | 62-63 | PR7 | communications Total number of incidents of non-compliance with regulations and voluntary codes con |
√ | No such cases in 2011. | |
| SO10 | Prevention and mitigation measures implemented in operations with signifi cant |
62-63 | cerning marketing communications | |||||
| potential or actual negative impacts on local | ○ | Customer Privacy | ||||||
| communities | PR8 | Total number of substantiated complaints regarding breaches of customer privacy and |
√ | No such cases in 2011. | ||||
| CRE7 | Number of persons voluntarily and involyn tarily displaced and/or resett led by develop ment, broken down by project |
— | Not material to Citycon. | losses of customer data | ||||
| Corruption | Compliance | No such cases in 2011. | ||||||
| SO2 | Percentage and total number of business units analyzed for risks related to corruption |
√ 43, 61-62 | Citycon Code of Conduct. | PR9 | Signifi cant fi nes for non-compliance with laws and regulations concerning the provision and use of products and services |
√ | ||
| SO3 | Percentage of employees trained organiza tion's anti-corruption policies and procedures √ 43, 61-62 |
Citycon Code of Conduct. | ||||||
| SO4 | Actions taken in response to incidents of corruption |
√ 43, 61-62 | No such cases in 2011. | |||||
| Public Policy | ||||||||
| SO5 | Public policy positions and participation in public policy development and lobbying |
√ 61-62 | ||||||
| SO6 | Total value of fi nancial and in-kind contribu tions to political parties, politicians, and related institutions by country |
√ | 61-62 | |||||
| Anti-Competitive Behavior | ||||||||
| SO7 | Total number of legal actions for anti-com petitive behavior, anti-trust, and monopoly practices and their outcomes |
√ | No such cases in 2011. | |||||
| Compliance | ||||||||
| SO8 | Monetary value of signifi cant fi nes and total number of non-monetary sanctions for non compliance with laws and regulations |
√ | No such cases in 2011. |
96 CITYCON OYJ ○ ANNUAL AND SUSTAINABILITY REPORT 2011 ○ FACTS AND FIGURES
Fair value change: Change of property portfolios market values deducted by investments and excluding exchange rate diff erences.
Gross rental income: Gross rents, capital rents, maintenance charges and other possible rental income.
Net initial yield: The annualized net rent from a property, at the balance sheet date, divided by the market value of the property.
Net rental income: Gross rental income added by service charge income deducted by property operating expenses from leasing operarions.
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 16.
Net yield requirement: For market value calculation, the net yield requirement comprises risk-free interest as well as property-specifi c and market risk. Net yield requirement is the lowest internal rate of the return of the total investment period, at which a company is willing to invest.
NNNAV: Based on the Best Practices Policy Recommendations by EPRA, a company's adjusted per-share NAV. Formula is available in the fi nancial statements on page 16.
Reversionary yield: The estimated rental value (market rent) of the property deducted by 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, 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 in Estonia, the population within a catchment area is defi ned as those living within 5 to 15 minutes' travel time to the shopping centre. In Lithuania, similar data are based on estimates.
Economic occupancy rate: Rental income based on existing leases divided by vacant premises' estimated market rents, to which rental income based on existing leases is added.
Gross leasable area: An area which can be reasonably expected to be available for lease and for which the lessee is ready to pay a rent.
Investments / (Gross) Capital expenditure: Refers to gross investments in the balance sheet. Capital expenditure includes the investments on investment properties and property, plant and equipment as well as on intangible assets. The acquisition cost of investment properties consists of a debt-free purchase price and transaction costs such as consultancy fees and transfer taxes. Gross investments on development projects, refurbishments and changes in leased premises are also considered as capital expenditure.
Like-for-like property: A property owned by the company for the whole current and previous fi nancial year (24 months), excluding properties under development and expansion as well as lots.
Occupancy cost ratio (OCR): Calculated as the share of annual gross rent paid by a tenant to Citycon, of the tenant´s annual sales, excluding VAT. The VAT percentage is an estimate. Expresses tenant´s ability to pay rent.
Occupancy rate (sq.m): The ratio of leased premises to leasable premises.
Operating expenses, or the costs of operations: Costs resulting from the management and maintenance of a property, such as heating, electricity, security guard services and cleaning services for common areas.
Turnover-based rent or turnover-linked rent: Rent divided into turnover-linked capital rent and maintenance fee. A minimum rent tied to the cost-of-living index also pertains to the turnover-linked capital rent. If the minimum rent is lower than the rent based on the actual turnover, the lessee will pay the resulting excess. The portion tied to turnover is determined by the lessee's fi eld of industry and estimated sales.
Brownfi eld site: An abandoned or underused former industrial facility, not necessarily a polluted land area; opposite of "greenfi eld".
Carbon dioxide, CO2: A greenhouse gas produced during the combustion of organic matt er (e.g. power plants using fossil fuels, car engines etc.). Carbon dioxide substantially contributes to climate warming, since its level in the atmosphere is over a hundred times that of other greenhouse gases in total.
Carbon footprint: Carbon footprint refers to the eff ect on climate warming of an individual person, organisation, event or product. Nearly all human activities have a carbon footprint that gives the amount of greenhouse gas emissions each activity produces. Presented by mass (g, kg, t).
Climate change: The increase in the average temperature of the Earth, its sea level rise and the decrease in its ice and snow cover. Eff ects also include changes in rainfall. Global warming is most probably primarily due to the acceleration in the planet's greenhouse 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.
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.
Environmental impact: Any change in the environment that entirely or partly results from an organisation's activities, products or services. Such a change may be hazardous or benefi cial.
G3.1 guidelines: A reporting guideline update related to GRI reporting, published in 2011.
GHG: Greenhouse gas (cf. Greenhouse gases).
GHG protocol: Greenhouse gas protocol; an accounting tool for calculating the size of carbon footprints.
Greenfi eld site: An undeveloped land area. The opposite to brownfi eld land.
Greenhouse gases: Gases appearing in the atmosphere that warm the Earth in a manner similar to glass panes in a greenhouse. Greenhouse gases allow short-wave solar light radiation to pass through the atmosphere while absorbing long-wave heat radiation emitt ed by the Earth's surface. The most important gases in the atmosphere, which maintain and strengthen the greenhouse eff ect, are carbon dioxide, methane, ozone, nitrous oxide ("laughing gas") and the Freons.
Hazardous waste: Hazardous waste, as defi ned in the Finnish Waste Act, means any waste which may pose a particular hazard or harm to health or the environment due to its chemical or some other properties. Examples of waste classifi ed as hazardous waste include solvents, paints and coatings, batteries containing heavy metals, fl uorescent tubes, cooling appliances, TV sets and computer displays as well as waste oil.
Primary energy: Primary energy is energy found in nature that has not been converted. It is divided into renewable (e.g. wind power) and non-renewable (e.g. oil) energy.
Secondary energy: Energy produced from primary energy, e.g. electricity or district heating. Part of the original (primary) energy is lost in the conversion process.
Sustainable development: Sustainable development is continuous, guided societal change, with the aim of safeguarding the possibilities for a good life of present and future generations. Sustainable development can be divided into four dimensions: economic, ecological, social and cultural.
CRESS (Construction and Real Estate Sector Supplement): GRI's Construction and Real Estate Sector Supplement which provides guidance for anyone who invests in, develops, constructs, or manages buildings on the principles and indicators to follow to report business strategy and performance.
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.
Global survey of property funds and real estate companies disclosing information on environmental management and performance. The survey's initiative origins from a global consortium of institutional investors. The survey was conducted by CRESB Foundation.
GRI, Global Reporting Initiative: A non-profi t organization that works towards a sustainable global economy by providing sustainability reporting guidance.
ICSC: The International Council of Shopping Centers.
IEA: The International Energy Agency.
NCSC: The Nordic Council of Shopping Centers.
NGO : Non-governmental organization.
RAKLI ry: The Finnish Association of Building Owners and Construction Clients.
SIPA: Scandinavian International Property Association.
UNEP: United Nations Environment Programme. The programme monitors the global environment and co-ordinates activities to prevent environmental threats and alleviate or eliminate any hazards.
UNEP SBCI: The UNEP Sustainable Buildings and Climate Initiative.
WBCSD: World Business Council for Sustainable Development.
WRI: World Resources Institute.
kWh = kilowatt hour
MWh = megawatt hour
MJ = megajoule
TJ = terajoule
t = tonne
m³ = cubic metre
FINANCIAL STATEMENTS 2011
| Report by the Board of Directors 3 | |
|---|---|
| EPRA performance measures 15 | |
| CITYCON OYJ'S CONSOLIDATED FINANCIAL STATEMENTS |
|
| FOR 1 JANUARY -31 DECEMBER 201120 | |
| Consolidated statement of comprehensive income, IFRS 20 |
|
| Consolidated statement of fi nancial position, IFRS 21 |
|
| Consolidated cash fl ow statement, IFRS 22 | |
| Consolidated statement of changes in shareholders' equity, IFRS 23 |
|
| Notes to the consolidated | |
| fi nancial statements, IFRS 24 | |
| 1. | Basic company data 24 |
| 2. | Basis of preparation 24 |
| 3. | Changes in IFRS and accounting policies 24 |
| 4. | Summary of signifi cant accounting policies 24 |
| 5. | Key estimates and assumptions, |
| and accounting policies requiring judgment 28 | |
| 6. | Gross rental income 30 |
| 7. | Segment information 30 |
| 8. | Property operating expenses 32 |
| 9. | Other expenses from leasing operations 32 |
| 10. Administrative expenses 32 | |
| 11. Personnel expenses 32 | |
| 12. Depreciation and amortisation 32 |
| 13. Other operating income and expenses 32 | ||
|---|---|---|
| 14. Net fi nancial income and expenses 33 | ||
| 15. Income taxes 33 | ||
| 16. Earnings per share 33 | ||
| 17. Investment properties34 | ||
| 18. Investments in jointly controlled entities 35 | ||
| 19. Intangible assets 35 | ||
| 20. Property, plant and equipment 35 | ||
| 21. Deferred tax assets and liabilities 35 | ||
| 22. Classifi cation of fi nancial instruments 36 | ||
| 23. Derivative fi nancial instruments 37 | ||
| 24. Investment properties held for sale 37 | ||
| 25. Trade and other receivables 38 | ||
| 26. Cash and cash equivalents 38 | ||
| 27. Shareholders' equity 38 | ||
| 28. Loans 39 | ||
| 29. Trade and other payables 42 | ||
| 30. Employee benefi ts 43 | ||
| 31. Cash generated from operations 44 | ||
| 32. Commitments and contingent liabilities 44 | ||
| 33. Related party transactions 45 | ||
| 34. Changes in group structure in 2011 47 | ||
| Key fi gures and ratios 48 | ||
| 1. | Consolidated key fi gures | |
| and ratios for fi ve years 48 | ||
| 2. | Five year segment information 49 | |
| Parent company income statement, FAS 50 | ||
| Parent company balance sheet, FAS 51 | ||
| Parent company cash fl ow statement, FAS 52 |
| Notes to the parent company's | |||||
|---|---|---|---|---|---|
| fi nancial statements, FAS 53 | |||||
| 1. | Accounting policies 53 | ||||
| 2. | Turnover 53 | ||||
| 3. | Other expenses from leasing operations 53 | ||||
| 4. | Personnel expenses 53 | ||||
| 5. | Depreciation and amortisation and impairments 53 | ||||
| 6. | Other operating income and expenses 53 | ||||
| 7. | Net fi nancial income and expenses 53 | ||||
| 8. | Income tax expense 54 | ||||
| 9. | Intangible assets 54 | ||||
| 10. Tangible assets 54 | |||||
| 11. Shares in subsidiaries 54 | |||||
| 12. Shares in associated companies 54 | |||||
| 13. Other investments 54 | |||||
| 14. Subsidiaries and associated companies 54 | |||||
| 15. Long- and short-term receivables 54 | |||||
| 16. Shareholders' equity 55 | |||||
| 17. Liabilities 55 | |||||
| 18. Contingent liabilities 55 | |||||
| Shareholders and shares 56 | |||||
| Formulas for key fi gures and ratios 57 | |||||
| Signatures to the fi nancial statements 58 | |||||
| Auditors' report 59 | |||||
| Property list 60 | |||||
| Valuation statement 64 |
Citycon was able to reach the fi nancial targets announced for 2011. In connection with its Q3/2011 interim report, the company revised its guidance announcing that it expects an increase of EUR 18– 23 million in turnover compared with 2010, an increase of EUR 10–15 million in direct operating profi t (EPRA operating profi t), and an increase of EUR 4–8 million in the direct result (EPRA Earnings). In 2011, turnover grew from 2010 by EUR 21.1 million, EPRA operating profi t by EUR 12.4 million and EPRA Earnings by EUR 6.0 million.
Citycon changed its external provider of property appraisal services in 2011. For the fi rst time, the value of Citycon's property portfolio at the year-end was assessed by Jones Lang LaSalle Finland Oy. Citycon has changed its independent external appraiser at regular intervals. For the fi rst three quarters of 2011, property valuation was conducted by Realia Management Oy, which had served as Citycon's appraiser for over four years.
Turnover increased to EUR 217.1 million (2010: EUR 195.9 million).
Net rental income increased by EUR 17.1 million, or 13.4 per cent, to EUR 144.3 million (EUR 127.2 million). Based on comparable exchange rates, net rental income grew by EUR 15.5 million or 12.2 per cent. Completion of redevelopment projects such as Espoontori, Forum in Jyväskylä and Åkersberga Centrum increased net rental income by EUR 5.3 million. The acquisitions of the Kristiine and Högdalen Centrum shopping centres increased net rental income by EUR 7.0 million.
| KEY FIGURES | Q4/2011 Q4/2010 Q3/2011 | 2011 | 2010 Change-% 1) | |||
|---|---|---|---|---|---|---|
| Turnover, EUR million | 56.0 | 49.9 | 55.0 | 217.1 | 195.9 | 10.8% |
| Net rental income, EUR million | 37.3 | 31.8 | 38.3 | 144.3 | 127.2 | 13.4% |
| Operating profi t, EUR million | 10.7 | 35.4 | 17.0 | 81.8 | 157.7 | -48.1% |
| % of turnover | 19.1% | 70.9% | - | 37.7% | 80.5% | - |
| Loss/profi t before taxes, EUR million | -5.3 | 22.0 | 1.0 | 19.7 | 102.8 | -80.9% |
| Loss/ profi t att ributable to parent company share | ||||||
| holders, EUR million | -5.4 | 14.4 | -0.7 | 13.0 | 78.3 | -83.5% |
| EPRA operating profi t, EUR million 2) | 28.9 | 24.3 | 31.3 | 117.4 | 105.0 | 11.8% |
| % of turnover | 51.6% | 48.8% | 56.8% | 54.1% | 53.6% | 0.9% |
| EPRA Earnings, EUR million 2) | 12.5 | 13.5 | 14.9 | 53.3 | 47.3 | 12.7% |
| Indirect result, EUR million | -17.9 | 0.9 | -15.6 | -40.3 | 31.1 | -- |
| Earnings per share (basic), EUR | -0.02 | 0.06 | 0.00 | 0.05 | 0.34 | -85.5% |
| Earnings per share (diluted), EUR | -0.02 | 0.06 | 0.00 | 0.05 | 0.34 | -85.5% |
| EPRA Earnings per share (basic), EUR 2) | 0.05 | 0.06 | 0.05 | 0.21 | 0.21 | -1.1% |
| Net cash from operating activities per share, EUR | 0.04 | 0.00 | 0.14 | 0.25 | 0.09 | 190.5% |
| Fair value of investment properties, EUR million | 2,512.6 2,522.1 2,367.7 | 6.5% | ||||
| Equity per share, EUR | 3.29 | 3.25 | 3.47 | -6.5% | ||
| Net asset value (EPRA NAV) per share, EUR | 3.64 | 3.62 | 3.79 | -4.6% | ||
| EPRA NNNAV per share, EUR | 3.31 | 3.29 | 3.49 | -5.7% | ||
| Equity ratio, % | 37.7 | 36.0 | 37.1 | -2.9% | ||
| Gearing, % | 148.3 | 151.4 | 153.1 | -1.1% | ||
| Net interest-bearing debt (fair value), EUR million | 1,445.2 1,463.5 1,386.0 | 5.6% | ||||
| Net rental yield, % | 5.9 | 6.0 | 5.8 | 3.4% | ||
| Net rental yield, like-for-like properties, % | 6.0 | 6.1 | 6.0 | 1.7% | ||
| Occupancy rate (economic), % | 95.4 | 95.5 | 95.1 | 0.5% | ||
| Personnel (at the end of the period) | 129 | 136 | 129 | 5.4% | ||
| Dividend per share, EUR | 0.04 3) | 0.04 | 0.0% | |||
| Return from invested unrestricted equity fund per | ||||||
| share, EUR | 0.11 3) | 0.10 | 10.0% | |||
| Dividend and return from invested unrestricted equity fund per share total, EUR |
0.15 3) | 0.14 | 7.1% |
1) Change-% is calculated from exact fi gures and refers to the change between 2011 and 2010.
2) Citycon has renamed previously disclosed direct operating profi t as EPRA operating profi t and direct result as EPRA Earnings. Citycon has been previously disclosing only EPRA Earnings, diluted. In the Financial Statements 2011, Citycon discloses also EPRA Earnings basic and in the future is going to disclose only EPRA Earnings basic in accordance with the EPRA's Recommendations. Additional information on the EPRA EPS basic and diluted is available on page 15 of the Financial Statements 2011 under the section EPRA Perfromance Measures.
3) Proposal by the Board of Directors.
Five-year key fi gures are available on page 48 of the Financial Statements.
Simultaneously with the Financial Statements and the Report by the Board of Directors, the Corporate Governance Statement of Citycon Group for the fi nancial year 2011 has been published and is available on the corporate website at www.citycon.com.
Comments from Citycon Oyj's Chief Executive Offi cer Marcel Kokkeel on the year 2011:
"The year 2011 was a period of solid performance: the company's net rental income grew by 13.4 per cent, like-for-like net rental income by 3.8 per cent, the occupancy rate remained high at 95.5 per cent, the shopping centre footfall in total grew by 3 per cent and sales by 7 per cent. In particular, the shopping centre Liljeholmstorget Galleria in Sweden improved during the year.
In 2011, a clear distinction was made between asset classes of diff erent quality. This general trend refl ects in Citycon's property performance and valuation. Overall, demand for the best properties is solid and their fair values remain stable, whereas non-prime properties show the opposite trend.
Management prioritises working on sustainable cash fl ows and therefore we need to improve the quality of the portfolio. We are engaged in high level of activities to accelerate property redevelopments, disposals and selective acquisitions. Also, we have been organising for example work shops to fi nd new leasable space in shopping centres. We are also committ ed to use temporary and specialty leasing to generate additional income.
The year 2011 was a year of transition: we updated our strategy to focus on only quality shopping centres in the Nordic and Baltic countries and we concentrated on business improvements. During the year, we launched an internal project called "Project Now" to improve our operations and reduce costs. The aim is to become more effi cient, be close to customers, tenants and market places and to become a more pro-active partner. There have also been changes in the management. These changes are a main cause of one-off administrative costs, for example in terms of severance pays. However, as of the start of 2012, most of these changes have been executed and the cost pressures will ease going forward.
During the year, the company strengthened its property portfolio through both acquisitions and redevelopment projects. In May, Citycon acquired two new shopping centres: Kristiine in Tallinn, and Högdalen Centrum in Stockholm. We are pleased with both acquisitions and especially Kristiine has outperformed our expectations. The most signifi cant ongoing redevelopment projects are in Finland: Koskikeskus in Tampere and Myllypuro in Helsinki, additionally there is a minor extension project in Iso Omena, Espoo. Also, the shopping centre Magistral in Tallinn is currently being redeveloped and extended. In addition, some non-core properties have been sold and these disposals will be accelerated.
Citycon's fi nancial position is good. The directed share issue arranged by the company in July was completed successfully. At the year-end, available liquidity totalled EUR 345.0 million and equity ratio was 36.0 per cent."
On the whole, the fi rst half of 2011 was positive in Citycon's operating countries, with strong consumer confi dence and growing retail. Aft er the summer, economic sentiment turned negative, particularly due to the sovereign debt crisis in the euro area. During 2011, changes in real economy trends impacted on retail trade. However, retail sales grew in both Finland and Sweden. Total retail sales growth rate in 2011 was 5.3 per cent in Finland, 1.2 per cent in Sweden, 4.0 per cent in Estonia and 8.8 per cent in Lithuania. (Sources: Statistics Finland, Statistiska Central Byrån, Statistics Estonia, Statistics Lithuania)
Household consumer confi dence remained strong until last summer, but deteriorated sharply in the fi nal months of the year in all operating countries. In Finland and Sweden, the household consumer confi dence indicator was still positive, unlike in Estonia and Lithuania. (Eurostat)
Retail sales growth and the infl ation rate are key drivers for Citycon's business and have an impact on the rents from retail premises. Consumer prices continued to rise during the year in all of Citycon's operating countries. In December, the annual infl ation rate was 2.9 per cent in Finland, 2.3 per cent in Sweden, 5.0 per cent in Estonia and 3.4 per cent in Lithuania. (Statistics Finland, Statistiska Central Byrån, Statistics Estonia, Statistics Lithuania)
In Finland and Sweden, unemployment is lower than the European Union average: at the end of December, the unemployment rate in Finland was 7.4 per cent and in Sweden 7.1 per cent. In Estonia and Lithuania, the unemployment rates remain high: 10.9 per cent in Estonia and 15.3 per cent in Lithuania at the end of September. However, the adoption of the euro has had a positive impact on the Estonian economy, through tourism and foreign investment. (ibid.)
The instability of the fi nancial market in Europe deepened towards the year-end, aff ecting the cost and availability of fi nancing.
The Finnish property investment market overall has witnessed low levels of transactions since the slowdown of market in H1 2008. Even though the investment demand has been increasing, low supply of prime assets has limited the transactional activity. The retail investment volume remained below EUR 400 million in 2011. As a result of a strong investment demand both shopping centre and retail warehouse prime yields have moved in since the Q1 2010. The polarisation of the market seems also to continue and at the same time demand for core assets remains strong.
In Sweden, the retail property transaction volume increased from approximately SEK 3.22 billion in H1 2010 to SEK 8.537 billion in H1 2011. However, demand is weaker for secondary and tertiary retail property investments.
In Estonia, demand for shopping centre space has been growing as shopping in centres is increasing its share in shopping habits and retail chains are expanding. Despite global turmoil the outlook for Estonian retailing is positive and in general, plans to enlarge existing shopping centres have been resumed.
In Vilnius, Lithuania, there are no new shopping centres under development, but some super- and hypermarkets are under construction. (Source: Jones Lang LaSalle Finland Oy)
During the year, total sales in Citycon's shopping centres grew by 7 per cent and the footfall increased by 3 per cent, year-on-year. There was sales growth in all of the company's operating countries: 5 per cent in Finland, 7 per cent in Sweden and 18 per cent in the Baltic countries. In Finland, the footfall increased by 2 per cent, in Sweden by 6 per cent and in the Baltic countries by 2 per cent. Positive developments in sales and footfall are mainly attributable to redevelopment projects completed in recent years. Like-for-like shopping centre sales (sales excluding the impact of redevelopment projects and property acquisitions) grew by 4 per cent and were positive in all operating countries. Like-for-like footfall remained at the previous year's level.
Citycon's Board of Directors considers the company's major short-term risks and uncertainties to be associated with economic development in the company's operating regions, which aff ects demand, vacancy rates and market rents in retail premises. In addition, key near-term risks include a rise in loan margins, weaker availability of debt fi nancing and the fair value development of properties in uncertain economic conditions.
Although the fi nancial crisis' eff ects on rent levels for retail premises, and on occupancy rates, have so far been minor in Citycon's operating areas, demand for retail premises, reduction of vacancy rates and market rent levels involve challenges in a sluggish economic environment. Economic developments, particularly trends impacting on consumer confi dence and consumer behaviour, are inevitably aff ecting demand for retail premises. Escalation of the sovereign debt problems in the euro area towards the end of 2011 was followed by growing uncertainty in the fi nancial markets; as a result, short-term fi nancial growth forecasts have been revised downwards. Risks to fi nancial growth are clearly higher, and in conditions of weak economic growth, rental levels typically will fall for retail premises, demand for new premises is lower, and vacancy rates will rise.
Implementation of Citycon's growth strategy requires new fi nancing, which means the risks associated with the availability and cost of fi nancing are of fundamental importance to Citycon. Banks' willingness to lend money to companies improved in 2010 and in early 2011, but towards the end of 2011 the availability of debt fi nancing decreased and loan margins rose sharply as banks experienced more diffi culties with their own funding. In the future, tightening regulation governing the banking and insurance sectors (Basel III and Solvency II regulations) is likely to push the costs of debt fi nancing upwards, and to limit the availability of long-term bank loans. This will probably raise the cost of Citycon's new loan fi nancing. So far this change in margins has been mitigated by reduced underlying base rates and Citycon's active fi nancing policy. In 2012, the company does not have major refi nancing needs, whereas in the next few years, Citycon will have to refi nance some loan agreements signed at low margins before the fi nancial crisis, which means the margins on these loans will rise. Such a rise in loan margins is likely to push Citycon's average interest rate up in the future, even if market interest rates remained largely unchanged.
At the moment, the fair value development of investment properties is characterised by high uncertainty caused by the sovereign debt crisis and the resulting harsh economic conditions. Several factors aff ect the fair value of the investment properties owned by Citycon, such as general and local economic development, interest rate levels, foreseeable infl ation, the market rent trend, vacancy rates, property investors' yield requirements and the competitive environment. This uncertainty will refl ect most strongly on retail properties located outside major cities, or in otherwise less att ractive properties, because investor demand is not currently focused on these properties, and banks are not particularly keen to off er fi nancing for such projects. Yet, at the same time, the fair value of winning shopping centres, which att ract investor interest in uncertain conditions, has remained stable in 2011 or even increased.
The company's short-term risks and uncertainties, as well as its risk management and risk management principles, are discussed in more depth at www.citycon.com/riskmanagement, on pages 40-42 of the Financial Statements for 2011, and on pages 73–74 of the Annual Report for 2011, to be published in week seven.
The parent company's retained earnings amount to EUR 11.5 million, including the profi t for the period of EUR 7.6 million. On 31 December 2011, the funds in the parent company's invested unrestricted equity fund amounted to a total of EUR 277.2 million.
The Board of Directors proposes to the Annual General Meeting to be held on 21 March 2012 that a per-share dividend of EUR 0.04 be paid out for the fi nancial year ending on 31 December 2011, and that a return of equity of EUR 0.11 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 26 March 2012 and that the dividend and equity return be paid on 4 April 2012.
Moreover, the Board of Directors proposes that the profi t for the period is recognised in retained earnings.
In the view of the Board of Directors, the proposed distribution of profi ts and return of equity do not pose a risk to the company's solvency.
Citycon continues to focus on increasing both its net cash fl ow from operating activities and its EPRA operating profi t. In order to implement this strategy, the company will pursue value-added activities, selected acquisitions and proactive asset management.
Initiation of planned projects will be carefully evaluated against strict pre-leasing criteria. Citycon intends to continue the divestment of its non-core properties, in order to improve the property portfolio and strengthen the company's fi nancial position. The company is also considering alternative property fi nancing sources.
In 2012, Citycon expects to continue generating solid cash fl ow and expects its turnover to grow by EUR 7–16 million and its EPRA operating profi t by EUR 8–16 million compared with the previous year, based on the existing property portfolio. The company expects its EPRA Earnings to increase by EUR 4–11 million from the previous year. Furthermore, the company expects its EPRA EPS (basic) to be EUR 0.21–0.23 based on existing property portfolio and number of shares. These estimates are based on already completed (re)development projects and those completed in the future, as well as on the prevailing level of infl ation and the euro-krona exchange rate, and current interest rates. Properties taken offl ine for planned development projects will reduce net rental income during the year.
Citycon's strategy is to focus on quality shopping centres in the Nordic and Baltic countries. Citycon seeks growth, both through shopping centre acquisitions and the redevelopment and expansion of its existing shopping centres. In its strategy updated in the summer of 2011, Citycon defi ned supermarkets and shops as non-core properties and announced its intention to divest these properties within the next few years.
At the end of 2011, the fair value of Citycon's property portfolio totalled EUR 2,522.1 million (EUR 2,367.7 million) and the company owned 36 (33) shopping centres and 44 (50) other properties. Of the shopping centres, 23 (22) were located in Finland, 9 (8) in Sweden and 4 (3) in the Baltic countries.
Citycon's gross capital expenditure (including acquisitions) for the period totalled EUR 216.7 million (EUR 133.7 million), with new property acquisitions accounting for EUR 138.9 million (EUR 4.2 million), agreed purchase price adjustments related to property acquisitions concluded earlier for EUR 1.1 million (EUR 2.6 million), acquisitions of jointly controlled entities for EUR 0.3 million (EUR 0.0 million), property development for EUR 75.0 million (EUR 125.3 million) and other investments for EUR 1.4 million (EUR 1.7 million).
Capital expenditure (including acquisitions) during the period totalled EUR 62.5 million (EUR 76.3 million) in Finland, EUR 45.5 million (EUR 50.6 million) in Sweden and EUR 108.1 million (EUR 6.0 million) in the Baltic countries. Capital expenditure in the company's headquarters amounted to EUR 0.6 million (EUR 0.8 million). The company made divestments totalling EUR 18.1 million (EUR 67.9 million), from which a total of EUR 0.6 million (EUR 2.1 million) was recognised in gains on sale (tax eff ect included).
During the year:
During the year:
• The company sold a 57.4 per cent interest in MREC Kiinteistö Oy Tullintori shares for approximately EUR 6.1 million. As a result, the company's leasable area fell by approximately 10,000 square metres. Citycon continues the commercial management of the shopping centre Tullintori.
Changes in the Group structure during 2011 are presented on page 47 of the Financial Statements.
Citycon is pursuing a long-term increase in the footfall, cash fl ow and effi ciency of its retail properties, as well as in the return on its investment in these properties. The purpose of the company's development activities is to keep its shopping centres competitive for both customers and tenants. In the short term, redevelopment projects weaken returns from some properties, as some retail premises may have to be temporarily vacated for refurbishment, aff ecting rental income. Citycon aims to complete its construction projects in phases, in order to secure continuous cash fl ow.
During the year:
• A major redevelopment project was initiated at the Koskikeskus shopping centre in Tampere, resulting in an increase of approximately 1,500 square metres of leasable area. Once the project is completed, Koskikeskus will have approximately 28,600 square metres of leasable retail area. The fully renovated Koskikeskus will open in November 2012. Koskikeskus will remain open and serve customers throughout the renovation project. The total project investment amounts to EUR 37.9 million.
Lindome in Greater-Gothenburg area and Liljeholmstorget's offi ce part. The combined estimated investment need of these projects is approximately EUR 7.5 million and all of these projects are expected to be completed during 2012.
• The company had nine (re)development projects underway, due to which some 17,600 square metres of retail space were offl ine. For the moment, the redevelopment projects of Porin Asema-aukio and Isolinnankatu have been discontinued and will be resumed when leasing moves ahead.
During the year:
| Location | Project area, sq.m. before |
Project area, sq.m. aft er |
Estimated total project investment (EUR million) |
Actual gross capital investments by 31 December 2011 (EUR million) |
Estimated fi nal year of completion |
|
|---|---|---|---|---|---|---|
| Forum | Jyväskylä, Finland | 12,000 | 12,000 | 16.0 | 16.0 | completed |
| Espoontori | Espoo, Finland | 10,400 | 10,400 | 25.82) | 21.7 | completed |
| Åkersberga Centrum | Österåker, Sweden | 20,000 | 27,500 | 52.43) | 51.6 | completed |
| Martinlaakso | Vantaa, Finland | 3,800 | 7,300 | 22.9 | 22.9 | completed |
| Hansa (Trio) | Lahti, Finland | 11,000 | 11,000 | 8.0 | 6.3 | completed |
| Myyrmanni | Vantaa, Finland | 8,400 | 8,400 | 6.5 4) | 6.5 | completed |
| Kirkkonummen liikekeskus | Kirkkonummi, Finland | 5,000 | 5,000 | 4.0 | 3.2 | completed |
| Koskikeskus | Tampere, Finland | 27,700 | 28,600 | 37.9 | 12.0 | 2012 |
| Myllypuro | Helsinki, Finland | 7,700 | 7,300 | 21.3 | 21.3 5) | 2012 |
| Iso Omena | Espoo, Finland | 60,600 | 63,000 | 7.6 | 0.6 | 2012 |
| Magistral | Tallin, Estonia | 9,500 | 11,900 | 7.0 | 2.3 | 2012 |
| Åkermyntan | Stockholm, Sweden | 8,500 | 10,100 | 6.9 | 0.2 | 2012 |
1) Calculated at end of period exchange rates.
2) The estimated total investment of the refurbishment, EUR 18 million, has been exceeded by EUR 2.5 million. In addition, the estimated total project investment includes costs related to the planned extension of Espoontori to adjacent Asemakuja property, such as zoning and land use payments.
3) Estimated total investment in SEK has not changed from year end 2009.
4) The estimated total investment has been raised by EUR 1.7 million.
5) The compensation of EUR 5.9 million and its tax impact received from the City of Helsinki has been deducted from actual gross investments
• During the year, several smaller projects were completed in Finland, such as the Kirkkonummi retail centre, the Hansa property in connection with Trio, and the refurbishment of the Torikeskus in Seinäjoki.
New projects planned during the year, requiring the approval of Citycon's Board of Directors prior to their launch, include the following:
The enclosed table lists the most signifi cant (re)development projects in progress, as well as projects completed in 2010 and 2011. Further information on the company's completed, ongoing and planned (re)developments can be found on the corporate website and on pages 85–87 of the Annual Report for 2011, to be published in week seven.
The fi gures presented below are for the year 2011 and the fi gures in brackets are the reference fi gures for the year 2010, unless otherwise indicated.
The company's turnover consists mainly of rental income from retail properties, and utility and service charge income. Turnover came to EUR 217.1 million (EUR 195.9 million). Turnover grew by EUR 21.1 million, or 10.8 per cent. With comparable exchange rates, turnover increased by EUR 18.2 million, or 9.3 per cent. Completed redevelopment projects, such as Espoontori, Forum in Jyväskylä and Åkersberga Centrum, accounted for EUR 6.5 million of turnover growth, with acquisitions accounting for EUR 10.3 million. Divestments (see divestments in 2011 under paragraph Property portfolio; sales of apartments in Sweden in 2010 are included in the reference period's divestment portfolio) decreased turnover by EUR 1.8 million. Like-for-like properties contributed to turnover growth by EUR 3.2 million. (Also see the table Net rental income and turnover by segment and property portfolio.)
Turnover from like-for-like properties increased thanks to higher rental levels and improved occupancy rate in shopping centres, but reduced due to higher vacancy rates in other retail properties. Turnover from like-for-like properties was also increased by temporary rental rebates falling from EUR 3.0 million to EUR 2.4 million.
At the year-end, Citycon had a total of 3,955 (3,765) leases. The leasable area increased by 5.6 per cent to 994,730 square metres. Changes in the number of lease agreements and in the leasable area were due to acquisitions of shopping centre properties in the Baltic Countries and Sweden, and the opening of redeveloped properties. These were off set by the divestments of the shopping centre Tullintori and supermarket properties in Finland, and of residential units in Sweden. The average remaining length of the lease portfolio increased and was 3.4 (3.2) years. The average rent increased from EUR 18.7/sq.m. to EUR 19.7/sq.m. thanks to exchange rate changes, redevelopment projects, property acquisitions and divestments, as well as to index increments. The economic occupancy rate rose to 95.5 per cent (95.1%), due to lower vacancy rates in shopping centres. During the preceding twelve months, the rolling twelve-month occupancy cost ratio for like-for-like shopping centre properties was 8.9 per cent.
Property operating expenses consist of maintenance costs relating to real estate properties, such as electricity, cleaning and repairs. Property operating expenses rose by EUR 4.2 million, from EUR 67.4 million to EUR 71.6 million. With comparable exchange rates, the operating expenses increased by EUR 2.8 million, i.e. 4.1 per cent. Completed (re)development projects and acquisitions increased property operating expenses, while divestments decreased them. Like-for-like property operating expenses decreased by EUR 0.5 million due to ao. lower marketing costs. On the other hand, higher electricity and heating costs increased like-forlike property operating expenses, arising from the environmental electricity tax and cold winter (Cf. Notes to the Consolidated Financial Statements, Note 8 Property operating expenses). Snow loading expenses decreased from the previous year.
| Q4/2011 | Q4/2010 | Q3/2011 | 2011 | 2010 Change-% | ||
|---|---|---|---|---|---|---|
| Number of properties | 82 | 80 | 83 | -3.6 | ||
| Gross leasable area, sq.m. | 999,270 994,730 942,280 | 5.6 | ||||
| Annualised potential rental value, EUR million 1) | 226.0 | 228.5 | 205.2 | 11.4 | ||
| Average rent (EUR/sq.m.) | 19.5 | 19.7 | 18.7 | 5.3 | ||
| Number of leases started during the period | 228 | 245 | 188 | 782 | 789 | -0.9 |
| Total area of leases started, sq.m. 2) | 49,370 | 47,621 | 64,777 177,006 160,215 | 10.5 | ||
| Average rent of leases started (EUR/sq.m.) 2) | 19.8 | 18.3 | 21.9 | 19.7 | 17.9 | 10.1 |
| Number of leases ended during the period | 284 | 294 | 208 | 877 | 1,279 | -31.4 |
| Total area of leases ended, sq.m. 2) | 53,143 | 25,114 | 62,713 186,120 190,489 | -2.3 | ||
| Average rent of leases ended (EUR/sq.m.) 2) | 17.2 | 20.0 | 21.2 | 18.1 | 16.2 | 11.7 |
| Occupancy rate at end of the period (economic), % | 95.4 | 95.5 | 95.1 | - | ||
| Average remaining length of lease portfolio at the end of the period, year | 3.4 | 3.4 | 3.2 | 6.3 |
1) Annualised potential rental value for the portfolio includes annualised gross rent based on valid rent roll at the end of the period, market rent of vacant premises and rental income from turnover based contracts (estimate) and possible other rental income.
2) Leases started and ended don't necessarily refer to the same premises.
Other expenses from leasing operations consist of tenant improvements and credit losses. They totalled EUR 1.2 million (EUR 1.3 million). The decrease in expenses was mainly due to lower credit losses in Finnish operations.
Citycon's net rental income was EUR 144.3 million (EUR 127.2 million). Net rental income increased by EUR 17.1 million or 13.4 per cent. With comparable exchange rates, net rental income increased by EUR 15.5 million, i.e. 12.2 per cent. Redevelopment projects such as Espoontori, Forum in Jyväskylä and Åkersberga Centrum increased net rental income by EUR 5.3 million, while the acquisitions of the Kristiine and Högdalen Centrum shopping centres increased net rental income by EUR 7.0 million. Divestments reduced net rental income by EUR 0.8 million. Like-forlike net rental income grew by EUR 4.0 million or 3.8 per cent, mainly thanks to a clear increase in net rental income from Liljeholmstorget Galleria and other shopping centres, and reduced vacancy rates. The negative net rental income development in the Finnish like-for-like portfolio was mainly due to two largely vacant supermarket and shop properties, one in the Helsinki Metropolitan Area and one in Pori.
Citycon's property portfolio's net rental yield was 6.0 per cent (5.8%).
The following table presents like-for-like net rental income growth by segment. Like-for-like properties are properties held by Citycon throughout two full preceding periods, excluding properties under redevelopment or extension and undeveloped lots. 60.9 per cent of like-for-like properties are located in Finland, measured in net rental income.
Administrative expenses totalled EUR 28.0 million (EUR 23.3 million). This represented an increase of EUR 4.7 million or 20.4 per cent, mainly due to reorganisation costs (EUR 0.9 million), lower capitalisation of expenses for personnel involved in development projects (EUR 0.8 million), non-cash stock option costs (EUR 1.5 million) and a higher average headcount. In 2010, the amount of development personnel capitalised expenses was higher, as projects that had been planned for several years were started.
At the year-end, Citycon Group employed a total of 136 (129) persons, of whom 90 worked in Finland, 35 in Sweden, 10 in the Baltic countries and 1 in the Netherlands.
Citycon Group paid a total of EUR 11.2 million (EUR 8.7 million) in salaries and other remuneration, of which the share of the Group's managing directors' salaries and other remuneration was EUR 0.5 million (EUR 0.4 million) and the share of the Board of Directors EUR 0.7 million (EUR 0.7 million). The parent company paid a total of EUR 10.0 million (EUR 6.4 million) in salaries and other remuneration, of which the share of the CEO's salary and remuneration was EUR 0.5 million (EUR 0.4 million) and the share of the Board of Directors EUR 0.7 million (EUR 0.7 million).
| 2011 | 2010 | 2009 | |
|---|---|---|---|
| Average number of personnel | 131 | 123 | 117 |
| Salaries and other remuneration, EUR million | 11.2 | 8.7 | 8.2 |
Net fair value losses on investment properties totalled EUR –35.3 million (gains of EUR 50.8 million). This change in fair value was due to a decrease in value of the supermarket and shop proper-
| Net rental income by segments and portfolios | Turnover by portfolios |
|||||
|---|---|---|---|---|---|---|
| EUR million | Finland | Sweden | Baltic Countries | Other | Total | Citycon total |
| 2009 | 92.4 | 23.2 | 9.8 | 0.0 | 125.4 | 186.3 |
| (Re)development projects | -4.6 | 3.5 | 2.2 | - | 1.0 | 6.1 |
| Divestments | -0.3 | -1.2 | - | - | -1.6 | -2.3 |
| Like-for-like properties | -0.6 | 0.6 | -0.2 | - | -0.2 | 1.3 |
| Other (incl. exchange rate diff .) | 0.0 | 2.6 | 0.0 | 0.0 | 2.5 | 4.5 |
| 2010 | 86.7 | 28.7 | 11.8 | 0.0 | 127.2 | 195.9 |
| Acquisitions | 0.1 | 0.8 | 6.0 | - | 7.0 | 10.3 |
| (Re)developments projects | 4.2 | 1.4 | -0.3 | - | 5.3 | 6.5 |
| Divestments | 0.1 | -0.9 | - | - | -0.8 | -1.8 |
| Like-for-like properties | -0.7 | 3.8 | 0.9 | - | 4.0 | 3.2 |
| Other (incl. exchange rate diff .) | -0.1 | 1.6 | 0.1 | 0.0 | 1.6 | 3.0 |
| 2011 | 90.5 | 35.4 | 18.4 | 0.0 | 144.3 | 217.1 |
ties by EUR –42.6 million, off set by an increase in the value of the shopping centres by EUR 7.3 million. The company recorded a total value increase of EUR 39.8 million (EUR 95.7 million) and a total value decrease of EUR 75.1 million (EUR 44.9 million). On 31 December 2011, the average net yield requirement defi ned by Jones Lang LaSalle Finland Oy for Citycon's entire property portfolio was 6.4 per cent (30 September 2011: 6.4%). The net yield requirement for properties in Finland, Sweden and the Baltic countries was 6.3 per cent, 5.9 per cent and 8.0 per cent, respectively. The yield requirement for supermarket and shop properties increased, while future market rent estimates slightly reduced and cost estimates related to some of these properties rose.
The average market rent used for the valuation rose to EUR 23.8/sq.m. up from EUR 23.6/sq.m. (cf. Notes to the Consolidated Financial Statements, Note 17: Investment Property). Jones Lang LaSalle Finland Oy's Valuation Statement for the year-end can be found on the corporate website at www.citycon.com/valuation.
Net gains on the sale of investment properties totalled EUR 0.6 million (EUR 2.6 million) (cf. Property portfolio). The reference fi gure for 2010 included EUR 0.5 million in gains on sale from the divestment of apartments in Jakobsbergs Centrum and Åkersberga Centrum, and EUR 2.2 million from the sale of the building rights for apartments to be built in connection with the Myllypuron Ostari shopping centre.
Operating profi t came to EUR 81.8 million (EUR 157.7 million), being lower mainly due to negative fair value changes, lower gains on sale and higher administrative expenses off set by the increase in net rental income.
Net fi nancial expenses increased by EUR 7.5 million to EUR 62.4 million (EUR 54.9 million). This increase was mainly att ributable to higher interest expenses as a result of higher interest-bearing debt and appreciation of the Swedish krona. Interest-bearing debt increased due to investments and stronger Swedish krona. The year-to-date weighted average interest rate for interest-bearing debt remained virtually unchanged compared to the previous year, being 4.03 per cent (4.04%), because general market interest rates remained on a very low level. At the year-end, the weighted average interest rate, including interest rate swaps, rose to 4.07 per cent (3.91%). The year-end average interest rate increased due to higher credit margins on new loans signed in 2011.
Share of profi t of jointly controlled entities totalled EUR 0.3 million (EUR 0.0 million). Share of profi t of jointly controlled entities represents Citycon's share of the profi t of Espagalleria Oy.
Income tax benefi t for the fi nancial period was EUR 1.6 million (income tax expense of EUR 12.5 million). The increase in income tax benefi t was primarily due to deferred tax benefi t of EUR 2.5 million resulting from fair value losses on investment properties in 2011 compared to deferred tax expenses of EUR 11.8 million resulting from fair value gains on investment properties in 2010.
Profi t for the period came to EUR 21.3 million (EUR 90.4 million). The decrease was mainly due to the lower operating profi t resulting from negative fair value changes and higher fi nancial expenses.
The company's EPRA Earnings was EUR 53.3 million (EUR 47.3 million), up by EUR 6.0 million or 12.7 per cent (cf. EPRA Performance measures, table 1: EPRA Earnings). Growth in the EPRA Earnings was primarily due to net rental income growth. The reasons for net rental income growth can be found under Net rental income. EPRA Earnings was lowered by higher administrative expenses and fi nancial expenses. The reasons for administrative expenses growth are given under Administrative expenses. The increase in fi nancial expenses in 2011 arose from higher interest expenses due to an increase in interest-bearing debt. The effect of changes in the fair value of the property portfolio, of gains on sales and other indirect items on the profi t att ributable to the parent company's shareholders, tax eff ects included, was EUR –40.3 million (EUR 31.1 million). These items have no impact on EPRA Earnings.
The fair value of the company's property portfolio totalled EUR 2,522.1 million (EUR 2,367.7 million), with Finnish properties accounting for 61.4 per cent (64.7%), Swedish properties for 27.6 per cent (28.2%) and Baltic properties for 11.0 per cent (7.0%).
The fair value of investment properties increased by EUR 154.4 million because of gross capital expenditure of EUR 214.9 million, off set by divestments totalling EUR 16.6 million (see Property portfolio) and by EUR 12.7 million due to the transfer of Floda and Landvett er into Investment properties held for sale -category. In addition, net fair value losses on investment properties decreased the value of investment properties by EUR 35.3 million (see detailed analysis under Financial Performance: Net fair value gains on investment properties). The streghtening of the Swedish krona increased the fair value of the investment properties by EUR 4.0 million.
Shareholders' equity att ributable to parent company's shareholders was EUR 902.6 million (EUR 849.5 million). This fi gure increased from the end of 2010 due to a share issue of EUR 98.9 million (net of transaction costs) executed in July 2011. In addition, the profi t for the reporting period att ributable to parent company shareholders' increased shareholders' equity. On the other hand, dividend payments and equity returns, as well as the fair value change of interest derivative contracts, decreased shareholders' equity. Citycon applies hedge accounting, which means that fair value changes of applicable interest derivatives are recorded under Other items of comprehensive income, which aff ects shareholders' equity. A loss on fair value of interest derivatives of EUR -26.8 million was recorded for the period, taking into account their tax eff ect (a gain of EUR 3.8 million) (cf. Notes to the Consolidated Financial Statements, Note 23: Derivative fi nancial instruments).
Due to the aforementioned items, NAV per share decreased to EUR 3.62 (EUR 3.79) and NNNAV per share to EUR 3.29 (EUR 3.49). The equity ratio was 36.0 per cent (37.1%). The company's equity ratio, as defi ned in the loan agreement covenants, decreased to 39.0 per cent (39.4 %) due to net fair value losses on investment properties.
Liabilities totalled EUR 1,715.9 million (EUR 1,536.3 million), with short-term liabilities accounting for EUR 262.2 million (EUR 242.2 million). At the year-end, Citycon's liquidity was EUR 345.0 million, of which EUR 253.7 million consisted of undrawn, committ ed credit facilities and EUR 91.3 million of cash and cash equivalents. At the end of the year, Citycon's liquidity, excluding commercial papers, stood at EUR 296.3 million (EUR 267.1 million on 30 September 2011). The July share off ering of approximately EUR 99 million and the EUR 75 million new loan agreement signed in August increased liquidity.
Interest-bearing debt increased year on year by EUR 150.3 million to EUR 1,547.9 million (EUR 1,397.7 million). The fair value of interest-bearing debt was EUR 1,554.8 million (EUR 1,405.5 million) at the period- end. Cash and cash equivalents totalled EUR 91.3 million (EUR 19.5 million), making the fair value of interest-bearing net debt EUR 1,463.5 million (EUR 1,386.0 million). The average loan maturity, weighted according to the principal amount of the loans, was 2.9 years (3.1 years). The average interest-rate fi xing period remained at 3.6 years (3.6 years).
Citycon's interest coverage ratio remained unchanged and stood at 2.0x (Q3/2011: 2.0x).
Fixed-rate debt accounted for 81.3 per cent (80.3%) of the period-end interest-bearing debt, interest-rate swaps included. The hedge ratio increased because Citycon made new hedges and used the proceeds from the share off ering to repay fl oating rate debt. The debt portfolio's hedging ratio was in line with the company's fi nancing policy.
On 2 August 2006, Citycon issued subordinated convertible bonds of EUR 110 million. The terms and conditions of the convertible bonds, as well as the remaining principal and accrued interest, are presented in Note 28 Loans in the Notes to the Consolidated Financial Statements.
Net cash from operating activities totalled EUR 66.0 million (EUR 20.0 million). The increase was due to higher EPRA operating profi t, received tax returns, as well as extraordinary items and timing diff erences.
Net cash used in investing activities totalled EUR –203.0 million (EUR –67.5 million). Acquisitions were EUR 139.2 million (EUR 6.7 million). Capital expenditure related to investment properties, shares in jointly controlled entities and tangible and intangible assets totalled EUR 82.4 million (EUR 127.0 million). Negative cash fl ow from investing activities was reduced by sales of investment properties totalling EUR 18.6 million (EUR 66.3 million).
Net cash from fi nancing activities totalled EUR 208.5 million (EUR 45.2 million). This consisted of share issue in July 2011, loan repayments, new loan withdrawals and dividend and equity return payments. New equity was raised and new loans were taken out to fi nance redevelopment investments, acquisitions in Estonia, Sweden and Finland and the payment of dividends and equity return.
In August, SRV Construction Ltd initiated arbitration proceedings against Citycon's subsidiary, MREC Kiinteistö Oy Espoontori related to Espoontori shopping centre's completed redevelopment project. The dispute's monetary value is approximately EUR 4.6 million including VAT. Citycon does not expect SRV's claim to have signifi cant impact on the company's fi nancial position or results.
Additional claims have been submitt ed 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 a signifi cant impact on the company's fi nancial position or fi nancial results.
Citycon's business operations are divided into three business units: Finland, Sweden and the Baltic Countries. The Finnish unit is subdivided into fi ve functions: Centre Management (operative management of shopping centres), Leasing, Marketing, Property Development, and Finance and Administration. The Swedish unit is subdivided into three functions: Retail Property Management, Leasing and Commercial Planning, and Property Development. The Baltic unit is subdivided into two functions: Retail Property Management and Property Development.
Citycon is the market leader in the Finnish shopping centre business. At the year-end, the company owned 23 shopping centres and 37 other properties in Finland, with a total leasable area of 577,630 square metres (579,980 sq.m.). The leasable area fell due to completed divestments (cf. Property portfolio). The annualised potential rental value increased to EUR 139.3 million, mainly due to completed redevelopment projects (Myllypuro and Martinlaakso).
Lease agreements started during the fi nancial year applied to a GLA of 137,118 square metres (107, 970 sq.m.). The average rent for new lease agreements was slightly lower than average rent for the entire Finnish property portfolio, mainly due to new leases in supermarket and shop properties, which generally have lower rents than shopping centre properties. Ended lease agreements applied to 138,435 square metres (122,680 sq.m.). The average rent for ended lease agreements was also slightly lower than the average for the entire Finnish property portfolio, mainly due to divestments (e.g. Tullintori) and the ended offi ce leases (accounting for approx. 8,600 sq.m.). The average rent rose from EUR 20.3/sq.m. to EUR 21.0/sq.m., mainly thanks to completed redevelopment projects, divestments and index increments. The occupancy rate increased to 94.1 per cent (94.0%), following the decreased vacancy in shopping centre properties and reduced future rental estimates of certain vacant premises in supermarket and shop properties. In shopping centres, the occupancy rate was 96.3 per cent and the average rent was EUR 24.1/sq.m.
Citycon's net rental income from Finnish operations during the fi nancial year totalled EUR 90.5 million (EUR 86.7 million). Net rental income grew by EUR 3.7 million or 4.3 per cent, thanks to the EUR 4.2 million eff ect of completed redevelopment projects such as Espoontori, Forum in Jyväskylä and a retail property in Kirkkonummi. Net rental income for like-for-like properties in Finland fell by EUR 0.7 million, mainly due to the higher vacancy rate in supermarket and shop properties. The business unit accounted for 62.7 per cent (68.2%) of Citycon's total net rental income. Net rental yield was 6.0 per cent (6.0%).
| Q4/2011 Q4/2010 Q3/2011 | 2011 | 2010 Change-% | ||||
|---|---|---|---|---|---|---|
| Number of properties | 62 | 60 | 65 | -7.7 | ||
| Gross leasable area, sq.m. | 577,570 577,630 579,980 | -0.4 | ||||
| Annualised potential rental value, EUR million 1) | 137.8 | 139.3 | 135.5 | 2.8 | ||
| Average rent (EUR/sq.m.) | 20.9 | 21.0 | 20.3 | 3.4 | ||
| Number of leases started during the period | 130 | 133 | 107 | 470 | 429 | 9.6 |
| Total area of leases started, sq.m. 2) | 39,033 | 27,790 | 54,114 137,118 107,970 | 27.0 | ||
| Average rent of leases started (EUR/sq.m.) 2) | 18.9 | 19.2 | 22.8 | 20.2 | 19.6 | 3.1 |
| Number of leases ended during the period | 139 | 82 | 111 | 477 | 458 | 4.1 |
| Total area of leases ended, sq.m. 2) | 39,227 | 13,790 | 49,032 138,435 122,680 | 12.8 | ||
| Average rent of leases ended (EUR/sq.m.) 2) | 17.1 | 21.0 | 22.8 | 19.4 | 18.2 | 6.6 |
| Occupancy rate at end of the period (economic), % | 94.4 | 94.1 | 94.0 | - | ||
| Average remaining length of lease portfolio at the end of the period, year |
3.4 | 3.5 | 3.0 | 16.7 | ||
| Gross rental income, EUR million | 32.2 | 30.9 | 31.9 | 127.3 | 122.1 | 4.2 |
| Turnover, EUR million | 33.5 | 32.0 | 33.3 | 132.5 | 126.5 | 4.7 |
| Net rental income, EUR million | 23.2 | 22.0 | 23.4 | 90.5 | 86.7 | 4.3 |
| Net rental yield, % 3) | 6.0 | 6.0 | 6.0 | - | ||
| Net rental yield, like-for-like properties, % | 6.2 | 6.2 | 6.4 | - | ||
| Fair value of investment properties, EUR million | 1,557.3 | 1,547.4 | 1,533.0 | 0.9 |
1) Annualised potential rental value for the portfolio includes annualised gross rent based on valid rent roll at the end of the period, market rent of vacant premises and rental income from turnover based contracts (estimate) and possible other rental income.
2) Leases started and ended don't necessarily refer to the same premises.
3) Includes the lots for development projects.
1) Annualised potential rental value for the portfolio includes annualised gross rent based on valid rent roll at the end of the period, market rent of vacant premises and rental income from turnover based contracts (estimate) and possible other rental income. 2) Leases started and ended don't necessarily refer to the same premises.
3) Includes the lots for development projects.
KEY FIGURES, SWEDEN
At the end of the year, the company had nine shopping centres and seven other retail properties in Sweden, with a total leasable area of 303,700 square metres (291,500 sq.m.). The properties are located in the Greater Stockholm and Gothenburg Areas and in Umeå. The leasable area increased due to the acquisition of the Högdalen Centrum shopping centre and was off set by the divestment of residential units. The annualised potential rental value increased to EUR 62.7 million, mainly due to the aforementioned acquisition and to exchange rate fl uctuations.
Lease agreements started during the fi nancial year applied to a GLA of 37,006 square metres (46,879 sq.m.). The average rent level for new lease agreements was higher than the average for the entire Swedish property portfolio, mainly due to new retail lease agreements in the shopping centres. Ended lease agreements applied to 35,816 square metres (62,584 sq.m.). The average rent level for ended lease agreements was lower than the average for the entire Swedish property portfolio, due to residential divestments and ended leases in supermarket and shop properties.
The average rent rose from EUR 15.9/sq.m. to EUR 17.2/sq.m., mainly due to exchange rate fl uctuations and changes in the property portfolio (such as residential divestments). The occupancy
| Q4/2011 Q4/2010 Q3/2011 | 2011 | 2010 Change-% | ||||
|---|---|---|---|---|---|---|
| Number of properties | 4 | 4 | 3 | 33.3 | ||
| Gross leasable area, sq.m. | 113,500 113,400 | 70,800 | -0.1 | |||
| Annualised potential rental value, EUR million 1) | 25.0 | 26.5 | 15.0 | 76.7 | ||
| Average rent (EUR/sq.m.) | 19.0 | 20.2 | 17.8 | 13.5 | ||
| Number of leases started during the period | 7 | 27 | 10 | 36 | 44 | -18.2 |
| Total area of leases started, sq.m. 2) | 618 | 2,762 | 509 | 2,882 | 5,366 | -46.3 |
| Average rent of leases started (EUR/sq.m.) 2) | 16.5 | 12.5 | 15.5 | 18.8 | 12.9 | 45.7 |
| Number of leases ended during the period | 6 | 28 | 66 | 89 | 44 | 102.3 |
| Total area of leases ended, sq.m. 2) | 356 | 2,816 | 8,894 | 11,869 | 5,225 | 127.2 |
| Average rent of leases ended (EUR/sq.m.) 2) | 29.3 | 9.5 | 13.4 | 14.0 | 13.2 | 6.1 |
| Occupancy rate at end of the period (economic), % | 100.0 | 100.0 | 99.7 | - | ||
| Average remaining length of lease portfolio at the end of the period, year |
4.3 | 4.2 | 4.6 | -8.7 | ||
| Gross rental income, EUR million Turnover, EUR million |
6.2 7.1 |
3.5 4.1 |
6.1 7.2 |
21.2 24.5 |
13.9 16.7 |
52.3 46.8 |
| Net rental income, EUR million | 5.5 | 3.1 | 5.3 | 18.4 | 11.8 | 56.5 |
| Net rental yield, % 3) | 7.8 | 7.9 | 7.5 | - | ||
| Net rental yield, like-for-like properties, % | 7.6 | 7.8 | 7.4 | - | ||
| Fair value of investment properties, EUR million | 273.5 | 277.6 | 166.1 | 67.1 |
1) Annualised potential rental value for the portfolio includes annualised gross rent based on valid rent roll at the end of the period, market rent of vacant premises and rental income from turnover based contracts (estimate) and possible other rental income.
2) Leases started and ended don't necessarily refer to the same premises.
3) Includes the lots for development projects.
rate rose to 97.0 per cent (96.4%), thanks to reduced vacancy rates both in shopping centre and supermarket and shop properties.
The company's net rental income from Swedish operations increased by EUR 6.7 million or 23.3 per cent to EUR 35.4 million (EUR 28.7 million). Excluding the impact of the strengthened Swedish krona, net rental income from Swedish operations increased by EUR 5.1 million or 16.7 per cent. The increase in net rental income was due to the completion of Åkersberga Centrum redevelopment project, the acquisition of the Högdalen Centrum shopping centre as well as to net rental income increases from like-for-like properties. Net rental income from like-for-like properties grew by EUR 3.8 million, thanks mainly to improved net rental income from Liljeholmstorget Galleria. The business unit accounted for 24.5 per cent (22.6%) of Citycon's total net rental income. Net rental yield was 5.4 per cent, representing an increase of 0.6 percentage points from the reference year. The increase was due mainly to Liljeholmstorget Galleria's improved performance compared to its performance year before.
Citycon has four shopping centres in the Baltic countries: Rocca al Mare, Kristiine and Magistral in Tallinn, Estonia, and Mandarinas in Vilnius, Lithuania. The company acquired the Kristiine shopping centre on 2 May 2011. At the year-end, these properties' gross leasable area totalled 113,400 square metres (70,800 sq.m.). The annualised potential rental value increased to EUR 26.5 million, mostly due to the acquisition of the Kristiine shopping centre. The average rent rose from EUR 17.8/sq.m. to EUR 20.2/sq.m. due to the Kristiine acquisition and the closure of the Magistral shopping centre.
Lease agreements started during the fi nancial year applied to a GLA of 2,882 square metres (5,366 sq.m.). The average rent level for new lease agreements was lower than the average for the entire Baltic property portfolio, mainly due to new offi ce leases. Ended lease agreements applied to 11,869 square metres (5,225 sq.m.). The average rent level for ended lease agreements was lower than the average for the entire Baltic property portfolio, as leases in Magistral shopping centre were terminated due to the start of the redevelopment project.
The occupancy rate rose to 100.0 per cent (99.7%), because all vacant premises were leased.
The net rental income from Baltic operations increased markedly by EUR 6.6 million to EUR 18.4 million (EUR 11.8 million) mainly due to acquisition of the Kristiine shopping centre and like-for-like growth of EUR 0.9 million. The business unit accounted for 12.8 per cent (9.3%) of Citycon's total net rental income. Net rental yield was 7.9 per cent, representing an increase of 0.4 percentage points from the reference year. This increase was due to the rise in net rental income.
Citycon seeks to lead the way in responsible shopping centre operations 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 traffi c fl ows, combined with excellent public transport connections, makes them well positioned to face the demands of sustainable development.
In its sustainability reporting, Citycon applies for the fi rst time the construction and real estate sector specifi c (CRESS) guidelines of the Global Reporting Initiative, as well as the guidelines published by EPRA in autumn 2011, which Citycon helped to compile. Calculation methods have been retroactively revised to comply with the new and revised guidelines, primarily with respect to electricity consumption and the carbon footprint. The results and indicators for environmental responsibility for 2011 are presented on pages 48–53 of the Annual and Sustainability Report, to be published in week seven.
During 2011, all Citycon shopping centres were audited according to the Green Shopping Centre Management programme. The Green Shopping Centre Management programme is an internal company tool for advancing sustainable development in all of the company's shopping centres. The Green Index, established for assessing these results, rose by 11.1 per cent from the previous year. Citycon has conducted an extensive assessment of measures for improving its properties' energy effi ciency and reducing energy consumption. The objective in 2012 is to invest in measures which generate savings in consumption and costs, such as renewing lighting or increasing frequency transformer use and control in ventilation systems. Furthermore, we ensure the continuous optimisation of adjustments and temperature sett ings for technical systems, in order to meet consumption and cost saving targets.
The company defi ned its long-term environmental responsibility objectives in connection with its strategic planning in summer 2009. Citycon has set targets for its carbon footprint, energy and water consumption, waste recycling rate as well as land use and sustainable construction. Performance is compared to the base level of 2009. In 2011, Citycon's aim was to reduce its carbon footprint by 2–3 per cent, its energy consumption by 2–3 per cent and the water consumption in its shopping centres to an average of 3.8 litres per visitor per year. The long-term objectives for waste management and recycling were modifi ed aft er the original objectives were already reached within the fi rst year. The new long-term target for waste recycling rate is 80 per cent by 2015, and the corresponding annual target for 2011 was 78 per cent. Landfi ll waste may account for a maximum of 20 per cent of total waste by 2015, and the corresponding annual target for 2011 was 22 per cent.
Citycon procured a total of 181.1 gigawatt hours of electricity in 2011. Consumption was 3.2 per cent higher compared to the 2009 level. This increase can be att ributed to changes in the property portfolio and to higher energy consumption by tenants. Total electricity consumption (incl. tenants' electricity) in likefor-like shopping centres decreased by 2.5 per cent from 2009. Electricity consumption in common areas (excl. electricity used by tenants) amounted to 110.6 gigawatt hours, showing an increase of two per cent from 2009 due to changes in the property portfolio and increased consumption in supermarket and shop properties. In like-for-like shopping centres electricity consumption in common areas decreased by 4.9 per cent.
Heating energy consumption came to 136.2 gigawatt hours. Due to the exceptionally cold weather at the beginning of the year but a mild autumn and late winter, heating energy consumption fell by 2.4 per cent from 2009. Weather-adjusted consumption, 142.1 gigawatt hours, rose by one per cent. Heating energy consumption in like-for-like shopping centre properties decreased by 2.2 per cent.
Citycon's total energy consumption (incl. electricity consumption in common areas, heating and cooling) amounted to 246.6 gigawatt hours. The consumption decreased by 0.6 per cent compared to the 2009 level. In shopping centres, energy consumption per visitor decreased by 14.4 per cent and energy consumption per sales fell by 21.2 per cent. Also, energy consumption per gross leasable area fell by 6.7 per cent. Total energy consumption in like-for-like shopping centre properties decreased by 2.4 per cent, which means Citycon was able to reach the targeted annual 2–3 per cent reduction in energy consumption.
Citycon's reported energy consumption covers shopping centres owned by Citycon and other properties where Citycon's share of ownership is at least 50 per cent. Citycon also reports the tenants' electricity consumption in cases where Citycon is responsible for electricity procurement. Cases where the energy purchase agreement is under a tenant's responsibility have been excluded from reporting. In terms of key fi gures and results, Citycon has limited the reported electricity consumption to common areas, where Citycon can directly infl uence the consumption. This includes the electricity used for general lighting, ventilation and cooling, as well as lift s and escalators and other building technical systems. Energy used for heating and cooling is reported in its entirety.
In 2011, the carbon footprint totalled 69,413 tonnes of carbon dioxide equivalent. The carbon footprint reported by Citycon covers the energy and water consumption in properties, waste logistics and the emissions generated by the Citycon organisation. Energy consumption in properties constitutes 98.8 per cent of the carbon footprint. The carbon footprint grew by 10.6 per cent compared to the baseline year 2009. The growth in carbon footprint is mainly caused by changes in the property portfolio, i.e. carbon emission of new centres Kristiine and Högdalen. The carbon footprint of like-for-like shopping centres decreased by 0.8 per cent and 11.6 per cent per visitor. The annual target for reducing the carbon footprint by 2-3 per cent was not att ained.
The total water consumption in all shopping centres and retail properties owned by Citycon was 638,851 cubic metres in 2011. This includes water consumed by the real estate company and tenants. Water consumption showed a marked increase of 18.1 per cent in 2011. This increase can be att ributed to changes in the Estonian and Swedish property portfolios, and positive development in grocery as well as café & restaurant sales. Water consumption in like-for-like shopping centre properties rose by 13.4 per cent. Water consumption proportionate to sales decreased by 5.8 per cent compared to the 2009 level. The longterm water consumption target has been set at 3.5 litres per visitor per year. In 2011, water consumption per visitor in shopping centres was 4.3 litres and 4.6 litres in like-for-like shopping centres, which means the target for reducing water consumption per visitor was not met in 2011.
The total waste volume generated by Citycon's shopping centres amounted to 15,361 tonnes, with landfi ll waste accounting for 3,263 tonnes, or 22.4 per cent. Waste volumes have been rising in all operating countries from previous years, including in likefor-like shopping centres. In 2011, waste volumes rose by 14.5 per cent from the previous year. Similarly, the waste volume proportionate to sales showed an increase. The recycling rate in shopping centres improved slightly to 77.6 per cent. The Baltic countries saw their recycling rate improve dramatically to 82.1 per cent, from 34.3 per cent a year earlier. Citycon's annual targets set for waste processing and recycling were achieved.
In property acquisition, Citycon complies with its strategic environmental responsibility policies, which state that properties must be located in a built environment and easily accessible by public transport. Good examples of such properties are the Kristiine shopping centre in Tallinn and the Högdalen Centrum in Stockholm acquired in 2011.
Environmental certifi cation represents a key element in Citycon's eff orts towards sustainable development. An application has been made for LEED classifi cation for the company's shopping centre project in the Martinlaakso district in Vantaa. Gold-level certifi cation is being sought and is expected to be confi rmed in the spring of 2012.
Citycon Oyj's Annual General Meeting (AGM) took place in Helsinki, Finland, on 23 March 2011. The meeting was opened by Chairman of the Board Chaim Katzman, and chaired by Ari Keinänen, Att orney-at-Law, Trained at the Bench. A total of 247 shareholders att ended the AGM either personally or through a proxy representative, representing 70.9 per cent of shares and votes in the company.
The AGM adopted the company's fi nancial statements for the fi nancial year 2010 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 fi nancial year 2010 and on an equity return of EUR 0.10 per share from the invested unrestricted equity fund. The record date for the dividend payout and equity return was 28 March 2011, and the dividend and equity return, totalling EUR 34.2 million, were paid on 8 April 2011.
Other decisions made by the AGM are reported on the corporate website at www.citycon.com/agm2011. The AGM minutes are also available on the aforementioned website.
Under the Articles of Association, the Board of Directors consists of a minimum of fi ve and a maximum of ten members (Directors) who are elected by the Annual General Meeting for a term of one year at a time. Amendments to the Articles of Association may be adopted only by the General Meeting of shareholders and require a 2/3 majority vote.
In 2011, Citycon's Board of Directors included ten members: Ronen Ashkenazi, Chaim Katzman, Roger Kempe (as of 23 March 2011), Kirsi Komi (as of 23 March 2011), Claes Ott osson, Dor J. Segal, Jorma Sonninen (as of 23 March 2011), Thomas W. Wernink, Per-Håkan Westin and Ariella Zochovitzky. Gideon Bolotowsky, Raimo Korpinen and Tuomo Lähdesmäki stepped down from the Board on 23 March 2011.
Chaim Katzman was the Chairman of the Board of Directors in 2011, and Ronen Ashkenazi the Deputy Chairman. Thom Wernink served as the other Deputy Chairman of the Board as of 23 March 2011.
Since 2006, the company's auditor has been Ernst & Young Oy, a fi rm of authorised public accountants, which has designated Authorised Public Accountant Tuija Korpelainen to act as the chief auditor of Citycon, also from 2006.
Citycon Oyj's CEO changed in 2011, as Petri Olkinuora, the company's CEO since 2002, left his position on 23 March 2011. On 13 January 2011, the Board of Directors appointed Marcel Kokkeel (MA, born 1958) from the Netherlands as Citycon Oyj's new CEO and approved the terms and conditions of his executive contract. The new CEO assumed his duties on 24 March 2011. Information on the CEO's executive contract and its terms and conditions are available on page 46 of the Financial Statements.
In 2011, also several other signifi cant changes took place in the corporate management. In addition to the CEO, three new members joined the Corporate Management Committ ee: Michael Schönach, Executive Vice President, Finnish Operations, on 1 March; Anu Tuomola, General Counsel and Head of Legal Aff airs, on 1 September; and Johan Elfstadius, Vice President, Swedish Operations, on 21 November. Members who left the Corporate Management Committ ee during the year in addition to Petri Olkinuora, CEO, were Outi Raekivi, General Counsel and Head of Legal Aff airs; and Ulf Att ebrant, Vice President, Swedish Operations. At the year-end, the Corporate Management Committ ee had six members. In addition to the CEO Marcel Kokkeel, the Corporate Management Committ ee includes the company's Executive Vice President and Chief Financial Offi cer Eero Sihvonen, the General Counsel Anu Tuomola and the Vice Presidents of the company's geographical business units Johan Elfstadius, Harri Holmström and Michael Schönach.
Citycon's shares have been quoted on the Helsinki stock exchange (NASDAQ OMX Helsinki Ltd) since 1988. Citycon is a Mid Cap Company in the Financials sector, sub-industry Real Estate Operating Companies. Its trading code is CTY1S and its shares are traded in euros. The ISIN code used in international securities clearing is FI0009002471.
At the end of December, Citycon had a total of 4,276 (4,409) registered shareholders, of which ten were account managers of nominee-registered shares. Nominee-registered and other international shareholders held 230.4 million (209.6 million) shares, or 82.9 per cent (85.7%) of shares and voting rights in the company. Information on the company's major shareholders and on the breakdown of shareholdings, as well as on notifi cations of changes in shareholdings received during the year can be found on page 56 of the Financial Statements.
During the period, there were no changes in the company's share capital, but the number of shares increased by 33.2 million following the directed share issues arranged in July. The company has a single series of shares, with each share entitling to one vote at general meetings of shareholders. The shares have no nominal value.
| 2011 | 2010 | |
|---|---|---|
| Share price, transactions, EUR | ||
| Low | 2.02 | 2.29 |
| High | 3.41 | 3.31 |
| Average | 2.77 | 2.84 |
| Latest | 2.31 | 3.08 |
| Market capitalisation at year-end, EUR million | 641.7 | 753.3 |
| Share trading volume | ||
|---|---|---|
| Number of shares traded, million | 97.5 | 115.0 |
| Value of shares traded, EUR million | 270.7 | 326.4 |
| Share capital and shares | ||
|---|---|---|
| Share capital at year-start, EUR million | 259.6 | 259.6 |
| Share capital at year-end, EUR million | 259.6 | 259.6 |
| Number of shares at year-start, million | 244.6 | 221.1 |
| Number of shares at year-end, million | 277.8 | 244.6 |
In July, Citycon issued 246,325 new shares as part of the company's long-term share-based incentive plan. These new shares were registered in the Trade Register on 15 July 2011 and trading in them began on 18 July 2011 on the NASDAQ OMX Helsinki Ltd. Following the registration, the number of shares in the company increased to 244,811,297 shares.
Also in July, Citycon arranged a directed share off ering. The offering was based upon the authorisation granted by Citycon's Annual General Meeting of 13 March 2007. Waiving the shareholders' pre-emptive subscription rights, the share off ering was directed to Finnish and international institutional investors and was carried out in an accelerated book-building process on 13 July 2011.
Based on the bids submitt ed during the book-building process, on 13 July 2011 the company's Board of Directors decided to issue 33 million new shares at a per-share subscription price of EUR 3.02. The subscription price, EUR 99 million, was recorded in the invested unrestricted equity fund. The new shares were registered in the Trade Register on 18 July 2011 and trading in them began on the following day on the NASDAQ OMX Helsinki Ltd. The new shares entitle their holders to a dividend for the fi nancial year 2011. Following the issue, the number of the company's shares rose to 277,811,297. The new shares off ered accounted for 13.5 per cent of the number of Citycon's shares prior to the off ering and for 11.9 per cent thereaft er.
Pursuant to a share issue authorisation granted by the AGM of 2007, the Board of Directors can still decide on a maximum of 9,537,087 shares to be issued or treasury shares to be conveyed. Based on this authorisation, the Board may also decide on the grant of stock options and other special rights. The Board exercised this authorisation on 3 May 2011 when it decided to issue stock options; on 12 July 2011 when it decided on directed share issues without payment as a part of the company's long-term share-based incentive plan; and on 13 July 2011, when it decided on a directed share off ering to Finnish and international institutional investors. This authorisation will be valid until 13 March 2012.
The AGM of 2011 authorised the Board of Directors to decide on the acquisition of 20 million of the company's own shares. The acquisition authorisation will be valid until the next Annual General Meeting.
At the year-end, the Board of Directors had no other authorisations.
During the reporting period, the company held 145,000 treasury shares, which the company had directed to itself in July in a share issue without payment related to the company's long-term share-based incentive plan. The treasury shares were conveyed between 20 and 22 July 2011 at the market price prevailing at the time of conveyance through public trading organised by NAS-DAQ OMX Helsinki Ltd, waiving the shareholders' pre-emptive subscription rights. At the end of the year, the company had no treasury shares.
The AGM held on 15 March 2004 decided to issue a maximum of 3,900,000 A/B/C stock options to Citycon Group personnel. This stock option plan expired at the end of March 2011 simultaneously with the expiry of the subscription period with C-options. No shares were subscribed by exercising C-options.
The Board of Directors of Citycon Oyj decided on 3 May 2011, by virtue of an authorisation granted by the Annual General Meeting held on 13 March 2007, to issue stock options to key personnel of the company and its subsidiaries. The company had a weighty fi nancial reason for the issue of stock options, since the stock options are intended to form part of the incentive and commitment programme for key personnel. The purpose of the stock options is to encourage key personnel to work on a longterm basis to increase shareholder value. The purpose of the stock options is also to commit the key personnel to the company.
The maximum total number of stock options that can be issued is 7,250,000, and they entitle their owners to subscribe for a maximum total of 7,250,000 new shares in the company or existing shares held by the company. The stock options will be issued gratuitously. The stock options are marked with the symbol 2011A(I), 2011A(II) and 2011A(III); with the symbol 2011B(I), 2011B(II) and 2011B(III); with the symbol 2011C(I), 2011C(II) and 2011C(III); and with the symbol 2011D(I), 2011D(II) and 2011D(III). Upon the distribution of stock options the Board of Directors will decide on how the stock options are divided into sub-categories.
The number of shares subscribed by exercising stock options 2011 corresponds to a maximum total of 2.6 per cent of the shares and votes in the company, aft er the potential share subscription, if new shares are issued in the share subscription.
The subscription prices of the shares to be subscribed for by exercising the 2011 stock options were determined on the basis of the trade volume weighted average price of Citycon share quoted on the NASDAQ OMX Helsinki Ltd. during twenty (20) trading days following the release date of the company's Full Year 2010 Results, Q1/2011 Interim Report and Q3/2011 Interim Report, as follows:
| Option category | Subscription price determination period | Subscription price, EUR |
|---|---|---|
| 2011A–D(I) | 10 February–9 March 2011 | 3.17 |
| 2011A–D(II) | 5 May–1 June 2011 | 3.31 |
| 2011A–D(III) | 13 October–9 November 2011 | 2.63 |
The share subscription price will be recognised in the company's invested unrestricted equity fund. Each year, per-share dividends and equity returns, distributed diff ering from the company´s normal practice, may be deducted from the share subscription price.
Share subscription periods of stock options 2011 are presented in the table below:
| 2011A(I–III) | 2011B(I–III) | 2011C(I–III) | 2011D(I–III) | |
|---|---|---|---|---|
| Share subscription period begins | 1 April 2012 | 1 April 2013 | 1 April 2014 | 1 April 2015 |
| Share subscription period ends | 31 March 2018 31 March 2018 31 March 2018 31 March 2018 |
By the end of 2011, a total of 6,320,000 stock options 2011A–D(I), 2011A–D(II) and 2011A–D(III) had been granted to 24 key employees within the Group. These option rights entitle their holders to subscribe for an equal number of shares in 2012–2018. The option rights granted to the company's CEO and other members of the Corporate Management Committ ee are presented in the following table.
| 2011A(I) | 2011B(I) | 2011C(I) | 2011D(I) | Total | |
|---|---|---|---|---|---|
| Chief Executive Offi cer (CEO) | 250,000 | 250,000 | 250,000 | 250,000 | 1,000,000 |
| 2011A(I-III) 2011B(I-III) 2011C(I-III) 2011D(I-III) | |||||
| Other members of the Corporate | |||||
| Management Committ ee | 537,500 | 537,500 | 537,500 | 537,500 | 2,150,000 |
A share ownership obligation, under which the members of the Corporate Management Committ ee are obliged to acquire Citycon shares with 25 per cent of the gross stock option income gained from the exercised stock options, is incorporated into the 2011 stock options. The acquisition obligation will remain in force until a member of the Corporate Management Committ ee owns company's shares to the value of his or her gross annual salary, and share ownership must continue while his or her employment or service contract is in force.
The stock option plan and the terms of the stock options are presented in more detail on pages 43–44 of the Financial Statements.
The terms and conditions of stock options 2011 in their entirety are available on the corporate website at www.citycon.com/options.
The members of the Board of Directors of Citycon, its CEO, the other Corporate Management Committ ee members and their closely associated parties held a total of 348,554 company shares on 31 December 2011. These shareholdings represent 0.1 per cent of the total shares and votes in the company.
The number of stock options held by Citycon's CEO and other members of the Corporate Management Committ ee at the year-end 2011 are presented in the table above. The maximum number of shares that they can subscribe for by exercising these outstanding stock options amounts to 3,150,000. 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 are available on the corporate website at www.citycon.com/insiders.
Helsinki, 7 February 2012
Citycon Oyj Board of Directors
European Public Real Estate Association (EPRA) is a common interest group for listed real estate companies in Europe. EPRA's mission is to promote, develop and represent the European publicly traded real estate sector. Citycon is an active member of EPRA. EPRA's objective is to encourage greater investment in European listed real estate and strive for "best practices" in accounting, fi nancial reporting and corporate governance in order to provide high-quality information to investors and to increase the comparability of diff erent companies. The best practices create also a framework for discussion and decision-making on the issues that determine the future of the sector.
Since 2006, Citycon has been applying the best practices policy recommendations of EPRA for fi nancial reporting. And in 2011, Citycon started to follow EPRA best practice policy recommendations also for sustainability reporting (please see the section "Responsibility"). This section in Citycon's fi nancial statements presents the EPRA performance measures and their calculations. For more information about EPRA and EPRA's best practice policies pls visit EPRA's web pages: www.epra.com.
In addition to promoting European real estate sector and publishing best practice policies, EPRA publishes FTSE EPRA/NAREIT index in association with FTSE, which tracks the performance of the largest European and North-American listed real estate companies. Citycon is included in the FTSE EPRA index, which increases international interest towards Citycon as an investment.
| Note | 2011 | 2010 | |
|---|---|---|---|
| EPRA Earnings. EUR million | 1 | 53.3 | 47.3 |
| EPRA Earnings per share (basic), EUR | 1 | 0.21 | 0.21 |
| EPRA Earnings per share (diluted), EUR | 1 | 0.21 | 0.21 |
| EPRA NAV per share, EUR | 2 | 3.62 | 3.79 |
| EPRA NNNAV per share, EUR | 2 | 3.29 | 3.49 |
| EPRA Net Initial Yield (NIY) (%) | 3 | 6.2 | 6.3 |
| EPRA "topped-up" NIY (%) | 3 | 6.3 | 6.4 |
| EPRA vacancy rate (%) | 4 | 4.5 | 4.9 |
The following Notes, the numbers 1 - 4, present how EPRA Performance Measures are calculated. The Notes 5 and 6 present the EPRA Key Performance Measures for the last 5 years.
EPRA Earnings is presenting the underlying operating performance of a real estate company excluding all so called non-recurring items such as net fair value gains/losses on investment properties, profi t/loss on disposals and limited other non-recurring items. It provides a measure for recurring income, but doesn't exclude exceptional items that are part of normal IFRS earnings. EPRA earnings is especially important for investors who want to assess the extent to which dividends are supported by recurring income. Citycon has been paying 0.14 EUR/share as dividends and equity return for several years already, and for the fi nancial statements 2011, the Board of Directors propose for annual general meeting a dividend and equity return of 0.15 EUR/share.
Citycon has been previously disclosing only EPRA Earnings, diluted. In the fi nancial statements 2011, Citycon discloses also EPRA Earnings basic and in the future is going to only disclose EPRA Earnings basic in accordance with EPRA's Recommendations.
| EUR million |
2011 Average number of sha res (1,000) 1) |
per share, EUR |
EUR million |
2010 Average number of sha res (1,000) 1) |
per share, EUR |
|
|---|---|---|---|---|---|---|
| Earnings in IFRS Consolidated Statement of Comprehensive Income | 13.0 | 259,778.3 | 0.05 | 78.3 | 228,148.2 | 0.34 |
| +/- Net fair value losses/gains on investment property | 35.3 | 259,778.3 | 0.14 | -50.8 | 228,148.2 -0.22 | |
| -/+ Profi t/loss on disposal of investment property | -0.6 | 259,778.3 | 0.00 | -2.6 | 228,148.2 -0.01 | |
| + Transaction costs related to investment property disposals | 1.0 | 259,778.3 | 0.00 | 0.8 | 228,148.2 | 0.00 |
| -/+ Fair value gains/losses of fi nancial instruments | - | 259,778.3 | 0.00 | -0.2 | 228,148.2 | 0.00 |
| -/+ Fair value gains/losses of jointly controlled entities | -0.3 | 259,778.3 | 0.00 | - | 228,148.2 | 0.00 |
| +/- Current taxes arising from the items above | 0.5 | 259,778.3 | 0.00 | 0.0 | 228,148.2 | 0.00 |
| +/- Change in deferred taxes arising from the items above | -2.2 | 259,778.3 -0.01 | 11.6 | 228,148.2 | 0.05 | |
| -/+ Non-controlling interest arising from the items above | 6.7 | 259,778.3 | 0.03 | 10.3 | 228,148.2 | 0.05 |
| EPRA Earnings (basic) | 53.3 | 259,778.3 | 0.21 | 47.3 | 228,148.2 | 0.21 |
| EPRA Earnings (diluted) | 57.4 | 276,871.4 | 0.21 | 51.4 | 245,806.3 | 0.21 |
1) Calculation of the number of shares is presented in Note 16. Earnings per share.
EPRA NAV per share decreased by EUR 0.17 to EUR 3.62 (EUR 3.79) due to larger number of shares following the share issue on July 2011 and fair value losses of investment properties from the non-core portfolio. EPRA NNNAV per share decreased by EUR 0.20 to EUR 3.29 (EUR 3.49). In addition to the reasons for a decrease in EPRA NAV per share, EPRA NNNAV per share was reduced by negative valuation of interest rate hedges, owing to lower interest rates, which decreased EPRA NNNAV per share by EUR 0.09.
EPRA NAV is presenting the fair value of net assets of a real estate company. It is based on the assumption of owning and operating investment properties for a long term and therefore it is a useful tool to compare against the share price of a real estate company. The share price of Citycon was 2.31 EUR/share on December 31, 2011.
As EPRA NAV intends to refl ect the fair value of a business on a going-concern basis, all items arising from future disposals and the fair value of fi nancial instruments are excluded from EPRA NAV. Items arising from future disposals are the deferred taxes that would materialise only on disposal of properties. Fair value of fi nancial instruments i.e. mark-to-market value of hedging instruments will end up zero as they are held to maturity. Therefore, the fair value of fi nancial instruments at the balance sheet date is excluded from EPRA NAV.
EPRA NNNAV is including the deferred tax liabilities and fair value of fi nancial instruments and therefore it is a measure of the real estate company's "spot" fair value at the balance sheet date. Spot fair value means that EPRA NNNAV refl ects the fair value of net assets of the company at a particular day opposed to EPRA NAV, which refl ects the fair value of net assets on a going-concern basis. However, EPRA NNNAV is not either a liquidation NAV as the fair values of assets and liabilities are not based on a liquidation scenario.
| EUR million |
2011 Number of shares on the balance sheet date (1,000) |
per share, EUR |
EUR million |
2010 Number of shares on the balance sheet date (1,000) |
per share, EUR |
|
|---|---|---|---|---|---|---|
| Equity att ributable to parent company shareholders | 902.6 | 277,811.3 | 3.25 | 849.5 | 244,565.0 | 3.47 |
| Deferred taxes from the diff erence between the fair value and fi scal value of investment properties |
57.5 | 277,811.3 | 0.21 | 59.7 | 244,565.0 | 0.24 |
| Fair value of fi nancial instruments | 45.7 | 277,811.3 | 0.16 | 18.8 | 244,565.0 | 0.08 |
| Net asset value (EPRA NAV) | 1,005.9 | 277,811.3 | 3.62 | 928.1 | 244,565.0 | 3.79 |
| Deferred taxes from the diff erence between the fair value and fi scal value of investment properties |
-57.5 | 277,811.3 -0.21 | -59.7 | 244,565.0 -0.24 | ||
| Diff erence between the secondary market price and fair value of bonds and capital loans 1) |
11.4 | 277,811.3 | 0.04 | 3.6 | 244,565.0 | 0.01 |
| Fair value of fi nancial instruments | -45.7 | 277,811.3 -0.16 | -18.8 | 244,565.0 -0.08 | ||
| EPRA NNNAV | 914.1 | 277,811.3 | 3.29 | 853.1 | 244,565.0 | 3.49 |
1) Secondary market price
When calculating the EPRA NNNAV in accordance with EPRA's recommendations, the shareholders' equity is adjusted using EPRA's guidelines so that bonds and capital loans are valued based on secondary market prices. In accordance with Citycon's accounting policies, the carrying amount and fair value of bonds and capital loans are different from this secondary market price. Due to this, in the calculation of this key fi gure convertible capital loan 1/2006 and bond 1/2009 have been valued using the price derived from the secondary market on the balance sheet date. The secondary market price for convertible capital loan 1/2006 was 82.90 per cent (95.50%) and for bond 1/2009 101.85 per cent (99.00%) as of 31 December 2011. The diff erence between the secondary market price and the fair value of the bonds and capital loans was EUR 11.4 million (EUR 3.6 million) as of 31 December 2011.
There are a variety of yield performance indicators in the real estate market to present the companies' ability to generate rent. In order to have a consistent yield defi nition and comparable yield indicators between the real estate companies, EPRA has published a best practice recommendation for yield calculation i.e. EPRA Net Initial Yield (NIY).
EPRA NIY is calculated as the annualised rental income, based on the valid rent roll on the balance sheet date, divided by the gross market value of the completed property portfolio (including estimated transaction costs and excluding properties under development, lots, unused building right and properties the valuation of which is based on the value of the building right). Citycon also discloses net rental yield, which is calculated over the past 12 month period, by constructing an index from the monthly net rental income and computational monthly market value fi gures. Net rental yield includes the total property portfolio and excludes estimated transaction costs.
EPRA "topped-up" NIY presents the yield of a company with the full rent that is already agreed at the balance sheet date. In EPRA "topped-up" yield, the cash rent is "topped-up" to refl ect rent aft er the expiry of lease incentives such as rent free periods and discounted rents.
| EUR million | 2011 | 2010 |
|---|---|---|
| Fair value of investment properties determined by the external appraiser | 2,515.0 | 2,361.1 |
| Less (re)development properties, lots, unused building rights and properties, the valuation of which is based on the value of | ||
| the building right | -559.6 | -487.4 |
| Completed property portfolio | 1,955.4 | 1,873.7 |
| Plus the estimated purchasers' transaction costs | 36.8 | 37.1 |
| Gross value of completed property portfolio (A) | 1,992.2 | 1,910.8 |
| Annualised gross rents for completed property portfolio | 179.5 | 170.8 |
| Property portfolio's operating expenses | -56.6 | -50.2 |
| Annualised net rents (B) | 122.9 | 120.6 |
| Plus the notional rent expiration of rent free periods or other lease incentives | 2.5 | 2.4 |
| Topped-up annualised net rents ( C) | 125.4 | 123.0 |
| EPRA Net Initial Yield (NIY) (%) (B/A) | 6.2 | 6.3 |
| EPRA "topped-up" NIY (%) (C/A) | 6.3 | 6.4 |
EPRA initial yields decreased mainly due to increased property operating expenses assumption in the valuations relating to general expense increases and higher repair cost estimates. However, EPRA NIY and EPRA "topped up" NIY for 2011 and 2010 are not fully comparable due to changes in the completed property portfolio (such as property acquisitions, disposals and started and completed (re)development projects).
EPRA vacancy rate (%) presents how much out of the full potential rental income is not received because of vacancy. Technical vacancy, which Citycon also discloses, presents how many square meters out of total GLA is vacant.
EPRA vacancy rate is calculated by dividing the estimated rental value of vacant premises by the estimated rental value of the whole portfolio if all premises were fully let. EPRA vacancy rate is calculated using the same principles as economic occupancy rate, which Citycon also discloses.
| EUR million | 2011 | 2010 |
|---|---|---|
| Annualised potential rental value of vacant premises | 9.8 | 9.6 |
| ./. Annualised potential rental value for the whole portfolio | 219.4 | 196.5 |
| EPRA vacancy rate (%) | 4.5 | 4.9 |
CFO's comment on the development of EPRA vacancy rate: EPRA vacancy rate improved mainly due to decreased vacancy in the shopping centre -portfolio.
| 2011 | 2010 | 2009 | 2008 | 2007 | |
|---|---|---|---|---|---|
| EPRA Earnings, EUR million | 53.3 | 47.3 | 50.9 | 43.8 | 38.3 |
| EPRA Earnings per share (basic), EUR | 0.21 | 0.21 | 0.23 | 0.20 | 0.19 |
| EPRA Earnings per share (diluted), EUR | 0.21 | 0.21 | 0.23 | 0.20 | 0.19 |
| EPRA NAV per share, EUR | 3.62 | 3.79 | 3.64 | 3.96 | 4.80 |
| EPRA NNNAV per share, EUR | 3.29 | 3.49 | 3.35 | 3.80 | 4.42 |
| EPRA Net Initial Yield (NIY) (%) | 6.2 | 6.3 | 6.9 | N/A | N/A |
| EPRA "topped-up" NIY (%) | 6.3 | 6.4 | 7.1 | N/A | N/A |
| EPRA vacancy rate (%) | 4.5 | 4.9 | 5.0 | 4.0 | 4.3 |
| EUR million | 2011 | 2010 | 2009 | 2008 | 2007 |
|---|---|---|---|---|---|
| Earnings in IFRS Consolidated Statement of Comprehensive Income | 13.0 | 78.3 | -34.3 | -124.1 | 200.3 |
| +/- Net fair value losses/gains on investment property | 35.3 | -50.8 | 97.4 | 216.1 | -211.4 |
| -/+ Profi t/loss on disposal of investment property | -0.6 | -2.6 | -0.1 | -0.1 | 0.1 |
| + Transaction costs related to investment property disposals | 1.0 | 0.8 | 0.1 | 0.4 | 0.0 |
| -/+ Non-recurring other operating income and expenses | - | - | - | -6.0 | 0.0 |
| -/+ Fair value gains/losses of fi nancial instruments | - | -0.2 | 0.1 | 3.1 | 0.6 |
| -/+ Fair value gains/losses of jointly controlled entities | -0.3 | - | - | - | - |
| +/- Current taxes arising from the items above | 0.5 | - | 0.3 | 1.8 | 0.0 |
| +/- Change in deferred taxes arising from the items above | -2.2 | 11.6 | -7.3 | -29.7 | 46.0 |
| -/+ Non-controlling interest arising from the items above | 6.7 | 10.3 | -5.3 | -17.6 | 2.7 |
| EPRA Earnings | 53.3 | 47.3 | 50.9 | 43.8 | 38.3 |
| Average number of shares (1,000) | 259,778.3 | 228,148.2 | 221,035.1 | 220,991.5 | 199,403.7 |
| EPRA Earnings per share, EUR | 0.21 | 0.21 | 0.23 | 0.20 | 0.19 |
| EPRA Earnings per share, diluted, EUR | 0.21 | 0.21 | 0.23 | 0.20 | 0.19 |
Previously Citycon has followed the direct and indirect results. The EPRA Earnings corresponds to the direct result, but Citycon changed the presentation and renamed the direct result as EPRA Earnings in order to bett er comply with the EPRA's recommendations.
| EUR million | 2011 | 2010 | 2009 | 2008 | 2007 |
|---|---|---|---|---|---|
| Direct result | |||||
| Net rental income | 144.3 | 127.2 | 125.4 | 121.8 | 103.4 |
| Direct administrative expenses | -27.1 | -22.5 | -17.7 | -16.5 | -16.5 |
| Direct other operating income and expenses | 0.2 | 0.3 | 0.0 | 0.1 | 0.5 |
| Direct operating profi t | 117.4 | 105.0 | 107.7 | 105.3 | 87.4 |
| Direct net fi nancial income and expenses | -62.4 | -55.1 | -47.7 | -54.2 | -44.7 |
| Direct share of profi t/loss of jointly controlled entities | 0.0 | - | - | - | - |
| Direct current taxes | -0.4 | -0.6 | -6.2 | -4.8 | -3.4 |
| Change in direct deferred taxes | 0.3 | -0.3 | -0.2 | 0.2 | -0.2 |
| Direct non-controlling interest | -1.7 | -1.8 | -2.8 | -2.8 | -0.9 |
| Total | 53.3 | 47.3 | 50.9 | 43.8 | 38.3 |
| Direct result per share (diluted), (diluted EPRA EPS), EUR | 0.21 | 0.21 | 0.23 | 0.20 | 0.19 |
| Indirect result | |||||
| Net fair value losses/ gains on investment property | -35.3 | 50.8 | -97.4 | -216.1 | 211.4 |
| Profi t/loss on disposal of investment property | 0.6 | 2.6 | 0.1 | 0.1 | -0.1 |
| Indirect administrative expenses | -1.0 | -0.8 | -0.1 | -0.4 | 0.0 |
| Indirect other operating income and expenses | - | - | - | 6.0 | 0.0 |
| Movement in fair value of fi nancial instruments | 0.0 | 0.2 | -0.1 | -3.1 | -0.6 |
| Indirect share of profi t/loss of jointly controlled entities | 0.3 | - | - | - | - |
| Indirect current taxes | 0.5 | - | -0.3 | -1.8 | 0.0 |
| Change in indirect deferred taxes | 2.2 | -11.6 | 7.3 | 29.7 | -46.0 |
| Indirect non-controlling interest | -6.7 | -10.3 | 5.3 | 17.6 | -2.7 |
| Total | -40.3 | 31.1 | -85.2 | -167.9 | 162.1 |
| Indirect result per share, diluted, EUR | -0.16 | 0.13 | -0.39 | -0.76 | 0.71 |
| Profi t/loss for the period att ributable to parent company shareholders | 13.0 | 78.3 | -34.3 | -124.1 | 200.3 |
Business-ID 0699505-3
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME, IFRS | |
|---|---|
| -- | ------------------------------------------------------ |
| EUR million | Note 1 Jan.-31 Dec. 2011 1 Jan.-31 Dec. 2010 | |
|---|---|---|
| Gross rental income 6 |
206.0 | 185.9 |
| Service charge income | 11.1 | 10.0 |
| Turnover 7 |
217.1 | 195.9 |
| Property operating expenses 8, 11 |
71.6 | 67.4 |
| Other expenses from leasing operations 9 |
1.2 | 1.3 |
| Net rental income | 144.3 | 127.2 |
| Administrative expenses 10, 11, 12 |
28.0 | 23.3 |
| Other operating income and expenses 13 |
0.2 | 0.3 |
| Net fair value losses/gains on investment property 17 |
-35.3 | 50.8 |
| Profi t/losses on disposal of investment property 17, 23 |
0.6 | 2.6 |
| Operating profi t/loss | 81.8 | 157.7 |
| Financial income | 54.4 | 73.7 |
| Financial expenses | -116.8 | -128.6 |
| Net fi nancial income and expenses 14 |
-62.4 | -54.9 |
| Share of profi t/loss of jointly controlled entities 18 |
0.3 | - |
| Profi t/loss before taxes | 19.7 | 102.8 |
| Current taxes | -0.9 | -0.6 |
| Change in deferred taxes | 2.5 | -11.8 |
| Income taxes 15, 21 |
1.6 | -12.5 |
| Profi t/ loss for the period | 21.3 | 90.4 |
| Profi t/loss att ributable to | ||
| Parent company shareholders | 13.0 | 78.3 |
| Non-controlling interest | 8.3 | 12.0 |
| Earnings per share att ributable to parent company shareholders: | ||
| Earnings per share (basic), EUR 16 |
0.05 | 0.34 |
| Earnings per share (diluted), EUR 16 |
0.05 | 0.34 |
| Other comprehensive expenses/ income Net losses/gains on cash fl ow hedges 14 |
-35.9 | 5.1 |
| Income taxes relating to cash fl ow hedges 15, 21 |
9.0 | -1.3 |
| Exchange gains/losses on translating foreign operations | 0.6 | 3.1 |
| Other comprehensive expenses/ income for the period, net of tax | -26.2 | 6.9 |
| Total comprehensive loss/profi t for the period | -4.9 | 97.3 |
| Total comprehensive losst/profi t att ributable to | ||
| Parent company shareholders | -13.4 | 83.4 |
| Non-controlling interest | 8.5 | 13.9 |
| EUR million | Note 31 Dec. 2011 31 Dec. 2010 | ||
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Investment properties | 17 | 2,522.1 | 2,367.7 |
| Investments in jointly controlled entities | 18 | 0.6 | - |
| Intangible assets | 19 | 1.9 | 1.5 |
| Property, plant and equipment | 20 | 1.0 | 1.0 |
| Deferred tax assets | 21 | 14.5 | 5.6 |
| Derivative fi nancial instruments and other non-current assets | 22, 23 | 0.0 | 2.3 |
| Total non-current assets | 2,540.1 | 2,378.1 | |
| Investment properties held for sale | 24 | 12.7 | 1.5 |
| Current assets | |||
| Trade and other receivables | 22, 25 | 33.2 | 37.4 |
| Derivative fi nancial instruments | 22, 23 | 0.5 | - |
| Cash and cash equivalents | 22, 26 | 91.3 | 19.5 |
| Total current assets | 125.0 | 56.9 | |
| Total assets | 2,677.7 | 2,436.5 |
| EUR million | Note 31 Dec. 2011 31 Dec. 2010 | ||
|---|---|---|---|
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||
| Equity att ributable to parent company shareholders | 27 | ||
| Share capital | 259.6 | 259.6 | |
| Share premium fund | 131.1 | 131.1 | |
| Fair value reserve | -45.7 | -18.8 | |
| Invested unrestricted equity fund | 273.7 | 198.8 | |
| Translation reserve | -7.8 | -8.2 | |
| Retained earnings | 291.7 | 287.0 | |
| Total equity att ributable to parent company shareholders | 902.6 | 849.5 | |
| Non-controlling interest | 59.2 | 50.7 | |
| Total shareholders' equity | 961.8 | 900.2 | |
| LIABILITIES | |||
| Long-term liabilities | |||
| Loans | 22, 28 | 1,339.5 | 1,212.4 |
| Derivative fi nancial instruments | 22, 23 | 53.9 | 18.7 |
| Deferred tax liabilities | 21 | 59.8 | 62.6 |
| Other liabilities | 22 | 0.4 | 0.5 |
| Total long-term liabilities | 1,453.7 | 1,294.2 | |
| Short-term liabilities | |||
| Loans | 22, 28 | 208.4 | 185.3 |
| Derivative fi nancial instruments | 22, 23 | 0.6 | 1.6 |
| Trade and other payables | 22, 29 | 53.2 | 55.3 |
| Total short-term liabilities | 262.2 | 242.2 | |
| Total liabilities | 1,715.9 | 1,536.3 | |
| Total liabilities and shareholders' equity | 2,677.7 | 2,436.5 | |
| EUR million | Note 1 Jan.-31 Dec. 2011 1 Jan.-31 Dec. 2010 | ||
|---|---|---|---|
| Cash fl ow from operating activities | |||
| Profi t/loss before taxes | 19.7 | 102.8 | |
| Adjustments: | |||
| Depreciation and amortisation | 12, 31 | 1.0 | 0.8 |
| Net fair value losses/gains on investment property | 17, 31 | 35.3 | -50.8 |
| Profi t/losses on disposal of investment property | 17, 24, 31 | -0.6 | -2.6 |
| Financial income | 14, 31 | -54.4 | -73.7 |
| Financial expenses | 14, 31 | 116.8 | 128.6 |
| Other adjustments | 31 | 0.8 | 0.0 |
| Cash fl ow before change in working capital | 118.6 | 105.1 | |
| Change in working capital | 31 | 1.6 | 2.9 |
| Cash generated from operations | 120.2 | 108.0 | |
| Interest expenses and other fi nancial expenses paid | -60.1 | -68.0 | |
| Interest income and other fi nancial income received | 0.6 | 0.5 | |
| Realised exchange rate losses and gains | -1.8 | -10.6 | |
| Taxes received/paid | 7.2 | -9.9 | |
| Net cash from operating activities | 66.0 | 20.0 | |
| Cash fl ow from investing activities | |||
| Acquisition of subsidiaries, less cash acquired | 17 | -33.7 | -6.7 |
| Acquisition of investment properties | 17 | -105.5 | - |
| Capital expenditure on investment properties | 17 | -81.1 | -126.0 |
| Capital expenditure on investments in jointly controlled entities, | |||
| intangible assets and PP&E | 18, 19, 20 | -1.4 | -1.0 |
| Sale of investment properties | 17, 24 | 18.6 | 66.3 |
| Net cash used in investing activities | -203.0 | -67.5 | |
| Cash fl ow from fi nancing activities | |||
| Sale of treasury shares | 27 | 0.4 | 0.2 |
| Proceeds from share issue | 27 | 98.9 | 62.2 |
| Share subscriptions based on stock options | 27 | - | 3.3 |
| Proceeds from short-term loans | 28 | 160.9 | 109.0 |
| Repayments of short-term loans | 28 | -100.2 | -192.6 |
| Proceeds from long-term loans | 28 | 594.6 | 346.5 |
| Repayments of long-term loans | 28 | -511.8 | -252.2 |
| Dividends and return from the invested unrestricted equity fund | 27 | -34.3 | -31.2 |
| Net cash from fi nancing activities | 208.5 | 45.2 | |
| Net change in cash and cash equivalents | 71.6 | -2.3 | |
| Cash and cash equivalents at period-start | 26 | 19.5 | 19.8 |
| Eff ects of exchange rate changes | 0.2 | 2.0 | |
| Cash and cash equivalents at period-end | 26 | 91.3 | 19.5 |
| Equity att ributable to parent company shareholders | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| EUR million | Share capital |
Share premium fund |
Fair value reserve |
Invested unrestricted equity fund |
Translation reserve |
Retained earnings |
Total | Non controlling interest |
Total share holders' equity |
| Balance at 31 Dec. 2009 | 259.6 | 131.1 | -22.7 | 155.2 | -9.5 | 217.3 | 731.1 | 36.8 | 767.9 |
| Profi t for the period | 78.3 | 78.3 | 12.0 | 90.4 | |||||
| Net gains/losses on cash fl ow hedges, net of tax (Notes 14, 15 and 21) | 3.8 | 3.8 | 3.8 | ||||||
| Exchange gains/losses on translating foreign operations | 1.2 | 1.2 | 1.9 | 3.1 | |||||
| Total other comprehensive income/expenses for the period, net of tax | 3.8 | 1.2 | 5.0 | 1.9 | 6.9 | ||||
| Total comprehensive profi t/loss for the period | 3.8 | 1.2 | 78.3 | 83.4 | 13.9 | 97.3 | |||
| Share issue (Note 27) | 62.2 | 62.2 | 62.2 | ||||||
| Share subscriptions based on stock options (Notes 27 and 30) | 3.3 | 3.3 | 3.3 | ||||||
| Recognised gain in the equity arising from convertible bond buybacks (Note 28) | 0.0 | 0.0 | 0.0 | ||||||
| Sale of treasury shares (Note 27) | 0.2 | 0.2 | 0.2 | ||||||
| Dividends and return from the invested unrestricted equity fund (Note 27) | -22.1 | -8.8 | -30.9 | -30.9 | |||||
| Share-based payments (Notes 27 and 30) | 0.3 | 0.3 | 0.3 | ||||||
| Balance at 31 Dec. 2010 | 259.6 | 131.1 | -18.8 | 198.8 | -8.2 | 287.0 | 849.5 | 50.7 | 900.2 |
| Profi t for the period | 13.0 | 13.0 | 8.3 | 21.3 | |||||
| Net losses/gains on cash fl ow hedges, net of tax (Notes 14, 15 and 21) | -26.8 | -26.8 | -26.8 | ||||||
| Exchange gains/losses on translating foreign operations | 0.4 | 0.4 | 0.2 | 0.6 | |||||
| Total other comprehensive expenses/income for the period, net of tax | -26.8 | 0.4 | -26.4 | 0.2 | -26.2 | ||||
| Total comprehensive loss/profi t for the period | -26.8 | 0.4 | 13.0 | -13.4 | 8.5 | -4.9 | |||
| Share issue (Note 27) | 98.9 | 98.9 | 98.9 | ||||||
| Sale of treasury shares (Note 27) | 0.4 | 0.4 | 0.4 | ||||||
| Dividends and return from the invested unrestricted equity fund (Note 27) | -24.5 | -9.8 | -34.2 | -34.2 | |||||
| Share-based payments (Notes 27 and 30) | 1.5 | 1.5 | 1.5 | ||||||
| Balance at 31 Dec. 2011 | 259.6 | 131.1 | -45.7 | 273.7 | -7.8 | 291.7 | 902.6 | 59.2 | 961.8 |
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 7 February 2012. In accordance with Finnish Company Law, annual general meeting has the right to not approve the fi nancial statements approved by the Board of Directors and return the fi nancial statements back to the Board of Directors for a correction.
A copy of Citycon's Consolidated Financial Statements is available on the corporate website at www.citycon.fi and from the Group's headquarters at the address Pohjoisesplanadi 35 AB, FI-00100 Helsinki, Finland.
Citycon has prepared its consolidated fi nancial statements in accordance with the International Financial Reporting Standards (IFRS) and applied the IFRS/IAS standards, eff ective as of 31 December 2011, 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.
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 and rounded in thousands 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 deemed reasonable under the circumstances, the results of which form the basis of management judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may 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 affects only that period, or in the current and future periods if the revision aff ects both current and future periods. The chapter 5 Key estimates and assumptions, and accounting policies requiring judgment provides a more detailed description of the factors underlying judgements and assumptions.
The following new standards as well as amendments and interpretations to the existing standards have been adopted in the fi nancial statements 2011. These new standards and amendments were not relevant to Citycon as they didn't signifi cantly change Citycon's accounting policies.
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 2012 or later periods, but the group has not early adopted them. These are those that Citycon reasonably expects to have an impact on disclosures, fi nancial position or performance when applied at future date. Citycon will adopt these standards when they become eff ective.
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 2012 or later periods, but the group has not early adopted them. These are not relevant to Citycon, because according to the company's current view, they will not signifi cantly change its accounting policies nor presentation of the accounts.
The consolidated fi nancial statements include Citycon Oyj and its subsidiaries, as well as holdings in its associated and jointventure 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. 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.
When an acquisition is made, the judgment is needed whether the acquisition is treated as an asset acquisition or either as a business acquisition (see Chapter 5.2.2 Business acquisitions and asset acquisitions for judgment principles). An asset acquisition does not generate goodwill, but the entire acquisition cost is allocated to land, buildings and other assets and liabilities.
If business acquisition is made, IFRS 3 Business Combinations will apply, whereby the acquisition cost is allocated to the acquired assets. liabilities and contingent liabilities at their fair value. Goodwill arises when the given consideration exceeds the fair value of the acquired net assets .
Mutual real estate companies in Finland, in which the ownership of Citycon is less than 100%, are treated as jointly controlled assets in accordance with IAS 31 Interests in Joint Ventures. Jointly controlled assets are included in the consolidated fi nancial statements using proportionate consolidation, whereby the Group's share of assets, liabilities, income and expenses are included in the consolidated fi nancial statements line-by-line. 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, also those in which the ownership is less than 50%, are treated as jointly controlled assets, as described above.
Citycon has in interest in joint venture, which is treated as a jointly controlled entity based on IAS 31 Interest in Joint Ventures. In jointly controlled entity, venturers have a contractual arrangement that establishes joint control over the economic activities of the entity. Citycon recognises its interest in jointly controlled entity with equity method. The Group presents the aggregate share of profi t or loss from the jointly controlled entity on the face of its income statement in line "Share of profi t of jointly controlled entities". In the Note 18 "Investments in jointly controlled entities" the assets and liabilities of jointly controlled entities are presented.
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 from items included in shareholders' equity following their acquisition, are recognised under shareholders' equity.
Investment property refers to land or a building, or part of a building, held to earn rental income or capital appreciation, or both. Under IAS 40, investment property is measured at fair value, with gains and losses arising from changes in fair values being included in the income statement.
The investment properties are measured initially at cost, in-
cluding transaction costs such as consultant fees and transfer taxes. Aft er their initial measurement 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 defi ned 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 balancesheet date, best manifested in prices paid for properties on the active market on the review date, and the location and condition of these properties corresponding to those of the property under review while applying similar lease or other contracts.
Using International Valuation Standards (IVS), an external professional appraiser conducts the valuation of the company's property at least once a year, or at more regular intervals due to any major changes in the market. During 2011 and 2010, 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 fl ow is determined by the company's lease agreements valid at the valuation date. Upon the lease's expiry, the market rent assessed by an external appraiser is used to replace the contract rent. Gross rental income less operating expenses and investments equals cash fl ow, 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 cash- fl 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.
The fair value of (re)development projects i.e. investment properties under construction (IPUC) is determined under IAS 40 and Citycon uses a normal cash fl ow analysis or a special project model to measure the fair value of its (re)development projects, depending on the nature of the project. Both models take account of capital expenditure on the (re)development project and the property's future cash fl ows according to the (re)development project's schedule. Citycon takes into account the (re)development projects in its fair value evaluation, as soon as the Board of Directors has made a positive investment decision on the project and the external appraiser considers that suffi cient information is available for a reliable valuation. In the fair value evaluation on 31 December 2011, Citycon valued 5 properties (7 properties on 31 December 2010) as (re)development projects.
All potential development projects have been left out of the valuation conducted by the external appraiser. The valuation of properties with potential development projects is based on the situation and the estimated rental value on the valuation date. All undeveloped lots, or those under development, are evaluated based on their zoning on the valuation date. The value in each case was set based on market observations.
The fair value of Citycon's investment properties in the balance sheet equals the property portfolio's total value determined by the external appraiser, capital expenditure on development projects that have not been taken into account by the external appraiser, as well as the value of new properties acquired during the reporting quarter.
Gains and losses resulting from fair-value changes for investment properties are stated as separate items in the income statement.
An investment property is derecognised from the statement of fi nancial position on disposal or when the investment property is permanently withdrawn from use and no future economic benefi ts are expected from its disposal. As a main rule, investment properties not under construction or development for the purpose of a sale are measured at fair value in accordance with IAS 40 and presented under 'Investment properties' in the statement of fi nancial position. However, if the sale of an operative investment property is deemed probable, such a property is transferred to 'Investment properties held for sale' in the statement of fi nancial position. A sale is deemed highly probable when
However, investment properties held for sale are still recognised at fair value in accordance with IAS 40. Investment properties held for sale totalled EUR 12.7 million on 31 December 2011 (EUR 1.5 million on 31 December 2010).
Under IAS 40, a property must be reclassifi ed under inventories in the event of a change in the use of the property, evidenced by development starting with a view to a sale. If an investment property is being built/developed with a view to a sale, it will be treated in accordance with IAS 2 Inventories: it is recognised either at cost or below at net realisable value. If the property was acquired with a view to a sale, it will also be treated in accordance with IAS 2 Inventories. When a property is treated in accordance with IAS 2 Inventories, the property's value is presented under 'Inventory properties' in the statement of fi nancial position. Citycon had no inventory properties on 31 December 2011 or 31 December 2010.
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. If any major diff erences occur between the values, the depreciation plan is revised to correspond to these new values. The following depreciation periods apply:
Capital gains or losses on the sale of PPEs are recognised in the income statement.
An intangible asset is recognised in the balance sheet, provided its historical cost can be measured reliably and it is probable that its expected economic benefi ts will fl ow to the company.
Intangible assets are measured at cost less amortisation and any impairment losses.
These assets include mainly computer soft ware. They are amortised over their useful life on a straight-line basis over fi ve 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.
As required by IAS 39, fi nancial assets are classifi ed into the following categories for measurement purposes:
loans and other receivables not held for trading,
available-for-sale fi nancial assets and
fi nancial 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 current and non-current assets are carried at amortised cost. Their balance sheet value is impaired by the amount of any credit loss. In the company's consolidated statements of fi nancial position as at 31 December 2011 and 31 December 2010, loans and other receivables include the items "Other non-current assets", 'Trade and other receivables' and 'Cash and cash equivalents'.
Available-for-sale fi nancial assets are non-derivative assets carried at fair value. Changes in their fair value are recognised in the fair value reserve under shareholders' equity and in the income statement when the asset is disposed of or it has lost its value to the extent that an impairment loss must be recognised for the asset. Available-for-sale fi nancial assets are intended to be held for an indefi nite period and can be sold at a time deemed appropriate. On 31 December 2011 or 31 December 2010, Citycon had no available-for-sale fi nancial assets.
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. On 31 December 2011 and 31 December 2010, Citycon didn't have any derivative contracts classifi ed as fi nancial assets at fair value through profi t or loss.
Financial liabilities are classifi ed as
Financial liabilities are initially recognised at fair value. Aft erwards, fi nancial liabilities excluding derivative debt are recognised at amortised cost using the eff ective interest method. In the company's consolidated statement of fi nancial position, on 31 December 2011 and 31 December 2010, fi nancial liabilities at amortised cost include the items 'Loans', 'Other liabilities' and 'Trade payables and other payables'. On 31 December 2011 Citycon didn't have any derivative contracts classifi ed as fi nancial liabilities at fair value through profi t or loss on 31 December 2011 and on 31 December 2010.
Financial assets and liabilities are recognised in the balance sheet on the basis of the sett lement date.
Derivatives are initially measured at cost (if available) and remeasured 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 profi t fl uctuations. 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 eff ective 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 long-term liabilities in the statement of fi nancial 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 fi nancial 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 fi nancial 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, the 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.
Cash and cash equivalents consist of cash, bank deposits withdrawable on call, and other short-term, highly liquid investments. A maximum maturity of three months from the date of acquisition applies to cash and cash equivalents.
Ordinary shares are classifi ed as equity. The company has a single series of shares, with each share entitling to one vote at general meetings of shareholders. The shares have no nominal value, and there is no maximum amount to share capital.
Incremental costs directly att ributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds. Where any group company purchases the company's equity share capital (treasury shares), the consideration paid, including any directly att ributable incremental costs (net of income taxes) is deducted from equity att ributable to the company's equity holders until the shares are reissued. Where such ordinary shares are subsequently reissued, any consideration received, net of any directly att ributable incremental transaction costs and the related income tax eff ects, is included in equity att ributable to the company's equity holders.
Provisions are recognised when Citycon has a present legal or constructive obligation as a result of past events, when it is probable that an 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.
Leases based on Citycon as a lessor renting out investment properties are classifi ed under operating leases, since Citycon retains a signifi cant share of risks and rewards of ownership. Rental income from operating leases is spread evenly over the lease term.
Citycon also has leases including rent-free periods or rental discounts and which have been agreed in the original lease. Such lease incentives are treated according to SIC Interpretation 15 Operating Leases – Incentives and are recognised on a straight-line basis over the lease term, although rent payments are not received on the same basis. Citycon has also allowed rental discounts which have not been agreed in the original lease. In such cases, the leaseholder has requested a rental discount due to the market situation or the property's (re)development project. Such temporary rental discounts are recognised in the income statement during the period for which rent reductions have been granted.
On behalf of the lessee, Citycon may perform alteration work on premises rented by the lessee and charge the lessee for the resulting costs, in the form of a rent increase. The Group recognises the alteration-related rent increase as rental income over the lease term. Rent increase and the expense arising from the alteration work are taken into account when measuring the fair value of investment property.
Service charges are recognized in the period in which the expense it relates to is expensed. Service charges are included gross of the related costs in turnover as Citycon considers to act as principal in this respect.
Deeming itself the principal is based on the fact that Citycon selects the maintenance service providers for its properties, concludes agreements with property maintenance suppliers and bears the credit risk associated with maintenance. In addition, the tenant doesn't have a possibility to select the property maintenance service provider, nor the tenant can impact the service providers' pricing.
Service income, such as marketing income, is recognised for the period during which the services are provided.
A property is deemed as sold when the signifi cant risks and rewards of ownership have been transferred to the buyer.
When property is under (re)development and agreement has been made to sell such property when construction is complete, Citycon considers whether it was agreed to construct a property or to sell a completed property. If agreed to sell the completed property, the property is regarded as sold when the signifi cant risks and rewards of ownership have been transferred to the buyer. If agreed to construct a property, the revenue from disposal is recognised using the percentage of completion method as construction progresses, if the risks and rewards of the work in progress are transferred to the buyer as construction progresses.
Interest income is recognised according to the time that has elapsed, using the eff ective interest method.
Dividend income is recognised when the right to receive a dividend is established.
Borrowing costs are usually expensed as incurred. However, borrowing costs, such as interest expenses and arrangement fees, directly att ributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset. A qualifying asset is an asset that necessarily takes a substantial period of time to be ready for its intended use or sale. Capitalisation commences when the refurbishment of a property, or the construction of a new building or extension, begins and ceases once the building is ready for lease. Capitalisable borrowing costs include costs of funds borrowed for a construction project or costs 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 land are also capitalised on the development project, but only when activities necessary to preparing the asset for development are in progress on the purchased land.
Loan-related transaction expenses clearly associated with a 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 the taxable income of Group companies for the fi nancial 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 arises between the fair value and taxable value of investment properties. In such a case, taxes are calculated on the diff erence between the property's fair value and the debt-free acquisition cost of shares in the mutual real estate company in question, or the non-depreciated residual value of the directly owned property.
It is the company's policy to realise its shareholding in property companies by selling the shares it holds. For properties owned abroad, such deferred taxes are not recognised because, due to the ownership structure, property disposal does not lead to tax implications.
No deferred tax on subsidiaries' retained earnings is recognised, to the extent that the diff erence 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 att ributable to an item recognised in shareholders' equity, such as a change in the fair value of a derivative instrument used for hedging purposes, deferred taxes will also be recognised in shareholders' equity.
The tax rate enacted by the balance sheet date is used to determine deferred tax.
Leases, for which Citycon acts as a lessee, are 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 recognised in the balance sheet. Actuarial gains and losses are charged or credited to equity through other comprehensive income in the period in which they arise. Service cost is spread systematically over the working life. Professional actuaries perform these calculations using the projected credit method.
Citycon has applied IFRS 2 Share-based Payment to its stock options and to the long-term share-based incentive plan. Such stock options and share-based incentive plans are measured at fair value on the grant date and expensed over their vesting period. Stock options granted before the above date have not been expensed.
Citycon uses the Black & Scholes option-pricing model to measure the fair value of stock options.
Dividends to the company's shareholders are recognised as a liability in the consolidated statement of fi nancial position, for the period during which the Annual General Meeting of shareholders approves the dividends.
The preparation of fi nancial statements in accordance with IFRS requires the use of estimates and assumptions. Judgment is also required in the application of certain accounting policies. These may aff ect the reported assets and liabilities, recognition of income and expenses for the period, and other information such as the presentation of contingent liabilities. Although these estimates are based on the best knowledge and current information available, the actual results may diff er from the estimates.
Estimates and assumptions bearing a signifi cant risk concerning a material change in the carrying amounts of assets or liabilities are presented in the following.
Measuring the fair value of investment property is a key accounting policy that involves the management's judgement and assumptions about future uncertainties. Market rents, occupancy rate, operating expenses and yield requirement form the key variables used in the investment property's fair-value measurement. The evaluation of these variables involves the management's judgement and assumptions. On 31 December 2011, the fair value of investment properties totalled EUR 2,522.1 million (EUR 2,367.7 million). An analysis of investment properties' sensitivity to key variables is presented under Note 17. Investment Properties.
Citycon uses a net rental income based cash 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:
previous year's operating expenses and the benchmark data collected by the external appraiser.
• The yield requirement comprises risk-free interest as well as property-specifi c and market risk. The property-specifi c risk is defi ned by Citycon and this defi nition involves the management's judgement and assumptions. Market risks are defi ned by an external appraiser. Yield requirement added by infl ation assumption is used as the discount rate in the cash fl ow analysis. When the yield requirement decreases, the fair value of investment properties increases.
Other variables involving estimates and assumptions are the current leases' extension probability, the duration of vacant areas, investments, the infl ation rate and rental growth assumptions.
Citycon uses a normal cash-fl ow analysis or a special project model to measure the fair value of its (re)development projects depending on the nature of the project. Although the project model applies principles similar to those used in the cash fl ow analysis measuring the investment property's fair value, it is better suited to modelling changes, in many cases signifi cant ones, in premises and contracts during the development project. Based on 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.
When evaluating the fair value of (re)development projects, either with a normal cash fl ow analysis or with the use of a special project model, the judgement or assumptions about future investments, rental agreements and the project's timetable must be made.
Citycon is subject to income taxation in several countries. The complexity of tax legislation, as well as constant changes in it and in the operating environment, require Citycon to use estimates and assumptions when preparing its tax calculations. Future taxable income is uncertain, and the fi nal amount of taxes may deviate from the originally recorded amount. If fi nal tax deviates from originally recorded amounts, such diff erences may aff ect the period's taxable profi t, tax receivables or liabilities as well as deferred tax assets or liabilities. Citycon's current taxes in 2011 amounted to EUR 0.9 million (EUR 0.6 million in 2010).
Deferred tax assets and liabilities are calculated on temporary diff erences arising between the tax bases of assets and liabilities and their carrying amounts.
The major temporary diff erence arises between the fair value and taxable value of investment properties. Under the policy adopted by Citycon, deferred tax describes the tax payable on potential gains on sale in the case of a property being sold. This means that Citycon needs to estimate the future realisation of its property sales. In the main, Citycon realises its properties' sales by selling shares representing ownership in the property and by reporting deferred tax according to this rule. Deferred tax liability recognised from the diff erence between the fair value and taxable value of investment properties was EUR 57.5 million on 31 December 2011 (EUR 59.7 million on 31 December 2010).
Other main temporary diff erences relate to unused tax losses and fi nancial instruments. When tax receivables are recognised for tax losses that have been confi rmed in taxation, the company must evaluate whether it is probable that such tax losses can be used against a taxable profi t arising in the future. Deferred tax asset from tax losses amounted to EUR 1.1 million million on 31 December 2011 (EUR 1.3 million on 31 December 2010).
No deferred tax is recognised on subsidiaries' retained earnings, to the extent that it is considered unlikely that such a difference will be discharged in the future. On 31 December 2011, Citycon had confi rmed losses for which tax assets of EUR 19.4 million (EUR 16.6 million in 2010) were not recognised.
Deferred taxes are calculated on the balance sheet day using valid tax rates.
Citycon must use judgement when appling the following accounting policies.
Citycon uses judgment when classifying its properties into investment properties, inventory properties or investment properties held for sale, according to the following policies:
Citycon purchases investment properties through asset acquisitions and business acquisitions. It applies IAS 40 Investment Property to the accounting treatment of asset acquisitions and IFRS 3 Business Combinations to the accounting treatment of business acquisitions. Citycon exercises judgement in assessing whether the purchase of an investment property or an investment property portfolio is classifi ed as an asset acquisition or business acquisition. Acquisitions are treated as business acquisitions when signifi cant set of activities is acquired in addition to the property. The signifi cance of activities is assessed in accordance with the defi nition of ancillary services (e.g. maintenance, cleaning, security, book-keeping, etc.) of IAS 40. Citycon didn't have any business acquisitions in 2011 and 2010.
When investment properties are sold, Citycon exercises judgement in estimating whether the sale is classifi ed as a real estate sale or sale of a business. For Citycon, characteristics of a sale of a business include, for example, the sale of a major line of business or geographical area of operations that also involves the transfer of staff and/or management essential to the business.
In the case of real estate sale, IAS 40 Investment Property or IAS 2 Inventory based accounting treatment is applied. Policies concerning the sale of individual investment properties or properties are described in 4.4 Investment properties held for sale and 4.5 Inventory properties.
In the case of sale of a business, IFRS 5, Non-current Assets Held for Sale and Discontinued Operations based accounting treatment is applied. Businesses i.e. disposal groups such as segments or property portfolios 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. A sale is considered highly probable based on the policies presented under 4.4 Investment properties held for sale. Profi t for the period from the business held for sale must be stated as a separate item in the consolidated statement of comprehensive income, while the business held for sale must be presented in the statement of fi nancial position, separately from other assets. In addition, liabilities under the the business held for sale must be presented in the statement of fi nancial position, separately from other liabilities. Citycon had no businesses held for sale on 31 December 2011 or 31 December 2010.
| EUR million | 2011 | 2010 |
|---|---|---|
| Straight-lining of lease incentives | 0.3 | 0.6 |
| Temporary rental discounts | -2.4 | -3.0 |
| Additional rent from turnover based rental agreements |
3.8 | 2.4 |
| Gross rental income (excl. items above) | 204.3 | 185.9 |
| Total | 206.0 | 185.9 |
B) General description of Citycon's lease agreements In accordance with the table presented below, Citycon had 3,955 lease agreements on 31 December 2011 (3,765 agreements on 31 December 2010). The increase in number of lease agreements were due to acquisitions of shopping centre properties in the Baltic Countries and Sweden, opening of redevelopment projects and off set by divestments of shopping centre and supermarket properties in Finland and residential units in Sweden. In the majority, i.e. in 89 per cent (89% on 31 Dec. 2010) of Citycon's leases the rent is divided into base rent, tied to the cost-of-living index, and the maintenance charge. The maintenance charge, charged separately from the lessee, covers oper-
ices requested by the lessee. Part of Citycon's lease agreements also contain a turnoverlinked component in addition to a cost-of-living -indexation. Turnover based rent agreements accounted for roughly 49 per cent (43 per cent at 31.12.2010) of Citycon's lease portfolio at 31.12.2011. In Note 6. A) Breakdown of gross rental income, the additional rent received from turnover based rental agreements is presented.
ating expenses incurred by the property owner due to property maintenance, while enabling the provision of any additional serv-
Thus, Citycon's leases are chiefl y leases with contingent rent payments in accordance with IAS 17.4, because the entire portfolio is tied to the cost-of-living index, a predetermined minimum rent increase and/or the lessee's turnover.
| Number of lease agreements | 31 Dec. 2011 31 Dec. 2010 | |
|---|---|---|
| Finland | 1,699 | 1,672 |
| Sweden | 1,818 | 1,784 |
| Baltic Countries | 438 | 309 |
| Total | 3,955 | 3,765 |
In accordance with the table presented below, the average remaining length of Citycon's lease portfolio was 3.4 years on 31 December 2011 (3.2 years on 31 December 2010). Citycon mainly seeks to prepare fi xed-term contracts. As a main rule, new leases are signed for a fi xed period in all countries. Alongside storage facilities and individual parking spaces, apartments form the main exception to this. Fixed-term agreements represented about 78 per cent of Citycon's property portfolio on 31 December 2010 (75 percent on 31 December 2010) and initially fi xed-term contracts 10 per cent on 31 December 2011 (11 per cent on 31 December 2010). The rest of the agreements are leases in eff ect until further notice (12 percent out of all leases on 31 December 2011 and 14 percent on 31 December 2010).
A new lease's duration depends on the type of premises to be leased and the tenant. With an anchor tenant, the company typically concludes long-term leases of 10 or even 20 years. Leases for smaller retail premises, however, are chiefl y negotiated for a term of 3–5 years.
| Average remaining length of lease portfolio at the end of fi nancial year, year |
31 Dec. 2011 31 Dec. 2010 | |
|---|---|---|
| Finland | 3.5 | 3.0 |
| Sweden | 2.9 | 3.1 |
| Baltic Countries | 4.2 | 4.6 |
| Average | 3.4 | 3.2 |
C) Future minimum lease payments
receivable under non-cancellable leases
Non-cancellable leases include fi xed-term and initially fi xed-term leases until the end of their terms. Leases in eff ect until further notice are assumed as non-cancellable leases for the equivalent of their notice period.
| EUR million | 31 Dec. 2011 31 Dec. 2010 | |
|---|---|---|
| Not later than 1 year | 50.7 | 54.8 |
| 1-5 years | 112.6 | 109.7 |
| Over 5 years | 46.2 | 24.8 |
| Total | 209.5 | 189.3 |
The presentation of segment information is based on the Group's geographical business units. In turn, these units are based on the Group's organisational structure and internal fi nancial reporting. Furthermore, the Group's profi t is reported to the Board of Directors, which is the chief operating decision maker, 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 EPRA operating profi t. Fair value changes are also reported to Citycon's management and Board of Directors, by business unit. In addition to geographical business units, Citycon's management and Board of Directors monitor property-specifi c net rental income.
Segment assets and liabilities consist of operating items which the segment uses in its operations or which can be allocated to the segment on a reasonable basis. Unallocated items include tax and 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 diff erent property types: shopping centres, and supermarkets and shops. Citycon presents its gross rental income broken down by property type.
Principal customers include the fi ve biggest tenants, one of whose share of gross rental income exceeds 10 per cent. The proportion of gross rental income and the segment is specifi ed for each of these tenants. The proportion of gross rental income is based on the rent roll at 31 Dec. 2011 and at 31 Dec. 2010.
The geographical segments are Finland, Sweden and the Baltic countries. The segment Other mainly includes the administrative expenses arising from the Group's headquarter.
Citycon is Finland's largest company in the shopping-centre business. It owns 23 shopping centres, in addition to 37 other retail properties. 29 of the Finnish properties are located in the Helsinki Metropolitan Area and 31 elsewhere in Finland.
Citycon has nine shopping centres and seven other retail properties in Sweden. Eight of the properties in Sweden are located in the Greater Stockholm Area, six in the Greater Gothenburg Area and two in Umeå.
Citycon owns four shopping centres in the Baltic region, three in Estonia and one in Lithuania.
| EUR million 1 Jan.-31 Dec. 2011 | Finland | Sweden | Baltic Countries |
Other | Total |
|---|---|---|---|---|---|
| Gross rental income | 127.3 | 57.4 | 21.2 | - | 206.0 |
| Service charge income | 5.1 | 2.7 | 3.3 | - | 11.1 |
| Turnover | 132.5 | 60.1 | 24.5 | - | 217.1 |
| Property operating expenses | 41.7 | 23.9 | 6.0 | 0.0 | 71.6 |
| Other expenses from leasing operations | 0.3 | 0.9 | 0.0 | 0.0 | 1.2 |
| Net rental income | 90.5 | 35.4 | 18.4 | 0.0 | 144.3 |
| Administrative expenses | 7.6 | 4.9 | 1.3 | 13.2 | 27.1 |
| Other operating income and expenses | 0.3 | - | 0.0 | -0.1 | 0.2 |
| EPRA operating profi t | 83.2 | 30.4 | 17.1 | -13.4 | 117.4 |
| Indirect administrative expenses | 0.7 | 0.3 | - | - | 1.0 |
| Net fair value losses/gains on investment property |
-40.4 | 1.7 | 3.4 | - | -35.3 |
| Profi t on disposal of investment property | 0.0 | 0.6 | 0.0 | - | 0.6 |
| Operating profi t/loss | 42.3 | 32.4 | 20.5 | -13.4 | 81.8 |
| Net fi nancial income and expenses | -62.4 | -62.4 | |||
| Share of profi t/loss of jointly controlled entitities |
0.3 | 0.3 | |||
| Income tax expense | 1.6 | 1.6 | |||
| Profi t for the period | 21.3 | ||||
| Allocated assets | |||||
| Investment properties | 1,547.4 | 697.1 | 277.6 | - | 2,522.1 |
| Investment properties held for sale | - | 12.7 | - | - | 12.7 |
| Other allocated assets | 10.6 | 21.5 | 1.0 | 94.9 | 128.0 |
| Unallocated assets | |||||
| Deferred tax assets | 14.5 | 14.5 | |||
| Derivative fi nancial instruments Assets |
1,558.0 | 731.3 | 278.6 | 0.5 109.8 |
0.5 2,677.7 |
| Allocated liabilities | |||||
| Trade and other payables | 5.1 | 19.4 | 1.6 | 27.0 | 53.2 |
| Unallocated liabilities | |||||
| Interest-bearing liabilities | 1,547.9 | 1,547.9 | |||
| Deferred tax liabilities | 59.8 | 59.8 | |||
| Derivative fi nancial instruments | 54.5 | 54.5 | |||
| Other unallocated liabilities | 0.4 | 0.4 | |||
| Liabilities | 5.1 | 19.4 | 1.6 | 1,689.8 | 1,715.9 |
| Capital expenditure | 62.5 | 45.5 | 108.1 | 0.6 | 216.7 |
| EUR million 1 Jan.-31 Dec. 2010 | Finland | Sweden | Baltic Countries |
Other | Total |
|---|---|---|---|---|---|
| Gross rental income | 122.1 | 49.8 | 13.9 | - | 185.9 |
| Service charge income | 4.3 | 2.9 | 2.7 | - | 10.0 |
| Turnover | 126.5 | 52.8 | 16.7 | - | 195.9 |
| Property operating expenses | 39.3 | 23.3 | 4.8 | 0.0 | 67.4 |
| Other expenses from leasing operations | 0.4 | 0.7 | 0.1 | 0.0 | 1.3 |
| Net rental income | 86.7 | 28.7 | 11.8 | 0.0 | 127.2 |
| Administrative expenses | 6.1 | 4.6 | 1.2 | 10.5 | 22.5 |
| Other operating income and expenses | 0.3 | - | 0.0 | - | 0.3 |
| EPRA operating profi t | 80.9 | 24.1 | 10.6 | -10.5 | 105.0 |
| Indirect administrative expenses | 0.0 | 0.7 | - | - | 0.8 |
| Net fair value gains/losses on investment | |||||
| property | 24.5 | 22.8 | 3.5 | - | 50.8 |
| Profi t on disposal of investment property | 2.2 | 0.5 | 0.0 | - | 2.6 |
| Operating profi t/loss | 107.5 | 46.7 | 14.1 | -10.5 | 157.7 |
| Net fi nancial income and expenses | -54.9 | -54.9 | |||
| Income tax expense Profi t for the period |
-12.5 | -12.5 90.4 |
|||
| Allocated assets | |||||
| Investment properties | 1,533.0 | 668.6 | 166.1 | - | 2,367.7 |
| Investment properties held for sale | 1.5 | - | - | - | 1.5 |
| Other allocated assets | 6.2 | 20.1 | 0.7 | 32.4 | 59.4 |
| Unallocated assets | |||||
| Deferred tax assets | 5.6 | 5.6 | |||
| Derivative fi nancial instruments | 2.2 | 2.2 | |||
| Assets | 1,540.6 | 688.8 | 166.8 | 40.3 | 2,436.5 |
| Allocated liabilities | |||||
| Trade and other payables | 18.3 | 19.9 | 2.3 | 14.8 | 55.3 |
| Unallocated liabilities | |||||
| Interest-bearing liabilities | 1,397.7 | 1,397.7 | |||
| Deferred tax liabilities | 62.6 | 62.6 | |||
| Derivative fi nancial instruments | 20.3 | 20.3 | |||
| Other unallocated liabilities | 0.5 | 0.5 | |||
| Liabilities | 18.3 | 19.9 | 2.3 | 1,495.9 | 1,536.3 |
| Capital expenditure | 76.3 | 50.6 | 6.0 | 0.8 | 133.7 |
B) Turnover by property types
| Me | 2011 | 2010 |
|---|---|---|
| Shopping centres | 187.9 | 165.8 |
| Supermarkets and shops | 29.2 | 30.2 |
| Total | 217.1 | 195.9 |
| 2011 | Proportion of gross rental income, % |
Segment 2011 |
|---|---|---|
| Kesko | 17.2 | Finland |
| S Group | 5.6 | Finland and the Baltic Countries |
| ICA AB | 3.4 | Sweden and the Baltic Countries |
| Stockmann | 3.1 Finland, Sweden and the Baltic Countries | |
| Tokmanni | 1.7 | Finland |
| Total | 31.1 |
Proportion of gross rental income is based on the rent roll at 31 Dec. 2011
| 2010 | Proportion of gross rental income, % |
Segment 2010 |
|---|---|---|
| Kesko | 19.9 | Finland |
| S Group | 4.9 | Finland and the Baltic Countries |
| ICA AB | 3.6 | Sweden and the Baltic Countries |
| Stockmann | 3.3 | Finland, Sweden and the Baltic Countries |
| Tokmanni | 1.8 | Finland |
| Total | 33.5 |
Proportion of gross rental income is based on the rent roll at 31 Dec. 2010
| EUR million | 2011 | 2010 |
|---|---|---|
| Heating and electricity | 24.2 | 22.0 |
| Maintenance expenses | 23.3 | 23.0 |
| Land lease fees and other rents | 1.3 | 1.3 |
| Property personnel expenses | 0.6 | 0.6 |
| Administrative and management fees | 2.3 | 2.3 |
| Marketing expenses | 5.6 | 5.0 |
| Property insurances | 0.5 | 0.5 |
| Property taxes | 6.4 | 6.3 |
| Repair expenses | 7.5 | 6.5 |
| Other property operating expenses | -0.1 | 0.0 |
| Total | 71.6 | 67.4 |
One property had no income during the year 2011 (two properties in 2010), but it generated expenses of EUR 0.0 million (EUR 0.1 million).
| EUR million | 2011 | 2010 |
|---|---|---|
| Tenant improvement expenses and commissions | 0.4 | 0.3 |
| Credit losses | 0.8 | 1.0 |
| Total | 1.2 | 1.3 |
Signifi cant tenant improvements are recognised as investments.
Credit losses include decrease of EUR 0.1 million in credit loss provisions (increase of EUR 1.0 million) in the consolidated statement of comprehensive income. Credit loss provisions in the statement of fi nancial position are presented in Note 25. Trade and other receivables.
| EUR million | 2011 | 2010 |
|---|---|---|
| Personnel expenses | 15.1 | 11.0 |
| Non-recurring personnel expenses arising from employment terminations |
1.7 | 1.3 |
| Consultancy and advisory fees as well as external services |
4.8 | 5.6 |
| Offi ce and other administrative expenses | 5.4 | 4.4 |
| Depreciation and amortisation | 1.0 | 0.8 |
| Total | 28.0 | 23.3 |
Non-recurring personnel expenses arising from employment terminations include one-off compensations (incl. pension and social charges) payable to 11 persons in 2011 and to two persons in 2010.
The following audit fees and services from the audit fi rm Ernst & Young Oy are included within the consulting and advisory fees included in the administrative expenses and within the administrative and management fees included in the property operating expenses.
| EUR million | 2011 | 2010 |
|---|---|---|
| Audit fees | 0.3 | 0.2 |
| Other advisory services | 0.7 | 0.2 |
| Total | 0.9 | 0.4 |
| EUR million | 2011 | 2010 |
|---|---|---|
| Wages and salaries of management | ||
| CEO | 0.5 | 0.4 |
| Management committ ee | 1.2 | 1.0 |
| Board | 0.7 | 0.7 |
| Other wages and salaries | 8.8 | 6.6 |
| Pension charges: defi ned contribution plans | 1.6 | 1.2 |
| Pension charges: defi ned benefi t plans | -0.1 | 0.0 |
| Social charges | 1.3 | 1.1 |
| Expense of share based payments | 1.7 | 0.6 |
| Total | 15.7 | 11.6 |
Personnel expenses of EUR 0.6 million (EUR 0.6 million) are included in property operating expenses and EUR 15.1 million (EUR 11.0 million) in administrative expenses.
Citycon used to have a defi ned benefi t pension plan related to the pension plan of the previous CEO Petri Olkinuora. As Petri Olkinuora left the company, Citycon sett led its obligations related to Olkinuora's pension plan during 2010. Therefore, there were no defi ned benefi t pension liability recognized in the statement of fi nancial position on 31 December 2011 and 2010. The defi ned benefi t pension income of EUR 0.1 million in 2011 arose from from the diff erence between the accrued sett lement in 2010 and the fi nal actuarial calculations.
The share-based payment plans are described in Note 30. Employee benefi ts.
Information on management benefi ts is presented in Note 33. Related party transactions.
Depreciation and amortisation of EUR 1.0 million (EUR 0.8 million) on machinery and equipment, as well as on intangible assets, is included in administrative expenses.
| EUR million | 2011 | 2010 |
|---|---|---|
| Other operating income | 0.3 | 0.3 |
| Other operating expenses | -0.1 | - |
| Total | 0.2 | 0.3 |
A) Recognised in the income statement
| EUR million | 2011 | 2010 |
|---|---|---|
| Interest income | 0.6 | 0.5 |
| Foreign exchange gains | 53.8 | 73.0 |
| Fair value gain from derivatives | - | 0.2 |
| Other fi nancial income | 0.0 | 0.1 |
| Financial income, total | 54.4 | 73.7 |
| Interest expenses | 61.0 | 55.4 |
| Foreign exchange losses | 53.7 | 72.8 |
| Development interest capitalised | -2.5 | -3.3 |
| Other fi nancial expenses | 4.6 | 3.8 |
| Financial expenses, total | 116.8 | 128.6 |
| Net fi nancial income and expenses | 62.4 | 54.9 |
| Of which att ributable to fi nancial instrument categories: |
||
| Interest-bearing loans and receivables | 48.0 | 20.6 |
| Finance lease liabilities | 0.0 | 0.0 |
| Derivative fi nancial instruments | 14.1 | 34.2 |
| Other liabilities and receivables | 0.2 | 0.1 |
| Net fi nancial income and expenses | 62.4 | 54.9 |
In 2011, foreign exchange gains of EUR 0.1 million (loss of EUR -8.9 million) were recognised in the statement of comprehensive income from foreign exchange derivative agreements.
Interest on development expenditure is capitalised at a rate of 4.31% as at 31 December 2011 (4.32% as at 31 December 2010).
Citycon's interest expenses in the statement of comprehensive income contain interest expenses from interest-bearing debt as well as all interest expenses arising from derivative fi nancial instruments used for hedging purposes. Additional information on Citycon's derivative fi nancial instruments, their fair values and hedge accounting treatment can be found in Note 23. Derivative Financial Instruments.
| B) Recognised in the other comprehensive income | ||||||
|---|---|---|---|---|---|---|
| -- | -- | -- | -- | -- | ------------------------------------------------- | -- |
| EUR million | 2011 | 2010 |
|---|---|---|
| Losses arising during the period from cash fl ow hedges |
-50.1 | -17.7 |
| Less: interest expenses recognised in the income statement on cash fl ow hedges |
14.2 | 22.9 |
| Net losses/ gains on cash fl ow hedges | -35.9 | 5.1 |
| EUR million | 2011 | 2010 |
|---|---|---|
| Current tax | 0.9 | 0.6 |
| Tax for prior periods | 0.0 | 0.0 |
| Deferred tax | -2.5 | 11.8 |
| Income taxes | -1.6 | 12.5 |
Reconciliation between tax charge and Group tax at the Finnish tax rate (26.0%):
| EUR million | 2011 | 2010 |
|---|---|---|
| Profi t/loss before taxes | 19.7 | 102.8 |
| Taxes at Finnish tax rate | 5.1 | 26.8 |
| Fair value gains and losses from subsidiaries owned abroad |
-4.9 | -12.0 |
| Diff erence in foreign subsidiaries' tax rate | -3.3 | -1.6 |
| Unrecognised tax receivables from losses | 2.1 | 4.1 |
| Utilisation of previously unrecognised tax losses | -0.2 | -4.8 |
| Other | -0.5 | 0.0 |
| Income taxes | -1.6 | 12.5 |
| Eff ective tax rate | -8.3% | 12.1% |
Earnings per share (basic) is calculated by dividing the net profi t/ loss att ributable to parent company shareholders by the share issue adjusted weighted average number of shares.
| EUR million | 2011 | 2010 |
|---|---|---|
| Earnings per share, basic | ||
| Profi t/loss att ributable to parent company shareholders (EUR million) |
13.0 | 78.3 |
| Average number of shares (1,000) | 259,778.3 228,148.2 | |
| Earnings per share (basic) (EUR) | 0.05 | 0.34 |
| EUR million | 2011 | 2010 |
|---|---|---|
| Earnings per share, diluted | ||
| Profi t/loss att ributable to parent com pany shareholders (EUR million) |
13.0 | 78.3 |
| Expenses from convertible loan, less the tax eff ect (EUR million) 1) |
- | 4.1 |
| Profi t/loss used in the calculation of diluted earnings per share (EUR million) |
13.0 | 82.5 |
| Average number of shares (1,000) | 259,778.3 | 228,148.2 |
| Convertible capital loan impact (1,000) 1) | - | 17,519.6 |
| Adjustment for stock options (1,000) | - | 1.8 |
| Adjustments for long-term share-based incentive plan (1,000) |
128.8 | 136.8 |
| Average number of shares used in the calcu lation of diluted earnings per share (1,000) |
259,907.1 245,806.3 | |
| Diluted earnings per share (EUR) | 0.05 | 0.34 |
1) The potential new shares from the conversion of convertible capital loan and the expenses from convertible loan (less the tax eff ect) are not included in calculating 2011 diluted per-share fi gures, because the earnings per share basic would be less than diluted earnings per share. Adjustments for long-term share-based incentive plan and stock options are taken into account when calculating the diluted earnings per share.
Diluted earnings per share is calculated by adjusting the weighted average number of shares to assume the conversion of all dilutive potential shares. The Group currently has three categories of dilutive shares in place: convertible capital loan, stock options and long-term share-based incentive plan.
scheme has a dilutive eff ect. In calculating the dilutive eff ect of the share-based incentive scheme, the number of shares the company would have received had it used assets to the value of the remaining work performance, to acquire treasury shares at fair value, is considered a deductive factor in the full number of shares granted.
| Average number of shares used in the calculation of earnings per share | days | number of shares |
|---|---|---|
| 1.1.2011 | 195 | 244,564,972 |
| 15.7.2011 | 3 | 244,811,297 |
| 18.7.2011 | 167 | 277,811,297 |
| Weighted average (daily) number of shares | 365 | 259,778,329 |
Citycon divides its investment properties into two categories: Investment Properties Under Construction (IPUC) and Operative Investment Properties. At 31 December 2011, the fi rst mentioned category included Iso Omena, Koskikeskus and Myllypuro in Finland as well as Åkermyntan Centrum in Sweden and Magistral in Estonia. At 31 December 2010, the fi rst mentioned category included Espoontori, Kirkkonummen Liikekeskus, Lahden Hansa (Trio), Myllypuro, Martinlaakso and Myyrmanni in Finland as well as Åkersberga Centrum in Sweden. IPUC-category includes the fair value of the whole property even though only part of the property may be under construction.
Contractual obligations to purchase, construct or develop investment properties are presented in Note 32. B) Pledges and other contingent liabilities.
| EUR million 31 Dec. 2011 | Investment property under construction |
Operative investment properties |
Investment properties total |
|---|---|---|---|
| At period-start | 326.1 | 2 041.6 | 2 367.7 |
| Acquisitions during the period | - | 139.9 | 139.9 |
| Investments during the period | 23.5 | 48.9 | 72.4 |
| Disposals during the period | - | -16.6 | -16.6 |
| Capitalised interest | 0.5 | 2.0 | 2.6 |
| Fair value gains on investment property | 20.3 | 19.5 | 39.8 |
| Fair value losses on investment property | -0.2 | -74.9 | -75.1 |
| Exchange diff erences | 0.1 | 3.9 | 4.0 |
| Transfer between IPUC and operative investment properties | |||
| and transfer into investment properties held for sale | 156.0 | -168.7 | -12.7 |
| At period-end | 526.4 | 1 995.7 | 2 522.1 |
| EUR million 31 Dec. 2010 | Investment property under construction |
Operative investment properties |
Investment properties total |
|---|---|---|---|
| At period-start | 269.8 | 1 877.6 | 2 147.4 |
| Acquisitions during the period | 1.9 | 4.8 | 6.8 |
| Investments during the period | 69.5 | 52.2 | 121.7 |
| Disposals during the period | -3.4 | -36.3 | -39.7 |
| Capitalised interest | 2.2 | 1.2 | 3.4 |
| Fair value gains on investment property | 2.1 | 93.6 | 95.7 |
| Fair value losses on investment property | -14.0 | -30.8 | -44.9 |
| Exchange diff erences | 5.8 | 73.0 | 78.7 |
| Transfer between IPUC and operative investment properties | -7.8 | 6.3 | -1.5 |
| At period-end | 326.1 | 2 041.6 | 2 367.7 |
Under the IAS 40 Investment Property -standard, Citycon measures its investment properties at fair value. An external professional appraiser has conducted the valuation of the company's properties using a net rental income based cash fl ow analysis. Market rents, occupancy rate, operating expenses and yield requirement form the key variables used in the cash fl ow analysis.
A global property valuation expert Jones Lang LaSalle conducted the valuation of Citycon's properties for the fi nancial statements 2011. Realia Management conducted the property valuation for the year 2010 and for the fi rst three quarters of 2011. The resulting fi xed fees based on the 2011 valuations total EUR 0.2 million (EUR 0.1 million in 2010).
The fair value of Citycon's investment properties in the balance sheet equals the property portfolio's total value determined by the external appraiser, capital expenditure on development projects not taken into account by the external appraiser, transfer into investment properties held for sale as well as the value of new properties acquired during the reporting quarter. The reconciliation between the fair value determined by the external appraiser and the fair value of investment properties in Citycon's balance sheet, is as follows.
| Me | 31.12.2011 | 31.12.2010 |
|---|---|---|
| Fair value of investment properties determined by the external appraiser as at Dec. 31 1) |
2,515.0 | 2,361.1 |
| Capital expenditure on development projects | 7.1 | 5.6 |
| Transfer into investment properties held for sale | - | -1.5 |
| Acquisition of new properties | - | 2.5 |
| Fair value of investment properties as at Dec. 31 | 2,522.1 | 2,367.7 |
1) The properties held for sale (EUR 12.7 million) were not included within the fair value determined by the external appraiser on 31 December 2011.
The segments' assumptions used by the external appraisers in the cash fl ow analysis on 31 December 2011 and on 31 December 2010 are presented the table below. The average yield requirements decreased in all countries e.g. due to property acquisitions and disposals. In Sweden the average yield requirement decreased also due to increased demand for prime properties in the property markets. The average yield requirement for the total property portfolio remained, however, unchanged at 6.4% as proportion of the Baltic portfolio increased due to acquisition of Kristiine Shopping Centre. Market rents increased slightly from 23.6 EUR/sq.m. on 31 December 2010 to 23.8 EUR/sq.m. on 31 December 2011. The vacancy assumption for the cash fl ow period increased by 30bps from 4.4% on 31 December 2010 to 4.7% on 31 December 2011.
| EUR million 31 Dec. 2011 | Finland | Sweden Baltic Countries | Average | |
|---|---|---|---|---|
| Yield requirement (%) | 6.3 | 5.9 | 8.0 | 6.4 |
| Initial yield (%) | 6.0 | 5.5 | 8.2 | 6.1 |
| Reversionary yield (%) | 6.8 | 6.6 | 8.4 | 6.9 |
| Market rents (€/m²) | 24.4 | 23.6 | 20.8 | 23.8 |
| Vacancy during the cash fl ow period (%) | 4.9 | 5.5 | 2.0 | 4.7 |
| Infl ation assumption (%) | 2.00 | 2.05 | 2.71 | - |
| Operating expense growth assumption (%) | 2.00 | 2.05 | 3.00 | - |
| EUR million 31 Dec. 2010 | Finland | Sweden Baltic Countries | Average | |
|---|---|---|---|---|
| Yield requirement (%) | 6.4 | 6.1 | 8.1 | 6.4 |
| Initial yield (%) | 6.1 | 6.0 | 7.9 | 6.2 |
| Reversionary yield (%) | 6.9 | 6.8 | 8.3 | 6.9 |
| Market rents (€/m²) | 23.6 | 24.1 | 21.4 | 23.6 |
| Vacancy during the cash fl ow period (%) | 4.6 | 4.1 | 3.6 | 4.4 |
| Infl ation assumption (%) | 2.00 | 2.00 | 2.50 | - |
| Operating expense growth assumption (%) | 2.25 | 2.25 | 2.75 | - |
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 2,515.0 million defi ned by the external appraiser at 31 December 2011 as the starting value. Sensitivity analysis indicates that the market value is most sensitive to the market rents and yield requirement. A ten percent decrease in the yield requirement results in an approximately 11 percent increase in market value. Correspondingly, a ten percent increase in gross income increases the value by approximately 14 percent. The market value reacts to change in vacancy and operating expenses, but their relative eff ect is not as great as changes to rental income and yield requirement.
| Change % | -10% | -5% | Value of properties (EUR million) ±0% |
+5% | +10% |
|---|---|---|---|---|---|
| Yield requirement | 2,794.4 | 2,647.3 | 2,515.0 | 2,395.2 | 2,286.3 |
| Market rents | 2,167.0 | 2,341.0 | 2,515.0 | 2,688.9 | 2,862.9 |
| Operating expenses | 2,626.2 | 2,570.6 | 2,515.0 | 2,459.3 | 2,403.7 |
| Change, percentage points | -2 | -1 | ±0 | 1 | 2 |
| Vacancy | 2,598.8 | 2,556.9 | 2,515.0 | 2,473.0 | 2,431.1 |
During 2011, Citycon Oyj acquired a 50% interest in Espagalleria Oy, jointly controlled entity, which is the management company of Kämp Galleria shopping centre in Finland. Included in the consolidated fi nancial statements are the following items that represent the Group's interest in the assets and liabilities, revenues and expenses of the jointly controlled entities.
| EUR million | 2011 | 2010 |
|---|---|---|
| Total assets | 0.8 | - |
| Total liabilities | 0.2 | - |
| Net assets | 0.6 | - |
| Turnover | 6.1 | - |
| Net rental income | 0.3 | - |
| Asset management fee of the property | -0.3 | - |
| Profi t on valuation of investment property | 0.3 | - |
| Operating profi t/loss | 0.3 | - |
| Profi t/ loss for the period | 0.3 | - |
Citycon didn't have any contingent liabilities and capital commitments in relation to its interest in jointly controlled entities. Jointly controlled entities themselves didn't have either any contingent liabilities and capital commitments.
| EUR million | 2011 | 2010 |
|---|---|---|
| Acquisition cost Jan. 1 | 2.9 | 1.9 |
| Additions during the period | 1.0 | 1.0 |
| Accumulated acquisition cost Dec. 31. | 3.9 | 2.9 |
| Accumulated depreciation and impairment losses, Jan. 1 | 1.4 | 1.0 |
| Depreciation during the period | 0.5 | 0.5 |
| Accumulated depreciation and impairment losses, Dec 31. | 2.0 | 1.4 |
| Net carrying amount Jan 1. | 1.5 | 0.9 |
| Net carrying amount Dec 31. | 1.9 | 1.5 |
Intangible assets consisted mainly of computer soft ware and licenses.
| EUR million | 2011 | 2010 |
|---|---|---|
| Acquisition cost Jan. 1 | 3.0 | 2.3 |
| Additions during the period | 0.4 | 0.7 |
| Accumulated acquisition cost Dec. 31. | 3.4 | 3.0 |
| Accumulated depreciation and impairment losses, Jan. 1 | 2.0 | 1.6 |
| Depreciation during the period | 0.5 | 0.4 |
| Accumulated depreciation and impairment losses, Dec 31. | 2.5 | 2.0 |
| Net carrying amount Jan 1. | 1.0 | 0.7 |
| Net carrying amount Dec 31. | 1.0 | 1.0 |
Property, plant and equipment consisted mainly of machinery and equipment. Machinery and equipment acquired through fi nancial leases amounted to EUR 0.7 million (EUR 0.6 million).
Changes in deferred tax assets and liabilities in 2011:
| EUR million | 1 Jan. 2011 | Recognized in income statement |
Recognized in other comprehensive |
income 31 Dec. 2011 |
|---|---|---|---|---|
| Deferred tax assets | ||||
| Tax losses | 1.3 | -0.2 | - | 1.1 |
| Measurement of interest-rate swaps at fair value | 4.4 | - | 9.0 | 13.3 |
| Deferred tax assets, total | 5.6 | -0.2 | 9.0 | 14.5 |
| Deferred tax liabilities | ||||
| Measurement of investment property at fair value | 59.7 | -2.2 | - | 57.5 |
| Temporary diff erence in fi nancial expenses | 2.8 | -0.5 | - | 2.3 |
| Deferred tax liabilities, total | 62.6 | -2.7 | - | 59.8 |
| EUR million | 1 Jan. 2010 | Recognized in income statement |
Recognized in other comprehensive |
income 31 Dec. 2010 |
|---|---|---|---|---|
| Deferred tax assets | ||||
| Tax losses | 0.0 | 1.3 | - | 1.3 |
| IAS 19 Defi ned benefi t pension obligation | 0.0 | 0.0 | - | 0.0 |
| Measurement of interest-rate swaps at fair value | 8.6 | -0.6 | -3.6 | 4.4 |
| Deferred tax assets, total | 8.6 | 0.7 | -3.6 | 5.6 |
| Deferred tax liabilities | ||||
| Measurement of investment property at fair value | 48.7 | 11.0 | - | 59.7 |
| Temporary diff erence in fi nancial expenses | 1.3 | 1.5 | - | 2.8 |
| Deferred tax liabilities, total | 50.0 | 12.5 | - | 62.6 |
Citycon's deferred taxes mainly arise from changes in the fair value of investment properties. In 2011, deferred taxes resulting from the changes in the investment properties' fair value recognised in the income statement totalled EUR 2.2 million (EUR -11.0 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 did recognise such deferred taxes, the tax impact would have been EUR -4.9 million in 2011 (EUR -12.0 million) (See the Note 15. Income taxes).
On the contrary, divesting a property in Finland through an asset or share sale does have tax implications, due to which, Citycon recognises deferred taxes arising from the fair value changes of its investment properties located in Finland. The taxation of limited companies in Finland decreases from earlier 26% to 24.5% in 2012. The deferred taxes have been calculated based on the 2012 rate. 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 investment properties is measured in accordance with IFRS (International Financial Reporting Standards). The provisions of 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 2011, Group companies had confi rmed losses for which tax assets of EUR 19.4 million (EUR 16.6 million in 2010) were not recognised, since these Group companies are unlikely to record a taxable profi t, before the expiration of carry forwards of these losses, against which loss carry forwards can be utilised. Citycon had impairment of EUR 6.6 million (EUR 0.0 million), which was not deducted in taxation on 31 December 2011.
A) Classifi cation of fi nancial instruments and their carrying amounts and fair values
| EUR million | Note | Carrying amount 2011 |
Fair value 2011 |
Carrying amount 2010 |
Fair value 2010 |
|---|---|---|---|---|---|
| Financial assets | |||||
| I Loans and other receivables | |||||
| Trade and other receivables | 25 | 33.2 | 33.2 | 37.4 | 37.4 |
| Cash and cash equivalents | 26 | 91.3 | 91.3 | 19.5 | 19.5 |
| II Derivative contracts under hedge accounting | |||||
| Derivative fi nancial instruments | 23 | 0.5 | 0.5 | 2.2 | 2.2 |
| Financial liabilities | |||||
| Financial liabilities amortised at cost | |||||
| I.I Loans | |||||
| Loans from fi nancial institutions | 28 | 1 439.5 | 1 442.9 | 1 291.3 | 1 293.6 |
| Convertible capital loan 1/2006 | 28 | 68.1 | 71.3 | 66.3 | 71.3 |
| Bond 1/2009 | 28 | 39.6 | 40.0 | 39.5 | 40.0 |
| Finance lease liabilities | 28 | 0.7 | 0.7 | 0.6 | 0.6 |
| I.II Other liabilities | |||||
| Other liabilities | 0.4 | 0.4 | 0.5 | 0.5 | |
| Trade and other payables | 29 | 53.2 | 53.2 | 55.3 | 55.3 |
| II Derivative contracts under hedge accounting | |||||
| Derivative fi nancial instruments | 23 | 54,5 | 54,5 | 20,3 | 20,3 |
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.
Due to their short maturity, the fair value of trade payables and receivables and other short-term receivables and payables is regarded as corresponding to their original carrying amount.
Derivative 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 interest-rate 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 fi nancial instruments is determined by the counterparty banks based on customary valuation techniques used by market participants in the OTC derivative market. The fair value of interest rate derivative fi nancial instruments corresponds to level 2 according to IFR-S7p27a. The fair value of foreign exchange derivative contracts is 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 unamortised capitalised arrangement fees of the loans.
Convertible capital loan 1/2006 is a fi xed rate loan which has a fair value equal to the nominal amount of the loan. The diff erence between the fair value and carrying amount is the unamortised capitalised arrangement fees of the loan, together with the market value of the option component on the issue date.
Bond1/2009 is a fi xed rate loan which has a fair value equal to the nominal amount of the loan. The diff erence between the fair value and carrying amount is the unamortised capitalised arrangement fees for 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.
A) Nominal amounts and fair values of derivative fi nancial instruments
| EUR million | Nominal amount 2011 |
Fair value 2011 |
Nominal amount 2010 |
Fair value 2010 |
|---|---|---|---|---|
| Interest rate derivatives | ||||
| Interest rate swaps | ||||
| Maturity: | ||||
| less than 1 year | 30.0 | -0.5 | 40.0 | -1.6 |
| 1-2 years | 28.2 | -1.3 | 30.0 | -0.8 |
| 2-3 years | 152.5 | -5.7 | 161.2 | -10.2 |
| 3-4 years | 173.9 | -6.6 | 202.0 | -6.6 |
| 4-5 years | 257.1 | -15.0 | 123.6 | 0.5 |
| over 5 years | 363.8 | -25.4 | 313.1 | 0.6 |
| Subtotal | 1,005.4 | -54.4 | 869.8 | -18.1 |
| Foreign exchange derivatives | ||||
| Forward agreements | ||||
| Maturity: | ||||
| less than 1 year | 20.8 | 0.3 | - | - |
| Total | 1,026.3 | -54.1 | 869.8 | -18.1 |
Interest on fl oating-rate loans is mainly fi xed every three or six months. 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 all of its interest rate swaps valid as at 31 December 2011, 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 a derivative fi nancial instrument represents the market value of the instrument at the 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 a foreign exchange gain of EUR 0.3 million (loss of EUR 1.5 million), which is recognised in the statement of comprehensive income.
Hedge accounting is applied to interest rate swaps, which have a nominal amount of EUR 1005.4 million (EUR 869.8 million).
The average fi xed interest rate of the interest rate swaps as at 31 December 2011 was 3.16 per cent (3.48 %).
| Cash fl ow hedging | ||||
|---|---|---|---|---|
| Interest rate derivatives EUR million |
Assets 2011 |
Liabilities 2011 |
Assets 2010 |
Liabilities 2010 |
| Fair value | - | -54.4 | 2.2 | -18.8 |
Citycon's cash fl ow hedges consist of interest rate and cross-currency swaps which are used to protect against exposure to 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 upon maturity on similar terms.
The critical terms of the interest rate derivatives have been negotiated to match the respective terms of the variable rate loans.
The cash fl ow 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 recognised 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 2011 and at 31 December 2010, interest rate derivatives assigned as cash fl ow hedges were assessed as highly eff ective. The fair values (net of taxes) of these derivatives were EUR -41.1 million (EUR -12.3 million) and the change of these fair values (net of taxes) EUR -26.8 million (EUR 3.8 million) is recognised under other comprehensive income, taking the tax effect into account.
On 31 December 2011, the Investment Properties Held for Sale comprised two properties Landvett er and Floda located in Sweden. Both transactions are expected to be fi nalised during the fi rst quarter in 2012. Landvett er will be sold to Torstaden and a gain on sale of EUR 0.2 million is estimated to be recorded from this transaction. Floda will be sold to Floda Torg Fastighets Ab. From this transaction, a gain on sale of EUR 2.5 million is estimated to be recognised. In 2010, the investment properties held for sale included MREC Naantalin Tullikatu 16, which was sold in January 2011.
| EUR million | 2011 | 2010 |
|---|---|---|
| Acquisition cost Jan. 1 | 1.5 | 26.0 |
| Investments | - | - |
| Disposals | -1.5 | -28.5 |
| Exchange diff erences | - | 2.5 |
| Transfers from investment properties | 12.7 | 1.5 |
| Accumulated acquisition cost Dec. 31. | 12.7 | 1.5 |
| EUR million | 2011 | 2010 |
|---|---|---|
| Trade receivables | 6.2 | 4.9 |
| Credit loss provision | -1.2 | -1.3 |
| Trade receivables (net) | 5.1 | 3.7 |
| Accrued income and prepaid expenses | 5.2 | 5.3 |
| Tax receivables (incl. VAT-receivables) | 18.6 | 27.0 |
| Other receivables | 4.3 | 1.4 |
| Total | 33.2 | 37.4 |
| EUR million | 2011 | 2010 |
|---|---|---|
| NOT past due nor impaired | 1.6 | 1.6 |
| Past due, less than 1 month | 1.5 | 0.6 |
| Past due, 1-3 months | 0.9 | 0.8 |
| Past due, 3-6 months | 0.6 | 0.5 |
| Past due, 6-12 months | 1.3 | 1.4 |
| Past due, 1-5 years | 0.4 | 0.1 |
| Total | 6.2 | 4.9 |
| EUR million | 2011 | 2010 |
|---|---|---|
| At the beginning of the year | -1.3 | -0.3 |
| Exchange diff erence | 0.0 | 0.0 |
| Charge for the year | -0.1 | -1.0 |
| Utilised | 0.2 | 0.1 |
| Unused amounts reversed | 0.0 | 0.0 |
| Credit loss provision at the end of the year | -1.2 | -1.3 |
Trade receivables are non-interest bearing and their payment terms vary between 2-20 days. Rent collaterals equal 2-6 month of rent and other payments.
| EUR million | 2011 | 2010 |
|---|---|---|
| Cash in hand and at bank | 91.3 | 19.4 |
| Short-term deposits | 0.1 | 0.1 |
| Total | 91.3 | 19.5 |
Cash and cash equivalents in the cash fl ow statement comprise the items presented above.
A) The eff ect of the changed number of shares on funds included in the shareholders' equity
| Outstanding number of shares 1) |
Treasury shares |
Share capital (EUR million) |
Share premium fund (EUR million) |
Invested unrest ricted equity fund (EUR million) |
Total (EUR million) |
|
|---|---|---|---|---|---|---|
| 1 Jan. 2010 | 221 059 735 | - | 259,6 | 131,1 | 155,2 | 545,9 |
| Directed share issue without payment to Citycon Group key employees |
124 020 | - | - | - | - | - |
| Directed share issue without payment to Citycon itself |
- | 80 000 | - | - | - | - |
| Sale of treasury shares | 80 000 | -80 000 | - | - | 0.2 | 0.2 |
| Share issue | 22 000 000 | - | - | - | 62.2 | 62.2 |
| Share subscriptions based on stock options |
1,301,217 | - | - | - | 3.3 | 3.3 |
| Return from the invested unrestricted equity fund |
- | - | - | - | -22.1 | -22.1 |
| 31 Dec. 2010 | 244 564 972 | 0 | 259.6 | 131.1 | 198.8 | 589.4 |
| Directed share issue without payment to Citycon Group key employees |
101 325 | - | - | - | - | - |
| Directed share issue without payment to Citycon itself |
- | 145 000 | - | - | - | - |
| Sale of treasury shares | 145 000 | -145 000 | - | - | 0.4 | 0.4 |
| Share issue | 33 000 000 | - | - | - | 98.9 | 98.9 |
| Return from the invested unrestricted equity fund |
- | - | - | - | -24.5 | -24.5 |
| 31 Dec. 2011 | 277 811 297 | 0 | 259.6 | 131.1 | 273.7 | 664.3 |
1) All outstanding shares were fully-paid on 31 December 2011 and 31 December 2010.
The company has a single series of shares, each share entitling to one vote at general meetings of shareholders. The shares have no nominal value and the share capital has no maximum value.
Since the entry into force of the new Finnish Companies Act, no new items are recognised in the share premium fund. The share premium fund accumulated before 2007 due to option schemes and share issues.
The invested unrestricted equity fund is credited, for instance, with that part of the subscription price of the shares that, according to the Memorandum of Association or the share issue decision, is not to be credited to the share capital. The invested unrestricted equity fund accumulated in 2011 and 2010, due to share issue and sale of treasury shares. In addition, in 2010, subscriptions under option schemes increased the invested unrestricted equity fund.
The fair value reserve contains fair value changes of derivative instruments used to hedge cash fl ows.
The translation reserve contains translation diff erences arising from the currency translation of foreign subsidiaries' fi nancial statements.
C) Board proposal for dividends and return from the invested unrestricted equity fund To the Annual General Meeting to be held on 21 March 2012, the Board of Directors of Citycon proposes a dividend of EUR 0.04 per share for the fi nancial year 2011 (EUR 0.04 for the fi nancial year 2010) and an equity return of EUR 0.11 per share from the invested unrestricted equity fund (EUR 0.10 for the fi nancial year 2010). The proposal for dividends and equity return from the invested unrestricted equity fund has not been recognised in the consolidated fi nancial statements on 31 December 2011.
All Citycon loans were interest-bearing liabilities on 31 December 2011 and 2010. These interestbearing loans are explained here in detail.
| EUR million | Eff ective interest (%) |
Carrying amount 2011 |
Carrying amount 2010 |
|---|---|---|---|
| Long-term interest-bearing liabilities | |||
| Bonds | |||
| Convertible capital loan 1/2006 | 7.580 | 68.1 | 66.3 |
| Bond 1/2009 | 5.461 | 39.6 | 39.5 |
| Syndicated term loans | |||
| EUR 435 million term loan facility | Reference rate + 0.675 | 332.6 | 352.0 |
| EUR 220 million term loan facility | Reference rate + 1.400 | 221.3 | - |
| EUR 200 million term loan facility | Reference rate + 0.675 | 199.7 | 204.5 |
| Revolving credit facilities | |||
| EUR 150 million revolving credit facility | STIBOR + 0.550 | - | 84.8 |
| EUR 50 million revolving credit facility | EURIBOR + 0.600 | - | 43.0 |
| Bilateral bank loans | |||
| EUR 75 million bank loan | EURIBOR + 1.550 | 71.0 | - |
| SEK 500 million bank loan | STIBOR + 0.600 | 56.1 | 55.8 |
| EUR 50 million bank loan | Reference rate + 1.500 | 50.9 | 50.6 |
| EUR 50 million bank loan | EURIBOR + 1.525 | 49.9 | 49.9 |
| EUR 50 million bank loan | EURIBOR + 1.500 | 49.9 | 49.9 |
| EUR 30 million bank loan | EURIBOR + 0.750 | 27.5 | 30.0 |
| EEK 470 million bank loan | 5.599 | - | 25.2 |
| Finance lease liabilities | - | 0.4 | 0.3 |
| Other interest-bearing liabilities | - | 172.5 | 160.6 |
| Total long-term interest-bearing liabilities | 1 339.5 | 1 212.4 | |
| Short-term interest-bearing liabilities | |||
| Short-term syndicated and bank loans and revolving credit facilities- | 133.5 | 152.0 | |
| Current portion of interest-bearing liabilities | - | 25.9 | 21.0 |
| Commercial papers | - | 48.7 | 11.9 |
| Finance lease liabilities | - | 0.3 | 0.3 |
| Total short-term interest-bearing liabilities | 208.4 | 185.3 |
The carrying amounts 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 Note 22. Classifi cation of Financial Instruments.
The market value of the option component on the issue date of the convertible capital loan 1/2006 of EUR 15.1 million is recognised in equity att ributable to parent company shareholders, under the share premium fund.
| EUR million | 2011 | 2010 |
|---|---|---|
| 1-2 years | 453.8 | 132.3 |
| 2-3 years | 315.1 | 491.4 |
| 3-4 years | 161.8 | 312.3 |
| 4-5 years | 238.1 | 157.7 |
| over 5 years | 170.7 | 118.7 |
| Total | 1 339.5 | 1 212.4 |
| Long-term interest-bearing liabilities by currency, EUR million | 2011 | 2010 |
| EUR | 800.3 | 740.1 |
| EEK | - | 43.1 |
| SEK | 530.2 | 429.2 |
| LTL | 9.0 | - |
| Total | 1 339.5 | 1 212.4 |
| Short-term interest-bearing liabilities by currency, EUR million | 2011 | 2010 |
| EUR | 91.5 | 48.4 |
| EEK | - | 1.2 |
| SEK | 116.7 | 125.8 |
| LTL | 0.2 | 9.8 |
| Total | 208.4 | 185.3 |
On 2 August 2006, Citycon Oyj issued a seven-year convertible capital loan, 1/2006, of EUR 110 million at a fi xed annual nominal interest rate of 4.50 per cent. Aft er the buyback transactions performed during 2008, 2009 and 2010, the outstanding amount was EUR 71.3 million. The loan's conversion price is EUR 4.2000 per share and a full conversion of the loan would result in the issue of 16,964,285 shares. The loan's issue price accounted for 100.00 per cent of the nominal loan amount, and its maturity date is 2 August 2013.
The main terms and conditions of convertible capital loan 1/2006:
3) Fixed annual interest of 4.50% will be paid annually in arrears on the loan's principal until 2 August 2013. In the event, that the loan is not repaid in full on its maturity date of 2 August 2013, interest on the unpaid loan principal 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 on 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.
During 2008, 2009 and 2010, from the open markets, Citycon has repurchased the convertible capital loan for a nominal amount of EUR 38.8 million, with a weighted average purchase price of 58.1%. The amount repurchased by Citycon equals approximately 35.2 per cent of the initial nominal amount of the loans issued. Net fi nancial expenses in the statement of comprehensive income include a one-off gain of EUR 0.1 million for the buybacks of the convertible capital loan in 2010.
| 2010 | |
|---|---|
| 0.3 | 0.3 |
| 0.4 | 0.4 |
| 0.7 | 0.7 |
| 0.3 | 0.3 |
| 0.4 | 0.3 |
| 0.7 | 0.6 |
| 0.0 | 0.0 |
| 0.7 | 0.7 |
| 2011 |
Citycon's fi nance leases mainly apply to computer hardware and offi ce machinery and equipment.
Citycon uses a holistic Enterprise Risk Management (ERM) programme. The objective of risk management is to ensure that Citycon will reach its business targets and to identify key risks which may threaten its ability to meet these targets before they realise.
Citycon's risk management process involves identifying, analysing, measuring, mitigating and controlling business-related risks. The Board of Directors has approved the company's risk management guidelines specifying risk management principles, which are subject to updating in order to take account of changes in business operations. During the ERM process for each business unit, a risk management policy has been prepared which outlines objectives, responsibilities and development plans within the unit.
Part of the ERM process includes identifi cation of existing, and the planning of new, risk mitigation plans in the event that current actions are not deemed suffi cient for each risk identifi ed. Successful risk management decreases the likelihood of risk realisation and mitigates the negative eff ects of realised risk.
Risk management under ERM in Citycon comprises three main elements, namely 1) risk management implemented in the main business processes 2) risk reporting and 3) continuous improvement of risk management.
Citycon has analysed and identifi ed fi ve main business processes during the implementation of ERM. These are property acquisitions, takeover of acquired properties, shopping centre management, property development and planning and control. Each main process has been carefully analysed from a risk management angle. A detailed process description has been prepared for each process determining the target state of the process, aft er implementation of improvement measures and taking risk management requirements into account. The implementation of these common best practices in daily operations forms an essential part of daily risk management throughout the organisation.
The risk reporting process gathers analytical data on risks and the respective mitigation plans, for reporting to the Board of Directors. During the risk reporting period, each business unit and legal and fi nance unit independently defi nes its near term targets, risks threatening these targets and mitigation plans related to the risks. In order to evaluate the importance of each risk, an estimate of the loss associated with the risk is determined together with the probability of risk realisation and the eff ectiveness of each mitigation plan on the loss and/or probability. An additional feature of risk reporting involves each business unit reporting the potentially realised risks during the previous year, and mitigation plans put into eff ect during the period. Risk data is inputt ed into one group-wide risk register, from which business unit risk reports are prepared for the Board of Directors and Audit Committ ee. In addition, from the risk register a consolidated Citycon Group risk report and analysis is prepared, which aims to recognise group level risk concentrations across business units. Risk reports to the Board of Directors and Audit Committ ee are prepared in conjunction with budgeting during the autumn and the strategy review during the spring. Risk management and business unit risk reports are additionally discussed four times a year by the Corporate Management Committ ee.
Citycon aims to continuously evaluate and develop its ERM process and risk management in general. Four times a year, a risk management supervisory group meets, whose tasks include acceptance of the risk reports, annually evaluating the suffi ciency of the risk management measures taken in the light of identifi ed risks, monitoring progress in the implementation of the mitigation plans, and annually assessing the adequacy of Citycon's risk management capabilities.
Each business unit and the legal and fi nance units have a dedicated person responsible for the ERM process, who is in charge of reporting the risks and mitigation plans and following up on their implementation. The Group Treasurer prepares the risk report for the Board of Directors and Audit Committ ee. The membership of the risk management supervisory group includes the 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 as business critical risks for Citycon. Financial risk arises for Citycon in the form of fi nancial instruments, which are mainly used to raise fi nancing for operations. The Group also uses interest rate and foreign exchange derivatives to manage interest rate and currency risks arising from 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 to interest rate, foreign exchange, counterparty, liquidity and electricity risk management. The execution of fi nancial risk management is performed by the Group Treasurer and Treasury Manager, under the supervision of the CFO. The Group Treasurer reports compliance with the objectives, in conjunction with the interim and annual report, to the Board of Directors and CFO.
Citycon's identifi ed, key fi nancial 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, whereby 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 at a loan portfolio with the right balance of fi xed and variable rate debts. Under the company's interest rate risk management policy, the target debt portfolio is one in which a minimum of 70 and a maximum of 90 per cent of interest bearing liabilities are based on 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. A portion of the hedges can also be performed using infl ation derivatives. The interest sensitivity of Citycon's loan portfolio at the end of 2011 is depicted by the fact that a one-percentage point rise in money market interest rates would increase its interest expenses for 2012 by EUR 2.5 million, while a fall of onepercentage point in such rates would decrease them by EUR 2.5 million in the same year.
The following table shows interest expenses' sensitivity to a 100 basis point change in short term interest rates, assuming that all other variables remain constant. The impact is shown as a change in interest expenses resulting from changes in the interest rate related to a fl oating rate debt.
| Euro | 1.1 | 0.6 |
|---|---|---|
| Swedish krona | 1.3 | 1.8 |
| Other currencies | 0.1 | 0.3 |
| Yhteensä | 2.5 | 2.6 |
The following table shows the consolidated shareholders' equity's sensitivity to a 100 basis point change in short term interest rates, assuming that all other variables remain constant. The impact is shown as a change in shareholders' equity resulting from changes in interest rates, which relate to interest rate derivatives under hedge accounting treatment.
| EUR million | 2011 | 2010 |
|---|---|---|
| Euro | 14.9 | 11.5 |
| Swedish krona | 15.7 | 12.2 |
| Total | 30.6 | 23.7 |
Given that Citycon's strategy is to expand in the Nordic and Baltic countries, the company will need both equity capital and borrowings. 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. Here, the goal is to arrange fi nancing on a long term basis and avoid any large concentration of due dates for 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 the 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 management's assesment of the amount required, and the company will arrange committ ed back-up limits for all funds drawn under commercial paper programmes. On 31 December 2011, unused credit limits amounted to EUR 253.7 million.
The table below summarises the maturity profi le of the Group's fi nancial liabilities, based on contractual payments. The table includes both principal and interest 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 the balance sheet date, and are not discounted. Future interest payments for derivative fi nancial instruments are based on discounted net present values and future interest rates are obtained through interpolation based on the yield curve prevailing on the balance sheet date.
| EUR million 31 December 2011 | Less than 1 month | 1 to 12 months | 1-5 years | Over 5 years | Total |
|---|---|---|---|---|---|
| Loans from fi nancial institutions | 18.4 | 236.7 | 1 162.8 | 181.7 | 1599.6 |
| Convertible capital loan 1/2006 | - | 3.2 | 74.5 | - | 77.7 |
| Bond 1/2009 | - | 2.0 | 44.1 | - | 46.1 |
| Finance lease liabilities | - | 0.3 | 0.4 | - | 0.7 |
| Derivative fi nancial instruments | 0.1 | 10.4 | 40.5 | 1.5 | 52.4 |
| Trade and other payables | |||||
| (excl. interest liabilities) | 36.6 | 2.9 | 6.3 | - | 45.8 |
| EUR million 31 December 2010 | Less than 1 month | 1 to 12 months | 1-5 years | Over 5 years | Total |
|---|---|---|---|---|---|
| Loans from fi nancial institutions | 7.1 | 209.9 | 1 065.3 | 132.7 | 1415.0 |
| Convertible capital loan 1/2006 | - | 3.2 | 77.7 | - | 80.9 |
| Bond 1/2009 | - | 2.0 | 46.1 | - | 48.2 |
| Finance lease liabilities | - | 0.3 | 0.3 | - | 0.6 |
| Derivative fi nancial instruments | 0.1 | 13.6 | 7.3 | -3.6 | 17.4 |
| Trade and other payables | |||||
| (excl. interest liabilities) | 33.6 | 10.2 | 4.5 | - | 48.3 |
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 the 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.
| EUR million 31 December 2011 | Less than 1 month | 1 to 12 months | 1-5 years | Over 5 years | Total |
|---|---|---|---|---|---|
| Undrawn committ ed credit facilities | - | 43.7 | 210.0 | - | 253.7 |
| EUR million 31 December 2010 | Less than 1 month | 1 to 12 months | 1-5 years | Over 5 years | Total |
| Undrawn committ ed credit facilities | - | 24.9 | 150.6 | 50.0 | 225.5 |
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 has not so far identifi ed 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 unexpected changes in the customers' fi nancial standing on Citycon's business and fi nancial results. Customer-risk management is primarily based on the knowledge of the customers' business and active monitoring of customer data. Citycon's lease agreements include lease deposit provisions used to contribute to managing customers' risks. The maximum exposure from trade receivables is the carrying amount as disclosed in Note 25. Trade and other receivables.
Credit risk arising from cash and cash equivalents and certain derivative agreements relate to a default of a counterparty with a maximum exposure equal to the carrying amount of these instruments. Citycon invests its liquidity in a manner which does not put the nominal amount at risk. Citycon does not, for example, invest in equity markets. Citycon's cash and cash equivalents are primarily placed in short term money market deposits, in which the counterparties are commercial banks participating in Citycon's credit agreements. Citycon's fi nancing policy also sets forth the approved fi nancial instruments in which the company can invest, and includes counterparty limits for those investments.
Citycon's entry into countries outside the euro-zone exposes the company to exchange rate risk. Exchange rate risk stems from transaction risks resulting from the conversion of foreign currency denominated transactions into local currency, on the one hand, and from translation risks in the balance sheet associated with investments in foreign subsidiaries. The company hedges against exchange rate risk in the balance sheet by aiming to 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 may also be used to hedge a possible mismatch between assets and liabilities denominated in the same currency in the balance sheet. Currently, the company's exchange rate risk mainly relates to 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 that all other variables remain constant. Such an impact is att ributable to a change in the fair value of fi nancial instruments, given the assumed change in foreign exchange rates.
Eff ect of a fi ve percent change in foreign exchange rates on net fi nancial expenses
| EUR million | 2011 | 2010 |
|---|---|---|
| Swedish krona | 0.1 | -0.2 |
| Other currencies | - | - |
| Total | 0.1 | -0.2 |
Other currencies comprise those of Estonia and Lithuania. The foreign exchange rate in these countries is pegged to the euro and Estonia has adopted euro as its functional currency as of 1 January 2011.
The objective of the company's capital management is to support the growth strategy, maximise shareholder value, comply with loan agreement provisions and ensure the company's ability to pay dividends. Citycon's capital structure is managed in an active manner and capital structure requirements are taken into account when considering various fi nancing alternatives. The company can adjust the capital structure by deciding on the issuance of new shares, raising debt fi nancing or making adjustments to the dividend.
The company's long term equity ratio target is 40 per cent and its current syndicated loan agreements require a minimum equity ratio of 32.5 per cent. The equity ratio of the loan agreements is calculated by making certain adjustments to the equity ratio defi ned in the Financial Supervisory Authority standard 5.1. Disclosure of periodic information, among other things, adding the convertible capital loan issued by the company to the shareholders' equity. As of 31 December 2011, the company's equity ratio stood at 36.0 per cent and the equity ratio as defi ned in the loan agreement was around 39.0 per cent.
Citycon monitors its capital structure based on equity ratio and gearing. The formulas for calculating the equity ratio and gearing can be found on page 53 in the consolidated fi nancial statements.
Company monitors its capital structure mainly with equity ratio. Equity ratio:
| EUR million | 2011 | 2010 |
|---|---|---|
| Total shareholders' equity (A) | 961.8 | 900.2 |
| Total assets | 2,677.7 | 2,436.5 |
| Less advances received | 9.6 | 12.7 |
| ./. (Total assets - advances received) (B) | 2,668.2 | 2,423.8 |
| Equity ratio (A/B) | 36.0% | 37.1% |
Gearing-%:
| EUR million | 2011 | 2010 |
|---|---|---|
| Interest-bearing debt total (Note 28) | 1,547.9 | 1,397.7 |
| Less cash and cash equivalents (Note 26) | 91.3 | 19.5 |
| Interest-bearing net debt (A) | 1,456.6 | 1,378.2 |
| Total shareholders' equity (B) | 961.8 | 900.2 |
| Gearing-% (A/B) | 151.4% | 153.1% |
Equity ratio decreased in 2011 due to fair value losses on investment properties and lower fair value of interest rate derivatives under hedge accounting, which led to lower equity as a proportion of total assets. Gearing decreased in 2011mainly as a result of a share issue executed in 2011, which led to a improved ratio of equity to net interest-bearing debt.
Trade and other payables
| EUR million | 2011 | 2010 |
|---|---|---|
| Trade payables | 18.5 | 18.0 |
| Short-term advances received | 9.6 | 12.2 |
| Interest liabilities | 7.3 | 6.9 |
| Other liabilities | 13.5 | 12.6 |
| Accrued expenses total | 20.8 | 19.6 |
| VAT-liabilities | 4.4 | 5.1 |
| Other short-term payables | -0.1 | 0.5 |
| Other short-term payables total | 4.3 | 5.5 |
| Total | 53.2 | 55.3 |
| Due dates of future payments of trade and other payables: |
||
| Due in less than 1 month | 37.8 | 34.7 |
| Due in 1-3 months | 2.8 | 6.3 |
| Due in 3-6 months | 5.4 | 5.7 |
| Due in 6-12 months | 0.8 | 4.1 |
| Due in 1-2 years | 6.3 | 4.5 |
| Due in 2-5 years | - | - |
| Due in over 5 years | 0.0 | 0.0 |
| Total | 53.2 | 55.3 |
A) Stock option schemes
The AGM held on 15 March 2004 decided to issue a maximum of 3,900,000 A/B/C stock options to Citycon Group personnel. This stock option plan expired at the end of March 2011 simultaneously with the expiry of the subscription period with C-options. No shares were subscribed by exercising C-options. The unexercised stock options have been deleted as worthless from their holder's bookentry accounts.
The Board of Directors of Citycon Oyj decided on 3 May 2011, by virtue of an authorisation granted by the Annual General Meeting held on 13 March 2007, to issue stock options to the key personnel of the company and its subsidiaries. The company had a weighty fi nancial reason for the issue of stock options, since the stock options are intended to form part of the incentive and commitment program for the key personnel. The purpose of the stock options is to encourage the key personnel to work on a long-term basis to increase shareholder value. The purpose of the stock options is also to commit the key personnel to the company.
The maximum total number of stock options that can be issued is 7,250,000, and they entitle their owners to subscribe for a maximum total of 7,250,000 new shares in the company or existing shares held by the company. The stock options will be issued gratuitously. 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. If an employee leaves the Group, (s)he will forfeit his/her right to exercise stock options for which the share subscription period has not begun on the date of the termination of his/her employment/executive contract. However, the Board of Directors can specifi cally decide that the stock-option holder retains his/her stock options or some of them. The Board of Directors shall also decide upon the re-distribution of the stock options returned to the company.
By the end of 2011, a total of 6,320,000 stock options 2011A–D(I), 2011A–D(II) and 2011A– D(III) had been granted to 24 key employees within the Group. These option rights entitle their holders to subscribe for an equal number of shares in 2012–2018.
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 2011, the expense recognised in the statement of comprehensive income totalled EUR 1.5 million (EUR 0.0 million in 2010). The expected volatility is determined by calculating the company share price's historical volatility.
The subscription prices of the shares to be subscribed for by exercising the 2011 stock options were determined on the basis of the trade volume weighted average price of Citycon share quoted on the NASDAQ OMX Helsinki Ltd. during twenty (20) trading days following the release date of the company's Full Year 2010 Results, Q1/2011 Interim Report as well as Q3/2011 Interim Report as follows:
| Option category | Subscription price determination period | Subscription price, EUR |
|---|---|---|
| 2011A-D(I) | 10 February–9 March 2011 | 3.17 |
| 2011A-D(II) | 5 May–1 June 2011 | 3.31 |
| 2011A-D(II) | 13 October–9 November 2011 | 2.63 |
The share subscription price will be recognised in the company's invested unrestricted equity fund. Each year, the per-share dividends and equity returns, diff ering from the company´s normal practice, may be deducted from the share subscription price.
| Share subscription period | 2011A(I-III) | 2011B(I-III) | 2011C(I-III) |
|---|---|---|---|
| Share subscription period begins | 1 April 2012 | 1 April 2013 | 1 April 2014 |
| Share subscription period ends | 31 March 2018 | 31 March 2018 | 31 March 2018 |
Summary of the stock option plan 2011 on 31 December 2011:
| Stock option plan 2011 | Stock options 2011A–D(I) |
Stock options 2011A–D(II) |
Stock options 2011A–D(III) |
|---|---|---|---|
| Type of scheme | Share-based | Share-based | Share-based |
| options, granted | options, granted | options, granted | |
| to the Group's key | to the Group's key | to the Group's key | |
| personnel | personnel | personnel | |
| Grant date | 3 May 2011 | 3 May 2011 | 11 October 2011 |
| No. of instruments granted | 2,250,000 | 2,350,000 | 1,720,000 |
| Exercise price, EUR | 3.17 | 3.31 | 2.63 |
| Share subscription price, EUR | 3.17 | 3.31 | 2.63 |
| Vesting period as per option terms | |||
| (No. of days) (1 | 332-1,427 | 332-1,427 | 172-1,267 |
| Vesting conditions | Employment | Employment | Employment |
| during vesting | during vesting | during vesting | |
| period. In case of | period. In case of | period. In case of | |
| prior employment | prior employment | prior employment | |
| termination, stock | termination, stock | termination, stock | |
| options forfeited. | options forfeited. | options forfeited. | |
| Exercise | In terms of shares | In terms of shares | In terms of shares |
| Expected volatility, % | 35.00 | 33.00 | 35.00 |
| Expected exercise period at grant date | |||
| (No. of days) (1 | 1,095-2,190 | 1,095-2,190 | 1,095-2,190 |
| Risk-free interest rate, % | 3.18 | 2.87 | 1.73 |
| Expected dividend/share, EUR | 0.14 | 0.14 | 0.14 |
| Instrument fair value determined | |||
| at grant date, EUR | 0.78 | 0.73 | 0.46 |
| Option-pricing model | Black&Scholes | Black&Scholes | Black&Scholes |
1) The number of days varies among the sub-categories of the options
Changes in the stock options and their weighted average exercise prices during the period were as follows:
| 2011 Exercise price, weighted avera ge, EUR/share |
No. of stock options |
2010 Exercise price, weighted avera ge, EUR/share |
No. of stock options |
|
|---|---|---|---|---|
| At period-start | 4.22 | 1,050,000 | 3.43 | 2,140,000 |
| New stock options granted | 3.08 | 6,320,000 | - | - |
| Forfeited stock options | 3.31 | 160,000 | - | - |
| Redistributed stock options | 3.31 | 160,000 | ||
| Exercised stock options | - | - | 2.56 | 1,072,998 |
| Lapsed stock options | 4.15 | 1,050,000 | 2.52 | 17,002 |
| At period-end | 3.08 | 6,320,000 | 4.22 | 1,050,000 |
The company had no exercisable stock options at period-end and no stock options were exercised during 2011. In 2010, the per-share exercise price of the exercised stock options averaged EUR 2.56. The stock options exercised during 2010 brought in EUR 3.3 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 | 2011 | Exercise price, EUR No. of shares, 1,000 | 2010 No. of shares, 1,000 |
|---|---|---|---|
| 2011 | - | - | 1,273 |
| 2012 | - | - | |
| 2013 | - | - | |
| 2014 | - | - | |
| 2015 | - | - | |
| 2016 | - | - | |
| 2017 | - | - | |
| 2018 | 3.17 / 3.31 / 2.63 | 6,320,000 |
B) Long-term share-based incentive plan
On 26 April 2007, the Board of Directors decided on a long-term share-based incentive plan for key personnel of Citycon Group. The incentive plan was divided into three incentive periods: 2007, 2008 and 2009. In addition, on 9 February 2010, Citycon Oyj's Board of Directors decided to continue the long-term share-based incentive plan by one year into the fi nancial year 2010.
The incentives are granted to key personnel during the years 2008-2013, so that the incentives earned during each incentive period are paid evenly in the following three years. The incentive granted comprises Citycon shares, cash or both.
Incentives paid in shares are charged to administration expenses and recognised as an increase in shareholders' equity. Incentives paid in cash are charged to administration expenses and recognised as liabilities. In 2011, expenses recognised in the statement of comprehensive income amounted to EUR 0.2 million (EUR 0.7 million in 2010).
The following table presents additional information on the share-based incentive plan:
| Incentive period 2010 |
Incentive period 2009 |
Incentive period 2008 |
Incentive period 2007 |
Total | |
|---|---|---|---|---|---|
| Grant date | 9 February 2010 |
22 April 2009 |
15 May 2008 |
26 april 2007 |
- |
| No. of key personnel at period end | 18 | 16 | 13 | - | - |
| Maximum number of shares to be granted on grant date |
86,800 | 221,600 | 82,200 | 38,700 | 429,300 |
| Shares granted in 2008 | - | - | - | 4,293 | 4,293 |
| Shares granted in 2009 | - | - | 20,109 | 4,288 | 24,397 |
| Shares granted in 2010 | - | 60,041 | 18,965 | 3,960 | 82,966 |
| Shares granted in 2011 | 13,410 | 68,183 | 16,700 | - | 98,293 |
According to the terms and conditions of the incentive plan, a participant can also choose to receive shares instead of the cash component intended for paying the related income tax. In addition to shares granted as presented above, 3,032 shares were granted in 2011 (41,054 shares in 2010) instead of paying the cash component in cash.
| EUR million | 2011 | 2010 |
|---|---|---|
| Profi t/loss before taxes | 19.7 | 102.8 |
| Adjustments for: | ||
| Depreciation and amortisation (Note 12) | 1.0 | 0.8 |
| Net fair value losses (+)/ gains (-) on investment property (Note 17) | 35.3 | -50.8 |
| Profi t (-)/losses (+) on disposal of investment property (Notes 17 and 24) | -0.6 | -2.6 |
| Share-based payments (Note 30) | 1.5 | 0.3 |
| Other non-cash income | -0.7 | -0.4 |
| Foreign exchange gains (-)/ losses (+) in fi nancing expenses (Note 14) | -0.1 | -0.1 |
| Fair value gains (-)/ losses (+) of derivatives (Note 14) | - | -0.2 |
| Interest and other fi nancing income (Note 14) | -0.6 | -0.6 |
| Interest and other fi nancing expenses (Note 14) | 63.1 | 55.8 |
| Changes in working capital | ||
| Trade and other receivables (Note 25) | -4.2 | -8.2 |
| Trade and other payables (Note 29) | 5.8 | 11.0 |
| Cash generated from operations | 120.2 | 108.0 |
A) Other leases - Group as lessee
Future minimum lease payments under non-cancellable other leases are as follows:
| EUR million | 2011 | 2010 |
|---|---|---|
| Not later than 1 year | 0.9 | 0.9 |
| 1-5 years | 0.7 | 0.9 |
| Total | 1.6 | 1.8 |
Leases mainly concern premises and cars. Leases of premises are in eff ect until further notice and have a notice period of six months. For most leases, rent increases are tied to the cost-of-living index. Car lease agreements are in eff ect for three years. While the lease agreements have no renewal clause, in practice the contract period can be extended for one to two years.
Lease payments recognised as expenses during the period were EUR 1.1 million (EUR 1.0 million) and they don't include contingent rents or sublease payments. Lease expenses recognised in the statement of comprehensive income are included in Administrative expenses on row offi ce and other administrative expenses (Note 10. Administrative expenses)
| EUR million | 2011 | 2010 |
|---|---|---|
| Loans, for which mortgages are given in security and shares pledged | ||
| Loans from fi nancial institutions | 27.7 | 27.7 |
| Contingent liabilities for loans | ||
| Mortgages on land and buildings | 35.9 | 36.9 |
| Bank guarantees | 39.2 | 43.4 |
| Capital commitments | 20.4 | 32.3 |
| VAT refund liabilities | 60.7 | 51.2 |
Mortgages relate to certain bank loans of the subsidiaries where the subsidiary has given security on the loan via mortgages.
Bank guarantees relate to bank loans of subsidiaries which Citycon Oyj has guaranteed via parent guarantee or alternatively third party bank guarantees.
Capital commitments mainly relate to on-going (re)development projects.
There are value-added tax refund liabilities arising from capitalised renovations and new investments in Citycon's investment properties. The VAT refund liabilities will realise if the investment property is sold or transferred for non-VAT-liability use within 10 years. Exception to 10-year review rule apply to investments in Finland that have been completed prior to 2008, and the review period is 5 years.
Under a commitment given in the terms of the syndicated loan facilities, Citycon Group undertakes to maintain its equity ratio at above 32.5% and its interest coverage ratio at a minimum of 1.8. For the calculation of equity ratio, shareholders' equity includes capital loans and excludes non-cash valuation gain/loss from derivative contracts recognised in equity and the minority interest. The interest coverage ratio is calculated by dividing the EBITDA - adjusted by extraordinary gains/losses, provisions and non-cash items - by net fi nancial expenses.
Accordingly, equity ratio on 31 December 2011 stood at around 39.0 per cent and interest coverage ratio at around 2.0 (2010: equity ratio was around 39.4 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 48.0 per cent on 31 December 2011 (31 December 2010: 47.3%).
| Group companies | Country | Group holding, % |
Parent company holding, % |
|
|---|---|---|---|---|
| Parent company: Citycon Oyj | Finland | |||
| 1 | Asematie 3 Koy | Finland | 100.0 | 100.0 |
| 2 | Asolantien Liikekiinteistö Oy | Finland | 100.0 | 100.0 |
| 3 | Citycon AB | Sweden | 100.0 | 100.0 |
| 4 | Citycon Development AB | Sweden | 100.0 | - |
| 5 | Citycon Estonia Oü | Estonia | 100.0 | - |
| 6 | Citycon Estonian Investments B.V. | The Netherlands | 100.0 | - |
| 7 | Citycon Hedging C.V. | The Netherlands | 100.0 | - |
| 8 | Citycon Holding S.à r.l. | Luxembourg | 100.0 | 100.0 |
| 9 | Citycon Högdalen Centrum AB | Sweden | 100.0 | - |
| 10 | Citycon Imröret AB | Sweden | 100.0 | - |
| Group companies | Country | Group holding, % |
Parent company holding, % |
|
|---|---|---|---|---|
| 11 | Citycon Jakobsbergs Centrum AB | Sweden | 100.0 | - |
| 12 | Citycon Liljeholmstorget Galleria AB | Sweden | 100.0 | - |
| 13 | Citycon Services AB | Sweden | 100.0 | - |
| 14 | Citycon Shopping Centers AB | Sweden | 100.0 | - |
| 15 | Citycon Treasury B.V. | The Netherlands | 100.0 | - |
| 16 | Citycon Tumba Centrumfastigheter AB | Sweden | 100.0 | - |
| 17 | Drabantvägen bostäder AB | Sweden | 100.0 | - |
| 18 | Espoon Asemakuja 2 Koy | Finland | 100.0 | 100.0 |
| 19 | Excellency HoldCo Oy | Finland | 100.0 | 100.0 |
| 20 | Forssan Hämeentie 3 Koy | Finland | 100.0 | 100.0 |
| 21 | Jyväskylän Forum Koy | Finland | 100.0 | 100.0 |
| 22 | Jyväskylän Kauppakatu 31 Koy | Finland | 100.0 | 100.0 |
| 23 | Kaarinan Liiketalo Koy | Finland | 100.0 | 100.0 |
| 24 | Karjaan Ratakatu 59 Koy | Finland | 100.0 | 100.0 |
| 25 | Karjalan Kauppakeskus Koy | Finland | 100.0 | 100.0 |
| 26 | Kauppakeskus Columbus Koy | Finland | 100.0 | 100.0 |
| 27 | Kauppakeskus Isokarhu Oy | Finland | 100.0 | 100.0 |
| 28 | Kivensilmänkuja 1 Koy | Finland | 100.0 | 100.0 |
| 29 | Kotkan Keskuskatu 11 Koy | Finland | 100.0 | 100.0 |
| 30 | Kouvolan Valtakadun Kauppakeskus Koy | Finland | 100.0 | 100.0 |
| 31 | Kristiine Keskus Oü | Estonia | 100.0 | - |
| 32 | Kuopion Kauppakatu 41 Koy | Finland | 100.0 | 100.0 |
| 33 | Kuusankosken Kauppakatu 7 Koy | Finland | 100.0 | 100.0 |
| 34 | Kuvernöörintie 8 Koy | Finland | 100.0 | 100.0 |
| 35 | Lahden Hansa Koy | Finland | 100.0 | 100.0 |
| 36 | Lahden Kauppakatu 13 Koy | Finland | 100.0 | 100.0 |
| 37 | Lappeenrannan Villimiehen Vitonen Oy | Finland | 100.0 | 100.0 |
| 38 | Lentolan Perusyhtiö Oy | Finland | 100.0 | 100.0 |
| 39 | Liljeholmstorget Development Services AB | Sweden | 100.0 | - |
| 40 | Lillinkulma Koy | Finland | 100.0 | 100.0 |
| 41 | Lintulankulma Koy | Finland | 100.0 | 100.0 |
| 42 | Lippulaiva Koy | Finland | 100.0 | 100.0 |
| 43 | Magistral Kaubanduskeskuse Oü | Estonia | 100.0 | - |
| 44 | Martinlaakson Kivivuorentie 4 Koy | Finland | 100.0 | 100.0 |
| 45 | Minkkikuja 4 Koy | Finland | 100.0 | 100.0 |
| 46 | Montalbas B.V. | The Netherlands | 100.0 | 100.0 |
| 47 | Myyrmanni Koy | Finland | 100.0 | 100.0 |
| 48 | Oulun Galleria Koy | Finland | 100.0 | 100.0 |
| 49 | Porin Asema-Aukio Koy | Finland | 100.0 | 100.0 |
| 50 | Porin Isolinnankatu 18 Koy | Finland | 100.0 | 100.0 |
| 51 | Riddarplatsen Fastigheter HB | Sweden | 100.0 | - |
| 52 | Rocca al Mare Kaubanduskeskuse AS | Estonia | 100.0 | - |
| 53 | Runeberginkatu 33 Koy | Finland | 100.0 | 100.0 |
| 54 | Sinikalliontie 1 Koy | Finland | 100.0 | 100.0 |
| Group companies | Country | Group holding, % |
||
|---|---|---|---|---|
| 55 | Säkylän Liiketalo Koy | Finland | 100.0 | 100.0 |
| 56 | Talvikkitie Koy 7-9 | Finland | 100.0 | 100.0 |
| 57 | Tampereen Hatanpää Koy | Finland | 100.0 | 100.0 |
| 58 | Tampereen Hermanni Koy | Finland | 100.0 | 100.0 |
| 59 | Tampereen Suvantokatu Koy | Finland | 100.0 | 100.0 |
| 60 | UAB Citycon | Lithuania | 100.0 | - |
| 61 | UAB Prekybos Centras Mandarinas | Lithuania | 100.0 | - |
| 62 | Ultima Oy | Finland | 100.0 | 100.0 |
| 63 | Valkeakosken Torikatu 2 Koy | Finland | 100.0 | 100.0 |
| 64 | Vantaan Laajavuorenkuja 2 Koy | Finland | 100.0 | 100.0 |
| 65 | Varkauden Relanderinkatu 30 Koy | Finland | 100.0 | 100.0 |
| 66 | Wavulinintie 1 Koy | Finland | 100.0 | 100.0 |
| 67 | Veniamo-Invest Oy | Finland | 100.0 | 100.0 |
| 68 | Vaakalintu Koy | Finland | 95.8 | 95.8 |
| 69 | Lappeen Liikekeskus Koy | Finland | 90.6 | 90.6 |
| 70 | Lahden Trio Koy | Finland | 89.9 | 89.9 |
| 71 | Linjurin Kauppakeskus Koy | Finland | 88.5 | 88.5 |
| 72 | Lappeenrannan Brahenkatu 7 Koy | Finland | 84.5 | 84.5 |
| 73 | Tikkurilan Kauppakeskus Koy | Finland | 83.8 | 83.8 |
| 74 | Koskikeskuksen Huolto Oy | Finland | 81.7 | 81.7 |
| 75 | Hervannan Liikekeskus Oy | Finland | 79.4 | 79.4 |
| 76 | Orimatt ilan Markkinatalo Oy | Finland | 77.3 | 77.3 |
| 77 | Strömpilen AB | Sweden | 75.0 | - |
| 78 | Åkersberga Centrum AB | Sweden | 75.0 | - |
| 79 | Myyrmäen Kauppakeskus Koy | Finland | 74.0 | 74.0 |
| 80 | Stenungs Torg Fastighets AB | Sweden | 70.0 | - |
| 81 | Heikintori Oy | Finland | 68.7 | 68.7 |
| 82 | Kirkkonummen Liikekeskus Oy | Finland | 66.7 | 66.7 |
| 83 | Espoontori Koy | Finland | 66.6 | 66.6 |
| 84 | Tampereen Koskenranta Koy | Finland | 63.7 | 63.7 |
| 85 | Myyrmäen Autopaikoitus Oy | Finland | 62.7 | - |
| 86 | Vantaan Säästötalo Koy | Finland | 61.2 | 61.2 |
| 87 | Espoontorin Pysäköintitalo Oy | Finland | 60.1 | - |
| 88 | Big Apple Top Oy | Finland | 60.0 | - |
| 89 | Manhatt an Acquisition Oy | Finland | 60.0 | - |
| 90 | Tikkurilan Kassatalo As Oy | Finland | 59.7 | 59.7 |
| 91 | Espoon Asematori Koy | Finland | 54.1 | 54.1 |
| 92 | Laajasalon Liikekeskus Oy | Finland | 50.4 | 50.4 |
| 93 | Espagalleria Oy | Finland | 50.0 | 50.0 |
| 94 | Retail Park Oy | Finland | 50.0 | 50.0 |
| 95 | Espoon Louhenkulma Koy | Finland | 48.9 | 48.9 |
| 96 | Pihlajamäen Liiketalo Oy | Finland | 42.7 | 42.7 |
| 97 | Länsi-Keskus Koy | Finland | 41.4 | 41.4 |
| 98 | Hakunilan Keskus Oy | Finland | 41.1 | 41.1 |
| Parent company holding, % |
Group companies | Country | Group holding, % |
Parent company holding, % |
|---|---|---|---|---|
| 99 Hansaparkki Koy |
Finland | 36.0 | - | |
| 100 Kontulan Asemakeskus Koy | Finland | 34.8 | 34.8 | |
| 101 Puijonlaakson Palvelukeskus Koy | Finland | 31.3 | 31.3 | |
| 102 Salpausseläntie 11 Koy | Finland | 31.3 | 31.3 | |
| 103 Valtakatu 5-7 Koy | Finland | 31.3 | 31.3 | |
| 104 Jyväskylän Ydin Oy | Finland | 29.0 | 21.5 | |
| 105 Soukan Itäinentorni As Oy | Finland | 27.3 | 27.3 | |
| 106 Valkeakosken Liikekeskus Koy | Finland | 25.4 | 25.4 | |
| 107 Lautt asaaren Liikekeskus Oy | Finland | 23.7 | 23.7 | |
| 108 Hakucenter Koy | Finland | 18.7 | 18.7 | |
| 109 Liesikujan Autopaikat Oy | Finland | 8.0 | - | |
| 110 Tapiolan Alueen Kehitys Oy | Finland | 7.7 | 7.7 | |
| Partnerships for taxation purposes: | ||||
| Parkeringshuset Väpnaren | Sweden | 64.0 | - | |
Group companies have paid each other fees such as maintenance and fi nancial charges, interest expenses, loan repayments and other administrative service charges.
Such income and expenses have been eliminated from the consolidated fi nancial statements. There have been no other related party transactions between Group companies.
| Management benefi ts | |
|---|---|
| CEO wages and salaries, EUR | 2011 | 2010 |
|---|---|---|
| Marcel Kokkeel (CEO as of 24 March 2011) | 448,966 | - |
| Petri Olkinuora (CEO until 23 March 2011) | 70,464 | 403,207 |
Citycon's Board of Directors appoints the CEO and decides on the terms and conditions of his/ her executive contract in writing. On 13 January 2011, the Board of Directors appointed Mr. Marcel Kokkeel (MA, born in 1958), a Dutch citizen, Citycon's new CEO, and approved the terms and conditions of his executive contract. The new CEO assumed his duties on 24 March 2011. According to his service agreement, the CEO's annual gross base salary amounts to EUR 450,000. At the full discretion of the Board of Directors, the CEO may be awarded an additional cash bonus up to a maximal amount corresponding to his annual gross base salary. However, the minimum bonus payable for the year 2011 shall be an amount corresponding to not less than 50 per cent of the annual gross base salary. In addition to this, the CEO is entitled to the following fringe benefi ts: company car, housing, telephone and luncheon benefi ts. The CEO's pension benefi t is in line with mandatory provisions of the Finnish Pension Act. The CEO's service agreement has been signed for a fi xed term and will expire at the end of February 2015. The company may terminate the agreement even earlier without cause at any time upon six months' notice period, in which case the CEO will be paid, in addition to the salary payable for the notice period, a severance pay consisting of 1.5 times the annual base salary at the moment of termination as well as 1.5 times the most recent annual bonus payment.
Related to the company's stock option plan 2011, the CEO has been granted 1,000,000 stock options 2011A–D(I), 250,000 stock options in each sub-category.
Citycon Oyj's CEO since 2002, Petri Olkinuora left his position in the company following the company's Annual General Meeting on 23 March 2011. In line with Mr Olkinuora's service contract, he was paid a lump-sum cash compensation equalling his 18-month salary in addition to his regular
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
salary for the notice period, as well as a gratitude bonus equalling his 6-month salary. In July 2011, Mr Olkinuora was issued 30,951 incentive shares (39,680 shares in 2010) related to the company's long-term share-based incentive plan, earned according to the plan but not yet distributed at the end of the contractual relationship. Due to the termination of CEO Olkinuora's service contract, the company has recognised non-recurring personnel expenses of EUR 0.0 million in 2011 (EUR 1.2 million in 2010).
| Personnel expenses for the entire corporate manage ment committ ee, EUR million |
2011 | 2010 |
|---|---|---|
| Wages and salaries | 1.7 | 1.4 |
| Pensions: defi ned contribution plans | 0.3 | 0.2 |
| Pension charges: defi ned benefi t plans | - | 0.0 |
| Social charges | 0.2 | 0.1 |
| Total | 2.2 | 1.8 |
In addition to wages and salaries, Corporate Management Committ ee members received income of EUR 0.2 million (EUR 0.2 million) from stock options and share-based incentive plan. Also, non-recurring personnel expenses of EUR 0.5 million (EUR 1.3 million) arising from employment terminations of Corporate Management Committ ee members were recognised in 2011.
| Remuneration of the members of the Board of Directors, EUR |
2011 | 2010 |
|---|---|---|
| Ashkenazi Ronen | 68,600 | 71,900 |
| Bolotowsky Gideon | ||
| (Board member until 23 March 2011) | 2,000 | 54,500 |
| Katzman Chaim | ||
| (Board member as of 17 May 2010) | 170,400 127,313 | |
| Kempe Roger | ||
| (Board member as of 23 March 2011) | 47,500 | - |
| Komi Kirsi | ||
| (Board member as of 23 March 2011) | 49,800 | - |
| Korpinen Raimo | ||
| (Board member until 23 March 2011) | 2,200 | 56,700 |
| Lähdesmäki Tuomo | ||
| (Board member until 23 March 2011) | 1,900 | 57,200 |
| Ott osson Claes | 49,000 | 51,000 |
| Segal Dor J. | 46,000 | 51,500 |
| Sonninen Jorma | ||
| (Board member as of 23 March 2011) | 48,000 | - |
| Wernink Thomas W. | 71,200 | 89,604 |
| Westin Per-Håkan | 49,000 | 57,000 |
| Zochovitzky Ariella | 51,800 | 56,500 |
| Total | 657,400 673,217 |
Board members do not participate in the company's share-based incentive schemes. During 2011, the travel expenses of the Board members amounted to EUR 0.2 million (EUR 0.5 million).
The outstanding amount of convertible capital loan was EUR 71.3 million on 31 December 2011 (EUR 71.3 million on 31 December 2010) and the carrying amount was EUR 68.1 million on 31 December 2011 (EUR 66.3 million). Based on the information Citycon has received, Gazit-Globe Ltd. held 58.9 per cent (58.9%) out of the outstanding amount of convertible capital loan, i.e. EUR 40.1 million (EUR 39.1 million) out of the carrying amount of convertible capital loan on 31 December 2011. Total of EUR 1.9 million (EUR 1.9 million) out of the convertible capital loan annual coupon payment made in 2011 belong to Gazit-Globe Ltd. and EUR 0.8 million (EUR 0.8 million) out of the convertible capital loan interest liability on 31 December 2011.
Citycon has paid expenses of EUR 0.3 million (EUR 0.6 million) to Gazit-Globe Ltd. and its subsidiaries and charged expenses of EUR 0.2 million (EUR 0.1 million) forward to Gazit-Globe Ltd. and its subsidiaries.
In September 2010, the company issued 22 million new shares in a share issue directed to Finnish and international institutional investors, raising approximately EUR 63 million in new equity. Gazit-Globe Ltd. subscribed 10 million shares in this share issue.
In July 2011, the company issued 33 million new shares in a share issue directed to Finnish and international institutional investors, raising approximately EUR 99 million in new equity. Gazit-Globe Ltd. subscribed 14.9 million shares in this share issue.
The company's main shareholder, Gazit-Globe Ltd, holding approximately 48 per cent of the shares in the company, has announced that it has been applying International Financial Reporting Standards (IFRS) in its fi nancial reporting starting from 2007. According to IFRS, one company may exercise a controlling interest in another company even if its shareholding in that company does not exceed 50 per cent. Gazit-Globe Ltd. holds the view that it exercises a controlling interest, as 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.
Hakarinne 4
Myllypuron Ostoskeskus Oy
| EUR million | Formula | 2011 | 2010 | 2009 | 2008 | 2007 |
|---|---|---|---|---|---|---|
| Statement of comprehensive income data | ||||||
| Turnover | 217.1 | 195.9 | 186.3 | 178.3 | 151.4 | |
| Other operating income and expense | 0.2 | 0.3 | 0.0 | 6.1 | 0.5 | |
| Operating profi t/loss | 81.8 | 157.7 | 10.3 | -105.0 | 298.7 | |
| Profi t/loss before taxes | 19.7 | 102.8 | -37.5 | -162.3 | 253.5 | |
| Profi t/loss att ributable to parent company shareholders | 13.0 | 78.3 | -34.3 | -124.1 | 200.3 | |
| Statement of fi nancial position data | ||||||
| Investment properties | 2,522.1 | 2,367.7 | 2,147.4 | 2,111.6 | 2,248.9 | |
| Current assets | 125.0 | 56.9 | 65.9 | 52.4 | 48.1 | |
| Equity att ributable to parent company shareholders | 902.6 | 849.5 | 731.1 | 799.1 | 982.0 | |
| Non-controlling interest | 59.2 | 50.7 | 36.8 | 38.2 | 28.9 | |
| Interest-bearing liabilities | 1,547.9 | 1,397.7 | 1,321.7 | 1,199.5 | 1,154.0 | |
| Total liabilities | 1,715.9 | 1,536.3 | 1,485.3 | 1,341.2 | 1,297.7 | |
| Total liabilities and shareholders' equity | 2,677.7 | 2,436.5 | 2,253.2 | 2,178.5 | 2,308.6 | |
| Key performance ratios | ||||||
| Equity ratio, % | 1 | 36.0 | 37.1 | 34.2 | 38.5 | 43.9 |
| Equity ratio for the banks, % | 39.0 | 39.4 | 40.6 | 45.1 | 50.1 | |
| Gearing, % | 2 | 151.4 | 153.1 | 169.5 | 141.3 | 111.8 |
| Return on equity, % (ROE) | 3 | 2.3 | 11.1 | -4.7 | -15.0 | 23.3 |
| Return on investment, % (ROI) Quick ratio |
4 5 |
3.8 0.5 |
10.6 0.3 |
-0.5 0.4 |
-1.5 0.5 |
16.3 0.3 |
| Gross capital expenditure, EUR million | 216.7 | 133.7 | 134.6 | 157.9 | 603.9 | |
| % of turnover | 99.8 | 68.3 | 72.2 | 88.6 | 398.9 | |
| Per-share fi gures and ratios | ||||||
| Earnings per share, EUR | 6 | 0.05 | 0.34 | -0.16 | -0.56 | 1.00 |
| Earnings per share,diluted, EUR | 7 | 0.05 | 0.34 | -0.16 | -0.56 | 0.91 |
| Net cash from operating activities per share, EUR | 8 | 0.25 | 0.09 | 0.30 | 0.21 | 0.20 |
| Equity per share, EUR | 9 | 3.25 | 3.47 | 3.31 | 3.62 | 4.44 |
| P/E (price/earnings) ratio | 10 | 46 | 9 | -19 | -3 | 3 |
| Return from invested unrestricted equity fund per share, EUR | 0.11 | 0.10 | 0.10 | 0.10 | 0.10 | |
| Dividend per share, EUR | 0.04 | 0.04 | 0.04 | 0.04 | 0.04 | |
| Dividend and return from invested unrestricted equity fund per share total, EUR | 0.15 | 0.14 | 0.14 | 0.14 | 0.14 | |
| Dividend and return of equity per earnings, % | 11 | 300.7 | 40.8 | -90.2 | -24.9 | 13.9 |
| Eff ective dividend and return of equity yield, % | 12 | 6.5 | 4.5 | 4.8 | 8.3 | 4.3 |
| Operative key ratios | ||||||
| Net rental yield, % | 13 | 6.0 | 5.8 | 6.1 | 5.8 | 5.8 |
| Occupancy rate (economic), % | 15 | 95.5 | 95.1 | 95.0 | 96.0 | 95.7 |
| Citycon's GLA, sq.m. | 994 730 | 942,280 | 961,150 | 937,650 | 923,980 | |
| Personnel (at the end of the period) | 136 | 129 | 119 | 113 | 102 |
1) Board proposal
Formulas are available on page 57.
| EUR million | 2011 | 2010 | 2009 | 2008 | 2007 |
|---|---|---|---|---|---|
| Turnover | |||||
| Finland | 132.5 | 126.5 | 131.3 | 126.8 | 104.3 |
| Sweden | 60.1 | 52.8 | 41.0 | 41.9 | 39.0 |
| Baltic Countries | 24.5 | 16.7 | 14.0 | 9.6 | 8.0 |
| Total | 217.1 | 195.9 | 186.3 | 178.3 | 151.4 |
| Net rental income | |||||
| Finland | 90.5 | 86.7 | 92.4 | 90.9 | 75.7 |
| Sweden | 35.4 | 28.7 | 23.2 | 24.1 | 21.6 |
| Baltic Countries | 18.4 | 11.8 | 9.8 | 6.8 | 6.0 |
| Other | 0.0 | 0.0 | 0.0 | 0.0 | 0.1 |
| Total | 144.3 | 127.2 | 125.4 | 121.8 | 103.4 |
| EPRA operating profi t | |||||
| Finland | 83.2 | 80.9 | 86.3 | 85.4 | 70.4 |
| Sweden | 30.4 | 24.1 | 20.0 | 21.0 | 18.7 |
| Baltic Countries | 17.1 | 10.6 | 8.8 | 6.2 | 5.1 |
| Other | -13.4 | -10.5 | -7.4 | -7.3 | -6.8 |
| Total | 117.4 | 105.0 | 107.7 | 105.3 | 87.4 |
| Operating profi t/loss | |||||
| Finland | 42.3 | 107.5 | 21.2 | -62.9 | 218.4 |
| Sweden | 32.4 | 46.7 | 0.3 | -49.1 | 73.4 |
| Baltic Countries | 20.5 | 14.1 | -3.8 | 14.4 | 13.8 |
| Other | -13.4 | -10.5 | -7.4 | -7.4 | -6.8 |
| Total | 81.8 | 157.7 | 10.3 | -105.0 | 298.7 |
| EUR million | Note 1 Jan.-31 Dec. 2011 1 Jan.-31 Dec. 2010 | ||
|---|---|---|---|
| Gross rental income | 102.8 | 98.8 | |
| Service charge income | 4.4 | 4.7 | |
| Turnover | 2 | 107.3 | 103.5 |
| Property operating expenses | 55.1 | 66.6 | |
| Other expenses from leasing operations | 3 | 0.3 | 0.4 |
| Net rental income | 51.9 | 36.5 | |
| Administrative expenses | 4, 5 | 32.7 | 22.5 |
| Other operating income and expenses | 6 | 2.2 | 6.1 |
| Operating profi t | 21.3 | 20.1 | |
| Financial income | 101.1 | 112.4 | |
| Financial expenses | -116.4 | -137.5 | |
| Net fi nancial income and expenses | 7 | -15.3 | -25.1 |
| Profi t/loss before taxes | 6.0 | -5.0 | |
| Income tax expense | 8 | -1.6 | 0.0 |
| Profi t/loss for the period | 7.6 | -5.0 |
| EUR million | Note | 31 Dec. 2011 | 31 Dec. 2010 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Intangible assets | 9 | 24.5 | 12.9 |
| Tangible assets | 10 | 31.0 | 30.8 |
| Investments | |||
| Shares in subsidiaries | 11 | 1,252.6 | 857.5 |
| Shares in associated companies | 12 | 33.0 | 34.8 |
| Other investments | 13 | 699.4 | 972.9 |
| Total investments | 1,985.0 | 1,865.2 | |
| Total non-current assets | 2,040.4 | 1,908.8 | |
| Current assets | |||
| Long-term receivables | 15 | 1.6 | - |
| Short-term receivables | 15 | 28.8 | 25.9 |
| Cash and cash equivalents | 63.6 | 0.8 | |
| Total current assets | 94.1 | 26.7 | |
| Total assets | 2,134.6 | 1,935.5 |
| EUR million | Note | 31 Dec. 2011 | 31 Dec. 2010 |
|---|---|---|---|
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||
| Shareholders' equity | 16 | ||
| Share capital | 259.6 | 259.6 | |
| Share premium fund | 133.1 | 133.1 | |
| Invested unrestricted equity fund | 277.2 | 201.5 | |
| Retained earnings | 3.9 | 18.6 | |
| Profi t/loss for the period | 7.6 | -5.0 | |
| Total shareholders' equity | 681.3 | 607.8 | |
| Liabilities | 17 | ||
| Long-term liabilities | |||
| Convertible capital loan 1/2006 | 68.1 | 66.3 | |
| Bond 1/2009 | 39.6 | 39.5 | |
| Other long-term liabilities | 1,088.1 | 987.9 | |
| Total long-term liabilities | 1,195.8 | 1,093.7 | |
| Short-term liabilities | |||
| Other short-term liabilities | 257.5 | 234.1 | |
| Total short-term liabilities | 257.5 | 234.1 | |
| Total liabilities | 1,453.3 | 1,327.7 | |
| Total liabilities and shareholders' equity | 2,134.6 | 1,935.5 |
| EUR million | 1 Jan.-31 Dec. 2011 1 Jan.-31 Dec. 2010 | |
|---|---|---|
| Cash fl ow from operating activities | ||
| Profi t/loss before taxes | 6.0 | -5.0 |
| Adjustments: | ||
| Depreciation and impairment loss | 12.0 | 4.2 |
| Non-cash property operating expenses | 21.8 | 25.3 |
| Net fi nancial income and expenses | 15.3 | 25.1 |
| Loss/gain on sale and on liquidation of shares in subsidiaries | ||
| and other investments | 0.7 | -4.4 |
| Cash fl ow before change in working capital | 55.9 | 45.2 |
| Change in working capital | 4.6 | 22.8 |
| Cash generated from operations | 60.4 | 68.0 |
| Interest expense and other fi nancial expenses paid | -93.6 | -64.2 |
| Interest income and other fi nancial income received | 52.7 | 15.0 |
| Realized exchange rate gains and losses | 10.8 | -10.6 |
| Income taxes received/paid | 7.4 | -8.8 |
| Net cash fl ow from operating activities | 37.6 | -0.5 |
| Cash fl ow used in investing activities | ||
| Investment in tangible and intangible assets | -18.0 | -3.3 |
| Proceeds from sale of tangible assets | 0,7 | - |
| Loans granted | -122.1 | -98.0 |
| Repayments of loans receivable | 335.6 | 66.9 |
| Increase in subsidiary shares | -792.0 | -27.3 |
| Decrease in subsidiary shares | 390.3 | 2.8 |
| Purchase of minority and associated companies' shares | -0.3 | -0.3 |
| Sale of associated companies' shares | 1.8 | 3.2 |
| Net cash used in investing activities | -204.0 | -56.0 |
| Cash fl ow from fi nancing activities | ||
| Proceeds from share issue | 99.7 | 63.1 |
| Sale of treasury shares | 0.4 | 0.2 |
| Share subscriptions based on stock options | - | 3.3 |
| Proceeds from short-term loans | 135.6 | 107.8 |
| Repayments of short-term loans | -98.8 | -198.5 |
| Proceeds from long-term loans | 582.2 | 347.6 |
| Repayments of long-term loans | -470.4 | -242.0 |
| Dividends paid and return from the invested unrestricted equity fund | -34.3 | -31.0 |
| Net cash from fi nancing activities | 214.4 | 50.5 |
| Net change in cash and cash equivalents | 48.0 | -6.1 |
| Cash and cash equivalents at period-start | -7.6 | -1.5 |
| Eff ects of exchange rate changes | - | - |
| Cash and cash equivalents at period-end 1) | 40.4 | -7.6 |
1) Cash and cash equivalents of Citycon Oyj included the Group cash pool as at 31 December 2011 and at 31 December 2010, in which the parent company's bank account can have a negative balance. Cash pool balance of EUR -23.3 million as at 31 December 2011 and EUR -8.4 million as at 31 December 2010 has been recognised 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 functionbased format and it includes both gross and net rental income.
Non-current assets are recognized in the balance sheet at acquisition cost less impairment losses and depreciation/amortisation.
The buildings' acquisition cost is depreciated annually on a straight line basis at 2–4 per cent. Repair costs are expensed as incurred.
Other non-current assets include capitalised costs related to the acquisition of properties, which are amortised over three years, and tenant improvements, which are amortised during the lease term.
Machinery and equipment is depreciated at 25 percent annually, using the reducing balance method of depreciation. The machinery and equipment category includes also technical equipment in buildings and the depreciation is made accordingly.
The company's employee pension cover is based on statutory pension insurance.
Receivables and payables denominated in foreign currencies as well as forward rate agreements are measured at the exchange rate quoted on the balance sheet date. Any exchange rate diff erences resulting from currency translations are recognised as exchange rate diff erences in the income statement.
Convertible capital loan is shown as separate item in liabilities.
Current taxes are recognised on an accrual basis. Deferred taxes arising from temporary diff erences between the book and fi scal values have been recognised separately in the income statement and the balance sheet.
Individual fi gures and sum totals presented in the fi nancial statements have been rounded to the nearest thousands of euros; this may cause minor discrepancies between the sum totals and the sums of individual fi gures as given.
| EUR million | 2011 | 2010 |
|---|---|---|
| Turnover by business segments: | ||
| Shopping centres | ||
| Helsinki Metropolitan Area | 32.4 | 32.5 |
| Other areas in Finland | 47.9 | 44.8 |
| Other retail properties | 27.0 | 26.2 |
| Total | 107.3 | 103.5 |
Geographically the parent company's turnover is generated in Finland. Parent company turnover includes the following administrative fees received from Group companies:
| EUR million | 2011 | 2010 |
|---|---|---|
| Administrative fees from Group companies | 0.9 | 0.9 |
| EUR million | 2011 | 2010 |
|---|---|---|
| Tenant improvements and commissions | 0.2 | 0.0 |
| Credit losses | 0.2 | 0.3 |
| Total | 0.3 | 0.4 |
| EUR million | 2011 | 2010 |
|---|---|---|
| Average number of employees during period | 86 | 81 |
| Personnel expenses | ||
| Wages and salaries | 10.0 | 7.4 |
| Pension charges | 1.2 | 1.7 |
| Other social charges | 0.4 | 0.3 |
| Total | 11.6 | 9.4 |
The items presented above include non-recurring personnel expenses of EUR 1.2 million (EUR 1.3 million in 2010) arising from employment terminations.
Personnel expenses include management salaries and emoluments.
| EUR million | 2011 | 2010 |
|---|---|---|
| CEO's salary and emoluments | 0.5 | 0.4 |
| Board remuneration | 0.7 | 0.7 |
| Total | 1.2 | 1.1 |
| EUR million | 2011 | 2010 |
|---|---|---|
| The following depreciation and amortisation as well as impairments are included in the adminis trative expenses: |
||
| Amortisation on intangible assets | 4.7 | 3.3 |
| Depreciation on buildings and constructions | 0.5 | 0.5 |
| Depreciation on machinery and equipment | 0.3 | 0.3 |
| Impairment of shares in subsidiaries and in | ||
| associated companies | 6.6 | - |
| Total | 12.0 | 4.2 |
| EUR million | 2011 | 2010 |
|---|---|---|
| Loss/gain on sale of shares in subsidiaries and | ||
| other investments | -4.1 | 4.4 |
| Liquidation of Myllypuron Ostoskeskus Oy | 3.4 | - |
| Leasing and asset management fees from | ||
| Group companies | 2.8 | 1.6 |
| Other operating income | 0.1 | 0.1 |
| Total | 2.2 | 6.1 |
| EUR million | 2011 | 2010 |
|---|---|---|
| Dividend income | ||
| From Group companies | 11.7 | 0.1 |
| From others | 0.0 | 0.0 |
| Total | 11.7 | 0.1 |
| Interest and other fi nancial income | ||
| From Group companies | 32.5 | 38.8 |
| Gain from convertible bond buybacks | - | 0.2 |
| Foreign exchange rate gains | 53.7 | 73.0 |
| Other interest and fi nancial income | 3.3 | 0.3 |
| Total | 89.4 | 112.3 |
| Total fi nancial income | 101.1 | 112.4 |
| Interest and other fi nancial expenses | ||
| To Group companies | 8.0 | 5.3 |
| Foreign exchange losses | 53.6 | 72.8 |
| Fair value loss from derivatives | - | 8.6 |
| Interest and other fi nancial expenses | 54.8 | 50.8 |
| Total fi nancial expenses | 116.4 | 137.5 |
| Net fi nancial income and expenses | -15.3 | -25.1 |
| - | - |
|---|---|
| -1.6 | - |
| - | |
| -1.6 |
| EUR million | 2011 | 2010 |
|---|---|---|
| Intangible rights | ||
| Acquisition cost 1 Jan. | 2.0 | 1.7 |
| Additions during the period | 0.5 | 0.3 |
| Accumulated acquisition costs 31 Dec. | 2.5 | 2.0 |
| Accumulated depreciation 1 Jan. | -1.2 | -0.9 |
| Depreciation for the period | -0.3 | -0.3 |
| Accumulated depreciation 31 Dec. | -1.5 | -1.2 |
| Net carrying amount 31 Dec. | 1.0 | 0.8 |
| Connection fees | ||
| Acquisition cost 1 Jan. | 0.2 | 0.2 |
| Net carrying amount 31 Dec. | 0.2 | 0.2 |
| Tenant improvements and other non-current assets |
||
| Acquisition cost 1 Jan. | 23.7 | 18.4 |
| Additions during the period | 15.8 | 5.4 |
| Transfer between items | - | 0.0 |
| Accumulated acquisition costs 31 Dec. | 39.5 | 23.7 |
| Accumulated depreciation 1 Jan. | -11.9 | -8.9 |
| Depreciation for the period | -4.3 | -3.1 |
| Accumulated depreciation 31 Dec. | -16.3 | -11.9 |
| Net carrying amount 31 Dec. | 23.2 | 11.8 |
| Total intangible assets 31 Dec. | 24.5 | 12.9 |
| 10. TANGIBLE ASSETS | ||
|---|---|---|
| EUR million | 2011 | 2010 |
| Land | ||
| Acquisition cost 1 Jan. | 3.3 | 3.3 |
| Reductions during the period | -0.1 | - |
| Net carrying amount 31 Dec. | 3.2 | 3.3 |
| Buildings and constructions | ||
| Acquisition cost 1 Jan. | 68.7 | 68.7 |
| Additions during the period | 0.4 | 0.0 |
| Accumulated acquisition costs 31 Dec. | 69.1 | 68.7 |
| Accumulated depreciation 1 Jan. | -44.6 | -44.1 |
| Depreciation for the period | -0.5 | -0.5 |
| Accumulated depreciation 31 Dec. | -45.1 | -44.6 |
| Net carrying amount 31 Dec. | 24.0 | 24.1 |
| Machinery and equipment | ||
| Acquisition cost 1 Jan. | 5.7 | 5.5 |
| Additions during the period | 0.2 | 0.3 |
| Accumulated acquisition costs 31 Dec. | 5.9 | 5.7 |
| Accumulated depreciation 1 Jan. | -4.7 | -4.3 |
| Depreciation for the period | -0.3 | -0.3 |
| Accumulated depreciation 31 Dec. | -5.0 | -4.7 |
| Net carrying amount 31 Dec. | 1.0 | 1.1 |
| 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 |
| Construction in progress | ||
| Acquisition cost 1 Jan. | 2.2 | 4.9 |
| Reductions/additions during the period | 0.5 | -2.7 |
| Transfer between items | - | 0.0 |
| Net carrying amount 31 Dec. | 2.7 | 2.2 |
Total tangible assets 31 Dec. 31.0 30.8
| EUR million | 2011 | 2010 |
|---|---|---|
| Acquisition cost 1 Jan. | 857.5 | 830.3 |
| Additions during the period | 654.6 | 27.3 |
| Impairment of shares | -5.2 | - |
| Reductions during the period | -254.7 | 0.0 |
| Transfer between items | 0.3 | - |
| Net carrying amount 31 Dec. | 1,252.6 | 857.5 |
| EUR million | 2011 | 2010 |
|---|---|---|
| Acquisition cost 1 Jan. | 34.8 | 34.8 |
| Impairment of shares | -1.4 | - |
| Reductions during the period | -0.4 | - |
| Net carrying amount 31 Dec. | 33.0 | 34.8 |
| EUR million | 2011 | 2010 |
|---|---|---|
| Minority holdings | ||
| Acquisition cost 1 Jan. | 0.9 | 3.7 |
| Additions during the period | 0.3 | 0.3 |
| Reductions during the period | - | -3.2 |
| Transfer between items | -0.3 | - |
| Net carrying amount 31 Dec. | 0.9 | 0.9 |
| Loan receivables from Group companies | 698.5 | 972.0 |
| Other receivables from outside the Group | - | 0.0 |
| Total other investments 31 Dec. | 699.4 | 972.9 |
| Total investments 31 Dec. | 1,985.0 | 1,865.2 |
Parent company's subsidiaries and associated companies are presented in Note 33 Related Party Transactions in the Notes to the Consolidated Financial Statements.
| EUR million | 2011 | 2010 |
|---|---|---|
| Long-term receivables from outside the Group | ||
| Deferred tax assets | 1.6 | - |
| Total long-term receivables | 1.6 | - |
| Short-term receivables from outside the Group | ||
| Trade receivables | 2.0 | 1.0 |
| Other receivables | 1.8 | 11.4 |
| Accrued income and prepaid expenses | 1.2 | 0.8 |
| Total | 5.0 | 13.2 |
| EUR million | 2011 | 2010 |
|---|---|---|
| Receivables from Group companies | ||
| Trade receivables | 1.2 | 0.9 |
| Loan receivables | -0.1 | -0.2 |
| Maintenance charge receivables | 4.5 | 2.4 |
| Other receivables | 13.5 | 0.0 |
| Total other receivables | 17.9 | 2.3 |
| Interest receivables | 1.7 | 9.4 |
| Other accrued income and prepaid expenses |
2.9 | 0.1 |
| Total accrued income and prepaid expenses | 4.7 | 9.5 |
| Total | 23.8 | 12.7 |
| Total short-term receivables | 28.8 | 25.9 |
| EUR million | 2011 | 2010 |
|---|---|---|
| Share capital at 1 Jan. | 259.6 | 259.6 |
| Share capital at 31 Dec. | 259.6 | 259.6 |
| Share premium fund at 1 Jan. | 133.1 | 133.1 |
| Share premium fund at 31 Dec. | 133.1 | 133.1 |
| Invested unrestricted equity fund at 1 Jan. | 201.5 | 157.0 |
| Proceeds from share issue | 99.7 | 63.1 |
| Sale of treasury shares | 0.4 | 0.2 |
| Share subscriptions based on stock options | - | 3.3 |
| Equity return from the invested unrestricted | ||
| equity fund | -24.5 | -22.1 |
| Invested unrestricted equity fund at 31 Dec. | 277.2 | 201.5 |
| Retained earnings at 1 Jan. | 13.6 | 27.5 |
| Dividends | -9.8 | -8.8 |
| Profi t/ Loss for the period | 7.6 | -5.0 |
| Retained earnings at 31 Dec. | 11.5 | 13.6 |
| Total shareholders' equity at 31 Dec. | 681.3 | 607.8 |
| EUR million | 2011 | 2010 |
|---|---|---|
| Fixed-rate loans | ||
| Convertible capital loan 1/2006 1) | 68.1 | 66.3 |
| Bond 1/2009 | 39.6 | 39.5 |
| Floating-rate loans, which are | ||
| converted into fi xed rates through interest | ||
| rate swaps | 1,005.4 | 869.8 |
| tied to market interest rates | 97.7 | 90.1 |
| Total | 1,103.1 | 959.9 |
| Current portion of interest-bearing liabilities | -25.0 | -19.7 |
| Total | 1,078.1 | 940.2 |
| Other long-term liabilities | ||
| Loans from fi nancial institutions | 1,078.1 | 940.2 |
| Loans from Group companies | 9.9 | 47.7 |
| Total | 1,088.1 | 987.9 |
| Total long-term liabilities | 1,195.8 | 1,093.7 |
| Loans maturing later than 5 years | 64.6 | 12.5 |
| EUR million | 2011 | 2010 |
|---|---|---|
| Short-term interest-bearing liabilities | ||
| Commercial papers | 48.7 | 11.9 |
| Loans from fi nancial institutions | 108.8 | 142.1 |
| Current portion of interest-bearing liabilities | 25.0 | 19.7 |
| Loans from Group companies | 40.7 | 19.3 |
| Total | 223.2 | 193.1 |
| Short-term non-interest-bearing liabilities | ||
| Payables to outside the Group | ||
| Advances received | 0.2 | 0.3 |
| Accounts payable | 1.6 | 1.7 |
| Derivative fi nancial instruments | 0.1 | 1.5 |
| Other payables | 0.2 | 0.1 |
| Total other payables | 0.3 | 1.6 |
| Interest liability | 5.4 | 5.2 |
| Other accruals | 4.3 | 3.9 |
| Total accruals | 9.7 | 9.0 |
| Total | 11.7 | 12.7 |
| EUR million | 2011 | 2010 |
|---|---|---|
| Payables to Group companies | ||
| Accounts payable | 0.0 | 0.6 |
| Charge-for-fi nancial cost payables | 1.9 | 13.9 |
| Other payables | 20.7 | 13.3 |
| Total other payables | 22.6 | 27.2 |
| Accruals | 0.0 | 0.5 |
| Total | 22.6 | 28.3 |
| Total short-term liabilities | 257.5 | 234.1 |
| Total liabilities | 1,453.3 | 1,327.7 |
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 Note 23 Derivative Financial Instruments in the Notes to the Consolidated Financial Statements.
The parent company doesn't have any mortgages nor given securities.
| A) Lease liabilities | ||
|---|---|---|
| EUR million | 2011 | 2010 |
| Payables on lease commitments | ||
| Maturing next fi nancial year | 0.8 | 0.9 |
| Maturing later | 0.4 | 0.9 |
| Total | 1.2 | 1.8 |
Citycon's fi nance leases mainly apply to computer hardware, machinery and equipment, cars and offi ce premises.
| EUR million | 2011 | 2010 |
|---|---|---|
| Bank guarantees | 39.2 | 43.4 |
| On behalf of Group companies | - | 5.9 |
| EUR million | 2011 | 5 year review period 2010 |
2011 | 10 year re wiev period 2010 |
|||
|---|---|---|---|---|---|---|---|
| Property investment (net) | 0.9 | 0.9 | 0.8 | 0.5 | |||
| VAT of property investment (100%) | 0.2 | 0.3 | 0.2 | 0.1 | |||
| out of which VAT has been deducted on the date of completion |
0.2 | 0.3 | 0.1 | 0.1 | |||
| Annual amount under review | 0.0 | 0.1 | 0.0 | 0.0 | |||
| VAT refund liability at 31 Dec. | 0.0 | 0.0 | 0.1 | 0.0 |
| SHAREHOLDERS BY OWNERGROUP ON 31 DECEMBER 2011 | ||
|---|---|---|
| -- | ------------------------------------------------ | -- |
| Name | Number of shares | Percentage of shares and votes |
|---|---|---|
| Ilmarinen Mutual Pension Insurance Company | 24,943,027 | 8.98 |
| The State Pension Fund of Finland | 1,700,000 | 0.61 |
| Sijoitusrahasto Aktia Capital | 1,310,000 | 0.47 |
| Odin Finland | 1,265,586 | 0.46 |
| Folketrygdfondet | 1,171,000 | 0.42 |
| Taaleritehdas ArvoMarkka Investment Fund | 750,000 | 0.27 |
| Mutual Fund Evli Finnish Equity | 620,000 | 0.22 |
| Icecapital European Property | 482,401 | 0.17 |
| Tudeer Lauri | 480,120 | 0.17 |
| von Fieandt Johan | 480,000 | 0.17 |
| 10 biggest, total | 33,202,134 | 11.95 |
| Number of owners |
Percentage of owners |
Number of shares |
Percentage of shares and votes |
|
|---|---|---|---|---|
| Financial and insurance corporations | 30 | 0.70 | 226,874,710 | 81.66 |
| Corporations | 329 | 7.69 | 4,182,580 | 1.51 |
| Households | 3,823 | 89.41 | 10,764,900 | 3.88 |
| General government | 4 | 0.09 | 26,720,027 | 9.62 |
| Foreign | 40 | 0.94 | 8,145,780 | 2.93 |
| Non-profi t institutions | 50 | 1.17 | 1,123,300 | 0.40 |
| Total | 4,276 | 100.00 | 277,811,297 | 100.00 |
| of which nominee-registered | 10 | 226,398,815 | 81.49 | |
| Issued stock, total | 277,811,297 |
| Nominee-registered shares | ||
|---|---|---|
| Sampo Bank Plc | 115,998,111 | 41.75 |
| Skandinaviska Enskilda Banken AB | 34,683,910 | 12.48 |
| Nordea Bank Finland Plc | 32,088,996 | 11.55 |
| Svenska Handelsbanken AB (publ), fi lial verksamheten i Finland | 21,729,734 | 7.82 |
| Evli Bank Plc | 17,665,651 | 6.36 |
| Other nominee-registered shares | 4,232,413 | 1.53 |
| Nominee-registered shares, total | 226,398,815 | 81.49 |
| Others | 18,210,348 | 6.56 |
| Shares, total | 277,811,297 | 100.00 |
Gazit-Globe Ltd. has informed the company that the number of shares held by it on 31 December 2011 amounts to 133,456,930 shares accounting for 48.04 per cent of the shares and voting rights in the company at the year-end of 2011. Gazit-Globe Ltd.'s shareholding is nominee-registered.
On 14 July 2011, the company was notifi ed by Ilmarinen Mutual Pension Insurance Company that Ilmarinen had participated in Citycon's directed share off ering in July and that as a result of this, Ilmarinen's shareholding in the company had exceeded the threshold of 1/20. According to the notice, on 14 July 2011, Ilmarinen held a total of 24,943,027 Citycon shares, or 8.99 per cent of the total shares and votes in the company on that date.
| Number of owners |
Percentage of owners |
Number of shares |
Percentage of shares and votes |
|
|---|---|---|---|---|
| 1 - 100 | 456 | 10.66 | 26,777 | 0.01 |
| 101 - 1,000 | 1,818 | 42.52 | 914,559 | 0.33 |
| 1,001 - 5,000 | 1,475 | 34.49 | 3,530,044 | 1.27 |
| 5,001 - 10,000 | 250 | 5.85 | 1,835,707 | 0.66 |
| 10,001 - 50,000 | 203 | 4.75 | 4,465,793 | 1.61 |
| 50,001 - 100,000 | 31 | 0.72 | 2,155,943 | 0.78 |
| 100,001 - 500,000 | 30 | 0.70 | 6,824,054 | 2.45 |
| 500,001 - 1,000,000 | 2 | 0.05 | 1,370,000 | 0.49 |
| 1,000,001 - | 11 | 0.26 | 256,688,420 | 92.40 |
| Total | 4,276 | 100.00 | 277,811,297 | 100.00 |
| of which nominee-registered | 10 | 226,398,815 | 81.49 | |
| Issued stock, total | 277,811,297 |
| Formula | 2011 | 2010 | 2009 | 2008 | 2007 | |
|---|---|---|---|---|---|---|
| Share price, transactions, EUR | ||||||
| Low | 2.02 | 2.29 | 1.3 | 1.26 | 3.24 | |
| High | 3.41 | 3.31 | 3.16 | 4.28 | 6.09 | |
| Average | 16 | 2.77 | 2.84 | 1.99 | 2.94 | 4.76 |
| Market capitalisation, EUR million | 17 | 641.7 | 753.3 | 649.9 | 371.3 | 806.6 |
| Share trading volume | ||||||
| No. of shares traded as of year-start, 1,000 | 97,483 114,974 149,340 150,852 153,696 | |||||
| Percentage of total | 35.1 | 47.0 | 67.0 | 68.3 | 69.6 | |
| Average number of shares, 1,000 | 259,778 228,148 221,035 220,991 199,404 | |||||
| Average number of shares, diluted, 1,000 | 276,871 245,806 239,502 247,223 227,122 | |||||
| Number of shares on 31. Dec., 1,000 | 277,811 244,565 221,060 220,999 220,981 |
| Equity ratio, % Shareholders' equity | |||
|---|---|---|---|
| 1) | Balance sheet total - advances received | X 100 | |
| Gearing, % Interest-bearing liabilities - cash and cash equivalents | |||
| 2) | Shareholders' equity | X 100 | |
| Return on equity (ROE), % Profi t/loss for the period | |||
| 3) | 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 on the balance sheet date + opening balance of non- | X 100 |
| interest-bearing liabilities)/2 | |||
| Quick ratio Current assets | |||
| 5) | Short-term liabilities | ||
| Earnings per share (EPS), EUR Profi t/loss for the period att ributable to parent company shareholders | |||
| 6) | Average number of shares for the period | X 100 | |
| 7) | Earnings per share, diluted, EUR Profi t/loss for the period att ributable to parent company shareholders Diluted average number of shares for the period |
X 100 | |
| 8) | Net cash from operating activities per share, EUR Net cash from operating activities | Average number of shares for the period | X 100 |
| 9) | Equity per share, EUR Equity att ributable to parent company shareholders Number of shares on the balance sheet date |
||
| 10) | P/E ratio (price/earnings) Closing price at year-end | EPS | |
| 11) | Dividend and return of equity per earnings, % Dividend per share | EPS | X 100 |
| 12) | Eff ective dividend and return of equity yield, % Dividend per share | Closing price at year-end | X 100 |
| 13) | Net rental yield, % Net rental income (last 12 months) Average fair value of investment property |
X 100 | |
| 14) | Occupancy rate, %, sq.m. Leased space | X 100 | |
| Leasable space | |||
| 15) | Occupancy rate (economic), % Rental income as per leases | X 100 | |
| Estimated market rent of vacant premises + rental income as per leases | |||
| 16) | Average share price, EUR Value of shares traded (EUR) | ||
| Average number of shares traded | |||
| 17) | Market capitalisation Number of shares x closing price for the period excl. treasury shares | ||
18) Net interest-bearing debt (fair value), EUR million Fair value of interest-bearing debts - cash and cash equivalents
Signatures to the Financial Statements 1 January - 31 December 2011
In Helsinki, on 7 February 2012
Chaim Katzman Ronen Ashkenazi
Roger Kempe Kirsi Komi
Claes Ott osson Dor J. Segal
Jorma Sonninen Thomas W. Wernink
Per-Håkan Westin Ariella Zochovitzky
Marcel Kokkeel CEO
We have today submitt ed the report on the conducted audit.
In Helsinki, on 7 February 2012
Ernst & Young Oy Authorized Public Accountants
Tuija Korpelainen Authorized Public Accountant
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 31 December 2011. The fi nancial statements comprise the consolidated statement of fi nancial position, statement of comprehensive income, statement of changes in equity and statement of cash fl ows, and notes to the consolidated fi nancial statements, as well as the parent company's balance sheet, income statement, cash fl ow statement and notes to the fi nancial statements.
The Board of Directors and the Managing Director are responsible for the preparation of consolidated fi nancial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, as well as for the preparation of fi nancial statements and the report of the Board of Directors that give a true and fair view in accordance with the laws and regulations governing the preparation of the 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 express an opinion on the fi nancial statements, on the consolidated fi nancial statements and on the report of the Board of Directors based on our audit. The Auditing Act requires that we comply with the requirements of professional ethics. We conducted our audit in accordance with good auditing practice in Finland. Good auditing practice requires that we plan and perform the audit to obtain reasonable assurance about whether the 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 of the parent company and the Managing Director are guilty of an act or negligence which may result in liability in damages towards the company or have violated the Limited Liability Companies Act or the articles of association of the company.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements and the report of the Board of Directors. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation of fi nancial statements and report of the Board of Directors that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the eff ectiveness of the company's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the fi nancial statements and the report of the Board of Directors.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
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.
In our opinion, the fi nancial statements and the report of the Board of Directors give a true and fair view of both the consolidated and the parent company's fi nancial performance and fi nancial position 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.
Helsinki, 7 February 2012
Ernst & Young Oy Authorized Public Accountants
Tuija Korpelainen Authorized Public Accountant
| FINLAND HELSINKI METROPOLITAN AREA 1 Asolantien Liikekiinteistö Oy Asolanväylä 50 01360 VANTAA 1986 100% 1,800 100.0 |
100.0 99.6 100.0 |
|---|---|
| 2 Columbus 20,900 98.4 |
|
| Kauppakeskus Columbus Koy Vuotie 45 00980 HELSINKI 1997/2007 100% |
|
| 3 Espoon Louhenkulma Koy Louhentie 2 02130 ESPOO 1963 49% 880 100.0 |
|
| 4 Espoontori 17,100 83.3 |
85.7 |
| Espoon Asemakuja 2 Koy Asemakuja 2 02770 ESPOO 1991 100% 6,300 |
|
| Espoon Asematori Koy Kamreerintie 5 02770 ESPOO 1989/2010 54% 1,800 |
|
| Espoontori Koy Kamreerintie 3 02770 ESPOO 1987/2010 67% 9,000 |
|
| Espoontorin Pysäköintitalo Oy Kamreerintie 1 02770 ESPOO 1987/2010 60% |
|
| 5 Hakunilan Keskus 3,780 95.8 |
95.0 |
| Hakucenter Koy Laukkarinne 6 01200 VANTAA 1986 19% 780 |
|
| Hakunilan Keskus Oy Laukkarinne 4 01200 VANTAA 1982 41% 3,000 |
|
| 6 Heikintori 6,300 76.0 |
89.8 |
| Heikintori Oy Kauppamiehentie 1 02100 ESPOO 1968 69% |
|
| 7 Iso Omena 60,600 99.7 |
99.8 |
| Big Apple Top Oy Piispansilta 9 02230 ESPOO 2001 60% |
|
| 8 Isomyyri 10,800 87.5 |
94.3 |
| Myyrmäen Kauppakeskus Koy Liesitori 1 01600 VANTAA 1987 74% |
|
| Liesikujan Autopaikat Oy Liesikuja 2 01600 VANTAA 1987 8% |
|
| 9 Aseman Ostari 4,000 80.9 |
89.3 |
| Kirkkonummen Liikekeskus Oy Asematie 3 02400 KIRKKONUMMI 1991/2011 67% |
|
| 10 Kontulan Asemakeskus Koy Keinulaudankuja 4 00940 HELSINKI 1988/2007 35% 4,500 100.0 |
100.0 |
| 11 Laajasalon Liikekeskus 2,660 99.7 |
99.7 |
| Laajasalon Liikekeskus Oy Yliskyläntie 3 00840 HELSINKI 1972/1995 50% 2,300 |
|
| Kuvernöörintie 8 Koy Kuvernöörintie 8 00840 HELSINKI 1982 100% 360 |
|
| 12 Lautt asaaren Liikekeskus Oy Lautt asaarentie 28-30 00200 HELSINKI 1970 24% 1,500 100.0 |
100.0 |
| 13 Lippulaiva 18,500 96.7 |
97.2 |
| Lippulaiva Koy Espoonlahdenkatu 4 02320 ESPOO 1993/2007 100% |
|
| 14 Länsi-Keskus Koy Pihatörmä 1 02210 ESPOO 1989 41% 8,600 54.8 |
54.7 |
| 15 Martinlaakson Ostari 7,400 97.6 |
98.5 |
| Martinlaakson Kivivuorentie 4 Koy Kivivuorentie 4 01620 VANTAA 2011 100% |
|
| 16 Minkkikuja 4 Koy Minkkikuja 4 01450 VANTAA 1989 100% 2,300 100.0 |
100.0 |
| 17 Myllypuron Ostari 6,600 89.5 |
90.1 |
| Kivensilmänkuja 1 Koy Kivensilmänkuja 1 00920 HELSINKI 2011- 100% |
|
| 18 Myyrmanni 39,700 92.3 |
94.7 |
| Myyrmanni Koy Iskoskuja 3 01600 VANTAA 1994/2007/2011 100% |
|
| Myyrmäen Autopaikoitus Oy Iskoskuja 3 01600 VANTAA 1994 63% |
|
| 19 Pihlajamäen liiketalo Oy Meripihkatie 1 00710 HELSINKI 1970 43% 1,700 84.3 |
69.1 |
| 20 Salpausseläntie 11 Koy Salpausseläntie 11 00710 HELSINKI 1973 31% 600 0.0 |
0.0 |
| Property | Address | Built in / renovated in | Holding, % Citycon's GLA, sq.m. | Occupancy rate, %, sq.m. 1) |
Occupancy rate, %, EUR 1) |
|||
|---|---|---|---|---|---|---|---|---|
| 21 Sampotori | Heikintori, Kauppamiehentie 1 | 02100 ESPOO | lot | 100% | 50 | 100.0 | 100.0 | |
| 22 Sinikalliontie 1 Koy | Sinikalliontie 1 | 02630 ESPOO | 1964/1992 | 100% | 15,700 | 96.1 | 98.3 | |
| 23 Soukan Itäinentorni As Oy | Soukantie 16 | 02360 ESPOO | 1972 | 27% | 1,600 | 100.0 | 100.0 | |
| 24 Talvikkitie 7-9 Koy | Talvikkitie 7-9 | 01300 VANTAA | 1989 | 100% | 9,800 | 64.0 | 38.1 | |
| 25 Tikkuri | 13,300 | 89.0 | 94.7 | |||||
| Tikkurilan Kauppakeskus Koy | Asematie 4-10 | 01300 VANTAA | 1984/1991 | 84% | 10,500 | |||
| Asematie 3 Koy | Asematie 3 | 01300 VANTAA | 1972 | 100% | 1,400 | |||
| Tikkurilan Kassatalo As Oy | Asematie 1 | 01300 VANTAA | 1956 | 60% | 1,400 | |||
| 26 Ultima Oy | Äyritie 1 | 01510 VANTAA | lot | 100% | ||||
| 27 Vantaan Laajavuorenkuja 2 Koy | Laajavuorenkuja 2 | 01620 VANTAA | 1976 | 100% | 2,000 | 100.0 | 100.0 | |
| 28 Vantaan Säästötalo Koy | Kielotie 20 | 01300 VANTAA | 1983 | 61% | 3,800 | 97.3 | 98.0 | |
| 29 Wavulinintie 1 Koy | Wavulinintie 1 | 00210 HELSINKI | 1950/1992 | 100% | 1,700 | 29.5 | 13.7 | |
| OTHER AREAS IN FINLAND | ||||||||
| 30 Forssan Hämeentie 3 Koy | Hämeentie 3 | 31100 FORSSA | 1978 | 100% | 4,500 | 0.0 | 0.0 | |
| 31 Forum | 16,500 | 97.8 | 99.4 | |||||
| Jyväskylän Forum Koy | Asemakatu 5 | 40100 JYVÄSKYLÄ | 1953/1972/1980/1991/2010 | 100% | ||||
| 32 Galleria | 3,500 | 95.0 | 97.3 | |||||
| Oulun Galleria Koy | Isokatu 23 | 90100 OULU | 1987 | 100% | ||||
| 33 Isokarhu | 14,900 | 94.6 | 98.2 | |||||
| Kauppakeskus IsoKarhu Oy | Yrjönkatu 14 | 28100 PORI | 1972/2001/2004 | 100% | ||||
| 34 IsoKristiina | 19,400 | 89.6 | 94.6 | |||||
| Karjalan Kauppakeskus Koy | Brahenkatu 3 | 53100 LAPPEENRANTA 1987 | 100% | 8,400 | ||||
| Lappeen Liikekeskus Koy | Brahenkatu 5 | 53100 LAPPEENRANTA 1987 | 91% | 7,400 | ||||
| Lappeenrannan Brahenkatu 7 Koy | Brahenkatu 7 | 53100 LAPPEENRANTA 1993 | 84% | 3,600 | ||||
| Lappeenrannan Villimiehen Vitonen Oy Kaivokatu 5 | 53100 LAPPEENRANTA lot | 100% | ||||||
| 35 Isolinnankatu 18 Koy | Isolinnankatu 18 | 28100 PORI | 1986/2010- | 100% | 5,300 | 36.3 | 42.7 | |
| 36 Jyväskeskus | 5,800 | 92.1 | 93.0 | |||||
| Jyväskylän Kauppakatu 31 Koy | Kauppakatu 31 | 40100 JYVÄSKYLÄ | 1955/1993 | 100% | ||||
| 37 Kaarinan Liiketalo Koy | Oskarinaukio 5 | 20780 KAARINA | 1979/1982 | 100% | 9,200 | 94.8 | 96.6 | |
| 38 Karjaan Ratakatu 59 Koy | Ratakatu 59 | 10320 KARJAA | 1993 | 100% | 3,100 | 100.0 | 100.0 | |
| 39 Duo | 13,500 | 96.2 | 97.9 | |||||
| Hervannan Liikekeskus Oy | Insinöörinkatu 23 | 33720 TAMPERE | 1979 | 79% | 5,200 | |||
| Tampereen Hermanni Koy | Pietilänkatu 2 | 33720 TAMPERE | 2007 | 100% | 8,300 | |||
| 40 Koskikara | 5,800 | 96.3 | 96.9 | |||||
| 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 | |||
| 41 Koskikeskus | 28,000 | 100.0 | 100.0 | |||||
| Tampereen Koskenranta Koy | Hatanpään valtatie 1 | 33100 TAMPERE | 1988/1995/2011- | 64% | 12,100 | |||
| Tampereen Hatanpää Koy | Hatanpään valtatie 1 | 33100 TAMPERE | 1988/2011- | 100% | 7,200 | |||
| Tampereen Suvantokatu Koy | Hatanpään valtatie 1 | 33100 TAMPERE | 1988/2011- | 100% | 8,700 | |||
| 42 Kotkan Keskuskatu 11 Koy | Keskuskatu 11 | 48100 KOTKA | 1976 | 100% | 4,300 | 63.8 | 65.5 |
| Property | Address | Built in / renovated in | Holding, % Citycon's GLA, sq.m. | Occupancy rate, %, sq.m. 1) |
Occupancy rate, %, EUR 1) |
|||
|---|---|---|---|---|---|---|---|---|
| 43 Kuopion Kauppakatu 41 Koy | Kauppakatu 41 | 70100 KUOPIO | 1977 | 100% | 11,200 | 87.3 | 92.7 | |
| 44 Kuusankosken Kauppakatu 7 Koy | Kauppakatu 7 | 45700 KUUSANKOSKI | 1980 | 100% | 2,100 | 100.0 | 100.0 | |
| 45 Lahden Kauppakatu 13 Koy | Kauppakatu 13 | 15140 LAHTI | 1971 | 100% | 8,600 | 100.0 | 100.0 | |
| 46 Lentolan Perusyhtiö Oy | Mäkirinteentie 4 | 36220 KANGASALA | 2007 | 100% | 11,900 | 80.7 | 79.4 | |
| 47 Lillinkulma Koy | Jännekatu 2-4 | 20760 PIISPANRISTI | 2007 | 100% | 7,400 | 80.6 | 81.6 | |
| 48 Linjuri | 9,200 | 96.2 | 96.5 | |||||
| Linjurin Kauppakeskus Koy | Vilhonkatu 14 | 24100 SALO | 1993/2007 | 89% | ||||
| 49 Orimatt ilan Markkinatalo Oy | Erkontie 3 | 16300 ORIMATTILA | 1983 | 77% | 3,500 | 80.3 | 83.6 | |
| 50 Aseman Ostari | 18,900 | 34.8 | 34.4 | |||||
| Porin Asema-aukio Koy | Satakunnankatu 23 | 28130 PORI | 1957/1993 | 100% | ||||
| 51 Puijonlaakson Palvelukeskus Koy | Sammakkolammentie 6 | 70200 KUOPIO | 1971 | 31% | 1,500 | 100.0 | 100.0 | |
| 52 Runeberginkatu 33 Koy | Runeberginkatu 33 | 06100 PORVOO | 1988 | 100% | 6,300 | 100.0 | 100.0 | |
| 53 Sampokeskus | 13,700 | 86.0 | 93.6 | |||||
| Rovaniemen Sampotalo | Maakuntakatu 29-31 | 96200 ROVANIEMI | 1990 | 100% | 11,700 | |||
| Lintulankulma Koy | Rovakatu 28 | 96200 ROVANIEMI | 1989/1990 | 100% | 2,000 | |||
| 54 Kiinteistö Oy Säkylän Liiketalo | Pyhäjärventie 3 | 27800 SÄKYLÄ | 1969 | 100% | 1,200 | 100.0 | 100.0 | |
| 55 Torikeskus | Kauppatori 1 | 60100 SEINÄJOKI | 1992/2007 | 100% | 11,500 | 79.3 | 83.4 | |
| 56 Trio | 45,700 | 89.6 | 93.1 | |||||
| Lahden Hansa Koy | Kauppakatu 10 | 15140 LAHTI | 1992/2010- | 100% | 10,700 | |||
| Lahden Trio Koy | Aleksanterinkatu 20 | 15140 LAHTI | 1977/1985-1987/1992/2007 | 90% | 35,000 | |||
| Kiinteistö Oy Hansaparkki | Kauppakatu 10 | 15140 LAHTI | 1992 | 36% | ||||
| 57 Vaakalintu Koy | Keskuskatu 15 | 11100 RIIHIMÄKI | 1980 | 96% | 6,700 | 100.0 | 100.0 | |
| 58 Valtakatu 5-7 Koy | Valtakatu 5-7 | 37600 VALKEAKOSKI | 1938/1992 | 31% | 460 | 51.2 | 44.6 | |
| 59 Valtari | 7,600 | 80.1 | 76.5 | |||||
| Kouvolan Valtakadun Kauppakeskus Koy Kouvolankatu 15 | 45100 KOUVOLA | 1971-1975 /1994-2002 | 100% | |||||
| 60 Varkauden Relanderinkatu 30 Koy | Relanderinkatu 28-34 | 78200 VARKAUS | 1990 | 100% | 8,200 | 100.0 | 100.0 | |
| 60 FINLAND TOTAL | 577,630 | 88.4 | 94.1 | |||||
| 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 | 27,500 | 90.7 | 91.3 | |||||
| Åkersberga Centrum AB | Storängstorget | 18430 ÅKERSBERGA | 1985/1995/1996/2010/2011 | 75% | |||||
| 2 | Åkermyntan Centrum | Drivbänksvägen 1 | 16574 HÄSSELBY | 1977 | 100% | 8,400 | 98.0 | 99.0 | |
| 3 | Kallhäll | Skarprätt arvägen 36-38 | 17677 JÄRFALLA | 1991 | 100% | 3,700 | 100.0 | 100.0 | |
| 4 | Jakobsbergs Centrum | 56,300 | 97.1 | 97.9 | |||||
| Citycon Jakobsbergs Centrum AB | Tornérplatsen 30 | 17730 JÄRFALLA | 1959/1993 | 100% | |||||
| Drabantvägen bostäder AB | Tornérplatsen 30 | 17730 JÄRFALLA | 1959/1993 | 100% | |||||
| 5 | Fruängen Centrum | Fruängsgången | 12952 HÄGERSTERN | 1965 | 100% | 14,700 | 99.6 | 99.8 | |
| 6 | Liljeholmstorget Galleria | 40,900 | 99.0 | 98.1 | |||||
| Citycon Liljeholmstorget Galleria AB | Liljeholmstorget 7 | 11763 STOCKHOLM | 1973/1986/2007/2008/2009 | 100% | |||||
| 7 | Strömpilen | 26,800 | 98.0 | 98.6 | |||||
| Strömpilen AB | Strömpilsplatsen | 90743 UMEÅ | 1927/1997 | 75% | |||||
| 8 | Länken | Gräddvägen 1-2 | 90620 UMEÅ | 1978/2004/2006 | 75% | 7,300 | 100.0 | 100.0 | |
| 9 | Tumba Centrum | 29,100 | 99.3 | 99.1 | |||||
| Citycon Tumba Centrumfastigheter AB Tumba Torg 115 | 14730 BOTKYRKA | 1954/2000 | 100% | ||||||
| 10 Högdalen Centrum | 19,200 | 90.3 | 96.0 | ||||||
| Citycon Högdalen Centrum AB | Högdalsgången 1-38 | 12454 BANDHAGEN | 1959/1995 | 100% | |||||
| Citycon Imröret AB | Högdalsgången 19 | 12454 BANDHAGEN | 1959/1995 | 100% | |||||
| GOTHENBURG AREA | |||||||||
| 11 Stenungs Torg | 36,400 | 97.4 | 98.4 | ||||||
| Stenungs Torg Fastighets AB | Östra Köpmansgatan 2-16, 18A-C 44430 STENUNGSUND | 1967/1993 | 70% | ||||||
| 12 Backa | Backavägen 3-5 | 41705 GOTHENBURG | 1990 | 100% | 7,800 | 56.0 | 58.9 | ||
| Floda (Property sold, closing to take | |||||||||
| 13 | place in March 2012) | Rurik Holms väg | 44830 FLODA | 1960/1990 | 100% | 11,300 | 91.6 | 93.8 | |
| 14 Hindås | Hindås Stationväg 41-47 | 43063 HINDÅS | 1978/1999 | 100% | 1,700 | 100.0 | 100.0 | ||
| Landvett er (Property sold, closing took | |||||||||
| 15 | place on 9 January 2012) | Bratt åsvägen | 43832 LANDVETTER | 1975/1988/1999 | 100% | 4,800 | 100.0 | 100.0 | |
| 16 Lindome | Almåsgången | 43730 LINDOME | 1974 | 100% | 7,800 | 96.8 | 97.6 | ||
| 16 SWEDEN TOTAL | 303,700 | 95.7 | 97.0 | ||||||
| 80 TOTAL ALL | 994,730 | 92.0 | 95.5 |
1) Formulas are available on page 57.
PROPERTY LIST
In accordance with our instructions as External Valuer to the Citycon Oyj ("Company") we have carried out a market valuation of the Properties held within the Company's investment property portfolio as at 31 December 2011 to arrive at our opinion of Gross Market Value (no allowance for the deduction of typical purchaser's costs has been made).
Market Value is defi ned as:
"The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's-length transaction aft er proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion."
We understand that this valuation is required for fi nancial reporting and performance measurement purposes. We confi rm that our valuations are fully compliant with IFRS accounting standards and IVSC valuation standards and guidance. We also confi rm that we have no involvement with the subscriber or the properties valued which is likely to cause a confl ict of interest in providing this advice.
We have carried out inspections of each of the properties during September-December 2011. We have not measured the properties but have relied on the lett able areas which have been supplied to us by the Company. We have neither read copies of the leases or other related documents but have relied on the tenancy information provided by the Company which refl ects the latest available tenancy position.
The valuations have been carried out by local Jones Lang LaSalle offi ces in Finland and Sweden. In Estonia and Lithuania we have been supported by the local affi liates in the delivery of our advice.
This report is addressed to and may be relied upon by the Company and their investors. This report has no other purpose and should not be relied upon by any other person or entity. No responsibility whatsoever is accepted to any third party other than those specifi ed above and neither the whole of the Report, nor any part, nor references thereto, may be published in any document, statement or circular, nor in any communication with such third parties without our prior writt en approval of the form and context in which it will appear.
Consumer and business confi dence in Western Europe have fallen substantially over the past few months as a result of the Eurozone sovereign debt crisis and the heightened fi nancial market turmoil that has followed. The economic recovery has lost its momentum with GDP growth projections now lower than previously anticipated. At the same time, regional economic disparities persist, as highlighted by the marked contrast between the Nordics and Germany and the Southern European economies.
The Finnish economy continued on a growth track in Q3 2011 GDP expanding by 2.7% year-on-year and the forecast for the full year being around 3% which outperforms clearly the Eurozone average. The export driven economy has however been aff ected by the weakening economic prospects globally and the growth projections have been revised downwards over recent months. Due the gloomy market conditions the range between the latest forecasts has been wide the most pessimistic estimates for GDP growth in 2012 being around -1.5% when the more optimistic ones are forecasting the economy to still expand almost 1%.
Even though consumers' confi dence in the economy has been weakening and being clearly below its long-term average in November (0.4 vs. 13.0 since year 1995) retail sales have continued increasing which has been supported by strengthening employment situation and low interest rates. According to Statistics Finland, retail sales rose by 5.4% in October year-on-year and sales volume by 2.3%. During the 11 months of 2011 retail sales have risen by 5.8%.
GDP growth in 2011 is forecast to be relatively strong at around 4.3%, a rate which will surpass most other European countries. Reasons for the impressive growth have been increasing exports, household consumption and business investment, which have all been assisted by relatively low interest rates and the government's expansive economic policies. However GDP growth is expected to be low in 2012 at 0.5%, as the continued economic turbulence in the World economy, especially the Eurozone starts to impact Sweden too.
Swedish retail sales have seen consistent growth over the past 14 years according to HUI (Swedish Retail Institute). During 2010, retail sales increased by 3.7% in current prices. Sales of non-daily goods increased by 5%, while sales of daily goods increased by 2.2%. In 2011, it is forecast that total retail sales, will increase by 0.5% of which non-daily goods will be 0.5% and daily goods will be 1.0%. An increase of 1.0% in total retail sales is forecast for 2012.
During the fi rst half of 2011 Estonian GDP was growing in real terms by 9% annually, slowing slightly to 7.9% in the Q3. Economic growth was mainly lead by export sector, also purchasing power of consumers had positive eff ect on economy due to improving labour markets - recovering employment rates and average salary income. The outlook of Estonian economy is dependent on developments in its exporting destination countries, i.e. Scandinavia, Baltics, Russia and Germany. In case economies in this region would rapidly contract Estonia would follow the suit.
During the 11 months of 2011 the Estonian retail sales increased annually by 4% measured at constant prices (National departments of statistics). The food sales counted over half of the total retail sales increase. At current prices the retail sector sales enjoyed 9.5% year-on-year increase during 11 months of 2011. The grocery segment saw decelerated infl ationary pressure from food prices lowering from 9.3% year-on-year in September, 6.0% in October and further to 4.3% in November 2011.
Lithuanian economy was growing fast in the fi rst half of 2011 by annualised rate of 6.3%, accelerating to 6.7% in Q3. According to the forecasts produced by European Commission Lithuanian GDP would achieve the second highest growth level in EU aft er Estonia. The growth engine of Lithuanian economy has been exports, supported by the domestic demand. In 2012 various experts forecast GDP real growth in Lithuania to be 2.5-3.4%.
Lithuanian retail sales at constant prices was growing at 7.6% year-on-year during 11 months of 2011. Retail sales growth in grocery segment was growing at double speed compared to nonfood segment.
Sources: Statistics authorities, research institutes and banks
Retail real estate investment in Europe remained strong in Q4 2011. Preliminary analysis suggests that direct investment in retail real estate for the year is likely to exceed €28bn representing a signifi cant increase on 2009 and 2010 total volumes of €12.3bn and €20.7bn respectively. Geographically, the majority of activity remains focused on the UK and Germany but also France and Sweden enjoyed strong fi nal quarters. Overall 2011 saw the development of a multispeed Europe, with national economic performance and stability dictating investment fl ows and pricing.
The Finnish property investment market overall has witnessed low levels of transactions since the slowdown of market in H1 2008. Even though the investment demand has been increasing supply of prime assets has limited the transactional activity and the retail investment volume remained below €400 million in 2011. As a result of a strong investment demand both shopping centre and retail warehouse prime yields have moved in since the Q1 2010 but currently the short-term forecast for the yields is stable.
The polarisation of the market seems also to continue. Demand for core assets remains strong as equity rich investors keep on looking for safe heavens but at the same time tightening fi nancing conditions hit the business logic of value added and opportunistic investors.
As a consequence of relatively strong development of retail sales, also retail rents have been increasing. Particularly in retail warehouse sector rental growth has however been focused just on very best locations and overall occupier demand is strongest in prime high street and shopping centre units.
The retail property transaction volume increased from around SEK 3.22 billion in H1 2010 to SEK 8.537 billion in H1 2011. Investor demand has been driven by strong GDP and consumption growth and the increased availability of debt fi nance (especially for prime stock) over the last couple of years. However, demand is weaker for secondary / tertiary retail property investments. Shopping centres accounted for around 79% of retail transactions in H1 2011 whilst retail warehouses accounted for 15%.
Aft er the sharp rise in retail property yields during the recession of 2008 and 2009; since mid-2009 prime retail yields have decreased. Prime shopping centre yields have fallen from 6.5% in mid-2009 to 5.5% in late 2011 and prime retail warehouse yields have fallen from 6.75% in mid-2009 to 6.0% in late 2011.
Strong demand for retail units in prime city centre locations has led to a continued increase in prime rents. This is partly due to the fact that demand from international brands has increased. There has also been a general 'fl ight to quality' trend by retailers in recent years.
Demand for shopping centre space has been growing as shopping in centres is increasing its share in shopping habits and retail chains are expanding carefully. Despite global turmoil the outlook for Estonian retailing is positive and plans to enlarge existing shopping centres have been resumed. Largest shopping centres have enjoyed rental rate recovery by 3-5% and vacancy remains near 0%.
Average retail net initial yields in Baltic countries stay at 8+% level, although some investors demand a risk premium for investment objects located in Latvia and Lithuania due to relatively higher country risk compared to Estonia.
Vilnius has no new shopping centres under development, some super- and hypermarkets are under construction. Rents in centres bott omed out in 2010 and slow rental recovery is expected during 2012. Well managed shopping centres have practically no vacant space. The average vacancy on the capital's retail market is running near 5%.
We have adopted a 10-year cash fl ow model as a main valuation method. The model has been provided by the Company. Cash fl ows are calculated based on the information of existing lease agreements and aft er their expiry the estimated rental value (ERV) based on our market opinion replaces the contract rent.
Potential Gross Rental Income equals leased space with respect to contract rents and vacant space with respect to ERV. Deducting both the ERV for the void period 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 capital expenditure equals the bott om level cash fl ow that has been discounted to reach the present value of the income stream.
The residual value at the end of the 10-year cash fl ow period is calculated by capitalising the 11th year bott om level cash fl ow with an exit yield. The value of the property is calculated as a sum of the annually discounted net income stream, the discounted residual value at the end of the calculation period and any other assets increasing the value (e.g. unused building right or unbuilt plot).
The development projects are included in the valuation of the portfolio according to the information received from the representatives of the Company. In the applied valuation model, future rental income is based on fi nalised rental agreements and rental projections of the valued development project. Correspondingly, the development period is considered a period when premises generate no/limited income and when uncommitt ed investments are included in the cost side of the valuation model as a value reducing factor. Thus, the value of development project increases automatically as investments are committ ed and the opening day of the renewed premises is approaching.
The property portfolio consists of mainly retail properties located in Finland, Sweden, Estonia and Lithuania. Citycon Oyj owns fully or partially total number of 78 properties of which 60 in Finland, 14 in Sweden, 3 in Estonia and one in Lithuania. Core of the portfolio are 36 shopping centre properties which comprise 79% of the lett able area of the portfolio and represent the majority stake of the value of the portfolio as well. In addition to the shopping centres there are other commercial properties and development properties. All the owned properties except one plot in Helsinki metropolitan area are built.
Aft er the previous valuation Citycon has sold few properties. In Finland Tullintori Shopping Centre in Tampere and partial ownership in Otaniemen Liikekeskus Oy have been sold. In Sweden has been sold commercial properties and apartments – Landvett er in Härryda, Floda in Lerum and shares of Jakobsberg LB Bostäder AB that owns 57 apartments in Jakobsbergs Centrum. The value of the divested properties in Q3 valuation was approximately EUR 23,500,000.
Total market value of the portfolio in Q4 2011 is approximately MEUR 2,515. Compared to Q3 2011 the value has increased by MEUR 10. When comparing the Q4 2011 and Q3 2011 market value of the portfolio excluding the disposed properties the market value has increased by MEUR 33 i.e. 1.3% but the weighted average yield requirement of the portfolio has remained same (6.4%) as in Q3. Increase in the market value is mostly driven by the investments made in Q4 and the strengthening exchange rate of Swedish krona (SEK).
In the table on the next page are presented the weighted average yields (weighted by the value of the property). Citycon portfolio includes few relatively valuable properties compared to the rest of the portfolio. This means that the weighted averages are highly infl uenced by changes in these few properties. Iso Omena is the most valuable property in the portfolio.
The market value of the Finnish portfolio is MEUR 1,542 thus the value of the portfolio has decreased by 0.6% (MEUR 9) compared to the Q3 value. Weighted yield requirement has stayed the same as in Q3 being 6.3% and reversionary yield has decreased by 20bps being 6.8% when compared to Q3 fi gure (7.0%). The weighted initial yield has decreased 10bps from Q3 being now 6.0%.
The change in the value of Finnish portfolio is mainly caused by value decrease of the other commercial properties. When excluding the sold properties the change of the value is -0.2%.
The market value of the Swedish portfolio is MEUR 695 thus the value of the portfolio has increased by 2.2% since Q3 when the value was MEUR 680. The weighted average yield requirement for the Swedish portfolio has decreased by 10bps when compared to Q3 fi gure being 5.9% in Q4.
Few properties have been sold since Q3 – Landvett er in Härryda, Floda in Lerum and shares of Jakobsberg LB Bostäder AB that owns 57 apartments in Jakobsbergs Centrum. The value of the sold properties in Q3 was MEUR 17. When excluding the sold properties the change in the value of the portfolio is +4.8% (MEUR 32).
Properties in Estonia and Lithuania
The value of the Estonian and Lithuanian portfolio is MEUR 278. Compared to the Q3 value there was 1.5% increase in the value. The weighted average yield requirement of the portfolio has increased by 10bps when compared to Q3 fi gure being now 8.0%. Both the weighted average initial yield and the weighted average reversionary yield have increased the reversionary yield being 8.4% (8.3% in Q3) and initial yield 8.2% (7.3% in Q3).
The sensitivity analysis of the fair value of the portfolio has been carried out by creating a summary cash fl ow based on individual cash fl ow calculations. Changes in fair value have then been tested by modifying key input parameters of the calculations. The parameters tested were yield requirement, estimated rental value and operating expenses. The current market value of the properties was used as a starting point 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 support understanding of the value eff ect of diff erent parameters on the valuation. 10% increase in estimated rental value causes approximately 14% increase in value and 10% decrease in yield requirement causes approximately 11% increase in the value. Changes in expenses have more modest eff ect to the value than other parameters.
We are of the opinion that the aggregate of the Market Values, free of liabilities and debt, of the properties in the subject portfolio as at 31 December 2011 is as follows: € 2,515,000,000 (Two Thousand Five Hundred Fift een Million Euros)
19 January 2012 in Helsinki and Stockholm
Tero Lehtonen Director For and on behalf of Jones Lang LaSalle Finland Oy
Åsa Linder Director For and on behalf of Jones Lang LaSalle AB
Maria Sirén Analyst For and on behalf of Jones Lang LaSalle Finland Oy
Design and production: Citycon Oyj, Spokesman Oy. Photographs: Studio Blick Oy, Citycon's photo archive. People appearing in photos: Juha Eteläniemi, Hanna Jaakkola, Pauli Jaakkola, Milla Juslin and Sanna Kostiainen Printing: Lönnberg Oy Paper: Galerie Art Matt 300 g/m² Galerie Art Matt 130 g /m², Scandia 2000 White 90 g/m²
POHJOISESPLANADI 35 AB FI-00100 HELSINKI, FINLAND TEL. +358 (0)207\664\400 [email protected] WWW.CITYCON.FI
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.