Annual Report • Feb 6, 2013
Annual Report
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FINANCIAL STATEMENTS 2012
| Report by the Board of Directors 3 | ||
|---|---|---|
| EPRA performance measures 17 | ||
| CITYCON OYJ'S CONSOLIDATED | ||
| FINANCIAL STATEMENTS FOR | ||
| 1 JANUARY-31 DECEMBER 2012 22 |
||
| Consolidated statement | ||
| of comprehensive income, IFRS 22 | ||
| Consolidated statement | ||
| of fi nancial position, IFRS 23 | ||
| Consolidated cash fl ow statement, IFRS 24 | ||
| Consolidated statement of changes | ||
| in shareholders' equity, IFRS25 | ||
| Notes to the consolidated | ||
| fi nancial statements, IFRS 26 | ||
| 1. | Basic company data 26 | |
| 2. | Basis of preparation 26 | |
| 3. | Changes in IFRS and accounting policies 26 | |
| 4. | Summary of signifi cant accounting policies 27 | |
| 5. | Key estimates and assumptions, and | |
| accounting policies requiring judgment 31 | ||
| 6. | Gross rental income 32 | |
| 7. | Segment information 33 | |
| 8. | Property operating expenses 34 | |
| 9. | Other expenses from leasing operations 35 | |
| 10. Administrative expenses 35 | ||
| 11. Personnel expenses 35 | ||
| 12. Depreciation and amortisation 35 |
| 13. Other operating income and expenses 35 | |
|---|---|
| 14. Net fi nancial income and expenses35 | |
| 15. Income taxes 36 | |
| 16. Earnings per share 36 | |
| 17. Investment properties36 | |
| 18. Investments in jointly controlled entities 38 | |
| 19. Intangible assets 38 | |
| 20. Property, plant and equipment 38 | |
| 21. Deferred tax assets and liabilities 38 | |
| 22. Classifi cation of fi nancial instruments 39 | |
| 23. Derivative fi nancial instruments 40 | |
| 24. Investment properties held for sale 41 | |
| 25. Trade and other receivables 41 | |
| 26. Cash and cash equivalents41 | |
| 27. Shareholders' equity 41 | |
| 28. Loans 42 | |
| 29. Trade and other payables 46 | |
| 30. Employee benefi ts 46 | |
| 31. Cash generated from operations 48 | |
| 32. Commitments and contingent liabilities 48 | |
| 33. Related party transactions 49 | |
| 34. Changes in group structure in 2012 51 | |
| 35. Post balance sheet date events 51 | |
| Key fi gures and ratios 52 | |
| 1) Consolidated key fi gures | |
| and ratios for fi ve years 52 | |
| 2) Five year segment information 53 | |
| Parent company income statement, FAS 54 | |
| Parent company balance sheet, FAS 55 | |
| Parent company cash fl ow statement, FAS 56 |
| Notes to the parent company's | ||
|---|---|---|
| fi nancial statements, FAS 57 | ||
| 1. | Accounting policies 57 | |
| 2. | Turnover 57 | |
| 3. | Other expenses from leasing operations 57 | |
| 4. | Personnel expenses 57 | |
| 5. | Depreciation and amortisation | |
| and impairments 57 | ||
| 6. | Other operating income and expenses 57 | |
| 7. | Net fi nancial income and expenses 57 | |
| 8. | Income tax expense 58 | |
| 9. | Intangible assets 58 | |
| 10. Tangible assets 58 | ||
| 11. Shares in subsidiaries 59 | ||
| 12. Shares in associated companies 59 | ||
| 13. Other investments 59 | ||
| 14. Subsidiaries and associated companies 59 | ||
| 15. Long-term and short-term receivables 59 | ||
| 16. Shareholders' equity59 | ||
| 17. Liabilities 59 | ||
| 18. Contingent liabilities 60 | ||
| Shareholders and shares 61 | ||
| Formulas for key fi gures and ratios 62 | ||
| Signatures to the fi nancial statements 63 | ||
| Auditors' report 64 | ||
| Property list 65 | ||
| Valuation statement 69 |
In 2012, Citycon refi nanced a large part of the bank loans it had maturing in 2013 and 2014. During the summer, the company expanded into Denmark and agreed on the acquisition of the Kista Galleria shopping centre in Stockholm, Sweden, together with the Canada Pension Plan Investment Board (CPPIB).
Rental development was positive, with like-for-like net rental income growing by 4.9 per cent.
Citycon fulfi lled the fi nancial targets it had announced for 2012. On the publication of its Q3 interim report, the company revised some of its targets, announcing that it expected a growth in turnover by EUR 16–21 million, a growth in EPRA operating profi t by EUR 14–19 million, and a growth in its EPRA earnings by EUR 6–11 million in 2012 as compared to 2011, and forecast an EPRA EPS of EUR 0.195–0.215. The outcomes were that in 2012, turnover grew by EUR 22.2 million compared to 2011. The timing of tenant specifi c projects in Baltic Countries, in particular, resulted in a higher turnover than what the company expected in its third quarter report. The general circumstances and environment related to turnover development did not change. The EPRA operating profi t grew by EUR 18.3 million and the EPRA earnings by EUR 10.6 million, and the EPRA EPS was EUR 0.214.
| KEY FIGURES | Q4/2012 | Q4/2011 | Q3/2012 | 2012 | 2011 | Change-%1) |
|---|---|---|---|---|---|---|
| IFRS based key fi gures | ||||||
| Turnover, EUR million | 62.1 | 56.0 | 60.9 | 239.2 | 217.1 | 10.2 % |
| Net rental income, EUR million | 42.1 | 37.3 | 42.6 | 162.0 | 144.3 | 12.3 % |
| Profi t/loss att ributable to parent company shareholders, EUR million | 20.4 | -5.4 | 30.2 | 77.2 | 13.0 | 495.7 % |
| Earnings per share (basic), EUR 2) | 0.06 | -0.02 | 0.10 | 0.26 | 0.05 | 438.9 % |
| Net cash from operating activities per share, EUR 2) | 0.04 | 0.04 | 0.05 | 0.21 | 0.25 | -16.2 % |
| Fair value of investment properties, EUR million | 2,695.5 | 2,714.2 | 2,522.1 | 7.6 % | ||
| Equity ratio, % | 34.8 | 37.8 | 36.0 | 4.7 % | ||
| EPRA based key fi gures | ||||||
| EPRA operating profi t, EUR million | 34.2 | 28.9 | 37.3 | 135.7 | 117.4 | 15.5 % |
| % of turnover | 55.1 % | 51.6 % | 61.3 % | 56.7 % | 54.1 % | 4.8 % |
| EPRA Earnings, EUR million | 16.2 | 12.5 | 17.8 | 63.9 | 53.3 | 20.0 % |
| EPRA Earnings per share (basic), EUR 2) | 0.049 | 0.043 | 0.062 | 0.214 | 0.197 | 8.5 % |
| EPRA NAV per share, EUR | 3.71 | 3.49 | 3.62 | -3.7 % | ||
| EPRA NNNAV per share, EUR | 3.24 | 3.08 | 3.29 | -6.4 % |
1) Change-% is calculated from exact fi gures and refers to the change between 2012 and 2011.
2) Result per share key fi gures have been calculated with the issue-adjusted number of shares resulting from the rights issue executed in October 2012.
"For Citycon, the key focus in 2012 has been to improve earnings and quality of cash fl ows.
This has meant sound operational improvements, identifying and working on redevelopment potential and carrying through selective acquisitions. We have broadened our portfolio geographically to Denmark by acquiring Albertslund Centrum in Copenhagen in July and strengthened our market position considerably in Sweden by acquiring Kista Galleria in Stockholm (closed in January 2013). The acquisition of Kista Galleria balances the weight of Citycon's diff erent business areasin the company's property portfolio in accordance with its growth strategy. Another key rationale for the acquisition is to further improve the retail space off ering and to bett er serve retailers with a wider supply of quality shopping centres.
Citycon's strategy also includes investing in shopping centres with joint venture partners. The co-operation with the global and respected joint venture partner CPPIB is another example of executing this strategy. Half of the Kista Galleria acquisition is fi nanced together with CPPIB with a stand-alone asset backed loan agreement. A share issue is currently under planning.
In 2012, the company's like-for-like net rental income grew by 4.9 per cent. In accordance with our strategy, we managed to attract new international tenants like Debenhams from the UK and the Italian Furla.
Last year, we achieved to cut administrative expenses and the effi ciency program continues with higher targets for 2013; the cost savings target relating to administrative expenses for 2013 is to save up to EUR 5 million compared to 2012 level.
We successfully refi nanced practically all of the loans maturing in 2013, expanded our fi nancing sources to the bond markets and further strengthened our balance sheet in October by a rights issue. Aft er the acquisition of Kista Galleria, the company started planning another rights issue mainly to fi nance the acquisition as well as to strengthen the balance sheet.
Citycon turns 25 years in 2013. The year will be characterized with strengthening the Citycon quality brand and profi le towards shareholders, tenants, customers and all other stakeholders. We believe that the power of the local shopping centre brand should be combined with the strength and knowledge of Citycon as a Nordic industry leader. "
In May, the company issued a EUR 150 million unsecured domestic bond. The bond has a fi ve-year maturity, maturing on 11 May 2017. It carries a fi xed annual interest at the rate of 4.25 per cent.
On 4 September, Citycon signed a EUR 360 million long-term unsecured credit facility agreement with a group of Nordic banks. The facility consists of a bullet term loan of EUR 190 million and a EUR 170 million revolving credit facility. The average loan period is fi ve years. This was used to pay off a EUR 332 syndicated term loan which was maturing in August 2013, in advance, on 30 November.
On 7 September, based on authorisation granted by the AGM of 21 March, the Citycon Board of Directors decided on a EUR 90.7 million share issue based on the shareholders' pre-emptive subscription rights. A total of 49,032,002 new shares were offered for subscription at a price of EUR 1.85 per share. The share subscription period was 17 September–1 October. All the off ered shares were subscribed in the share off ering. The issued shares represented around 17.6 per cent of all the shares and votes in the company before the issue and around 15.0 per cent aft er it. The new shares were entered in the Trade Register on 8 October.
During the year, Citycon continued the buyback and cancellation of capital convertible bonds issued on 2 August 2006. At the year-end there were 796 bonds issued under the convertible bonds outstanding, giving the right to subscribe a maximum of 9,827,160 Citycon shares. As a result of the cancellation, the maximum increase in Citycon's share capital on the basis of the convertible bonds decreased to EUR 13,266,666.
The economic occupancy rate of the shopping centres was 96.8 per cent (97.1%). The economic occupancy rate of the whole property portfolio was 95.7 per cent (95.5%).
In late September, Citycon made a lease agreement with British department store Debenhams. The chain will open its fi rst Estonian store in Citycon's Rocca al Mare in autumn 2013.
Citycon also agreed with Hennes & Mauritz concerning the opening of two stores in Tallinn, in order to launch the chain on the Estonian market. The stores will open at the latest in autumn 2013.
On 19 December, Citycon and the Canada Pension Plan Investment Board published an agreement concerning the acquisition of Kista Galleria in Stockholm for approximately SEK 4.6 billion (calculated with the closing date's exchange rate approx. EUR 530 million) from DNB Livsforsikring ASA. Under the terms of the transaction, the shopping centre will be owned 50 per cent by Citycon and 50 per cent by CPPIB. The acquisition was completed on 17 January 2013. Citycon expects a fi rst-year net rental yield of around 5.5 per cent. The shopping centre's gross leasable area is approximately 90,000 sq. m. Of this, approximately 60,000 sq.m consists of commercial property, while the other 30,000 sq.m comprises a hotel, student accommodation, health care facilities and municipal services. The shopping centre has an annual footfall of around 18.1 million and annual sales of around EUR 280 million. This is one of the biggest acquisitions in Citycon's history.
On 1 November, Citycon acquired 30 per cent of shopping centre Stenungstorg located in the Stenungsund municipality north of Gothenburg, Sweden for approximately SEK 126 million (approx. EUR 14.7 million) from KF Fastigheter AB. Citycon acquired the 70 percent share of the shopping centre in 2006 and then KF Fastigheter AB remained as a minority shareholder.
On 2 August, the company sold all the shares in Drabanten bostäder AB in Sweden for approximately SEK 50.0 million (approx. EUR 5.6 million) to Bostadsrätt sföreningen Stinsen 107- 111. The sold company owns 47 apartments at Tumba Centrum in the municipality of Botkyrka in Sweden, with a total leasable area of around 3,600 sq.m.
On 2 July, Citycon acquired the Citytalo property in Oulu, Finland, for EUR 13.5 million from a local parish union and private owners. The property is situated in the heart of the city, adjacent to shopping centre Galleria, also owned by Citycon. Citytalo has a total leasable area of approximately 2,800 sq.m. The premises are fully leased, with Clas Ohlson, Gina Tricot and DinSko as anchor tenants. The planned extension and redevelopment project of shopping centre Galleria was the main reason for acquiring the Citytalo property.
Also on 2 July, Citycon acquired a further 25 per cent share in shopping centre Strömpilen and of the Länken retail property both located in Umeå, Sweden, for approximately SEK 121 million (approx. EUR 13.8 million) from Balticgruppen AB. Citycon had previously acquired a 75 per cent holding in the property in June 2007, at which time the seller, Balticgruppen AB, stayed on as a minority shareholder with a 25 per cent holding. According to the original agreement, the minority shareholder had the right to sell its share in the property to Citycon within a certain period. The July 2012 deal was based on this right. The sale price was set in the original agreement and was in line with the property's current fair value. Aft er the deal, Citycon owned 100 per cent of shopping centre Strömpilen and the Länken retail property.
On 16 May, Citycon agreed to sell all of its shares in Jakobsberg Bostäder 3 AB in Sweden for approximately SEK 90.0 million (approx. EUR 10.0 million) to Lärjungen Lägenheter 18 AB, which is in turn owned by Akelius Lägenheter AB. The deal was closed on 2 July 2012. The sold company owns 129 apartments at Jakobsberg Centrum in the municipality of Jarfälla in Sweden, with a total leasable area of around 9,800 sq.m. Citycon realised a capital gain of around EUR 2.9 million on this sale.
On 7 June, Citycon signed an agreement to buy shopping centre Albertslund Centrum in Greater Copenhagen, Denmark, from the municipality of Albertslund for DKK 181 million (approx. EUR 24 million). The deal was closed on 2 July. This was the company's fi rst investment in Denmark. At the year-end the shopping centre had a leasable area of approximately 14,700 sq.m. The agreement also entailed the purchase of a grocery store extension by Citycon in 2014, when the project is completed. The extension will increase the leasable area to around 20,000 sq.m. At the time of the transaction, the shopping centre's economic occupancy rate is 97.5 per cent. More information on the acquisition can be found in the stock exchange release dated 7 June 2012.
In April, the company acquired shopping centre Arabia in Helsinki from the Tapiola Group for EUR 19.5 million. Arabia is located some 4 km north-east of the city centre, on a plot owned by the City of Helsinki. The centre's gross leasable area is approximately 14,000 sq.m, of which 12,900 sq.m are retail premises. At the time of the transaction, the shopping centre contained more than 30 shops and had an occupancy rate of 93.0 per cent. More information on the acquisition can be found in the stock exchange release dated 4 April 2012.
Also in April, the company acquired the remaining minority shares in shopping centre Koskikeskus in Tampere, Finland, by buying out 41.7 per cent of the shares in MREC Kiinteistö Oy Tampereen Koskenranta in Tampere, Finland, one of the MREC's of Koskikeskus, for EUR 7.8 million. The seller was one of the property companies involved in Koskikeskus. Aft er the deal, the company owned 100 per cent of the shopping centre, which will facilitated the smooth completion of an on-going redevelopment project.
During the year, the company sold off two non-core properties in Finland and two non-core properties and two residential portfolios in Sweden.
The redevelopment of shopping centre Koskikeskus was the company's biggest on-going project. The estimated gross value of the investment was roughly EUR 37.9 million. The project was completed in time for Christmas sales, with the opening taking place according to plan on 15 December. The shopping centre's gross leasable area aft er the project is approximately 34,300 sq.m. Koskikeskus remained open throughout the redevelopment.
The renovation of Åkermyntan Centrum in Sweden was delayed due to a delay in negotiations with existing tenants. The project is expected to be fi nalized in the fi rst half of 2013.
In May, fully let shopping centre Magistral in Tallinn reopened aft er an eight-month renovation and extension project. The centre's leasable area increased by 2,200 sq.m to 11,700 sq.m.
The fi nal phase of the development of Myllypuron Ostari in Helsinki was completed in May.
The Baltic Operations unit was renamed the Baltic Countries and New Business unit. In addition to the previous shopping centres in the Baltic region, this unit now encompasses Albertslund Centrum in Denmark.
On 11 July, Marko Juhokas was appointed VP of Finnish Operations and member of the Corporate Management Committ ee. Juhokas started in his new job on 16 July. Michael Schönach, VP of Finnish Operations and member of the Corporate Management Committ ee, left the company on 15 May. Nils Styf was appointed Citycon's Chief Investment Offi cer and a member of the Corporate Management Committ ee in April, and started in June.
On 12 December, collaborative negotiations were initiated in the Finnish Operations unit for the purpose of agreeing on reorganisation, including possible personnel reductions. In a press release the company estimated a maximum reduction of 14 man-years in Finland, as well as some signifi cant changes in job descriptions or other working conditions. The employee negotiations involved some 60 Finnish Operations employees. They were concluded on 30 January 2013.
On 18 December, the company announced some changes in its management and its cost-saving targets. The new objective for 2013 was a reduction in administrative expenses by around EUR 5 million compared to 2012. Harri Holmström, formerly Senior Vice President, Group Leasing and Baltic Countries and New Businesses, who has been with the company for eight years, was appointed Chief Operating Offi cer. Aft er Holmström's transfer, the Baltic and Danish operations were led by Mati Pops, Commercial Director Baltic Operations. Marko Juhokas, VP of Finnish Operations, continued in his post but left the Corporate Management Committ ee with the committ ee's reorganisation on 18 December.
As of 19 December, the members of the Citycon Corporate Management Committ ee were: Marcel Kokkeel, CEO, Eero Sihvonen, Executive Vice President and CFO, Anu Tuomola, General Counsel, Harri Holmström, COO, and Nils Styf, CIO.
At its annual conference, the European Public Real Estate Association (EPRA), representing listed real estate companies, acclaimed Citycon's Annual and Sustainability Report 2011 as one of the best in the industry. This was the third consecutive year in which Citycon received the EPRA Gold Award for its fi nancial reporting. The company also won gold in the new Sustainability BPR category.
Citycon adjusted its corporate structure on 1 April. The restructuring entailed Citycon's Finnish real estate operations being transferred to two new holding companies: Citycon Finland Oy and Etelä-Suomen Kauppakiinteistöt Oy. As a consequence, these two holding companies own, manage and maintain Citycon's Finnish properties. The changes had no impact on the group's other operations.
Citycon and CPPIB signed a property-secured loan worth SEK 2.29 billion (approx. EUR 265 million) to fi nance a shopping centre investment on 14 January 2013. The loan collateral is the Kista Galleria property. The loan has a fi ve-year maturity and was granted by Skandinaviska Enskilda Banken AB (publ) (acting as transaction coordinator), Swedbank AB and Aareal Bank AG.
The deal made by Citycon Oyj and CPPIB on 19 December concerning the acquisition of Kista Galleria in Stockholm from DNB Livsforsikring ASA for approximately EUR 530 million was closed on 17 January 2013. Under the terms of the transaction, the shopping centre will be owned 50 per cent by Citycon and 50 per cent by CPPIB.
The shareholders of Citycon Oyj were invited to an Extraordinary General Meeting to be held on Wednesday, 6 February 2013 at 2.00 p.m. The Board of Directors proposes that the Extraordinary General Meeting would resolve on authorising the Board of Directors to decide on issuance of new shares for consideration. Citycon decided to begin preparations for a rights issue of a maximum of 125,000,000 new shares pursuant to the shareholders' pre-emptive subscription right. In addition to fi nancing the acquisition of Kista Galleria shopping centre in Stockholm, which was announced on 19 December 2012, the proceeds from the Off ering are intended to strengthen the company's balance sheet, fi nance the Company's strategy and for general corporate purposes.
On 30 January 2013, Citycon announced that the statutory collaborative negotiations in the Finnish Business Unit concerning reorganization of business operations were concluded. As a result of the negotiations, Citycon will reduce a total of 10 employees from its Finnish Business unit. It was estimated when the process started that a maximum of 14 employees would possibly be reduced. A cluster organization model will be taken into use in all of Citycon's operating countries. In the cluster organizational model shopping centres will be combined to form entities which are led by commercial directors.
Citycon continues to focus on increasing both its net cash fl ow from operating activities and its direct operating profi t. In order to implement this strategy, the company will pursue value-added activities, selective acquisitions and proactive asset management.
The initiation of planned (re)development projects will be carefully evaluated against strict pre-leasing criteria. The company will continue selling off non-core properties to improve its investment portfolio and strengthen its balance sheet, and further refi ning its properties' sales strategies in order to maximise their value through proactive management and leasing.
In 2013 Citycon expects to continue producing a stable cash fl ow and to increase its turnover by EUR 5–20 million compared to 2012. It also predicts a growth in EPRA operating profi t by EUR 5–20 million based on the current property portfolio (including recent acquisitions and disposals). Citycon expects its EPRA earnings to increase by EUR 15–30 million over the previous year. Based on the existing number of shares the EPRA EPS is expected to be EUR 0.22–0.26. These estimates are
based on (re)development projects already completed and to be completed, on the prevailing level of infl ation and on the euro-krona exchange rate. Properties taken offl ine for planned development projects will reduce net rental income during the year.
In the outlook, Citycon has assumed Kista Galleria to be consolidated with the equity method meaning that Citycon's share (50%) out of the net profi t of Kista Galleria shopping centre is recorded as share of result in jointly controlled entities in the statement of comprehensive income. In the statement of fi nancial position, Citycon's share of Kista Galleria is reported within the line called Investment in jointly controlled entities.
Generally speaking, 2012 was a year of fi nancial uncertainty, although positive developments were observed in the form of a growth in the retail trade in Citycon's operating markets. Uncertainty increased during the year due to the worsening Eurozone debt crisis.
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 consumer price 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 2.4 per cent in Finland, -0.1 per cent in Sweden, 3.9 per cent in Estonia and 2.8 per cent in Lithuania.
(Sources: Statistics Finland, Statistics Sweden, Statistics Estonia, Statistic Lithuania)
Consumer confi dence in their own fi nancial situation was positive in the Nordic countries, but negative during the whole year in the Baltic region. The economic uncertainty and general weak news aff ected consumer confi dence in each of the Nordic countries, where the positive trend turned in the summer and confi dence declined in the fi nal months of the year. In December, consumer confi dence was restored in Finland and Denmark to the positive fi gures of the start of the year, but fell close to zero in Sweden. (Eurostat)
Retail sales growth and the infl ation rate are key drivers for Citycon's business, having an impact on rents from business premises. Retail sales grew in both Finland and Sweden. The total retail sales growth rate in 2012 was 4.4 per cent in Finland and 2.3 per cent in Sweden compared to 2011. In January – November 2012 compared to the previous year's corresponding period retail sales grew by 7.0 per cent in Estonia and 4.8 per cent in Lithuania. (Statistics Finland, Statistics Sweden, Statistics Estonia, Statistics Lithuania)
Unemployment adjusted for seasonal variation was below the EU average (10.7%) in Finland, Sweden and Denmark: at the end of December, seasonally adjusted unemployment was 7.7 per cent in Finland, 8.1 per cent in Sweden and 7.9 per cent in Denmark. Unemployment remained high in Estonia and Lithuania but, in contrast to the Nordic region, was falling, being 9.5 per cent in Estonia and 12.5 per cent in Lithuania at the end of October. (Eurostat)
The Europe-wide instability of the fi nancial market continued to aff ect the availability and cost of funding.
Demand for investment has remained stable in the Finnish property investment market but the scant supply of prime assets has lim¬ited transactional activities. During 2012 retail investment volume exceeded low levels of 2011 ending up to EUR 400 million. The forecast for 2013 does not indicate any big changes in the market. Shopping centre prime yields have remained stable but the second¬ary yields are facing upward pressure. As a consequence of relatively strong development in retail sales, retail rents have also kept rising, although such increases have been concentrated in the very best locations only.
In Sweden the retail property transaction volume (SEK 13.4 billion) for the year 2012 was clearly lower than in the previous year (SEK 16.1 billion). Investors' interest is strong for retail properties which have a good location, strong tenants and low vacancy rates. However, retail properties which do not meet some or all of these criteria will be more diffi cult to sell. Prime yields for shopping centres have generally remained stable since mid-2011 but prime yields for retail warehouse parks increased in the last quarter of 2012.
In Estonia retail sales development has been strong which encourages demand for retail space, especially in Tallinn downtown areas and professionally managed modern shopping centres. Vacancy rates in shopping centres are close to zero and rents have increased along with infl ation. Also the retail property investment market has picked up and retail yields have dropped below 8 per cent. Also in Lithuania retail investment market is recovering and investor demand is forecasted to decrease yield requirements. (Source: Jones Lang LaSalle Finland Oy)
During the year, total sales in Citycon's shopping centres grew by 6 per cent and the footfall increased by 3 per cent year on year. There was sales growth in all of the company's countries of operation: 5 per cent in Finland, 5 per cent in Sweden and 14 per cent in the Baltic Countries and New Business. Footfall increased by 2 per cent in Finland, 6 per cent in Sweden and 6 per cent in the Baltic Countries and New Business. Positive developments in sales and footfall are mainly att ributable to (re)development projects completed during recent years. Like-for-like shopping centre sales grew by 4 per cent and footfall by 2 per cent. There are estimates included in the sales and footfall fi gures.
Citycon's Board of Directors considers the company's major shortterm 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 rising fi nancial expenses due to higher loan margins, reduced availability of debt fi nancing and the fair value development of properties in uncertain economic conditions.
Although the fi nancial crisis' eff ects on both rent levels for retail premises and occupancy rates have so far been minor in Citycon's operating areas, demand for retail premises, reduction of vacancy rates and lower market rent levels pose challenges in a sluggish economic environment. Economic trends, particularly those impacting consumer confi dence and behaviour, inevitably aff ect demand for retail premises. The instability of the Eurozone has continued in 2012, which has made forecasting fi nancial growth diffi cult. Risks to economic growth are still present and in conditions of weak economic growth, rental levels of retail premises typically fall, leasing of new premises is more diffi cult, and vacancy rates rise.
Implementation of Citycon's growth strategy requires new fi nancing, which means that risks associated with the availability and cost of fi nancing are of fundamental importance to the company. The Nordic banks' willingness to lend money to real estate companies continues to be moderate, so the availability of fi nancing is limited and loan margins have remained at a high level. In the future, tightening regulation of the banking and insurance sectors (Basel III and Solvency II regulations) is likely to support the elevated costs of debt fi nancing, and to limit the availability of longterm 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. Over the next few years, Citycon will have to refi nance loan agreements that were signed at low margins before the fi nancial crisis, and consequently, the margins on these loans will rise which will push Citycon's average interest rate upwards in the future. The EUR 360 million credit facility agreement signed with Nordic banks in September decreased the refi nancing risk for 2013 considerably. The facility enables the refi nancing of the material bank loans due in 2012 and 2013.
The company is actively seeking to diversify its funding sources, as demonstrated by the EUR 150 million domestic bond issue in May, in order to mitigate the risks related to bank fi nancing, but there are no guarantees that such alternative funding sources would be available in the future at cost effi cient prices.
The fair value development of investment properties continues to be characterised by high uncertainty caused by the 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 is refl ected most strongly on retail properties that are located outside major cities, or which are otherwise less att ractive, because investor demand is currently not 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 the best shopping centres, which att ract investor interest in uncertain conditions, remained stable or even increased during 2012.
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 43-46 of the Financial Statements for 2012, and on pages 50-51 of the upcoming Annual Report for 2012.
Citycon's strategy is to focus on high-quality shopping centres in the Nordic and Baltic regions. The company looks for growth through new shopping centre acquisitions and the redevelopment and expansion of existing shopping centres.
At the year-end, the fair value of the company's entire property portfolio was EUR 2,714.2 million (EUR 2,522.1 million), comprising 37 (36) shopping centres and 41 (44) other properties. Of the shopping centres, 23 (23) were in Finland, nine (9) in Sweden, three (3) in Estonia, one (1) in Lithuania and one (0) in Denmark.
Citycon's reported gross capital expenditure (including acquisitions) during the year totalled EUR 161.7 million (EUR 216.7 million). Of this fi gure, new property acquisitions accounted for EUR 58.8 million (EUR 138.9 million), agreed purchase price adjustments related to property acquisitions concluded earlier accounted for EUR 0.0 million (EUR 1.1 million), acquisitions of jointly controlled entities for EUR 0.0 million (EUR 0.3 million), property development for EUR 101.6 million (EUR 75.0 million) and other investments EUR 1.4 million (EUR 1.4 million).
Capital expenditure during the period totalled EUR 119.9 million (EUR 62.5 million) in Finland, EUR 18.1 million (EUR 45.5 million) in Sweden and EUR 23.0 million (EUR 108.1 million) in the Baltic countries and Denmark. The company's headquarters accounted for EUR 0.7 million (EUR 0.6 million) of capital expenditure. The company made divestments totalling EUR 26.4 million (EUR 18.1 million), from which a total of EUR 4.2 million (EUR 0.3 million) was recorded as capital gains (including taxes).
During the period under review, Citycon acquired
Shopping centre Albertslund Centrum in Greater Copenhagen, Denmark, from the municipality of Albertslund for DKK 181 million (approx. EUR 24 million) in July, entailing entry into a new market.
30 per cent of shopping centre Stenungstorg located in the Stenungsund municipality north of Gothenburg, Sweden for approximately SEK 126 million (approx. EUR 14.7 million) from KF Fastigheter AB.
Through these acquisitions, the company increased its leasable area by a total of 35,900 sq.m.
During the period under review
Through these divestments, the company decreased its leasable area by a total of 38,650 sq. m. Since publishing its updated strategy in July 2011, the company has divested itself of eight noncore properties for a total value of around EUR 38 million.
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 the 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,
| Location | Project area before, sq.m. |
Project area aft er, sq.m. |
Estimated total project investment (EUR million) |
Actual gross capital investments by 31 December 2012 (EUR million) |
Completion | |
|---|---|---|---|---|---|---|
| Åkermyntan | Stockholm, Sweden | 8,500 | 10,100 | 6.9 | 6.7 | Q2/2013 |
| Koskikeskus | Tampere, Finland | 27,700 | 28,600 | 37.9 | 40.5 | completed 2012 |
| Iso Omena | Espoo, Finland | 60,600 | 63,000 | 7.6 | 7.5 | completed 2012 |
| Myllypuro | Helsinki, Finland | 7,700 | 7,300 | 21.3 | 21.3 2) | completed 2012 |
| Magistral | Tallinn, Estonia | 9,500 | 11,900 | 7.0 | 7.0 | completed 2012 |
| Åkersberga Centrum | Österåker, Sweden | 20,000 | 27,500 | 53.2 | 53.2 | completed 2011 |
| Martinlaakso | Vantaa, Finland | 3,800 | 7,400 | 22.9 | 24.4 3) | completed 2011 |
| Hansa (Trio) | Lahti, Finland | 11,000 | 11,000 | 8.0 | 7.0 | completed 2011 |
| Myyrmanni | Vantaa, Finland | 8,400 | 8,400 | 6.5 | 6.5 | completed 2011 |
| Kirkkonummen Liikekeskus | Kirkkonummi, Finland | 5,000 | 4,000 | 4.0 | 3.7 | completed 2011 |
1) Calculated at the end of period exchange rates.
2) The compensation of EUR 5.9 million and its tax impact received from the City of Helsinki has been deducted from the actual gross investments.
3) The estimated investment in the Martinlaakso development project was exceeded by EUR 1.5 million due to larger than planned commercial look and tenant fi tout works.
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.
At the year-end, the company had one redevelopment project under way at Åkermyntan Centrum in Stockholm. The project was delayed due to some delays in negotiations with existing tenants and the project is expected to be fi nalized in the fi rst half of 2013.
During the year, the redevelopment of Koskikeskus in Tampere, the roof top expansion of Iso Omena in Espoo, the renovation of Magistral in Tallinn and the development of Myllypuro in Helsinki were completed, all within the planned schedule. No new (re)development projects were started during the period.
The enclosed table lists the most signifi cant (re)development projects in progress at the year end and completed in 2011 and 2012. Further information on completed and planned development projects can be found on the company's website and in the upcoming Annual Report for 2012.
Changes in the Group structure during 2012 are presented on page 51 of the Financial Statements.
The fi gures presented below are for the period January–December 2012 and the fi gures in brackets are the reference fi gures for 2011, 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 239.2 million (EUR 217.1 million). Turnover grew
| Q4/2012 | Q4/2011 | Q3/2012 | 2012 | 2011 | Change-% | |
|---|---|---|---|---|---|---|
| Number of properties | 78 | 78 | 80 | -2.5% | ||
| Gross leasable area, sq.m. | 998,170 | 1,000,270 994,730 | 0.6% | |||
| Annualised potential rental value, EUR million 1) | 243.1 | 245.9 | 228.5 | 7.6% | ||
| Average rent (EUR/sq.m.) | 20.8 | 20.7 | 19.7 | 5.1% | ||
| Number of leases started during the period | 195 | 228 | 140 | 792 | 782 | 1.3% |
| Total area of leases started, sq.m. 2) | 40,257 | 49,370 | 23,685 | 141,167 177,006 | -20.2% | |
| Average rent of leases started (EUR/sq.m.) 2) | 22.0 | 19.8 | 22.5 | 20.5 | 19.7 | 4.1% |
| Number of leases ended during the period | 153 | 284 | 328 | 1,064 | 877 | 21.3% |
| Total area of leases ended, sq.m. 2) | 29,728 | 53,143 | 34,366 | 149,972 186,120 | -19.4% | |
| Average rent of leases ended (EUR/sq.m.) 2) | 24.6 | 17.2 | 16.8 | 18.6 | 18.1 | 2.8% |
| Occupancy rate at end of the period (economic), % | 95.4 | 95.7 | 95.5 | - | ||
| Average remaining length of lease portfolio at the end of the period, year | 3.4 | 3.5 | 3.4 | 2.9% | ||
| Net rental yield, % 3) | 6.3 | 6.4 | 6.0 | - | ||
| Net rental yield, like-for-like properties, % | 6.3 | 6.4 | 6.1 | - |
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.
by EUR 22.2 million, or 10.2 per cent. Completed or partly completed redevelopment projects, such as Martinlaakson Ostari, Koskikeskus, Myllypuron Ostari, Myyrmanni, Åkersberga Centrum and Magistral, accounted for EUR 8.3 million of turnover growth, and acquisitions accounted for EUR 11.1 million. Divestments decreased turnover by EUR 4.6 million (see divestments in 2012 under paragraph Property Portfolio; sales of apartments in Sweden in 2011 are included in the reference period's divestment portfolio). Like-for-like properties contributed to turnover growth by EUR 5.3 million. (Also see the table Net Rental Income and Turnover by Segment and Property Portfolio.)
Turnover from like-for-like properties increased thanks to indexations and higher rental levels in shopping centres. Temporary rental rebates of like-for-like properties decreased to EUR 1.5 million (EUR 1.9 million).
At the year-end, Citycon had a total of 3,846 (3,955) leases. The leasable area increased by 0.6 per cent to 1.000,270 square metres. Increase in the leasable area is due to acquisitions and completion of re-development projects off set by divested noncore properties. The average remaining length of the lease portfolio was 3.5 (3.4) years. The average rent increased from EUR 19.7/sq.m. to EUR 20.7/sq.m. thanks to redevelopment projects and divestments as well as index increments. Economic occupancy rate was 95.7 per cent (95.5%). During the preceding twelve months, the rolling twelve-month occupancy cost ratio for likefor-like shopping centre properties was 8.9 per cent.
Property operating expenses consist of maintenance costs relating to real estate properties, such as electricity, heating, cleaning and repairs. Property operating expenses rose by EUR 4.2 million, i.e. 5.9 per cent from EUR 71.6 million to EUR 75.8 million. Completed (re)development projects and acquisitions increased property operating expenses, while divestments decreased them. Like-for-like property operating expenses increased only by EUR 0.1 million. Increase was hindered by lower repair and energy costs. Winter in 2012 was milder than in 2011, except for February and December and summer in 2012 was cooler than in 2011. The consumption of energy has decreased also due to Citycon's internal cost effi ciency programme.
Other expenses from leasing operations, consisting of tenant improvements and credit losses, totalled EUR 1.4 million (EUR 1.2 million). This increase in expenses was mainly due to higher credit losses in Swedish operations.
Citycon's net rental income was EUR 162.0 million (EUR 144.3 million). Net rental income increased by EUR 17.7 million or 12.3 per cent. Redevelopment projects such as Martinlaakson Ostari, Koskikeskus, Myllypuron Ostari, Myyrmanni, Åkersberga Centrum and Magistral increased net rental income by EUR 5.8 million, while the acquisitions of the Kristiine, Högdalen Centrum, Arabia and Albertslund shopping centres increased net rental income by EUR 7.5 million. Divestments reduced net rental income by EUR 2.3 million. Like-for-like net rental income grew by EUR 5.5 million, or 4.9 per cent, mainly thanks to a clear increase in net rental income from shopping centres, up 6.0 per cent off set by a net rental decrease from supermarkets and shops by 0.6 per cent. The positive net rental income development in the shopping centres was mainly due to positive performance in Liljeholmstorget Galleria, Rocca al Mare, Iso Omena and Jakobsberg Centrum. The negative net rental income development in the like-for-like portfolio of supermarkets and shops was mainly due to two supermarkets and shop properties in Finland and one in Sweden.
The net rental yield of Citycon's property portfolio was 6.4 per cent (6.0%) and improved in all countries of operation due to increased net rental income.
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. 61.8 per cent of like-for-like properties are located in Finland, measured in terms of net rental income.
Administrative expenses totalled EUR 26.5 million (EUR 27.7 million). This represented a decrease of EUR 1.2 million, or 4.3 per cent, mainly due to savings in marketing expenses and other administrative items (EUR 0.8 million) as well as lower restructuring costs (EUR 0.4 million). Administrative expenses in the fourth quarter in 2012 were EUR 2.5 million higher than in the third quarter in 2012, mainly due to higher restructuring costs.
At the end of December, Citycon Group employed a total of 129 (136) persons, of whom 86 (90) worked in Finland, 32 (35) in Sweden, 12 (10) in the Baltic countries and 1 (1) in the Netherlands.
Citycon Group paid a total of EUR 11.6 million (EUR 11.2 million) in salaries and other remuneration, of which the share of the Group's managing directors' salaries and other remuneration was EUR 1.0 million (EUR 0.5 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 5.8 million (EUR 10.0 million) in salaries and other remuneration, of which the share of the CEO's salary and remuneration was EUR 1.0 million (EUR 0.5 million) and the share of the Board of Directors EUR 0.7 million (EUR 0.7 million).
| 2012 | 2011 | 2010 | |
|---|---|---|---|
| Average number of personnel | 132 | 131 | 123 |
| Salaries and other remuneration, EUR million | 11.6 | 11.2 | 8.7 |
Net fair value gains on investment properties totalled EUR 23.6 million (losses of EUR -35.3 million). The fair value gain of the shopping centres amounted to EUR 35.0 million off set by a fair value loss of EUR 11.5 million in the supermarket and shop properties. The fair value loss in supermarkets and shops was mainly due to somewhat lower market rent estimates. The company recorded a total value increase of EUR 54.4 million (EUR 39.8 million) and a total value decrease of EUR 30.8 million (EUR 75.1 million). On 31 December 2012, the average net yield requirement defi ned by Jones Lang LaSalle Finland Oy for Citycon's entire property portfolio was 6.3 per cent (30 September 2012: 6.3%). The net yield requirement for properties in Finland, Sweden and the Baltic countries and New Business was 6.2 per cent, 6.0 per cent and 7.7 per cent, respectively.
| Net rental income by segments and portfolios | Turnover by portfolios |
|||||
|---|---|---|---|---|---|---|
| EUR million | Finland | Sweden | Baltic Countries and New Business |
Other | Total | Citycon total |
| 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)development 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 |
| Acquisitions | 1.5 | 1.4 | 4.6 | - | 7.5 | 11.1 |
| (Re)developments projects | 4.6 | 0.6 | 0.6 | - | 5.8 | 8.3 |
| Divestments | -0.5 | -1.7 | - | - | -2.3 | -4.6 |
| Like-for-like properties | 2.2 | 2.3 | 1.1 | - | 5.5 | 5.3 |
| Other (incl. exchange rate diff .) | 0.0 | 1.2 | -0.1 | 0.0 | 1.1 | 1.8 |
| 2012 | 98.2 | 39.2 | 24.6 | 0.0 | 162.0 | 239.2 |
The average market rent used for the valuation rose to EUR 25.1/sq.m. up from EUR 23.8/sq.m. 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 4.2 million (EUR 0.3 million) (cf. Property Portfolio).
Operating profi t came to EUR 163.4 million (EUR 81.8 million), seeing growth thanks to increased net rental income, positive fair value changes and higher gains on sale of investment properties.
Net fi nancial expenses increased by EUR 5.7 million to EUR 68.1 million (EUR 62.4 million). This increase was mainly att ributable to increased interest expenses as a result of higher interest-bearing debt on average during the year, higher loan interest margins and a stronger SEK. In addition there was one-off book losses arising from convertible bond buy-backs, and write downs of arrangement fees related to debt refi nancing. The year-to-date weighted average interest rate for interest-bearing debt increased compared to the previous year, being 4.07 per cent (4.03 %), due to a rise in credit margins as a consequence of refi nancing activites. At the year-end, the weighted average interest rate, including interest rate swaps, increased to 4.25 per cent (4.07%) as a result of higher credit margins.
The share of profi t of jointly controlled entities totalled EUR 0.2 million (EUR 0.3 million) and represents Citycon's share of the profi t of Espagalleria Oy.
Income tax expenses for the year amounted to EUR 7.8 million (benefi t of EUR 1.6 million). The increase in income tax expenses was primarily due to deferred tax expenses of EUR 6.4 million resulting from fair value gains on investment properties in 2012 compared to deferred tax income of EUR 2.5 million resulting from fair value losses on investment properties in the corresponding period of 2011. Current tax for the period was EUR 1.4 million (EUR 0.9 million).
Profi t for the period came to EUR 87.7 million (EUR 21.3 million). This increase was mainly due to the higher operating profi t resulting from higher net rental income and positive fair value changes off set by higher fi nancial expenses.
At the year-end, the fair value of the company's property portfolio totalled EUR 2,714.2 million (EUR 2,522.1 million), with Finnish properties accounting for 61.1 per cent (61.4%), Swedish properties for 27.2 per cent (27.6%) and Baltic and New Business properties for 11.6 per cent (11.0%).
The fair value of investment properties increased by EUR 192.1 million from the end of 2011 (31 December 2011: EUR 2,522.1 million) because of gross capital expenditure of EUR 160.3 million, off set by divestments totalling EUR 1.4 million (see Property Portfolio) and by EUR 17.2 million due to the transfer of certain residential units in the Swedish shopping centres, which were disposed during Q3/2012, and some supermarkets and shops in Finland into the Investment Property Held for Sale -category. In addition, net fair value gains on investment properties increased the value of investment properties by EUR 23.6 million (see detailed analysis under Financial Performance: Net fair value gains on investment properties). The strengthening of the Swedish krona increased the fair value of investment properties by EUR 26.8 million.
Shareholders' equity att ributable to the parent company's shareholders was EUR 1,015.7 million (EUR 902.6 million). This fi gure increased by EUR 113.1 million due mainly to the rights issue of EUR 89.9 million executed in October 2012 and due to the profi t of EUR 77.2 million due to for the reporting period att ributable to parent company shareholders. On the other hand, dividend payments and equity returns as well as negative fair value change in 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 the fair value of interest derivatives of EUR 14.1 million was recorded for the period, taking into account their tax eff ect (a loss of EUR 26.8 million).
Due to the aforementioned items and higher number of shares
resulting from the rights issue, equity per share decreased to EUR 3.11 (Q4/2011: EUR 3.25). The equity ratio increased to 37.8 per cent (Q4/2011: 36.0). The company's equity ratio, as defi ned in the loan agreement covenants, increased to 40.5 per cent (Q3/2012: 37.2%) following the rights issue.
Details of the company's share capital, number of shares and related matt ers can be found in the Financial Statements in section Shareholders and Shares.
Liabilities totalled EUR 1,758.6 million (EUR 1,715.9 million), with short-term liabilities accounting for EUR 209.7 million (EUR 262.2 million). At the year-end, Citycon's liquidity was EUR 268.4 million, of which EUR 217.4 million consisted of undrawn, committ ed credit facilities and EUR 51.0 million of cash and cash equivalents. At the year-end, Citycon's liquidity, excluding commercial papers, stood at EUR 235.9 million (EUR 492.5 million on 30 September 2012). The liquidity as well as the short term debt decreased notably during the last quarter as a consequence of the agreed repayments of refi nanced debt.
Interest-bearing debt decreased year on year by EUR 14.9 million to EUR 1,533.0 million (EUR 1,547.9 million). The fair value of interest-bearing debt was EUR 1,538.8 million (EUR 1,554.8 million) at the year- end. Cash and cash equivalents totalled EUR 51.0 million (EUR 91.3 million), making the fair value of interest-bearing net debt EUR 1,487.8 million (EUR 1,463.5 million). The average loan maturity, weighted according to the principal amount of the loans, was 3.2 years (2.9 years). This increase is caused by the early refi nancing in November 2012 of the loans maturing in August 2013. The duration of the new loans were on average 5 years. The average interest-rate fi xing period decreased to 3.5 years (3.6 years).
The interest coverage ratio remained at 2.1 (Q3/2012: 2.1).
Fixed-rate debt accounted for 89.2 per cent (81.3 %) of the year-end interest-bearing debt, interest-rate swaps included. The hedge ratio increased because Citycon issued a fi xed-rate bond in May 2012. The debt portfolio's hedging ratio was in line with the company's fi nancing policy.
The company issued a EUR 150 million senior unsecured domestic bond on 4 May. The fi ve-year bond matures on 11 May 2017. The bond carries fi xed annual interest at the rate of 4.25 per cent, payable annually on 11 May, and is listed on the NASDAQ OMX Helsinki. The bonds were allocated to approximately 40 investors and the bond off ering was oversubscribed. The proceeds from the bond issue were used to repay existing loans and to cover the company's general fi nancing needs.
Citycon Oyj signed a EUR 360 million long-term unsecured credit facility agreement with a Nordic bank group on 4 September. The facility consists of bullet term loan of EUR 190 million and a EUR 170 million revolving credit facility. The loan period is on average fi ve years. Following this transaction practically all material bank loans due 2013 have been refi nanced and Citycon's average debt maturity is extended.
During 2012, Citycon has repurchased convertible capital bonds issued on 2 August 2006 with face value of EUR 31.5 million corresponding to 29 per cent of the aggregate amount of the Convertible Bonds maturing in 2013. The weighted average repurchase price was 100.3 per cent of the face value of the bonds.
These repurchased bonds have been cancelled. Following the cancellations, the number of shares available for subscription under the convertible bonds decreased to 9, 827,160 shares and the maximum increase allowed in Citycon's share capital decreased to EUR 13,266,666. Due to the rights off ering pursuant to the pre-emptive subscription right of shareholders, Citycon's Board of Directors has on 7 September 2012 decided to adjust the conversion price of the convertible bonds from EUR 4.20 to EUR 4.05. The new conversion price has been eff ective as from 5 October 2012.
Including the buybacks during 2008–2010, Citycon has repurchased a total principal amount of EUR 70.2 million of the convertible bonds, corresponding to approximately 64 per cent of the aggregate amount of the convertible bonds. The face value of the convertible bonds, originally EUR 110 million, totalled EUR 39.8 million at the end of the year.
On 7 September 2012, the Citycon's Board of Directors decided issue a maximum of 49,032,002 new shares on a share issue, worth approximately EUR 90.7 million, based on an authorisation granted by the AGM on 21 March 2012. The off ered shares represented around 17.6 per cent of the total shares and voting rights in the company prior to the off ering, and around 15.0 per cent following the off ering. The share subscription period was 17 September – 1 October 2012 and all the off ered shares were subscribed in the share issue. The new shares were entered in the Finnish Trade Register on 8 October 2012. More detailed information on the rights issue can be found in Citycon's stock exchange releases, published in September and October 2012.
Net cash from operating activities totalled EUR 61.5 million (EUR 66.3 million). This decrease was primarily due to higher realized exchange rate losses and higher taxes paid as the company received tax return amounting to EUR 7.2 million in 2011.
Net cash used in investing activities totalled EUR 104.9 million (EUR 203.3 million). Acquisition of subsidiaries and investment properties amounted to EUR 42.1 million (EUR 139.2 million). Capital expenditure related to investment properties, shares in jointly controlled entities and tangible and intangible assets totalled EUR 93.9 million (EUR 82.4 million). Negative cash fl ow from investing activities was reduced by sales of investment properties totalling EUR 31.1 million (EUR 18.3 million).
Net cash from fi nancing activities totalled EUR 2.3 million (EUR 208.5 million). This consisted of the rights issue, normal loan repayments and new loan withdrawals and dividend and equity return payments.
In 2011, SRV Construction Ltd initiated arbitration proceedings against Citycon's subsidiary, MREC Espoontori related to Espoontori shopping centre's completed redevelopment project. The dispute's monetary value is approximately EUR 4.7 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 as well as Baltic Countries and New Business.
Citycon is a market leader in the Finnish shopping centre business. At period-end, the company owned 23 shopping centres and 36 other properties in Finland, with a total leasable area of 595,670 sq. m (577,630 sq. m.). The leasable area increased due to acquisitions and completed redevelopment
| Q4/2012 Q4/2011 Q3/2012 | 2012 | 2011 Change-% | ||||
|---|---|---|---|---|---|---|
| Number of properties | 59 | 59 | 60 | -1.7 % | ||
| Gross leasable area, sq.m. | 594,170 595,670 577,630 | 3.1 % | ||||
| Annualised potential rental value, EUR million 1) | 148.8 | 150.6 | 139.3 | 8.1 % | ||
| Average rent (EUR/sq.m.) | 21.6 | 21.4 | 21.0 | 1.9 % | ||
| Number of leases started during the period | 131 | 130 | 107 | 453 | 470 | -3.6 % |
| Total area of leases started, sq.m. 2) | 25,402 | 39,033 | 20,438 | 89,689 137,118 | -34.6 % | |
| Average rent of leases started (EUR/sq.m.) 2) | 23.1 | 18.9 | 22.5 | 21.7 | 20.2 | 7.4 % |
| Number of leases ended during the period | 80 | 139 | 98 | 444 | 477 | -6.9 % |
| Total area of leases ended, sq.m. 2) | 15,324 | 39,227 | 15,450 | 79,049 138,435 | -42.9 % | |
| Average rent of leases ended (EUR/sq.m.) 2) | 28.4 | 17.1 | 22.5 | 21.9 | 19.4 | 12.9 % |
| Occupancy rate at end of the period (economic), % | 94.8 | 95.3 | 94.1 | - | ||
| Average remaining length of lease portfolio at the end of the period, year |
3.6 | 3.7 | 3.5 | 5.7 % | ||
| Gross rental income, EUR million | 35.5 | 32.2 | 34.5 | 137.0 | 127.3 | 7.6 % |
| Turnover, EUR million | 37.3 | 33.5 | 36.1 | 143.2 | 132.5 | 8.1 % |
| Net rental income, EUR million | 25.7 | 23.2 | 25.2 | 98.2 | 90.5 | 8.5 % |
| Net rental yield, % 3) | 6.2 | 6.3 | 6.0 | - | ||
| Net rental yield, like-for-like properties, % | 6.4 | 6.5 | 6.2 | - | ||
| Fair value of investment properties, EUR million | 1,640.9 | 1,659.0 | 1,547.4 | 7.2 % |
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.
projects (cf. Property Portfolio). The annualised potential rental value increased to EUR 150.6 million, mainly due to acquisitions and completed redevelopment projects.
Lease agreements started during the year applied to a GLA of 89,689 square metres (137,118 sq.m.) and ended lease agreements applied to 79,049 square metres (138 435 sq.m.). The average rent for the new lease agreements was slightly lower than the average rent for the ended lease agreements due to a couple of large lease agreements which started in the fourth quarter in supermarket and shop properties. The average rent rose from EUR 21.0/sq. m. to EUR 21.4/sq. m., mainly thanks to divestments, completed redevelopment projects and index increments. The economic occupancy rate increased to 95.3 per cent (94.1%). In shopping centres, the economic occupancy rate was 96.4 per cent and the average rent was EUR 24.8/sq. m.
Citycon's net rental income from Finnish operations during the year totalled EUR 98.2 million (EUR 90.5 million). Net rental income grew by EUR 7.7 million, or 8.5 per cent, thanks to the EUR 6.1 million eff ect of completed redevelopment projects such as Martinlaakson Ostari, Koskikeskus, Myllypuron Ostari, Myyrmanni, and acquisition of Arabia. Net rental income for like-for-like properties in Finland increased by EUR 2.2 million, or 3.1 per cent, mainly due to good performance in the shopping centres. The business unit accounted for 60.6 per cent (62.7%) of Citycon's total net rental income. Net rental yield was 6.3 per cent (6.0%).
At the end of the year, the company had nine shopping centres and fi ve other retail properties in Sweden, with a total leasable area of 274,300 square metres (303,700 sq. m.). These properties are located in the Greater Stockholm and Gothenburg Areas and in Umeå. The leasable area decreased due to the divestment of residential units and two supermarket properties. The annualised potential rental value increased to EUR 63.4 million, due to strengthened Swedish krona.
Lease agreements started during the year applied to a GLA of 33,464 square metres (37,006 sq.m.) and ended lease agreements applied to 64,629 square metres (35,816 sq.m.). The average
| Q4/2012 Q4/2011 Q3/2012 | 2012 | 2011 Change-% | ||||
|---|---|---|---|---|---|---|
| Number of properties | 14 | 14 | 16 | -12.5% | ||
| Gross leasable area, sq.m. | 273,700 274,300 303,700 | -9.7% | ||||
| Annualised potential rental value, EUR million 1) | 63.1 | 63.4 | 62.7 | 1.1% | ||
| Average rent (EUR/sq.m.) | 19.3 | 19.3 | 17.2 | 12.2% | ||
| Number of leases started during the period | 54 | 91 | 26 | 231 | 276 | -16.3% |
| Total area of leases started, sq.m. 2) | 14,218 | 9,719 | 2,312 | 33,464 | 37,006 | -9.6% |
| Average rent of leases started (EUR/sq.m.) 2) | 19.9 | 23.6 | 22.4 | 19.4 | 18.2 | 6.6% |
| Number of leases ended during the period | 64 | 139 | 219 | 575 | 311 | 84.9% |
| Total area of leases ended, sq.m. 2) | 13,776 | 13,560 | 17,980 | 64,629 | 35,816 | 80.4% |
| Average rent of leases ended (EUR/sq.m.) 2) | 20.5 | 17.1 | 11.4 | 14.1 | 14.8 | -4.7% |
| Occupancy rate at end of the period (economic), % | 94.8 | 94.7 | 97.0 | - | ||
| Average remaining length of lease portfolio at the end of the period, year |
2.9 | 3.0 | 2.9 | 3.4% | ||
| Gross rental income, EUR million | 15.3 | 14.6 | 15.3 | 60.3 | 57.4 | 5.1% |
| Turnover, EUR million | 16.0 | 15.4 | 15.9 | 63.1 | 60.1 | 5.0% |
| Net rental income, EUR million | 10.0 | 8.6 | 10.6 | 39.2 | 35.4 | 10.8% |
| Net rental yield, % 3) | 5.5 | 5.6 | 5.4 | - | ||
| Net rental yield, like-for-like properties, % | 5.6 | 5.7 | 5.5 | - | ||
| Fair value of investment properties, EUR million | 743.2 | 739.2 | 697.1 | 6.0% |
| Q4/2012 Q4/2011 Q3/2012 | 2012 | 2011 Change-% | ||||
|---|---|---|---|---|---|---|
| Number of properties | 5 | 5 | 4 | 25.0% | ||
| Gross leasable area, sq.m. | 130,300 130,300 113,400 | 14.9% | ||||
| Annualised potential rental value, EUR million 1) | 31.2 | 31.9 | 26.5 | 20.4% | ||
| Average rent (EUR/sq.m.) | 20.0 | 20.5 | 20.2 | 1.5% | ||
| Number of leases started during the period | 10 | 7 | 7 | 108 | 36 | 200.0% |
| Total area of leases started, sq.m. 2) | 637 | 618 | 935 | 18,014 | 2,882 | 525.1% |
| Average rent of leases started (EUR/sq.m.) 2) | 24.8 | 16.5 | 23.2 | 16.5 | 18.8 | -12.2% |
| Number of leases ended during the period | 9 | 6 | 11 | 45 | 89 | -49.4% |
| Total area of leases ended, sq.m. 2) | 628 | 356 | 935 | 6,294 | 11,869 | -47.0% |
| Average rent of leases ended (EUR/sq.m.) 2) | 20.2 | 29.3 | 27.8 | 23.3 | 14.0 | 66.4% |
| Occupancy rate at end of the period (economic), % | 99.5 | 99.6 | 100.0 | - | ||
| Average remaining length of lease portfolio at the end of the period, year |
3.8 | 3.7 | 4.2 | -11.9% | ||
| Gross rental income, EUR million | 7.7 | 6.2 | 7.8 | 28.6 | 21.2 | 34.8% |
| Turnover, EUR million | 8.8 | 7.1 | 8.9 | 32.8 | 24.5 | 34.1% |
| Net rental income, EUR million | 6.5 | 5.5 | 6.7 | 24.6 | 18.4 | 33.6% |
| Net rental yield, % 3) | 8.5 | 8.6 | 7.9 | - | ||
| Net rental yield, like-for-like properties, % | 8.3 | 8.3 | 7.8 | - | ||
| Fair value of investment properties, EUR million | 311.4 | 316.0 | 277.6 | 13.8% |
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.
rent level for new lease agreements was signifi cantly higher than the average rent level for the ended lease agreements due to divested residential units and supermarket and shop properties as well as due to leases which were renewed at higher rent.
The average rent rose from EUR 17.2/sq.m. to EUR 19.3/sq.m., mainly due to divestments, strengthened Swedish krona and leases which have been renewed at higher rent. The economic occupancy rate decreased to 94.7 per cent (97.0%), mostly due to a bankruptcy of a local department store during the third quarter.
The company's net rental income from Swedish operations increased by EUR 3.8 million or 10.8 per cent to EUR 39.2 million (EUR 35.4 million). The increase in net rental income was due to the completion of the 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 2.3 million, or 7.6 per cent, thanks mainly to improved net rental income from Liljeholmstorget Galleria and Jakobsberg Centrum. The business unit accounted for 24.2 per cent (24.5%) of Citycon's total net rental income. Net rental yield was 5.6 per cent, representing an increase of 0.2 percentage points from the reference period. This increase was especially due to Liljeholmstorget Galleria's improved performance compared to the reference period.
Citycon has four shopping centres in the Baltic countries: Rocca al Mare, Kristiine and Magistral in Tallinn, Estonia, and Mandarinas in Vilnius, Lithuania. In July the company acquired Albertslund Centrum in Denmark, Albertslund, in the Greater Copenhagen area and integrated it to the Baltic unit. At the year-end, these properties' gross leasable area totalled 130,300 square metres (113,400 sq.m.). The annualised potential rental value increased to EUR 31.9 million, mainly due to the aforementioned acquisition and completion of Magistral's re-development. The average rent rose from EUR 20.2/sq.m. to EUR 20.5/sq.m. thanks to index increments and fewer rental discounts.
Lease agreements started during 2012 applied to a GLA of 18,014 square metres (2,882 sq.m.) and ended lease agreements applied to 6,294 square metres (11,869 sq.m.). The average rent level for new lease agreements was lower than the average for the ended lease agreements mostly due to the opening of the Magistral shopping centre.
The economic occupancy rate decreased to 99.6 per cent (100.0 %) due to acquisition of Albertslund Centrum.
Net rental income from the operations of the Baltic Countries and New Business unit increased markedly by EUR 6.2 million to EUR 24.6 million (EUR 18.4 million) mainly due to the acquisition of the Kristiine and Albertslund shopping centres and like-for-like growth of EUR 1.1 million, or 9.2 per cent. The business unit accounted for 15.2 per cent (12.8%) of Citycon's total net rental income. Net rental yield was 8.6 per cent, representing an increase of 0.7 percentage points from 2011. This increase was especially due to Rocca al Mare's improved performance compared to 2011.
Citycon seeks to lead the way in responsible shopping centre operations and promoting 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, means that they are well positioned to face the demands of sustainable development.
In its sustainability reporting, Citycon applies the construction and real estate sector specifi c (CRESS) guidelines of the Global Reporting Initiative, as well as the Best Practices Recommendations on Sustainability Reporting published by EPRA. The results and indicators for environmental responsibility for 2012 are presented on pages 40-43 of the Annual and Sustainability Report, to be published approximately in week nine.
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. In 2012, 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 comparable shopping centres to an average of 4.0 litres per visitor per year. In waste management the target for recycling rate was 78 per cent and respectively the annual target for the proportion of landfi ll waste out of total waste was 22 per cent.
In 2012, Citycon procured a total of 183.4 gigawatt hours (181.7 GWh) of electricity. Total consumption increased by 0.9 per cent due to changes in the property portfolio and higher energy consumption by tenants. Total electricity consumption (incl. tenants' electricity) in like-for-like shopping centres decreased by 5.2 per cent from previous year. Electricity consumption in common areas (excl. electricity used by tenants) amounted to 109.7 gigawatt hours (113.7 GWh), showing a decrease of 3.6 per cent from previous year. In like-for-like shopping centres electricity consumption in common areas decreased by 5.2 per cent.
Heating energy consumption came to 143.4 gigawatt hours (138.2 GWh). Total heat consumption increased by 3.8 per cent but weather-adjusted consumption, 144.4 gigawatt hours, decreased by 2.2 per cent. Temperatures in the winter were above average, except for February and December, which were exceptionally cold. Heating energy consumption in like-for-like shopping centre properties rose by 1.5 per cent, whereas weather-adjusted consumption decreased by 4.2 per cent.
Citycon's total energy consumption (incl. electricity consumption in common areas, heating and cooling) amounted to 257.3 gigawatt hours (254.6 GWh). In shopping centres, energy consumption per visitor decreased by 1.3 per cent and energy consumption per sales fell by 7.2 per cent. Energy consumption per gross leasable area rose by 1.7 per cent. Total energy consumption in like-for-like shopping centres decreased by 1.7 per cent. The annual target for reducing energy consumption was att ained.
In 2012, Citycon invested in measures that generate savings in consumption and costs, such as renewing lighting and lighting control solutions, or greater use of frequency transformers and control in ventilation systems. Furthermore, Citycon ensured the continuous optimisation of adjustments and temperature settings for technical systems, in order to meet consumption and cost saving targets. By the end of 2012, the Ministry of Employment and the Economy had granted energy support for the energy saving measures in fi ve shopping centres covering 20–25 per cent, or approximately EUR 475,000, of the investment costs. In addition, four new applications of energy saving measures in shopping centres are in process. The value of these applications in process is approximately EUR 444,000.
During 2012, Citycon developed reporting methods covering energy consumption and costs. In comparable properties energy costs related to electricity remained at the same level and declined in heating by 3.0 per cent compared to the previous year.
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 2012, the carbon footprint totalled 74,208 tonnes of carbon dioxide equivalent (70,348 tnCO₂e). 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 99.2 per cent of the carbon footprint. The carbon footprint grew by 5.5 per cent compared to the previous year. The growth in carbon footprint was caused by changes in the property portfolio. The carbon footprint of like-for-like shopping centres decreased by 3.3 per cent and remained at the same level per visitor. The annual target for reducing the carbon footprint by 2-3 per cent was att ained.
The total water consumption in all shopping centres and retail properties owned by Citycon was 626,953 cubic metres (639,457 m³) in 2012. This includes water consumed by the real estate company and tenants. Water consumption showed a decrease of 2.0 per cent compared to the previous year. This decrease can be att ributed to changes in Swedish property portfolio, where apartments were sold. Water consumption in like-forlike shopping centre properties decreased by 10.0 per cent compared to the previous year. Water consumption proportionate to sales, decreased by 9.0 per cent compared to the previous year. In 2012, water consumption per visitor in shopping centres was 4.2 litres and 3.9 litres in like-for-like shopping centres, which means the target for reducing water consumption per visitor was met in 2012.
The total waste volume generated by Citycon's shopping centres amounted to 14,896 tonnes (15,361 tn), with landfi ll waste accounting for 2,375 tonnes (3,263 tn), or 15.9 per cent (21.2%). Waste volumes decreased by 3.0 per cent compared to the previous year. Waste volume proportionate to sales showed a decrease of 12.2 per cent. Waste volumes in like-for-like shopping centres, decreased by 8.2 per cent from the previous year. The recycling rate in shopping centres improved in each business unit and was 83.2 per cent. 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. A good example of such property is the shopping centre Kista Galleria in Stockholm, which was acquired in January 2013.
Environmental certifi cation represents a key element in Citycon's eff orts towards sustainable development. In March 2012, Citycon was awarded a gold-level LEED certifi cate for its shopping centre project in the Martinlaakso district in Vantaa.
Citycon Oyj's Annual General Meeting (AGM) took place in Helsinki on 21 March 2012. The meeting was opened by the Deputy Chairman of the Board of that time, Thomas W. Wernink, and chaired by Ari Keinänen, Att orney-at-Law, Trained at Bench. A total of 234 shareholders att ended the AGM either personally or through a proxy representative, representing 73.67 per cent (204,656,747 shares) of shares and votes in the company.
The AGM adopted the company's Financial Statements for the fi nancial year 2011 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 2011 and an equity return of EUR 0.11 per share from the invested unrestricted equity reserve. The record date for the dividend payout and equity return was 26 March 2012, and the dividend and equity returns totalling EUR 41.7 million were paid on 4 April 2012.
The other outcomes of the AGM can be seen on the company website at www.citycon.com/agm2012. The minutes of the meeting are also available there.
Citycon's Board member Dor J. Segal announced his resignation from the Board eff ective on 11 October 2012. Following the announcement, the Board convened an Extraordinary General Meeting (EGM) for 11 October 2012, where Yuval Yanai was elected as a new member of the Board of Directors. The minutes of the meeting can be found at www.citycon.com/for_investors/gm/ egm_2012/.
Under the Articles of Association, the Board consists of a minimum of fi ve and a maximum of ten members, elected by the General Meeting for a term of one year at a time. Amendments to the Articles of Association may be made only by the General Meeting and require a 2/3 majority vote.
In 2012 the Board of Directors had ten members: Ronen Ashkenazi, Chaim Katzman, Roger Kempe, Bernd Knobloch (from 21 March 2012), Kirsi Komi, Claes Ott osson, Jorma Sonninen, Per-Håkan Westin, Yuval Yanai (from 11 October 2012) and Ariella Zochovitzky. Thomas W. Wernink resigned from the Board as of 21 March 2012 and Dor J. Segal as of 11 October 2012.
Chaim Katzman was the Chairman of the Board of Directors in 2012, and Ronen Ashkenazi the Deputy Chairman. Thomas W. Wernink served as the second Deputy Chairman of the Board until 21 March 2012.
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 responsible auditor of Citycon, also from 2006.
Marcel Kokkeel (MA, Dutch citizen, born in 1958) has served as Citycon's CEO since 24 March 2011. Eero Sihvonen, CFO, is Citycon's Executive Vice President. Their personal details, career histories and any positions of trust can be found on the corporate website at www.citycon.com/management. Information on the CEO's executive contract and its terms and conditions are available on page 50 of the Financial Statements.
During the year, several changes took place in the Corporate Management Committ ee's (CMC) composition. Two new members joined the CMC: Nils Styf, Chief Investment Offi cer, on 11 June 2012, and Marko Juhokas, Vice President of Finnish Operations, on 16 July 2012. In December, Citycon announced its plans to reorganise its business operations and streamline the decision-making process in the Corporate Management Committ ee. Following these arrangements, Johan Elfstadius, Vice President, Swedish Operations, left the CMC and his position in Citycon as of 12 December 2012. Marko Juhokas, who continues in the company, left the CMC eff ective on 19 December 2012. Harri Holmström, Senior Vice President, Group Leasing and Baltic Countries and New Business, was appointed Chief Operating Offi cer (COO) of Citycon eff ective on 19 December 2012. At the end of 2012, the Corporate Management Committ ee had fi ve members: the CEO, the company's Executive Vice President and Chief Financial Offi cer, the General Counsel, the Chief Operating Offi cer and the Chief Investment Offi cer.
Citycon Oyj has been listed on the NASDAQ OMX Helsinki Ltd (Helsinki stock exchange) since November 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 2012, Citycon had 7,177 (4,276) registered shareholders, of whom 13 were account managers of nominee-registered shares. Nominee-registered and other international shareholders held 250.8 million (230.4 million) shares, or 76.7 per cent (82.9%) of shares and voting rights in the company. Details of the most signifi cant shareholders of the company, of the distribution of ownership, and of the notifi cations of changes in shareholdings received in 2012 can be found on page 61 of the Financial Statemens.
There were no changes in the company's share capital during the period, but the number of shares rose by around 49.0 million shares. It was increased by 36,713 shares which were issued to the Group's key employees at a part of the company's long-term incentive plan in May. No new shares are issued based on this plan. The number of shares was increased by 49,032,002 shares following the rights issue arranged in September-October. 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.
| Share price development, completed trades (EUR) | 2012 | 2011 |
|---|---|---|
| Lowest price | 2.12 | 2.02 |
| Highest price | 2.71 | 3.41 |
| Average price | 2.43 | 2.77 |
| Closing price | 2.57 | 2.31 |
| Market value of shares at year-end (EUR million) | 840.1 | 641.7 |
| Share trading development | ||
| Number of traded shares (million) | 82.0 | 97.5 |
| Value of traded shares (EUR million) | 199.2 | 270.7 |
| 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) | 277.8 | 244.6 |
| Number of shares at year-end (million) | 326.9 | 277.8 |
Based on authorisation granted by the AGM of 21 March, the Citycon Board of Directors decided on 7 September 2012 to issue a maximum of 49,032,002 new shares. The issued shares represented around 17.6 per cent of all the shares and votes in the company before the rights issue and around 15.0 per cent after the rights issue. The subscription period ended on 1 October 2012 and the new shares were registered in the Trade Register on 8 October 2012.
The 2012 AGM authorised the Board of Directors to issue a maximum of 50 million new shares or convey a maximum of 50 million treasury shares. Based on this authorisation, the Board may also decide on the granting of stock options and other special rights. The Board made use of this authorisation in deciding on the below mentioned incentive payment in May and on the rights issue in September. The authorisation will be valid until the next Annual General Meeting.
The 2012 AGM authorised the Board of Directors to decide on the acquisition of 20 million of the Company's own shares. The authorisation will be valid until the next Annual General Meeting.
At the year-end the Board had no other authorisations.
During the period the company held no treasury shares.
Citycon Oyj's Board of Directors decided to launch a long-term share-based incentive plan for key personnel of the Group on 26 April 2007. The scheme comprised four one-year earning periods, which were the years 2007, 2008, 2009 and 2010. On 29 May 2012 the Citycon Oyj's Board of Directors decided to pay out all the share-based remunerations that were still to fall due according to the incentive plan, i.e. the fi nal part of the remunerations for the 2009 earning period and the last two thirds of the remunerations for 2010. No further remunerations will be made based on the plan.
Based on authorisation granted by the AGM of 13 March 2007, the Board of Directors of Citycon Oyj decided on 3 May 2011 to issue stock options to key personnel of the company and its subsidiaries. As stock options are intended to form part of the Group's key personnel incentive and commitment plan, the company had weighty fi nancial reasons for issuing them. Stock options encourage key personnel to work on a long-term basis, in order to increase shareholder value. The purpose of the stock options is also to commit key personnel to the company.
At the end of the period under review, a maximum of 6,890,000 stock options could be issued based on the authorisation of the Board of Directors, bearing rights to subscribe a total maximum of 8,106,085 new shares or treasury shares. The options are granted free of charge and classifi ed as 2011A(I), 2011A(II) and 2011A(III); 2011B(I), 2011B(II) and 2011B(III); 2011C(I), 2011C(II) and 2011C(III); or 2011D(I), 2011D(II) and 2011D(I-II). Upon the distribution of stock options the Board of Directors decides on how the stock options are divided into sub-categories. Shares subscribed based on the Stock Option Plan 2011 may correspond to a maximum of 2.5 per cent of all shares and votes in the company aft er the potential share subscription, if new shares are issued in the share subscription.
In order to ensure the equal treatment of Stock Option 2011 holders and shareholders, Citycon Oyj's Board of Directors decided on 7 September and 5 October 2012, due to the rights issue, to adjust the subscription ratio and subscription price of the Stock Options 2011 in accordance with the terms and conditions of the Stock Option Plan 2011. In conjunction with this, the Board of Directors adjusted the maximum number of shares to be subscribed with the Stock Options 2011 to 8,106,085 shares, as permitt ed by the share issue authorisation available to the Board of Directors aft er the completion of the rights issue. The foregoing adjustments entered into force as of the registration of the adjusted maximum total number of shares to be subscribed for based on the Stock Options 2011 with the Trade Register on 8 October 2012.
Adjusted subscription ratios and subscription prices of Stock Option Plan 2011, aft er the rights issue 2012 as well as the subscription periods of the Stock Options 2011 are available on page 47 of the Financial Statements.
At the end of 2012, 2011A–D(I), 2011A–D(II) and 2011A–D(III) stock options were held by 20 key personnel of the group. On 31 December 2012 there were 6,505,000 outstanding options, entitling holders to subscribe 7,653,133 shares in 2012–2018. The table below indicates the Stock Options granted to the CEO and other Corporate Management Committ ee members.
A share ownership obligation, under which the members of the Corporate Management Committ ee are obliged to acquire the Citycon's shares with 25 per cent of the income gained from the exercised stock options, is incorporated into the Stock Options 2011. The acquisition obligation will remain in force until a member of the Corporate Management Committ ee owns company 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 its terms and conditions are presented in further detail on pages 46-47 of the Financial Statements.
The terms and conditions can be found at www.citycon.com/ options.
The members of the Board of Directors of Citycon, the CEO, the other Corporate Management Committ ee members and their related parties held a total of 508,655 company shares on 31 December 2012. These shareholdings represent 0.15 per cent of the company's total shares and total voting rights.
The number of Stock Options 2011 held by the CEO and other Corporate Management Committ ee members at the year-end 2012 are presented in the table above. The maximum number of shares that they can subscribe for by exercising these outstanding Stock Options 2011 amounts to 3,258,905 shares. Members of the Board of Directors are not included in the company's sharebased incentive plans.
Updated details of the share and stock option holdings of the members of the Board of Directors, the CEO and the members of the Corporate Management Committ ee are available on the corporate website at www.citycon.com/insiders.
| 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 CMC members | 412,500 | 452,500 | 452,500 | 452,500 | 1,770,000 |
16 CITYCON OYJ • FINANCIAL STATEMENTS 2012
EPRA (European Public Real Estate Association) 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 | 2012 | 2011 | |
|---|---|---|---|
| EPRA Earnings, EUR million | 1 | 63.9 | 53.3 |
| EPRA Earnings per share (basic), EUR 1) | 1 | 0.214 | 0.197 |
| EPRA NAV per share, EUR | 2 | 3.49 | 3.62 |
| EPRA NNNAV per share, EUR | 2 | 3.08 | 3.29 |
| EPRA Net Initial Yield (NIY) (%) | 3 | 6.0 | 6.2 |
| EPRA "topped-up" NIY (%) | 3 | 6.1 | 6.3 |
| EPRA vacancy rate (%) | 4 | 4.3 | 4.5 |
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 (in EUR millions) increased by EUR 10.6 million to EUR 63.9 million in 2012 from EUR 53.3 million in 2011. The increase was a result of NRI growth through acquisitions, (re)development projects and positive like-forlike growth. To the contrary, EPRA Earnings was reduced by the growth in fi nancial expenses due to higher level of debt to fi nance the growth. EPRA Earnings per share (basic) increased to EUR 0.214 compared to EUR 0.197 in 2011 due to higher EPRA Earnings off set by higher number of shares, which resulted from rights issue executed in October 2012.
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 paid 0.15 EUR/ share as dividends and equity return for the fi nancial statements 2011, and for the fi nancial statements 2012, the Board of Directors propose for annual general meeting a dividend and equity return of 0.15 EUR/share.
| EUR million |
2012 Average number of shares (1,000) 1 |
per share, EUR |
EUR million |
2011 Average number of shares (1,000) 1 |
per share, EUR |
|
|---|---|---|---|---|---|---|
| Earnings in IFRS Consolidated Statement of Comprehensive Income | 77.2 | 298,090.6 | 0.259 | 13.0 | 269,675.9 | 0.048 |
| -/+ Net fair value gains/losses on investment property | -23.6 | 298,090.6 | -0.079 | 35.3 | 269,675.9 | 0.131 |
| -/+ Net gains on disposal of investment property 2 | -4.2 | 298,090.6 | -0.014 | -0.3 | 269,675.9 | -0.001 |
| + Transaction costs related to investment property disposals 2 | - | 298,090.6 | - | 0.7 | 269,675.9 | 0.002 |
| -/+ Fair value gains of jointly controlled entities | -0.3 | 298,090.6 | -0.001 | -0.3 | 269,675.9 | -0.001 |
| +/- Current taxes arising from the items above | - | 298,090.6 | - | 0.5 | 269,675.9 | 0.002 |
| +/- Change in deferred taxes arising from the items above | 6.4 | 298,090.6 | 0.022 | -2.2 | 269,675.9 | -0.008 |
| +/- Non-controlling interest arising from the items above | 8.3 | 298,090.6 | 0.028 | 6.7 | 269,675.9 | 0.025 |
| EPRA Earnings (basic) | 63.9 | 298,090.6 | 0.214 | 53.3 | 269,675.9 | 0.197 |
¹) Calculation of the number of shares is presented in Note 16. Earnings per share. Number of shares has been issue-adjusted resulting from the rights issue executed in 2012.
2) Citycon has made an adjustment to its accounting policies related to the treatment of transaction costs arising from the investment property disposals in 2012. Previously Citycon reported transaction costs from the property disposals within the administrative expenses, but in the fi nancial statements 2012, Citycon has nett ed the transaction costs from the successful property disposals against the net gains on sale of investment properties. The adjustment doesn't impact the EPRA Earnings.
EPRA Earnings can also be calculated from the statement of comprehensive income from top to bott om. Below please fi nd the EPRA Earnings calculation with this diff erent method, which also presents the EPRA Operating profi t.
| EUR million |
2012 Average number of shares (1,000) 1 |
per share, EUR |
EUR million |
2011 Average number of shares (1,000) 1 |
per share, EUR |
|
|---|---|---|---|---|---|---|
| Net rental income | 162.0 | 298,090.6 | 0.544 | 144.3 | 269,675.9 | 0.535 |
| Direct administrative expenses | -26.5 | 298,090.6 | -0.089 | -27.1 | 269,675.9 | -0.100 |
| Direct other operating income and expenses | 0.2 | 298,090.6 | 0.001 | 0.2 | 269,675.9 | 0.001 |
| EPRA operating profi t | 135.7 | 298,090.6 | 0.455 | 117.4 | 269,675.9 | 0.435 |
| Direct net fi nancial income and expenses | -68.1 | 298,090.6 | -0.229 | -62.4 | 269,675.9 | -0.232 |
| Direct share of profi t/loss of joint ventures | 0.0 | 298,090.6 | 0.000 | 0.0 | 269,675.9 | 0.000 |
| Direct current taxes | -1.4 | 298,090.6 | -0.005 | -0.4 | 269,675.9 | -0.001 |
| Change in direct deferred taxes | 0.0 | 298,090.6 | 0.000 | 0.3 | 269,675.9 | 0.001 |
| Direct non-controlling interest | -2.2 | 298,090.6 | -0.008 | -1.7 | 269,675.9 | -0.006 |
| EPRA Earnings (basic) | 63.9 | 298,090.6 | 0.214 | 53.3 | 269,675.9 | 0.197 |
1) Calculation of the number of shares is presented in Note 16. Earnings per share. Number of shares has been issue-adjusted resulting from the rights issue executed in 2012.
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 2.57 EUR/share on December 31, 2012.
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 when 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
EPRA NAV per share decreased by EUR 0.13 to EUR 3.49 (EUR 3.62) due mainly to higher number of shares, which increased as a result of the rights issue executed in October 2012. EPRA NNNAV per share decreased by EUR 0.21 to EUR 3.08 (EUR 3.29). In addition to the reasons for a lower EPRA NAV per share, EPRA NNNAV per share was reduced by negative diff erence between the secondary market price and fair value of bonds and capital loans as all three company's bonds and capital loans are now valued above par due to lower interest rate levels, which decreased EPRA NNNAV per share by EUR 0.07.
| EUR million | 2012 Average number of shares (1,000) 1 |
per share, | EUR EUR million | 2011 Average number of shares (1,000) 1 |
per share, EUR |
|
|---|---|---|---|---|---|---|
| Equity att ributable to parent company shareholders | 1,015.7 | 326,880.0 | 3.11 | 902.6 | 277,811.3 | 3.25 |
| Deferred taxes from the diff erence between the fair value and fi scal value | ||||||
| of investment properties | 64.0 | 326,880.0 | 0.20 | 57.5 | 277,811.3 | 0.21 |
| Fair value of fi nancial instruments | 59.8 | 326,880.0 | 0.18 | 45.7 | 277,811.3 | 0.16 |
| Net asset value (EPRA NAV) | 1,139.5 | 326,880.0 | 3.49 | 1,005.9 | 277,811.3 | 3.62 |
| Deferred taxes from the diff erence between the fair value and fi scal value | ||||||
| of investment properties | -64.0 | 326,880.0 | -0.20 | -57.5 | 277,811.3 | -0.21 |
| Diff erence between the secondary market price and fair value of bonds | ||||||
| and capital loans 1) | -9.4 | 326,880.0 | -0.03 | 11.4 | 277,811.3 | 0.04 |
| Fair value of fi nancial instruments | -59.8 | 326,880.0 | -0.18 | -45.7 | 277,811.3 | -0.16 |
| EPRA NNNAV | 1,006.3 | 326,880.0 | 3.08 | 914.1 | 277,811.3 | 3.29 |
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 diff erent 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 100.96 per cent (82.90%), for bond 1/2009 105.01 per cent (101.85%) and for bond 1/2012 104.68 per cent as of 31 December 2012. The diff erence between the secondary market price and the fair value of the bonds and capital loans was EUR -9.4 million (EUR 11.4 million) as of 31 December 2012.
EPRA initial yields decreased mostly due to decreased market yield requirements in Baltic Countries and New Business. However, EPRA NIY and EPRA "topped up" NIY at the end of the year 2012 and 2011 are not fully comparable due to changes in the completed property portfolio (such as property acquisitions, disposals and started and completed (re) development projects).
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 | 2012 | 2011 |
|---|---|---|
| Fair value of investment properties determined by the external appraiser | 2,704.1 | 2,515.0 |
| Less (re)development properties, lots, unused building rights and properties, the valuation of which is based on the value of the building right |
-389.1 | -559.6 |
| Completed property portfolio | 2,315.0 | 1,955.4 |
| Plus the estimated purchasers' transaction costs | 47.2 | 36.8 |
| Gross value of completed property portfolio (A) | 2,362.2 | 1,992.2 |
| Annualised gross rents for completed property portfolio | 206.9 | 179.5 |
| Property portfolio's operating expenses | -64.1 | -56.6 |
| Annualised net rents (B) | 142.8 | 122.9 |
| Plus the notional rent expiration of rent free periods or other lease incentives | 1.6 | 2.5 |
| Topped-up annualised net rents ( C) | 144.4 | 125.4 |
| EPRA Net Initial Yield (NIY) (%) (B/A) | 6.0 | 6.2 |
| EPRA "topped-up" NIY (%) (C/A) | 6.1 | 6.3 |
EPRA vacancy rate (%) presents how much out of the full potential rental income is not received because of vacancy. Technical occupancy rate, which Citycon also discloses, presents how many square meters out of total GLA is leased.
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 | 2012 | 2011 |
|---|---|---|
| Annualised potential rental value of vacant premises | 10.3 | 9.8 |
| ./. Annualised potential rental value for the whole portfolio | 239.0 | 219.4 |
| EPRA vacancy rate (%) | 4.3 | 4.5 |
CFO's comment on the development of EPRA vacancy rate: EPRA vacancy rate improved due to decreased vacancy in the Finnish property portfolio.
| 2012 | 2011 | 2010 | 2009 | 2008 | |
|---|---|---|---|---|---|
| EPRA Earnings, EUR million | 63.9 | 53.3 | 47.3 | 50.9 | 43.8 |
| EPRA Earnings per share (basic), EUR 1) | 0.214 | 0.197 | 0.200 | 0.222 | 0.191 |
| EPRA NAV per share, EUR | 3.49 | 3.62 | 3.79 | 3.64 | 3.96 |
| EPRA NNNAV per share, EUR | 3.08 | 3.29 | 3.49 | 3.35 | 3.80 |
| EPRA Net Initial Yield (NIY) (%) | 6.0 | 6.2 | 6.3 | 6.9 | N/A |
| EPRA "topped-up" NIY (%) | 6.1 | 6.3 | 6.4 | 7.1 | N/A |
| EPRA vacancy rate (%) | 4.3 | 4.5 | 4.9 | 5.0 | 4.0 |
1) Per share result key fi gures have been calculated with the issue-adjusted number of shares resulting from the rights issue executed in 2012.
| EUR million | 2012 | 2011 | 2010 | 2009 | 2008 |
|---|---|---|---|---|---|
| Earnings in IFRS Consolidated Statement of Comprehensive Income | 77.2 | 13.0 | 78.3 | -34.3 | -124.1 |
| -/+ Net fair value gains/losses on investment property | -23.6 | 35.3 | -50.8 | 97.4 | 216.1 |
| -/+ Net gains/losses on disposal of investment property 1) | -4.2 | -0.3 | -1.9 | -0.1 | 0.3 |
| + Transaction costs related to investment property disposals 1) | 0.0 | 0.7 | 0.0 | 0.1 | 0.0 |
| -/+ Non-recurring other operating income and expenses | - | - | - | - | -6.0 |
| -/+ Fair value gains/losses of fi nancial instruments | - | - | -0.2 | 0.1 | 3.1 |
| -/+ Fair value gains of jointly controlled entities | -0.3 | -0.3 | - | - | - |
| +/- Current taxes arising from the items above | - | 0.5 | - | 0.3 | 1.8 |
| +/- Change in deferred taxes arising from the items above | 6.4 | -2.2 | 11.6 | -7.3 | -29.7 |
| +/- Non-controlling interest arising from the items above | 8.3 | 6.7 | 10.3 | -5.3 | -17.6 |
| EPRA Earnings (basic) | 63.9 | 53.3 | 47.3 | 50.9 | 43.8 |
| Issue-adjusted average number of shares, million 2) | 298,090.6 | 269,675.9 | 236,840.6 | 229,456.5 | 229,411.3 |
| EPRA Earnings per share (basic), EUR 2) | 0.214 | 0.197 | 0.200 | 0.222 | 0.191 |
1) Citycon has made an adjustment to its accounting policies related to the treatment of transaction costs arising from the investment property disposals in 2012. Previously Citycon reported transaction costs from the property disposals within the administrative expenses, but in the fi nancial statements 2012, Citycon has nett ed the transaction costs from the successful property disposals against the net gains on sale of investment properties. The adjustment doesn't impact the EPRA Earnings.
2) Number of shares has been issue-adjusted resulting from the rights issue executed in 2012. Per share result key fi gures have been calculated with the issue-adjusted number of shares.
EPRA Earnings can also be calculated from the statement of comprehensive income from top to bott om. Below please fi nd the EPRA Earnings calculation with this diff erent method, which also presents the EPRA Operating profi t.
| EUR million | 2012 | 2011 | 2010 | 2009 | 2008 |
|---|---|---|---|---|---|
| Net rental income | 162.0 | 144.3 | 127.2 | 125.4 | 121.8 |
| Direct administrative expenses | -26.5 | -27.1 | -22.5 | -17.7 | -16.5 |
| Direct other operating income and expenses | 0.2 | 0.2 | 0.3 | 0.0 | 0.1 |
| EPRA operating profi t | 135.7 | 117.4 | 105.0 | 107.7 | 105.3 |
| Direct net fi nancial income and expenses | -68.1 | -62.4 | -55.1 | -47.7 | -54.2 |
| Direct share of profi t/loss of joint ventures | 0.0 | 0.0 | - | - | - |
| Direct current taxes | -1.4 | -0.4 | -0.6 | -6.2 | -4.8 |
| Change in direct deferred taxes | 0.0 | 0.3 | -0.3 | -0.2 | 0.2 |
| Direct non-controlling interest | -2.2 | -1.7 | -1.8 | -2.8 | -2.8 |
| EPRA Earnings | 63.9 | 53.3 | 47.3 | 50.9 | 43.8 |
| Average number of shares (1,000) 1) | 298,090.6 | 269,675.9 | 236,840.6 | 229,456.5 | 229,411.3 |
| EPRA Earnings per share (basic), EUR 1) | 0.214 | 0.197 | 0.200 | 0.222 | 0.191 |
1) Number of shares has been issue-adjusted resulting from the rights issue executed in 2012. Per share result key fi gures have been calculated with the issue-adjusted number of shres.
| EUR million | Note | 1.1.–31.12.2012 | 1.1.–31.12.2011 |
|---|---|---|---|
| Gross rental income | 6 | 225.9 | 206.0 |
| Service charge income | 13.3 | 11.1 | |
| Turnover | 7 | 239.2 | 217.1 |
| Property operating expenses | 8, 11 | 75.8 | 71.6 |
| Other expenses from leasing operations | 9 | 1.4 | 1.2 |
| Net rental income | 162.0 | 144.3 | |
| Administrative expenses | 10, 11, 12 | 26,5 | 27,7 |
| Other operating income and expenses | 13 | 0.2 | 0.2 |
| Net fair value gains/losses on investment property | 17 | 23.6 | -35.3 |
| Net gains on sale of investment property | 17, 24 | 4.2 | 0.3 |
| Operating profi t | 163.4 | 81.8 | |
| Financial income | 32.1 | 54.4 | |
| Financial expenses | -100.3 | -116.8 | |
| Net fi nancial income and expenses | 14 | -68.1 | -62.4 |
| Share of profi t of jointly controlled entities | 18 | 0.2 | 0.3 |
| Profi t before taxes | 95.5 | 19.7 | |
| Current taxes | -1.4 | -0.9 | |
| Change in deferred taxes | -6.4 | 2.5 | |
| Income taxes | 15, 21 | -7.8 | 1.6 |
| Profi t for the period | 87.7 | 21.3 | |
| Profi t att ributable to | |||
| Parent company shareholders | 77.2 | 13.0 | |
| Non-controlling interest | 10.5 | 8.3 | |
| Earnings per share att ributable to parent company shareholders: | |||
| Earnings per share (basic), EUR | 16 | 0.26 | 0.05 |
| Earnings per share (diluted), EUR | 16 | 0.26 | 0.05 |
| Other comprehensive expenses/income | |||
| Net losses on cash fl ow hedges | 14 | -19.3 | -35.9 |
| Income taxes relating to cash fl ow hedges | 15, 21 | 5.2 | 9.0 |
| Exchange gains on translating foreign operations | 3.3 | 0.6 | |
| Other comprehensive expenses/income for the period, net of tax | -10.7 | -26.2 | |
| Total comprehensive profi t/loss for the period | 77.0 | -4.9 | |
| Total comprehensive profi t/loss att ributable to | |||
| Parent company shareholders | 65.4 | -13.4 | |
| Non-controlling interest | 11.6 | 8.5 |
| EUR million Note |
31.12.2012 | 31.12.2011 |
|---|---|---|
| ASSETS | ||
| Non-current assets | ||
| Investment properties 17 |
2,714.2 | 2,522.1 |
| Investments in jointly controlled entities 18 |
0.9 | 0.6 |
| Intangible assets 19 |
1.7 | 1.9 |
| Property, plant and equipment 20 |
1.4 | 1.0 |
| Deferred tax assets 21 |
19.5 | 14.5 |
| Total non-current assets | 2,737.6 | 2,540.1 |
| Investment properties held for sale 24 |
5.4 | 12.7 |
| Current assets | ||
| Derivative fi nancial instruments 22, 23 |
- | 0.5 |
| Current tax receivables 15 |
0.0 | 0.0 |
| Trade and other receivables 22, 25 |
24.5 | 33.2 |
| Cash and cash equivalents 22, 26 |
51.0 | 91.3 |
| Total current assets | 75.5 | 125.0 |
| Total assets | 2,818.5 | 2,677.7 |
| EUR million | Note | 31.12.2012 | 31.12.2011 |
|---|---|---|---|
| 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 | -59.8 | -45.7 | |
| Invested unrestricted equity fund | 333.0 | 273.7 | |
| Translation reserve | -5.5 | -7.8 | |
| Retained earnings | 357.3 | 291.7 | |
| Total equity att ributable to parent company shareholders | 1,015.7 | 902.6 | |
| Non-controlling interest | 44.2 | 59.2 | |
| Total shareholders' equity | 1,059.9 | 961.8 | |
| LIABILITIES | |||
| Long-term liabilities | |||
| Loans | 22, 28 | 1,406.3 | 1,339.5 |
| Derivative fi nancial instruments | 22, 23 | 75.6 | 53.9 |
| Deferred tax liabilities | 21 | 66.0 | 59.8 |
| Other liabilities | 22 | 1.0 | 0.4 |
| Total long-term liabilities | 1,548.9 | 1,453.7 | |
| Short-term liabilities | |||
| Loans | 22, 28 | 126.8 | 208.4 |
| Derivative fi nancial instruments | 22, 23 | 0.7 | 0.6 |
| Current tax liabilities | 15 | 0.8 | 0.2 |
| Trade and other payables | 22, 29 | 81.4 | 53.0 |
| Total short-term liabilities | 209.7 | 262.2 | |
| Total liabilities | 1,758.6 | 1,715.9 | |
| Total liabilities and shareholders' equity | 2,818.5 | 2,677.7 | |
| EUR million | Note 1 Jan.-31 Dec. 2012 1 Jan.-31 Dec. 2011 | ||
|---|---|---|---|
| Cash fl ow from operating activities | |||
| Profi t before taxes | 95.5 | 19.7 | |
| Adjustments: | |||
| Depreciation and amortisation | 12, 31 | 1.2 | 1.0 |
| Net fair value gains/losses on investment property | 17, 31 | -23.6 | 35.3 |
| Profi t on disposal of investment property 1) | 17, 24, 31 | -4.2 | -0.3 |
| Financial income | 14, 31 | -32.1 | -54.4 |
| Financial expenses | 14, 31 | 100.3 | 116.8 |
| Other adjustments | 31 | 1.3 | 0.8 |
| Cash fl ow before change in working capital | 138.4 | 118.9 | |
| Change in working capital | 31 | 8.6 | 1.6 |
| Cash generated from operations | 147.0 | 120.5 | |
| Interest expenses and other fi nancial expenses paid | -62.4 | -60.1 | |
| Interest income and other fi nancial income received | 0.6 | 0.6 | |
| Realised exchange rate losses | -22.9 | -1.8 | |
| Taxes paid/received | -0.8 | 7.2 | |
| Net cash from operating activities | 61.5 | 66.3 | |
| Cash fl ow from investing activities | |||
| Acquisition of subsidiaries, less cash acquired | 17 | -41.0 | -33.7 |
| Acquisition of investment properties | 17 | -1.1 | -105.5 |
| Capital expenditure on investment properties | 17 | -92.6 | -81.1 |
| Capital expenditure on investments in jointly controlled entities, | |||
| intangible assets and PP&E | 18, 19, 20 | -1.3 | -1.4 |
| Sale of investment properties 1) | 17, 24 | 31.1 | 18.3 |
| Net cash used in investing activities | -104.9 | -203.3 | |
| Cash fl ow from fi nancing activities | |||
| Sale of treasury shares | 27 | - | 0.4 |
| Proceeds from rights and share issue | 27 | 89.9 | 98.9 |
| Proceeds from short-term loans | 28 | 117.1 | 160.9 |
| Repayments of short-term loans | 28 | -157.5 | -100.2 |
| Proceeds from long-term loans | 28 | 623.5 | 594.6 |
| Repayments of long-term loans | 28 | -600.6 | -511.8 |
| Acquisition of non-controlling interests | 27 | -28.5 | - |
| Dividends and return from the invested unrestricted equity fund | -41.7 | -34.3 | |
| Net cash from fi nancing activities | 2.3 | 208.5 | |
| Net change in cash and cash equivalents | -41.1 | 71.6 | |
| Cash and cash equivalents at period-start | 26 | 91.3 | 19.5 |
| Eff ects of exchange rate changes | 0.8 | 0.2 | |
| Cash and cash equivalents at period-end | 26 | 51.0 | 91.3 |
1) Citycon has made an adjustment to its accounting policies related to the treatment of transaction costs arising from the investment property disposals in 2012. Previously Citycon reported transaction costs from the property disposals within the administrative expenses, but in the fi nancial statements 2012, Citycon has nett ed the transaction costs from the successful property disposals against the net gains on sale of investment properties.
| Equity att ributable to parent company shareholders | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| EUR million | Share capital | Share premi um fund |
Fair value reserve |
Invested unrestricted equity fund |
Translation reserve |
Retained earnings |
Total | Non-con trolling interest |
Total shareholders' equity |
| 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 |
| Profi t for the period | 77.2 | 77.2 | 10.5 | 87.7 | |||||
| Net losses/gains on cash fl ow hedges, net of tax (Notes 14, 15 and 21) | -14.1 | -14.1 | -14.1 | ||||||
| Exchange gains/losses on translating foreign operations Total other comprehensive expenses/income for the period, net of tax |
-14.1 | 2.3 2.3 |
2.3 -11.8 |
1.1 1.1 |
3.3 -10.7 |
||||
| Total comprehensive loss/profi t for the period | -14.1 | 2.3 | 77.2 | 65.4 | 11.6 | 77.0 | |||
| Rights issue (Note 27) | 89.9 | 89.9 | 89.9 | ||||||
| Recognised gain in the equity arising from convertible bond buybacks (Note 28) | -0.2 | -0.2 | -0.2 | ||||||
| Dividends and return from the invested unrestricted equity fund (Note 27) | -30.6 | -11.1 | -41.7 | -41.7 | |||||
| Share-based payments (Notes 27 and 30) | 1.8 | 1.8 | 1.8 | ||||||
| Acquisition of non-controlling-interests | -2.3 | -2.3 | -26.6 | -28.9 | |||||
| Balance at 31 Dec. 2012 | 259.6 | 131.1 | -59.8 | 333.0 | -5.5 | 357.3 | 1,015.7 | 44.2 | 1,059.9 |
As a real estate investment company specialising in retail properties, Citycon operates largely in the Helsinki Metropolitan Area and Finland's major regional centres as well as in Sweden and the Baltic Countries. Citycon is a Finnish, public limited liability company established under Finnish law and domiciled in Helsinki, the address of its registered offi ce being Korkeavuorenkatu 35, FI-00130 Helsinki. The Board of Directors has approved the fi nancial statements on 5 February 2013. 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 Korkeavuorenkatu 35, FI-00130 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 2012, 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 hundred 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 aff ects 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.
Citycon has made an adjustment to its accounting policies related to the treatment of transaction costs arising from the investment property disposals in 2012. Previously Citycon reported transaction costs from the property disposals within the administrative expenses, but in the fi nancial statements 2012, Citycon has nett ed the transaction costs from the successful property disposals against the net gains on sale of investment properties. The adjustment doesn't impact the operating profi t or profi t for the period in the statement of comprehensive income. The following table presents the impact of the adjustment in the accounting policies on the administrative expenses, net gains on sale of investment property and operating profi t.
| 2012 before ad |
justment Adjustment | 2012 aft er adjustment |
2011 before ad |
justment Adjustment | 2011 aft er adjustment |
|
|---|---|---|---|---|---|---|
| Administrative expenses | -27.0 | 0.5 | -26.5 | -28.0 | 0.3 | -27.7 |
| Net gains/losses on sale of investment property | 4.7 | -0.5 | 4.2 | 0.6 | -0.3 | 0.3 |
| Operating profi t | 163.4 | 0.0 | 163.4 | 81.8 | 0.0 | 81.8 |
3.2 New standards as well as interpretations and changes applied in 2012
The following new standards as well as amendments and interpretations to the existing standards have been adopted in the fi nancial statements 2012.
The amendment in IAS 12 Income Taxes clarifi ed a rebutt able presumption in the recognition of deferred taxes. Based on the amendment the deferred tax on investment property measured at fair value should be determined on the basis that its carrying amount will be recovered through sale. The amendment didn't have eff ect on Citycon's accounting policies as Citycon has been determining the deferred tax on investment property based on the assumption that the carrying amount of investment properties will be recovered through sale. In addition, amendment in IFRS 7 didn't change Citycon's accounting policies or disclosure as Citycon didn't have any assets with the characteristics impacted by the amendment.
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 July 2012 or 1 January 2013 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 and EU has approved them.
The following standards and amendments and interpretations to existing standards have been published and are mandatory for the group's accounting periods beginning on or aft er 1 January 2013 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 joint-venture companies.
Subsidiaries refer to companies in which the Group holds a controlling interest. This controlling interest implies that the Group has the power to govern the entity's fi nancial and operating policies for the purpose of profi ting from its operations. 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 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, including 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 balance-sheet date, best manifested in prices paid for properties on the active market on the review date, and the location and condition of these properties corresponding to those of the property under review while applying similar lease or other contracts.
Using International Valuation Standards (IVS), an external professional appraiser conducts the valuation of the company's property at least once a year, or at more regular intervals due to any major changes in the market. During 2012 and 2011, 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 2012, Citycon valued 3 properties (5 properties on 31 December 2011) 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 5.4 million on 31 December 2012 (EUR 12.7 million on 31 December 2011).
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 2012 or 31 December 2011.
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:
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 2012 and 31 December 2011, 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 undefi ned period and can be sold at a time deemed appropriate. On 31 December 2012 or 31 December 2011, 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.
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 2012 and 31 December 2011, fi nancial liabilities at amortised cost include the items 'Loans', 'Other liabilities' and 'Trade payables and other payables'. On 31 December 2012 Citycon had a foreign exchange derivative contract classifi ed as a fi nancial liability at fair value through profi t or loss.
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 re-measured at fair value on each balance sheet date.
Citycon uses interest rate swaps to hedge the interest rate cash fl ow risk. These interest rate swaps hedge against volatility in future interest payment cash fl ows (cash fl ow hedging) resulting from interest rate fl uctuations, and the resulting 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, if 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. As of 31 December 2012 all Citycon's interest rate swaps were under hedge accounting.
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 can the tenant 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 fi nancial 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 2012, the fair value of investment properties totalled EUR 2,714.2 million (EUR 2,522.1 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:
rent 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 bett er 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.
5.1.2 Taxes 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 2012 amounted to EUR 1.4 million (EUR 0.9 million in 2011).
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 64.0 million on 31 December 2012 (EUR 57.5 million on 31 December 2011).
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 1.0 million million on 31 December 2012 (EUR 1.1 million on 31 December 2011).
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 2012, Citycon had confi rmed losses for which tax assets of EUR 22.0 million (EUR 19.4 million in 2011) 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 2012 and 2011.
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 non-current 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 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 2012 or 31 December 2011.
A) Breakdown of gross rental income
| EUR million | 2012 | 2011 |
|---|---|---|
| Straight-lining of lease incentives | 0.3 | 0.3 |
| Temporary rental discounts | -2.4 | -2.4 |
| Additional rent from turnover based rental agreements |
3.9 | 3.8 |
| Gross rental income (excl. items above) | 224.2 | 204.3 |
| Total | 225.9 | 206.0 |
B) General description of Citycon's lease agreements In accordance with the table presented below, Citycon had 3,846 lease agreements on 31 December 2012 (3,955 agreements on 31 December 2011). The decrease in number of lease agreements were due to divestments of non-core properties in Finland and in Sweden. In the majority, i.e. in 89 per cent (89% on 31 Dec. 2011) of Citycon's leases the rent is divided into base rent and the maintenance charge. Base rent is typically tied to the cost-of-living index. The maintenance charge, charged separately from the lessee, covers operating expenses incurred by the property owner due to property maintenance.
Part of Citycon's lease agreements also contain a turnover-linked component in addition to a cost-of-living -indexation. Turnover based rent agreements accounted for roughly 53 per cent (49 per cent at 31.12.2011) of Citycon's lease portfolio at 31.12.2012. In Note 6. A) Breakdown of gross rental income, the additional rent received from turnover based rental agreements is presented.
Thus, Citycon's leases are chiefl y leases with contingent rent payments in accordance with IAS 17.4, because majority of the lease 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. 2012 31 Dec. 2011 | |
|---|---|---|
| Finland | 1,802 | 1,699 |
| Sweden | 1,474 | 1,818 |
| Baltic Countries and New Business | 570 | 438 |
| Total | 3,846 | 3,955 |
In accordance with the table presented below, the average remaining length of Citycon's lease portfolio was 3.5 years on 31 December 2012 (3.4 years on 31 December 2011). 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 2012 (78 percent on 31 December 2011) and initially fi xed-term contracts 12 per cent on 31 December 2012 (10 per cent on 31 December 2011). The rest of the agreements are leases in eff ect until further notice (9 percent out of all leases on 31 December 2012 and 12 percent on 31 December 2011).
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. 2012 31 Dec. 2011 | |
|---|---|---|
| Finland | 3.7 | 3.5 |
| Sweden | 3.0 | 2.9 |
| Baltic Countries and New Business | 3.7 | 4.2 |
| Average | 3.5 | 3.4 |
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. 2012 31 Dec. 2011 | |
|---|---|---|
| Not later than 1 year | 45.0 | 50.7 |
| 1-5 years | 133.7 | 112.6 |
| Over 5 years | 49.0 | 46.2 |
| Total | 227.8 | 209.5 |
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. 2012 and at 31 Dec. 2011.
The geographical segments are Finland, Sweden and the Baltic Countries and New Business. 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 36 other properties. 30 of the Finnish properties are located in the Helsinki Metropolitan Area and 29 elsewhere in Finland.
Citycon has nine shopping centres and fi ve other retail properties in Sweden. Eight of the properties in Sweden are located in the Greater Stockholm Area, four 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. In addition Citycon owns one shopping Centre in Denmark.
| EUR million 1 Jan.-31 Dec. 2012 | Finland Sweden | Baltic Countries and New Business |
Other | Total | |
|---|---|---|---|---|---|
| Gross rental income | 137.0 | 60.3 | 28.6 | - | 225.9 |
| Service charge income | 6.3 | 2.8 | 4.2 | - | 13.3 |
| Turnover | 143.2 | 63.1 | 32.8 | - | 239.2 |
| Property operating expenses | 44.7 | 22.9 | 8.2 | 0.0 | 75.8 |
| Other expenses from leasing operations | 0.3 | 1.0 | 0.0 | 0.0 | 1.4 |
| Net rental income | 98.2 | 39.2 | 24.6 | 0.0 | 162.0 |
| Direct administrative expenses | 9.1 | 5.1 | 1.0 | 11.3 | 26.5 |
| Other operating income and expenses | 0.2 | 0.0 | 0.0 | - | 0.2 |
| EPRA operating profi t | 89.3 | 34.0 | 23.7 | -11.4 | 135.7 |
| Indirect administrative expenses | - | - | - | - | - |
| Net fair value losses/gains on investment property | -0.9 | 9.0 | 15.4 | - | 23.6 |
| Losses/gains on disposal of investment property | -1.0 | 5.1 | 0.0 | - | 4.2 |
| Operating profi t/loss | 87.5 | 48.2 | 39.1 | -11.4 | 163.4 |
| Net fi nancial income and expenses | -68.1 | -68.1 | |||
| Share of profi t/loss of jointly controlled entitities | 0.2 | 0.2 | |||
| Income tax expense | -7.8 | -7.8 | |||
| Profi t for the period | 87.7 | ||||
| Allocated assets | |||||
| Investment properties | 1,659.0 | 739.2 | 316.0 | - | 2,714.2 |
| Investment properties held for sale | 5.4 | - | - | - | 5.4 |
| Other allocated assets | 8.5 | 10.2 | 1.1 | 59.5 | 79.4 |
| Unallocated assets | |||||
| Deferred tax assets | 19.5 | 19.5 | |||
| Derivative fi nancial instruments | - | - | |||
| Assets | 1,672.9 | 749.4 | 317.1 | 79.0 | 2,818.5 |
| Allocated liabilities | |||||
| Trade and other payables | 14.0 | 21.0 | 3.7 | 42.7 | 81.4 |
| Unallocated liabilities | |||||
| Interest-bearing liabilities | 1,533.2 | 1,533.2 | |||
| Deferred tax liabilities | 66.0 | 66.0 | |||
| Derivative fi nancial instruments | 76.3 | 76.3 | |||
| Other unallocated liabilities | 1.6 | 1.6 | |||
| Liabilities | 14.0 | 21.0 | 3.7 1,719.9 | 1,758.6 | |
| Capital expenditure | 119.9 | 18.1 | 23.0 | 0.7 | 161.7 |
| EUR million 1 Jan.-31 Dec. 2011 | Finland | Sweden | Baltic Countries and New Business |
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 | - | 1.2 |
| Net rental income | 90.5 | 35.4 | 18.4 | 0.0 | 144.3 |
| Direct 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 | - | - | - | 0.7 |
| Net fair value gains/losses on investment property | -40.4 | 1.7 | 3.4 | - | -35.3 |
| Profi t on disposal of investment property | 0.0 | 0.3 | 0.0 | - | 0.3 |
| 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 | - | 2522.1 |
| 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 | 0.5 | 0.5 | |||
| Assets | 1,558.0 | 731.3 | 278.6 | 109.8 2,677.7 | |
| Allocated liabilities | |||||
| Trade and other payables | 5.1 | 19.4 | 1.6 | 26.8 | 53.0 |
| 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 | 0.6 | 0.6 | |||
| 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 |
| 2012 | 2011 | |
|---|---|---|
| Shopping centres | 210.0 | 187.9 |
| Supermarkets and shops | 29.2 | 29.2 |
| Total | 239.2 | 217.1 |
| 2012 | Proportion of gross rental income, % |
Segment |
|---|---|---|
| Kesko | 16.9 | Finland |
| S Group | 5.7 | Finland and Baltic Countries and New Business |
| ICA AB | 3.4 | Sweden and Baltic Countries and New Business |
| Stockmann | 3.0 | Finland, Sweden and Baltic Countries and New Business |
| H & M Hennes & Mauritz AB | 1.7 | Finland and Sweden |
| Total | 30.6 |
Proportion of gross rental income is based on the rent roll at 31 Dec. 2012.
| 2011 | Proportion of gross rental income, % |
Segment |
|---|---|---|
| Kesko | 17.2 | Finland |
| S Group | 5.6 | Finland and Baltic Countries and New Business |
| ICA AB | 3.4 | Sweden and Baltic Countries and New Business |
| Stockmann | 3.1 | Finland, Sweden and Baltic Countries and New Business |
| Tokmanni | 1.7 | Finland |
| Total | 31.1 |
Proportion of gross rental income is based on the rent roll at 31 Dec. 2011.
| EUR million | 2012 | 2011 |
|---|---|---|
| Heating and electricity | 25.1 | 24.2 |
| Maintenance expenses | 25.4 | 23.3 |
| Land lease fees and other rents | 1.8 | 1.3 |
| Property personnel expenses | 0.8 | 0.6 |
| Administrative and management fees | 2.3 | 2.3 |
| Marketing expenses | 5.6 | 5.6 |
| Property insurances | 0.6 | 0.5 |
| Property taxes | 7.1 | 6.4 |
| Repair expenses | 7.0 | 7.5 |
| Other property operating expenses | 0.2 | -0.1 |
| Total | 75.8 | 71.6 |
Two properties generated no income during the year 2012 (in 2011 one property ), while these generated expenses of EUR 0.2 million (EUR 0.0 million)
| EUR million | 2012 | 2011 |
|---|---|---|
| Tenant improvement expenses and commissions | 0.1 | 0.4 |
| Credit losses | 1.2 | 0.8 |
| Total | 1.4 | 1.2 |
Signifi cant tenant improvements are recognised as investments.
Credit losses include increase of EUR 0.4 million in credit loss provisions (decrease of EUR 0.1 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 | 2012 | 2011 |
|---|---|---|
| Personnel expenses | 15.5 | 15.1 |
| Non-recurring personnel expenses arising from employment terminations |
1.5 | 1.7 |
| Consultancy and advisory fees as well as exter nal services 1) |
3.5 | 4.5 |
| Offi ce and other administrative expenses | 4.8 | 5.4 |
| Depreciation and amortisation | 1.2 | 1.0 |
| Total 1) | 26.5 | 27.7 |
1) Citycon has made an adjustment to its accounting policies related to the treatment of transaction costs arising from the investment property disposals in 2012. Previously Citycon reported transaction costs from the property disposals within the administrative expenses, but in the fi nancial statements 2012, Citycon has nett ed the transaction costs from the successful property disposals against the net gains on sale of investment properties.
Non-recurring personnel expenses arising from employment terminations include one-off compensations (incl. pension and social charges) payable to 7 persons in 2012 (to 11 persons in 2011) as well as estimated one-off compensations related to collaborative negotiations in the Finnish Business unit, which were initiated in December 2012.
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 | 2012 | 2011 |
|---|---|---|
| Audit fees | 0.3 | 0.3 |
| Other advisory services | 0.1 | 0.7 |
| Total | 0.3 | 0.9 |
| EUR million | 2012 | 2011 |
|---|---|---|
| Wages and salaries of management | ||
| CEO | 1.0 | 0.5 |
| Management committ ee | 1.6 | 1.2 |
| Board | 0.7 | 0.7 |
| Other wages and salaries | 8.4 | 8.8 |
| Pension charges: defi ned contribution plans | 1.7 | 1.6 |
| Pension charges: defi ned benefi t plans | - | -0.1 |
| Social charges | 1.2 | 1.3 |
| Expense of share based payments | 1.7 | 1.7 |
| Total | 16.2 | 15.7 |
Personnel expenses of EUR 0.8 million (EUR 0.6 million) are included in property operating expenses and EUR 15.5 million (EUR 15.1 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 2012 and 2011. The defi ned benefi t pension income of EUR 0.1 million in 2011 arose 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.
| Average Group staff by Business Units during the period |
2012 | 2011 |
|---|---|---|
| Finland | 61 | 55 |
| Sweden | 33 | 35 |
| Baltic Countries and New Business | 10 | 11 |
| Headquarter | 28 | 30 |
| Total | 132 | 131 |
Depreciation and amortisation of EUR 1.2 million (EUR 1.0 million) on machinery and equipment, as well as on intangible assets, is included in administrative expenses.
| EUR million | 2012 | 2011 |
|---|---|---|
| Other operating income | 0.4 | 0.3 |
| Other operating expenses | -0.2 | -0.1 |
| Total | 0.2 | 0.2 |
A) Recognised in the income statement
| EUR million | 2012 | 2011 |
|---|---|---|
| Interest income | 0.6 | 0.6 |
| Foreign exchange gains | 31.6 | 53.8 |
| Other fi nancial income | 0.0 | 0.0 |
| Financial income, total | 32.1 | 54.4 |
| Interest expenses | 65.0 | 61.0 |
| Foreign exchange losses | 31.6 | 53.7 |
| Development interest capitalised | -1.8 | -2.5 |
| Other fi nancial expenses | 5.5 | 4.6 |
| Financial expenses, total | 100.3 | 116.8 |
| Net fi nancial income and expenses | 68.1 | 62.4 |
| Of which att ributable to fi nancial instrument categories: |
||
| Interest-bearing loans and receivables | 48.4 | 48.0 |
| Finance lease liabilities | 0.0 | 0.0 |
| Derivative fi nancial instruments | 19.6 | 14.1 |
| Other liabilities and receivables | 0.1 | 0.2 |
| Net fi nancial income and expenses | 68.1 | 62.4 |
In 2012, foreign exchange losses of EUR 3.3 million (gains of EUR 0.1 million) were recognised in the statement of comprehensive income from foreign exchange derivative agreements.
Interest on development expenditure is capitalised at a rate of 4.34% as at 31 December 2012 (4.31% as at 31 December 2011).
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 | 2012 | 2011 | |
| Losses arising during the period from cash fl ow hedges |
-35.5 | -50.1 | |
| Less: interest expenses recognised in the income statement on cash fl ow hedges |
16.3 | 14.2 | |
| Net losses/ gains on cash fl ow hedges | -19.3 | -35.9 |
| EUR million | 2012 | 2011 |
|---|---|---|
| Current tax | 1.4 | 0.9 |
| Tax for prior periods | 0.0 | 0.0 |
| Deferred tax expense/benefi t | 6.4 | -2.5 |
| Income tax expense/benefi t | 7.8 | -1.6 |
Citycon didn't recognise any current taxes directly in the equity during 2012 and 2011.
Reconciliation between tax charge and Group tax at the Finnish tax rate (24.5%):
| EUR million | 2012 | 2011 |
|---|---|---|
| Profi t/loss before taxes | 95.5 | 19.7 |
| Taxes at Finnish tax rate | 23.4 | 5.1 |
| Fair value gains and losses from subsidiaries owned abroad |
-10.7 | -4.9 |
| Diff erence in foreign subsidiaries' tax rate | -3.6 | -3.3 |
| Unrecognised tax receivables from losses | 2.8 | 2.1 |
| Utilisation of previously unrecognised tax losses | -0.6 | -0.2 |
| Depreciation and amortisation deducted in taxation |
2.0 | -1.2 |
| Tax free income deducted by the tax exempt expenses |
-5.6 | 0.0 |
| Other | 0.2 | 0.6 |
| Income taxes | 7.8 | -1.6 |
| Eff ective tax rate | 8.2 % | -8.3 % |
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.
| 2012 | 2011 | |
|---|---|---|
| Earnings per share, basic | ||
| Profi t/loss att ributable to parent company shareholders (EUR million) |
77.2 | 13.0 |
| IIssue-adjusted average number of shares (1,000) 1) |
298,090.6 269,675.9 | |
| Earnings per share (basic) (EUR) | 0.26 | 0.05 |
| 2012 | 2011 | |
|---|---|---|
| Earnings per share, diluted | ||
| Profi t/loss att ributable to parent company shareholders (EUR million) |
77.2 | 13.0 |
| Expenses from convertible capital loan, the tax eff ect deducted (EUR million) 2) |
3.1 | - |
| Profi t/loss used in the calculation of diluted earnings per share (EUR million) |
80.3 | 13.0 |
| Issue-adjusted average number of shares (1,000) 1) |
298,090.6 269,675.9 | |
| Convertible capital loan impact, (1,000) 2) | 15,077.2 | - |
| Adjustment for stock options (1,000) | - | - |
| Adjustments for long-term share-based incentive plan (1,000) |
34.2 | 128.8 |
| Average number of shares used in the | ||
| calculation of diluted earnings per share | ||
| (1,000) | 313,202.1 269,804.7 | |
| Earnings per share ( diuted ) (EUR) | 0.26 | 0.05 |
1) Earnings per share key fi gures have been calculated with the issue-adjusted number of shares resulting from the rights issue executed in October 2012.
2) 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 two categories of dilutive shares in place: convertible capital loan and stock options. Long-term share-based incentive plan was fi nalised during 2012 and all incentives granted and paid.
| Average number of shares used in the calculation of earnings per share |
days | number of shares |
|---|---|---|
| 1.1.2012 | 151 | 288,407,020 |
| 31.5.2012 | 123 | 288,445,132 |
| 1.10.2012 | 92 | 326,880,012 |
| Weighted average (daily) | ||
| number of shares | 366 | 298,090,635 |
Citycon divides its investment properties into two categories: Investment Properties Under Construction (IPUC) and Operative Investment Properties. On 31 December 2012, the fi rst mentioned category included Koskikeskus in Finland, as well as Åkermyntan Centrum in Sweden. On 31 December 2011, the fi rst mentioned category included Iso Omena, Koskikeskus ja Myllypuroin Finland. as well as Åkermyntan in Sweden and Magistral in Estonia.
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 31.12.2012 | Investment property under construction |
Operative investment properties |
Investment properties total |
|---|---|---|---|
| At period-start | 526.4 | 1,995.7 | 2,522.1 |
| Acquisitions during the period | 7.9 | 50.9 | 58.8 |
| Investments during the period | 34.1 | 65.6 | 99.7 |
| Disposals during the period | - | -1.4 | -1.4 |
| Capitalised interest | 1.1 | 0.7 | 1.8 |
| Fair value gains on investment property | 0.6 | 53.7 | 54.4 |
| Fair value losses on investment property | -1.2 | -29.6 | -30.8 |
| Exchange diff erences | 0.5 | 26.3 | 26.8 |
| Transfer between IPUC and operative invest ment properties and transfer into investment |
|||
| properties held for sale | -373.7 | 356.5 | -17.2 |
| At period-end | 195.7 | 2,518.5 | 2,714.2 |
| EUR million 31.12.2011 | 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 invest | |||
| ment properties | 156.0 | -168.7 | -12.7 |
| At period-end | 526.4 | 1,995.7 | 2,522.1 |
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 for 2012 and 2011. Realia Management conducted the property valuation for the fi rst three quarters of 2011. The resulting fi xed fees based on the 2012 valuations total EUR 0.2 million (EUR 0.2 million in 2011).
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 | 31.12.2012 | 31.12.2011 |
|---|---|---|
| Fair value of investment properties determined by the external appraiser as at Dec. 31 1) | 2,704.1 | 2,515.0 |
| Capital expenditure on development projects | 10.1 | 7.1 |
| Fair value of investment properties as at Dec. 31 | 2,714.2 | 2,522.1 |
1) The properties held for sale (EUR 5.4 million) were not included within the fair value determined by the external appraiser on 31 December 2012.
The segments' assumptions used by the external appraisers in the cash fl ow analysis on 31 December 2012 and on 31 December 2011 are presented the table below. In Finland the average yield requirement decreased due to the value increase of the core properties followed e.g. by the progress/ completion the of re-development projects. In Sweden the average yield requirement increased due to the overall increase of non-prime property yields in the property markets. Also the divestment of residential units contributed to the yield increase. In Baltic Countries and New Business average yield requirement decreased due to re-development projects and due to increased demand for retail properties in Estonia. The average market rent for the whole property portfolio increased from 23.8EUR/sq.m. on 31 December 2011 to 25.1 EUR/sq.m. on 31 December 2012 e.g. due to re-development projects, divestment of non-core properties, strengthened Swedish krona and overall positive market rent development of the prime properties. The vacancy assumption for the cash fl ow period increased by 10bps to 4.8% (4.7% 31. Dec. 2011) due to increased vacancy in Sweden.
| EUR million 31 Dec. 2012 | Finland | Sweden | Baltic Coun tries and New Business |
Average |
|---|---|---|---|---|
| Yield requirement (%) | 6.2 | 6.0 | 7.7 | 6.3 |
| Initial yield (%) | 6.2 | 5.6 | 7.9 | 6.2 |
| Reversionary yield (%) | 6.8 | 6.6 | 8.2 | 6.9 |
| Market rents (€/m²) | 25.9 | 25.6 | 20.0 | 25.1 |
| Vacancy during the cash fl ow period (%) | 4.8 | 5.8 | 2.1 | 4.8 |
| Market rent growth assumption (%) | 2.0 | 1.9 | 1.6 | - |
| Operating expense growth assumption (%) | 2.0 | 1.9 | 3.1 | - |
| EUR million 31 Dec. 2011 | Finland | Sweden | Baltic Coun tries and New Business |
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 |
| Market rent growth assumption (%) | 2.0 | 2.1 | 1.4 | - |
| Operating expense growth assumption (%) | 2.0 | 2.1 | 3.0 | - |
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 2,704.1 million defi ned by the external appraiser at 31 December 2012 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.
| Value of properties (EUR million) | |||||
|---|---|---|---|---|---|
| Change % | -10% | -5% | ±0% | +5% | +10% |
| Yield requirement | 3,004.6 | 2,846.5 | 2,704.1 | 2,575.4 | 2,458.3 |
| Market rents | 2,331.8 | 2,518.0 | 2,704.1 | 2,890.3 | 3,076.5 |
| Operating expenses | 2,815.3 | 2,759.7 | 2,704.1 | 2,648.6 | 2,593.0 |
| Change, percentage points | -2 | -1 | ±0 | 1 | 2 |
| Vacancy | 2,788.8 | 2,746.5 | 2,704.1 | 2,661.8 | 2,619.5 |
During 2011, Citycon Oyj acquired a 50 % interest in Espagalleria Oy, jointly controlled entity, which is the management company of Galleria Esplanad 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 | 2012 | 2011 |
|---|---|---|
| Total assets | 1.0 | 0.8 |
| Total liabilities | 0.2 | 0.2 |
| Net assets | 0.9 | 0.6 |
| Turnover | 3.9 | 3.1 |
| Net rental income | 0.2 | 0.1 |
| Asset management fee of the property | -0.2 | -0.2 |
| Profi t on valuation of investment property | 0.3 | 0.3 |
| Operating profi t | 0.2 | 0.3 |
| Profi t for the period | 0.2 | 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 | 2012 | 2011 |
|---|---|---|
| Acquisition cost Jan. 1 | 3.9 | 2.9 |
| Additions during the period | 0.5 | 1.0 |
| Accumulated acquisition cost Dec. 31. | 4.3 | 3.9 |
| Accumulated depreciation and impairment losses, Jan. 1 | 2.0 | 1.4 |
| Depreciation during the period | 0.7 | 0.5 |
| Accumulated depreciation and impairment losses, Dec 31. | 2.6 | 2.0 |
| Net carrying amount Jan 1. | 1.9 | 1.5 |
| Net carrying amount Dec 31. | 1.7 | 1.9 |
Intangible assets consisted mainly of computer soft ware and licenses.
| EUR million | 2012 | 2011 |
|---|---|---|
| Acquisition cost Jan. 1 | 3.4 | 3.0 |
| Additions during the period | 1.1 | 0.4 |
| Accumulated acquisition cost Dec. 31. | 4.5 | 3.4 |
| Accumulated depreciation and impairment losses, Jan. 1 | 2.5 | 2.0 |
| Depreciation during the period | 0.5 | 0.5 |
| Accumulated depreciation and impairment losses, Dec 31. | 3.0 | 2.5 |
| Net carrying amount Jan 1. | 1.0 | 1.0 |
| Net carrying amount Dec 31. | 1.4 | 1.0 |
Property, plant and equipment consisted mainly of machinery and equipment.
Machinery and equipment acquired through financial leases amounted to EUR 0.4 million (EUR 0.7 million).
Changes in deferred tax assets and liabilities in 2012:
| EUR million | 1 Jan. 2012 | Recognized in income statement |
Recognized in other comprehensive |
income 31 Dec. 2012 |
|---|---|---|---|---|
| Deferred tax assets | ||||
| Tax losses | 1.1 | -0.2 | - | 1.0 |
| Measurement of interest-rate swaps at fair value | 13.3 | - | 5.2 | 18.5 |
| Deferred tax assets, total | 14.5 | -0.2 | 5.2 | 19.5 |
| Deferred tax liabilities | ||||
| Measurement of investment property at fair value | 57.5 | 6.4 | - | 64.0 |
| Temporary diff erence in fi nancial expenses | 2.3 | -0.2 | - | 2.1 |
| Deferred tax liabilities, total | 59.8 | 6.2 | - | 66.0 |
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 |
Citycon's deferred taxes mainly arise from changes in the fair value of investment properties. In 2012, deferred tax expense resulting from the changes in the investment properties' fair value recognised in the income statement totalled EUR 6.4 million (benefi t of EUR 2.2 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 -10.7 million in 2012 (EUR -4.9 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. 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 2012, Group companies had confi rmed losses for which tax assets of EUR 22.0 million (EUR 19.4 million in 2011) 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.
A) Classifi cation of fi nancial instruments and their carrying amounts and fair values
| EUR million | Note | Carrying 2012 |
amount Fair value 2012 |
Carrying amount 2011 |
Fair value 2011 |
|---|---|---|---|---|---|
| Financial assets | |||||
| I Loans and other receivables | |||||
| Trade and other receivables | 25 | 24.5 | 24.5 | 33.2 | 33.2 |
| Cash and cash equivalents | 26 | 51.0 | 51.0 | 91.3 | 91.3 |
| II Derivative contracts under hedge accounting | |||||
| Derivative fi nancial instruments | 23 | - | - | 0.5 | 0.5 |
| Financial liabilities | |||||
| Financial liabilities amortised at cost | |||||
| I.I Loans | |||||
| Loans from fi nancial institutions | 28 | 1,304.3 | 1,308.6 | 1,439.5 | 1,442.9 |
| Convertible capital loan 1/2006 | 28 | 39.1 | 39.8 | 68.1 | 71.3 |
| Bond 1/2009 | 28 | 39.7 | 40.0 | 39.6 | 40.0 |
| Bond 1/2012 | 28 | 149.5 | 150.0 | - | - |
| Finance lease liabilities | 28 | 0.4 | 0.4 | 0.7 | 0.7 |
| I.II Other liabilities | |||||
| Other liabilities | 1.0 | 1.0 | 0.4 | 0.4 | |
| Trade and other payables | 29 | 82.3 | 82.3 | 53.2 | 53.2 |
| II Financial liabilities at fair value through profi t and loss | |||||
| Derivative fi nancial instruments | 23 | 0.7 | 0.7 | 0.6 | 0.6 |
| III Derivative contracts under hedge accounting | |||||
| Derivative fi nancial instruments | 23 | 75.6 | 75.6 | 53.9 | 53.9 |
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 foreign exchange derivative contracts is based on quoted market prices. The fair value of both interest rate and foreign exchange derivative fi nancial instruments corresponds to level 2 according to IFRS7p27a
Citycon's loans from fi nancial institutions are fl oating rate loans which have 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 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.
The bonds 1/2009 and 1/2012 are fi xed rate loan which has fair values equal to the nominal amount of the loans. The diff erence between the fair value and carrying amount is the unamortised capitalised arrangement fees for the loans.
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 2012 |
Fair value 2012 |
Nominal amount 2011 |
Fair value 2011 |
|---|---|---|---|---|
| Interest rate derivatives | ||||
| Interest rate swaps | ||||
| Maturity: | ||||
| less than 1 year | - | - | 30.0 | -0.5 |
| 1-2 years | 155.6 | -6.0 | 28.2 | -1.3 |
| 2-3 years | 176.2 | -9.0 | 152.5 | -5.7 |
| 3-4 years | 263.1 | -19.9 | 173.9 | -6.6 |
| 4-5 years | 217.2 | -20.2 | 257.1 | -15.0 |
| over 5 years | 209.5 | -20.6 | 363.8 | -25.4 |
| Subtotal | 1,021.7 | -75.6 | 1,005.4 | -54.4 |
| Foreign exchange derivatives | ||||
| Forward agreements | ||||
| Maturity: | ||||
| less than 1 year | 67.6 | -0.7 | 20.8 | 0.3 |
| Total | 1,089.3 | -76.3 | 1,026.3 | -54.1 |
Interest on fl oating-rate loans is mainly fi xed every three or six months. Interest-rate swaps have been concluded for the same periods, 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 2012, 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 loss of EUR 0.6 million (gain of EUR 0.3 million) from foreign echange rate derivatives, which is recognised in the statement of comprehensive income.
Hedge accounting is applied to interest rate swaps, which have a nominal amount of EUR 1,021.7 million (EUR 1,005.4 million).
The average fi xed interest rate of the interest rate swaps as at 31 December 2012 was 3.07 per cent (3.16 %).
| Interest rate derivatives | Assets | Liabilities | Assets | Liabilities |
|---|---|---|---|---|
| EUR million | 2012 | 2012 | 2011 | 2011 |
| Fair value | - | -75.6 | - | -54.4 |
Citycon's cash fl ow hedges consist of interest rate 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 designated 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 2012 and at 31 December 2011, 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 -57.1 million (EUR -41.1 million) and the change of these fair values (net of taxes) EUR -14.1 million (EUR -26.8 million) is recognised under other comprehensive income, taking the tax eff ect into account.
On 31 December 2012, the Investment Properties Held for Sale comprised one property and one plot located in Finland. These transactions are expected to be fi nalised during Q1 2013. On 31 December 2011, the Investment Properties Held for Sale included two properties, Floda and Landvetter in Sweden, which were sold in January and March 2012.
| Me | 2012 | 2011 |
|---|---|---|
| Acquisition cost Jan. 1 | 12.7 | 1.5 |
| Disposals | -25.0 | -1.5 |
| Exchange diff erences | 0.5 | - |
| Transfers from investment properties | 17.2 | 12.7 |
| Accumulated acquisition cost Dec. 31. | 5.4 | 12.7 |
| 25. TRADE AND OTHER RECEIVABLES | |||
|---|---|---|---|
| EUR million | 2012 | 2011 |
|---|---|---|
| Trade receivables | 7.1 | 6.2 |
| Credit loss provision | -1.8 | -1.2 |
| Trade receivables (net) | 5.4 | 5.1 |
| Accrued income and prepaid expenses | 4.1 | 5.2 |
| Tax receivables (incl. VAT-receivables) | 10.8 | 18.6 |
| Other receivables | 4.1 | 4.3 |
| Total | 24.5 | 33.2 |
Ageing structure of trade receivables:
| EUR million | 2012 | 2011 |
|---|---|---|
| NOT past due nor impaired | 0.9 | 1.6 |
| Past due, less than 1 month | 2.2 | 1.5 |
| Past due, 1-3 months | 0.7 | 0.9 |
| Past due, 3-6 months | 0.9 | 0.6 |
| Past due, 6-12 months | 1.6 | 1.3 |
| Past due, 1-5 years | 0.9 | 0.4 |
| Total | 7.1 | 6.2 |
Movement in credit loss provisions
| Me | 2012 | 2011 |
|---|---|---|
| At the beginning of the year | -1.2 | -1.3 |
| Exchange diff erence | -0.1 | 0.0 |
| Charge for the year | -1.1 | -0.1 |
| Utilised | 0.5 | 0.2 |
| Unused amounts reversed | 0.0 | 0.0 |
| Credit loss provision at the end of the year | -1.8 | -1.2 |
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 | 2012 | 2011 |
|---|---|---|
| Cash in hand and at bank | 50.6 | 91.3 |
| Short-term deposits | - | 0.1 |
| Other bank deposits | 0.3 | - |
| Total | 51.0 | 91.3 |
Cash and cash equivalents in the cash fl ow statement comprise the items presented above. Other bank deposits consists of pledged cash accounts related to rental guarantees and redevelopment projects.
A) The eff ect of the changed number of shares on funds included in the shareholders' equity
| Outstanding num ber of shares 1) |
Treasury shares |
Share cap ital (EUR million) |
Share premium fund (EUR million) |
Invested unrestrict ed equity fund (EUR million) |
Total (EUR million) |
|
|---|---|---|---|---|---|---|
| 1 Jan. 2011 | 244,564,972 | - | 259.6 | 131.1 | 198.8 | 589.4 |
| Directed share issue without payment to Citycon Group key employees |
101,325 | - | - | - | - | - |
| Directed share issue without pay ment 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 unrestrict ed equity fund |
- | - | - | - | -24.5 | -24.5 |
| 31 Dec. 2011 | 277,811,297 | 0 | 259.6 | 131.1 | 273.7 | 664.3 |
| Directed share issue without payment to Citycon Group key employees |
36,713 | - | - | - | - | - |
| Rights issue | 49,032,002 | - | - | - | 89.9 | 89.9 |
| Return from the invested unrestrict ed equity fund |
- | - | - | - | -30.6 | -30.6 |
| 31 Dec. 2012 | 326,880,012 | 0 | 259.6 | 131.1 | 333.0 | 723.7 |
1) All outstanding shares were fully-paid on 31 December 2012 and 31 December 2011.
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 2012 and 2011, due to rights issue and share issues as well as sale of treasury shares.
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 2013, the Board of Directors of Citycon proposes a dividend of EUR 0.04 per share for the fi nancial year 2012 (EUR 0.04 for the fi nancial year 2011) and an equity return of EUR 0.11 per share from the invested unrestricted equity fund (EUR 0.11 for the fi nancial year 2011). 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 2012.
All Citycon loans were interest-bearing liabilities on 31 December 2012 and 2011. These interest-bearing loans are outlined here in detail.
A) Breakdown of interest-bearing liabilities
| EUR million | Eff ective interest (%) |
Carrying amount 2012 |
Carrying amount 2011 |
|---|---|---|---|
| Long-term interest-bearing liabilities | |||
| Bonds | |||
| Convertible capital loan 1/2006 | 7.580 | - | 68.1 |
| Bond 1/2009 | 5.461 | 39.7 | 39.6 |
| Bond 1/2012 | 4.336 | 149.5 | - |
| Syndicated term loans | |||
| EUR 220 million term loan facility | Reference rate + 1.400 | 217.1 | 221.3 |
| EUR 200 million term loan facility | Reference rate + 0.675 | 202.1 | 199.7 |
| EUR 190 million term loan facility | EURIBOR + 2.200 / STIBOR + 2.550 | 187.3 | - |
| Refi nanced syndicated term loan 2012 | Reference rate + 0.675 | - | 332.6 |
| Revolving credit facilities | |||
| EUR 170 million revolving credit facility | EURIBOR + 1.800 | 13.0 | - |
| EUR 110 million revolving credit facility | EURIBOR + 0.950 | 103.1 | - |
| EUR 50 million revolving credit facility | EURIBOR + 1.500 | 43.9 | - |
| Bilateral bank loans | |||
| EUR 75 million bank loan | EURIBOR + 1.550 | 67.5 | 71.0 |
| SEK 500 million bank loan | STIBOR + 0.600 | 58.3 | 56.1 |
| EUR 50 million bank loan | Reference rate + 1.950 | 50.1 | 50.9 |
| 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 | 22.5 | 27.5 |
| EUR 25 million bank loan | EURIBOR + 2.550 | 23.1 | - |
| Finance lease liabilities | - | 0.2 | 0.4 |
| Other interest-bearing liabilities | - | 129.0 | 172.5 |
| Total long-term interest-bearing liabilities | 1,406.3 | 1,339.5 | |
| Short-term interest-bearing liabilities | |||
| Convertible capital loan 1/2006 | 7.580 | 39.1 | - |
| Short-term syndicated and bank loans and revolving credit facilities |
- | 43.8 | 133.5 |
| Current portion of interest-bearing liabilities | - | 11.2 | 25.9 |
| Commercial papers | - | 32.5 | 48.7 |
| Finance lease liabilities | - | 0.2 | 0.3 |
| Total short-term interest-bearing liabilities | 126.8 | 208.4 | |
The carrying amounts of term loan facilities, convertible capital loan 1/2006, bond 1/2009 and bond 1/2012 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 | 2012 | 2011 |
|---|---|---|
| 1-2 years | 321.6 | 453.8 |
| 2-3 years | 162.5 | 315.1 |
| 3-4 years | 382.2 | 161.8 |
| 4-5 years | 283.4 | 238.1 |
| over 5 years | 256.6 | 170.7 |
| Total | 1,406.3 | 1,339.5 |
| Long-term interest-bearing liabilities by currency, EUR million |
2012 | 2011 |
| EUR | 844.1 | 800.3 |
| SEK | 553.3 | 530.2 |
| LTL | 8.8 | 9.0 |
| Total | 1,406.3 | 1,339.5 |
| Short-term interest-bearing liabilities by currency, EUR million |
2012 | 2011 |
| EUR | 100.5 | 91.5 |
| SEK | 26.0 | 116.7 |
| LTL | 0.2 | 0.2 |
| Total | 126.8 | 208.4 |
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, 2010 and 2012 the outstanding amount was EUR 39.8 million. The loan's conversion price is EUR 4.05 per share and a full conversion of the loan would result in the issue of 9,827,160 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:
1) In the event of company dissolution or bankruptcy, obligations on the issuer arising from the convertible capital loan shall be subordinated in right of payment to the claims of all unsubordinated creditors of Citycon Oyj, but shall rank pari passu with all other obligations which qualify as a capital loan.
During 2008, 2009, 2010 and 2012 from the open markets, Citycon has repurchased the convertible capital loan for a nominal amount of EUR 70.2 million, with a weighted average purchase price of 77.0 per cent. The amount repurchased by Citycon equals approximately 64 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 loss of EUR 0.8 million for the buybacks of the convertible capital loan in 2012 (EUR 0.0 million).
| EUR million | 2012 | 2011 |
|---|---|---|
| Maturity of fi nance lease liabilities: | ||
| Finance lease liabilities - minimum lease payments |
||
| Not later than 1 year | 0.2 | 0.3 |
| 1-5 years | 0.2 | 0.4 |
| Total | 0.4 | 0.7 |
| Finance lease liabilities - present value of minimum lease payments |
||
| Not later than 1 year | 0.2 | 0.3 |
| 1-5 years | 0.2 | 0.4 |
| Total | 0.4 | 0.7 |
| Future fi nance charges on fi nance leases | 0.0 | 0.0 |
| Total fi nance lease liabilities | 0.4 | 0.7 |
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.
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.
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 Committee. Risk reports to the Board of Directors and Audit Committ ee are prepared in conjunction with budgeting during the autumn.
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.
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 2012 is depicted by the fact that a one-percentage point rise in money market interest rates would increase its interest expenses for 2013 by EUR 1.4 million, while a fall of one-percentage point in such rates would decrease them by EUR 1.4 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.
| Eff ect on interest expenses of an increase of 100 basis points | |||
|---|---|---|---|
| EUR million | 2012 | 2011 | |
| Euro | 0.9 | 1.1 | |
| Swedish krona | 0.5 | 1.3 | |
| Other currencies | 0.1 | 0.1 | |
| Total | 1.4 | 2.5 |
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 | 2012 | 2011 |
|---|---|---|
| Euro | 13.7 | 14.9 |
| Swedish krona | 13.6 | 15.7 |
| Total | 27.2 | 30.6 |
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 2012, unused credit limits amounted to EUR 217.4 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.
| Less than 1 month | 1 to 12 months | 1-5 years | Over 5 years | Total |
|---|---|---|---|---|
| 3.4 | 118.7 | 1,051.7 | 260.3 | 1,434.1 |
| - | 41.6 | - | - | 41.6 |
| - | 2.0 | 42.0 | - | 44.1 |
| - | 6.4 | 175.5 | - | 181.9 |
| - | 0.2 | 0.2 | - | 0.4 |
| 0.9 | 18.6 | 55.8 | 1.3 | 76.6 |
| 61.3 | 9.7 | 2.5 | - | 73.5 |
| 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 | 1,599.6 |
| Convertible capital loan 1/2006 | - | 3.2 | 74.5 | - | 77.7 |
| Bond 1/2009 | - | 2.0 | 44.1 | - | 46.1 |
| Bond 1/2012 | - | - | - | - | - |
| 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 |
Citycon's rent revision procedures, long tenor 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 2012 |
Less than 1 month | 1 to 12 months | 1-5 years | Over 5 years | Total |
|---|---|---|---|---|---|
| Undrawn committ ed credit facilities | - | 50.0 | 167.4 | - | 217.4 |
| 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 |
The above mentioned credit facilities are freely available to Citycon based on the 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 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 | 2012 | 2011 |
|---|---|---|
| Swedish krona | 0.1 | 0.1 |
| Lithuanian litas | 0.0 | 0.0 |
| Total | 0.1 | 0.1 |
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 2012, the company's equity ratio stood at 37.8 per cent and the equity ratio as defi ned in the loan agreement was around 40.5 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 62 in the consolidated fi nancial statements.
Company monitors its capital structure mainly with equity ratio. Equity ratio:
| EUR million | 2012 | 2011 |
|---|---|---|
| Total shareholders' equity (A) | 1,059.9 | 961.8 |
| Total assets | 2,818.5 | 2,677.7 |
| Less advances received | 12.2 | 9.6 |
| ./. (Total assets - advances received) (B) | 2,806.3 | 2,668.2 |
| Equity ratio (A/B) | 37.8 % | 36.0 % |
Gearing-%:
| EUR million | 2012 | 2011 |
|---|---|---|
| Interest-bearing debt total (Note 28) | 1,533.0 | 1,547.9 |
| Less cash and cash equivalents (Note 26) | 51.0 | 91.3 |
| Interest-bearing net debt (A) | 1,482.1 | 1,456.6 |
| Total shareholders' equity (B) | 1,059.9 | 961.8 |
| Gearing-% (A/B) | 139.8 % | 151.4 % |
Equity ratio increased in 2012 due to the equity raise and the profi t of the period partly off set by lower fair value of interest rate derivatives under hedge accounting, which led to higher equity as a proportion of total assets. Gearing decreased in 2012 mainly as a result of a share issue executed in 2012, which led to a improved ratio of equity to net interest-bearing debt.
| EUR million | 2012 | 2011 |
|---|---|---|
| Trade payables | 18.3 | 18.5 |
| Short-term advances received | 11.3 | 9.6 |
| Interest liabilities | 10.6 | 7.3 |
| Other liabilities | 15.6 | 13.5 |
| Accrued expenses total | 26.2 | 20.8 |
| VAT-liabilities | 11.4 | 4.4 |
| Other short-term payables | 15.1 | -0.1 |
| Other short-term payables total | 26.5 | 4.3 |
| Total | 82.3 | 53.2 |
| Due dates of future payments of trade and other payables: |
||
|---|---|---|
| Due in less than 1 month | 61.6 | 37.8 |
| Due in 1-3 months | 6.6 | 2.8 |
| Due in 3-6 months | 2.1 | 5.4 |
| Due in 6-12 months | 1.0 | 0.8 |
| Due in 1-2 years | 2.5 | 6.3 |
| Due in 2-5 years | 8.5 | - |
| Due in over 5 years | 0.0 | 0.0 |
| Total | 82.3 | 53.2 |
A) Stock option schemes
Stock option plan 2011
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.
At the end of the period under review the maximum number of stock options which could be distributed by virtue of an authorisation of the Board of Directors was 6,890,000, and they entitle their owners to subscribe for a maximum total of 8,106,085 new shares or treasury shares. The stock options will be issued gratuitously. Stock options entitle their holders to subscribe for company shares 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.
At the end of 2012, stock options 2011A–D(I), 2011A–D(II) and 2011A–D(III) were held by 20 key employees within the Group. The amount of outstanding stock options was 6,505,000 on 31 December 2012. These option rights entitle their holders to subscribe for 7,653,133 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 2012, the expense recognised in the statement of comprehensive income totalled EUR 1.7 million (EUR 1.5 million in 2011). The expected volatility is determined by calculating the company share price's historical volatility.
In order to ensure the equal treatment of the holders of stock options 2011 and shareholders, the Board of Directors of Citycon Oyj decided on 7 September 2012 and 5 October 2012, due to rights issue, to adjust the subscription ratio and the subscription price of the stock options 2011 in accordance with the terms and conditions of the stock options 2011. Due to the above adjustments, the Board of Directors also adjusted the maximum total number of shares to be subscribed for based on the stock options 2011 to 8,106,085 shares, as permitt ed by the share issue authorisation available to the Board of Directors aft er the completion of the rights issue. The adjustments entered into force as of the registration of the adjusted maximum total number of shares to be subscribed for based on the options with the Finnish Trade Register on 8 October 2012.
| Option category | Subscription price, EUR | Subscription ratio |
|---|---|---|
| 2011A–D(I) | 2.9720 | 1,1765 (1,0) |
| 2011A–D(II) | 3.0910 | 1,1765 (1,0) |
| 2011A–D(III) | 2.5130 | 1,1765 (1,0) |
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) | 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 |
Summary of the stock option plan 2011 on 31 December 2012:
| 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 | 2,230,000 | 2,025,000 |
| Exercise price, EUR | 3.17 | 3.31 | 2.63 |
| Adjusted share subscription price, EUR (as | |||
| from 8 October 2012) | 2,9720 (3,17) | 3,0910 (3,31) | 2,5130 (2,63) |
| Adjusted subscription ratio (as from 8 | |||
| October 2012) | 1.1765 | 1.1765 | 1.1765 |
| Vesting period as per option terms (No. of | |||
| days) (1 | 332-1427 | 332-1427 | 172-1267 |
| 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 | 1 095-2190 | 1095-2190 | 1095-2190 |
| 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:
| 2012 Exercise price, weighted average, EUR/ share |
No. of stock options |
2011 Exercise price, weighted average, EUR/ share |
No. of stock options |
|
|---|---|---|---|---|
| At period-start | 3,12 | 5,400,000 | 4.22 | 1,050,000 |
| New stock options granted | 2,70 | 1,330,000 | 3.08 | 6,320,000 |
| Forfeited stock options | 2,82 | 1,150,000 | 3.31 | 160,000 |
| Redistributed stock options | 2,70 | 925,000 | 3.31 | 160,000 |
| Exercised stock options | - | - | - | - |
| Lapsed stock options | - | - | 4.15 | 1,050,000 |
| At period-end | 2,87 | 6,505,000 | 3.08 | 6,320,000 |
The company had 1,667,500 exercisable 2011A(I-III) stock options at period-end. No stock options were exercised during 2012.
The adjusted exercise prices of outstanding stock options were 2.9720 (2011A-D(I)), 3.0910 (2011A-D(II)) and 2.5130 (2011A-D(III)) and the adjusted subscription ratio 1.1765 at the period-end.
The above adjustments were made on 8 October 2012 following the rights issue in order to ensure the equal treatment of the holders of stock options 2011 and shareholders in accordance with the terms and conditions of the stock options 2011.
The lapse year is the year 2018 of the outstanding stock options.
On 26 April 2007, Citycon Oyj's Board of Directors decided on a long-term share-based incentive plan for the key personnel of the Citycon Group.
The aim of the share-based incentive plan is to encourage key personnel to make sustained efforts to increase shareholder value and to strengthen their commitment to the development of the Group's operations.
The incentive plan has been divided into four incentive periods: 2007, 2008, 2009 and 2010. The incentives earned through the incentive scheme have been granted to key personnel during the years 2008-2012. These incentives have been determined on the basis of Citycon's consolidated adjusted net cash fl ow from operations per share and net rental income. The Board of Directors has annually decided on sett ing the incentive goals and on the maximum number of incentive shares to be granted as well as following each incentive period, confi rmed the outcome of the performance and results criteria and the number of incentive shares to be granted on the basis of this outcome. The incentives have been granted as shares, cash or both.
Citycon Oyj's Board of Directors decided on 29 May 2012 to grant all share incentives yet to be paid under the share-based incentive plan established on 26 April 2007 meaning the last installment of the incentives for the incentive period 2009 and the second and third, i.e. the last two thirds of the share incentives for the earning period 2010.There are no more incentives to be granted on the basis of this incentive plan.
In 2012, expenses from long-term share-based incentive plan recognised in the statement of comprehensive income amounted to EUR 0.0 million (EUR 0.2 million in 2011). 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 |
- |
| 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 |
| Shares granted in 2012 | 8,890 | 22,663 | - | 31,553 |
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, 5,160 shares were granted in 2012 (3,032 shares in 2011) instead of paying the cash component in cash.
| Me | 2012 | 2011 |
|---|---|---|
| Profi t before taxes | 95.5 | 19.7 |
| Adjustments for: | ||
| Depreciation and amortisation (Note 12) | 1.2 | 1.0 |
| Net fair value gains(-)/losses(+) on investment property (Note 17) | -23.6 | 35.3 |
| Profi t(-)/losses(+) on disposal of investment property (Notes 17 and 24) | -4.2 | -0.3 |
| Share-based payments (Note 30) | 1.8 | 1.5 |
| Other non-cash income | -0.5 | -0.7 |
| Foreign exchange losses(+)/gains(-) in fi nancing expenses (Note 14) | 0.0 | -0.1 |
| Interest and other fi nancing income (Note 14) | -0.6 | -0.6 |
| Interest and other fi nancing expenses (Note 14) | 68.7 | 63.1 |
| Changes in working capital | ||
| Trade and other receivables (Note 25) | 8.1 | -4.2 |
| Trade and other payables (Note 29) | 0.5 | 5.8 |
| Cash generated from operations | 147.0 | 120.5 |
A) Other leases - Group as lessee
Future minimum lease payments under non-cancellable other leases are as follows:
| EUR million | 2012 | 2011 |
|---|---|---|
| Not later than 1 year | 0.9 | 0.9 |
| 1-5 years | 1.8 | 0.7 |
| Over 5 years | 0.2 | - |
| Total | 2.9 | 1.6 |
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 1.1 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 | 2012 | 2011 |
|---|---|---|
| Loans, for which mortgages are given in security and shares pledged | ||
| Loans from fi nancial institutions | 28.6 | 27.7 |
| Contingent liabilities for loans | ||
| Mortgages on land and buildings | 37.1 | 35.9 |
| Bank guarantees | 63.8 | 39.2 |
| Capital commitments | 296.1 | 20.4 |
| VAT refund liabilities | 73.4 | 60.7 |
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 an agreement signed on 19 December, 2012 concerning the acquisition of Kista Galleria and 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.
In 2011, SRV Construction Ltd initiated arbitration proceedings against Citycon's subsidiary, MREC Espoontori related to Espoontori shopping centre's completed redevelopment project. The dispute's monetary value is approximately EUR 4.7 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.
D) Equity ratio commitment and interest coverage ratio
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 2012 stood at around 40.5 per cent and interest coverage ratio at around 2.1 (2011: equity ratio was around 39.0 per cent and interest coverage ratio around 2.0).
Citycon Group's related parties comprise the parent company, subsidiaries, jointly controlled entities, associated companies, minority companies, Board members, CEO, Corporate Management Committ ee members and Gazit-Globe Ltd., whose shareholding in Citycon Oyj accounted for 49.0 per cent on 31 December 2012 (31 December 2011: 48.0%).
| Parent | Parent | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Group companies on 31 December 2012 | Country | Group holding, % |
company holding, % |
Group companies on 31 December 2012 | Country | Group holding, % |
company holding, % |
||
| 43 | Lippulaiva Koy | Finland | 100.0 | - | |||||
| Parent company: Citycon Oyj | Finland | 44 | Magistral Kaubanduskeskuse Oü | Estonia | 100.0 | - | |||
| 1 | Albertslund Centrum ApS | Denmark | 100.0 | - | 45 | Martinlaakson Kivivuorentie 4 Koy | Finland | 100.0 | - |
| 2 | Asematie 3 Koy | Finland | 100.0 | - | 46 | Minkkikuja 4 Koy | Finland | 100.0 | - |
| 3 | Asolantien Liikekiinteistö Oy | Finland | 100.0 | - | The | ||||
| 4 | Citycon AB | Sweden | 100.0 | 100.0 | 47 | Montalbas B.V. | Netherlands | 100.0 | 100.0 |
| 5 | Citycon Denmark ApS | Denmark | 100.0 | 100.0 | 48 | Myyrmanni Koy | Finland | 100.0 | - |
| 6 | Citycon Development AB | Sweden | 100.0 | - | 49 | Oulu Big Street Top Oy | Finland | 100.0 | - |
| 7 | Citycon Estonia Oü | Estonia | 100.0 | - | 50 | Oulun Galleria Koy | Finland | 100.0 | - |
| The | 51 | Oulun Isokatu 20 Koy | Finland | 100.0 | - | ||||
| 8 | Citycon Estonian Investments B.V. | Netherlands | 100.0 | - | 52 | Oulun Isokatu 22 Koy | Finland | 100.0 | - |
| 9 | Citycon Finland Oy | Finland | 100.0 | 100.0 | 53 | Porin Asema-aukio Koy | Finland | 100.0 | - |
| 10 | Citycon Hedging C.V. | The Netherlands |
100.0 | - | 54 | Porin Isolinnankatu 18 Koy | Finland | 100.0 | - |
| 11 | Citycon Holding S.à r.l. | Luxembourg | 100.0 | 100.0 | 55 | Riddarplatsen Fastigheter HB | Sweden | 100.0 | - |
| 12 | Citycon Högdalen Centrum AB | Sweden | 100.0 | - | Rocca al Mare | ||||
| 56 | Kaubanduskeskuse AS | Estonia | 100.0 | - | |||||
| 13 | Citycon Jakobsbergs Centrum AB | Sweden | 100.0 | - | 57 | Runeberginkatu 33 Koy | Finland | 100.0 | - |
| 14 | Citycon Liljeholmstorget Galleria AB |
Sweden | 100.0 | - | 58 | Sinikalliontie 1 Koy | Finland | 100.0 | - |
| 15 | Citycon Services AB | Sweden | 100.0 | - | 81 | Stenungs Torg Fastighets AB | Sweden | 100.0 | - |
| 16 | Citycon Shopping Centers AB | Sweden | 100.0 | - | 78 | Strömpilen AB | Sweden | 100.0 | - |
| The | 59 | Säkylän Liiketalo Koy | Finland | 100.0 | - | ||||
| 17 | Citycon Treasury B.V. | Netherlands | 100.0 | - | 60 | Talvikkitie 7-9 Koy | Finland | 100.0 | - |
| Citycon Tumba | 61 | Tampereen Hermanni Koy | Finland | 100.0 | - | ||||
| 18 | Centrumfastigheter AB | Sweden | 100.0 | - | 62 | Tampereen Koskikeskus Koy | Finland | 100.0 | - |
| 19 | Espoon Asemakuja 2 Koy | Finland | 100.0 | - | 63 | UAB Citycon | Lithuania | 100.0 | - |
| 20 | Etelä-Suomen Kauppakiinteistöt Oy Finland | 100.0 | - | 64 | UAB Prekybos Centras Mandarinas Lithuania | 100.0 | - | ||
| 21 | Forssan Hämeentie 3 Koy | Finland | 100.0 | - | 65 | Ultima Oy | Finland | 100.0 | - |
| 22 | Helsingin Hämeentie 109-111 Koy Finland | 100.0 | - | 66 | Valkeakosken Torikatu 2 Koy | Finland | 100.0 | - | |
| 23 | Jyväskylän Forum Koy | Finland | 100.0 | - | 67 | Vantaan Laajavuorenkuja 2 Koy | Finland | 100.0 | - |
| 24 | Jyväskylän Kauppakatu 31 Koy | Finland | 100.0 | - | 68 | Varkauden Relanderinkatu 30 Koy | Finland | 100.0 | - |
| 25 | Kaarinan Liiketalo Koy | Finland | 100.0 | - | 69 | Wavulinintie 1 Koy | Finland | 100.0 | - |
| 26 | Karjaan Ratakatu 59 Koy | Finland | 100.0 | - | 70 | Vaakalintu Koy | Finland | 95.8 | - |
| 27 | Karjalan Kauppakeskus Koy | Finland | 100.0 | - | 71 | Lappeen Liikekeskus Koy | Finland | 90.6 | - |
| 28 | Kauppakeskus Columbus Koy | Finland | 100.0 | - | 72 | Lahden Trio Koy | Finland | 89.5 | - |
| 29 | Kauppakeskus Isokarhu Oy | Finland | 100.0 | - | 73 | Linjurin Kauppakeskus Koy | Finland | 88.5 | - |
| 30 | Kivensilmänkuja 1 Koy | Finland | 100.0 | - | 74 | Lappeenrannan Brahenkatu 7 Koy | Finland | 84.5 | - |
| 31 | Kotkan Keskuskatu 11 Koy | Finland | 100.0 | - | 75 | Tikkurilan Kauppakeskus Koy | Finland | 83.8 | - |
| 32 | Kristiine Keskus Oü | Estonia | 100.0 | - | 76 | Hervannan Liikekeskus Oy | Finland | 79.4 | - |
| 33 | Kuopion Kauppakatu 41 Koy | Finland | 100.0 | - | 77 | Orimatt ilan Markkinatalo Oy | Finland | 77.3 | - |
| 34 | Kuusankosken Kauppakatu 7 Koy | Finland | 100.0 | - | 79 | Åkersberga Centrum AB | Sweden | 75.0 | - |
| 35 | Kuvernöörintie 8 Koy | Finland | 100.0 | - | 80 | Myyrmäen Kauppakeskus Koy | Finland | 74.0 | - |
| 36 | Lahden Hansa Koy | Finland | 100.0 | - | 82 | Heikintori Oy | Finland | 68.7 | - |
| 37 | Lahden Kauppakatu 13 Koy | Finland | 100.0 | - | 83 | Kirkkonummen Liikekeskus Oy | Finland | 66.7 | - |
| Lappeenrannan | 84 | Espoontori Koy | Finland | 66.6 | - | ||||
| 38 | Villimiehen Vitonen Oy | Finland | 100.0 | - | 85 | Myyrmäen Autopaikoitus Oy | Finland | 62.7 | - |
| 39 | Lentolan Perusyhtiö Oy | Finland | 100.0 | - | |||||
| Liljeholmstorget Development | |||||||||
| 40 | Services AB | Sweden | 100.0 | - | |||||
| 41 | Lillinkulma Koy | Finland | 100.0 | - | |||||
| 42 | Lintulankulma Koy | Finland | 100.0 | - | |||||
| Group companies on 31 December 2012 | Country | Group holding, % |
Parent | |
|---|---|---|---|---|
| 43 | Lippulaiva Koy | Finland | 100.0 | - |
| 44 | Magistral Kaubanduskeskuse Oü | Estonia | 100.0 | - |
| 45 | Martinlaakson Kivivuorentie 4 Koy | Finland | 100.0 | - |
| 46 | Minkkikuja 4 Koy | Finland | 100.0 | - |
| The | ||||
| 47 | Montalbas B.V. | Netherlands | 100.0 | 100.0 |
| 48 | Myyrmanni Koy | Finland | 100.0 | - |
| 49 | Oulu Big Street Top Oy | Finland | 100.0 | - |
| 50 | Oulun Galleria Koy | Finland | 100.0 | - |
| 51 | Oulun Isokatu 20 Koy | Finland | 100.0 | - |
| 52 | Oulun Isokatu 22 Koy | Finland | 100.0 | - |
| 53 | Porin Asema-aukio Koy | Finland | 100.0 | - |
| 54 | Porin Isolinnankatu 18 Koy | Finland | 100.0 | - |
| 55 | Riddarplatsen Fastigheter HB | Sweden | 100.0 | - |
| Rocca al Mare | ||||
| 56 | Kaubanduskeskuse AS | Estonia | 100.0 | - |
| 57 | Runeberginkatu 33 Koy | Finland | 100.0 | - |
| 58 | Sinikalliontie 1 Koy | Finland | 100.0 | - |
| 81 | Stenungs Torg Fastighets AB | Sweden | 100.0 | - |
| 78 | Strömpilen AB | Sweden | 100.0 | - |
| 59 | Säkylän Liiketalo Koy | Finland | 100.0 | - |
| 60 | Talvikkitie 7-9 Koy | Finland | 100.0 | - |
| 61 | Tampereen Hermanni Koy | Finland | 100.0 | - |
| 62 | Tampereen Koskikeskus Koy | Finland | 100.0 | - |
| 63 | UAB Citycon | Lithuania | 100.0 | - |
| 64 | UAB Prekybos Centras Mandarinas Lithuania | 100.0 | - | |
| 65 | Ultima Oy | Finland | 100.0 | - |
| 66 | Valkeakosken Torikatu 2 Koy | Finland | 100.0 | - |
| 67 | Vantaan Laajavuorenkuja 2 Koy | Finland | 100.0 | - |
| 68 | Varkauden Relanderinkatu 30 Koy | Finland | 100.0 | - |
| 69 | Wavulinintie 1 Koy | Finland | 100.0 | - |
| 70 | Vaakalintu Koy | Finland | 95.8 | - |
| 71 | Lappeen Liikekeskus Koy | Finland | 90.6 | - |
| 72 | Lahden Trio Koy | Finland | 89.5 | - |
| 73 | Linjurin Kauppakeskus Koy | Finland | 88.5 | - |
| 74 | Lappeenrannan Brahenkatu 7 Koy | Finland | 84.5 | - |
| 75 | Tikkurilan Kauppakeskus Koy | Finland | 83.8 | - |
| 76 | Hervannan Liikekeskus Oy | Finland | 79.4 | - |
| 77 | Orimatt ilan Markkinatalo Oy | Finland | 77.3 | - |
| 79 | Åkersberga Centrum AB | Sweden | 75.0 | - |
| 80 | Myyrmäen Kauppakeskus Koy | Finland | 74.0 | - |
| 82 | Heikintori Oy | Finland | 68.7 | - |
| 83 | Kirkkonummen Liikekeskus Oy | Finland | 66.7 | - |
| 84 | Espoontori Koy | Finland | 66.6 | - |
| 85 | Myyrmäen Autopaikoitus Oy | Finland | 62.7 | - |
| Group companies on 31 December 2012 | Country | Group holding, % |
Parent company holding, % |
|
|---|---|---|---|---|
| 86 | Vantaan Säästötalo Koy | Finland | 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 | - |
| 91 | Espoon Asematori Koy | Finland | 54.1 | - |
| 92 | Laajasalon Liikekeskus Oy | Finland | 50.4 | - |
| 93 | Espagalleria Oy | Finland | 50.0 | - |
| 94 | Retail Park Oy | Finland | 50.0 | - |
| 95 | Espoon Louhenkulma Koy | Finland | 49.9 | - |
| 96 | Pihlajamäen Liiketalo Oy | Finland | 42.7 | - |
| 97 | Länsi-Keskus Koy | Finland | 41.4 | - |
| 98 | Hakunilan Keskus Oy | Finland | 41.1 | - |
| 99 | Hansaparkki Koy | Finland | 36.0 | - |
| 100 Kontulan Asemakeskus Koy | Finland | 34.8 | - | |
| 101 Puijonlaakson Palvelukeskus Koy | Finland | 31.3 | - | |
| 102 Salpausseläntie 11 Koy | Finland | 31.3 | - | |
| 103 Jyväskylän Ydin Oy | Finland | 29.0 | - | |
| 104 Soukan Itäinentorni As Oy | Finland | 27.3 | - | |
| 105 Valkeakosken Liikekeskus Koy | Finland | 25.4 | - | |
| 106 Lautt asaaren Liikekeskus Oy | Finland | 23.7 | - | |
| 107 Hakucenter Koy | Finland | 18.7 | - | |
| 108 Liesikujan Autopaikat Oy | Finland | 8.0 | - | |
| 109 Martinlaakson Huolto Oy | Finland | 3.8 | - | |
| Partnerships for taxation purposes: | ||||
| Parkeringshuset Väpnaren | Sweden | 64.0 | - |
| B) Related party transactions | |
|---|---|
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.
Citycon Group's key personnel in the management comprise Board members, CEO and Corporate Management Committ ee members. The benefi ts of the key personnel in the management are presented in the following chapters.
| CEO wages and salaries, EUR | 2012 | 2011 |
|---|---|---|
| Marcel Kokkeel (CEO as of 24 March 2011) | 957,776 | 448,966 |
| Petri Olkinuora (CEO until 23 March 2011) | - | 70,464 |
Citycon's Board of Directors appoints the CEO and decides on the terms and conditions of his/her executive contract in writing. In 2011, the Board of Directors appointed Mr. Marcel Kokkeel (MA, born in 1958), a Dutch citizen, Citycon's CEO. According to his service agreement, the CEO's gross base salary in 2012 amounted to EUR 589,731.34. The amount of the CEO's base salary shall be adjusted based on changes in the Consumer Price Index. At the discretion of the Board of Directors, the CEO may be awarded an additional bonus up to a maximal amount corresponding to 80 per cent of his annual gross base salary. 50 per cent of the amount of the CEO's additional bonus shall be paid as cash while the other 50 per cent shall be paid as company's shares. In addition to his salary the CEO has in July 2012 received a one-off gross payment of EUR 91,844.41 to adjust the net salary paid in 2011 in accordance with his service agreement. In July 2012, the CEO was paid as a cash bonus EUR 246,908.32 and in October 2012 he was issued 79,151 shares of the company as a share bonus related to CEO's performance bonus payment for the year 2011.
In addition, 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.
| Personnel expenses for the entire corporate manage ment committ ee, EUR million |
2012 | 2011 | |
|---|---|---|---|
| Wages and salaries | 2.5 | 1.7 | |
| Pensions: defi ned contribution plans | 0.5 | 0.3 | |
| Social charges | 0.3 | 0.2 | |
| Total | 3.2 | 2.2 |
In addition to wages and salaries, the 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 0.6 million (EUR 0.5 million) arising from employment terminations of Corporate Management Committ ee members were recognised in 2012.
The Corporate Management Committ ee members including the CEO held a total of 2 770 000 stock options 2011A–D(I), 2011A–D(II) and 2011A–D(III) at the end of 2012.
| Remuneration of the members of the Board of Directors, EUR |
2012 | 2011 | |
|---|---|---|---|
| Ashkenazi Ronen | 69,000 | 68,600 | |
| Bolotowsky Gideon | |||
| (Board member until 23 March 2011) | - | 2,000 | |
| Katzman Chaim | 174,900 | 170,400 | |
| Kempe Roger | |||
| (Board member as of 23 March 2011) | 52,500 | 47,500 | |
| Knobloch Bernd | |||
| (Board member as of 21 March 2012) | 48,500 | - | |
| Komi Kirsi | |||
| (Board member as of 23 March 2011) | 54,900 | 49,800 | |
| Korpinen Raimo | |||
| (Board member until 23 March 2011) | - | 2,200 | |
| Lähdesmäki Tuomo | |||
| (Board member until 23 March 2011) | - | 1,900 | |
| Ott osson Claes | 53,000 | 49,000 | |
| Segal Dor J. | |||
| (Board member until 11 October 2012) | 26,205 | 46,000 | |
| Sonninen Jorma | |||
| (Board member as of 23 March 2011) | 52,000 | 48,000 | |
| Wernink Thomas W. | |||
| (Board member until 21 March 2012) | 2,000 | 71,200 | |
| Westin Per-Håkan | 51,000 | 49,000 | |
| Zochovitzky Ariella | 56,700 | 51,800 | |
| Yanai Yuval | 21,295 | - | |
| Total | 662,000 | 657,400 |
Board members do not participate in the company's share-based incentive schemes. During 2012, the travel expenses of the Board members amounted to EUR 0.1 million (EUR 0.2 million).
In August 2012 Citycon Oyj repurchased convertible capital bonds issued on 2 August 2006 from its main shareholder, Gazit-Globe Ltd. with face value of EUR 20 million. Based on the information Citycon has received, aft er the Citycon repurchases Gazit-Globe Ltd. did not hold any outstanding amount of convertible capital loan on 31 December 2012. At the end of the corresponding period on 31 December 2011, based on the information Citycon has received, Gazit-Globe Ltd. held 58.9 per cent out of the outstanding amount of convertible capital loan, i.e. EUR 40.1 million out of the carrying amount of convertible capital loan amounting to EUR 68.1 million.
Citycon has paid expenses of EUR 0.0 million (EUR 0.3 million) to Gazit-Globe Ltd. and its subsidiaries and invoiced expenses of EUR 0.1 million (EUR 0.2 million) forward to Gazit-Globe Ltd. and its subsidiaries.
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.
In October 2012, the company issued 49 million new shares in a rights issue, raising approximately EUR 91 million in new equity. Gazit-Globe Ltd. subscribed 23.6 million shares in this rights issue.
The company's main shareholder, Gazit-Globe Ltd, holding approximately 49 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.
| Companies acquired |
|---|
| Helsingin Hämeentie 109-111 Koy |
| Oulun Isokatu 20 Koy |
| Oulun Isokatu 22 Koy |
| Tampereen Koskenranta Koy (increase of ownership by 41,7% to 100%) (current Tampereen Koskikeskus Koy) |
| Stenungs Torg Fastighets AB (increase of ownership by 30% to 100%) |
| Strömpilen AB (increase of ownership by 25% to 100%) |
| Companies established |
| Etelä-Suomen Kauppakiinteistöt Oy |
| Citycon Denmark ApS |
|---|
| Albertslund Centrum ApS |
| Tapiolan Alueen Kehitys Oy |
|---|
| Drabantvägen bostäder AB |
| Citycon Jakobsberg Bostäder 3 AB |
| Kouvolan Valtakadun Kauppakeskus Koy |
| Valtakatu 5-7 Koy |
| Properties sold |
|---|
| Landvett er |
| Floda |
| Tampereen Koskenranta Koy |
|---|
| (current Tampereen Koskikeskus Koy) |
| Tampereen Suvantokatu Koy |
| (current Tampereen Koskikeskus Koy) |
| Koskikeskuksen Huolto Oy (current Tampereen Koskikeskus Koy) |
| Citycon Imröret AB (current Högdalen Centrum AB) |
Citycon Finland Oy (former Excellency HoldCo Oy)
Oulu Big Street Top Oy (former Veniamo-Invest Oy)
Tampereen Koskikeskus Oy (former Tampereen Hatanpää Koy)
Citycon and CPPIB signed a property-secured loan worth SEK 2.29 billion (approx. EUR 265 million) to fi nance a shopping centre investment on 14 January 2013. The loan collateral is the Kista Galleria property. The loan has a fi ve-year maturity and was granted by Skandinaviska Enskilda Banken AB (publ) (acting as transaction coordinator), Swedbank AB and Aareal Bank AG.
The deal made by Citycon Oyj and CPPIB on 19 December concerning the acquisition of Kista Galleria in Stockholm from DNB Livsforsikring ASA for approximately EUR 530 million was closed on 17 January 2013. Under the terms of the transaction, the shopping centre will be owned 50 per cent by Citycon and 50 per cent by CPPIB.
The shareholders of Citycon Oyj were invited to an Extraordinary General Meeting to be held on Wednesday, 6 February 2013 at 2.00 p.m. The Board of Directors proposes that the Extraordinary General Meeting would resolve on authorising the Board of Directors to decide on issuance of new shares for consideration. Citycon decided to begin preparations for a rights issue of a maximum of 125,000,000 new shares pursuant to the shareholders' pre-emptive subscription right. In addition to fi nancing the acquisition of Kista Galleria shopping centre in Stockholm, which was announced on 19 December 2012, the proceeds from the Off ering are intended to strengthen the company's balance sheet, fi nance the Company's strategy and for general corporate purposes.
On 30 January 2013, Citycon announced that the statutory collaborative negotiations in the Finnish Business Unit concerning reorganization of business operations were concluded. As a result of the negotiations, Citycon will reduce a total of 10 employees from its Finnish Business unit. It was estimated when the process started that a maximum of 14 employees would possibly be reduced. A cluster organization model will be taken into use in all of Citycon's operating countries. In the cluster organizational model shopping centres will be combined to form entities which are led by commercial directors.
| EUR MILLION Formula |
2012 | 2011 | 2010 | 2009 | 2008 | |
|---|---|---|---|---|---|---|
| Statement of comprehensive income data | ||||||
| Turnover | 239.2 | 217.1 | 195.9 | 186.3 | 178.3 | |
| Other operating income and expense | 0.2 | 0.2 | 0.3 | 0.0 | 6.1 | |
| Operating profi t/loss | 163.4 | 81.8 | 157.7 | 10.3 | -105.0 | |
| Profi t/loss before taxes | 95.5 | 19.7 | 102.8 | -37.5 | -162.3 | |
| Profi t/loss att ributable to parent company shareholders | 77.2 | 13.0 | 78.3 | -34.3 | -124.1 | |
| Statement of fi nancial position data | ||||||
| Investment properties | 2,714.2 | 2,522.1 | 2,367.7 | 2,147.4 | 2,111.6 | |
| Current assets | 75.5 | 125.0 | 56.9 | 65.9 | 52.4 | |
| Equity att ributable to parent company shareholders | 1,015.7 | 902.6 | 849.5 | 731.1 | 799.1 | |
| Non-controlling interest | 44.2 | 59.2 | 50.7 | 36.8 | 38.2 | |
| Interest-bearing liabilities | 1,533.0 | 1,547.9 | 1,397.7 | 1,321.7 | 1,199.5 | |
| Total liabilities | 1,758.6 | 1,715.9 | 1,536.3 | 1,485.3 | 1,341.2 | |
| Total liabilities and shareholders' equity | 2,818.5 | 2,677.7 | 2,436.5 | 2,253.2 | 2,178.5 | |
| Key performance ratios | ||||||
| Equity ratio, % | 1 | 37.8 | 36.0 | 37.1 | 34.2 | 38.5 |
| Equity ratio for the banks, % | 40.5 | 39.0 | 39.4 | 40.6 | 45.1 | |
| Gearing, % | 2 | 139.8 | 151.4 | 153.1 | 169.5 | 141.3 |
| Return on equity, % (ROE) | 3 | 9.0 | 2.3 | 11.1 | -4.7 | -15.0 |
| Return on investment, % (ROI) | 4 | 7.7 | 3.8 | 10.6 | -0.5 | -1.5 |
| Quick ratio | 5 | 0.4 | 0.5 | 0.3 | 0.4 | 0.5 |
| Gross capital expenditure, EUR million | 161.7 | 216.7 | 133.7 | 134.6 | 157.9 | |
| % of turnover | 67.6 | 99.8 | 68.3 | 72.2 | 88.6 | |
| Per-share fi gures and ratios | ||||||
| Earnings per share, EUR 1) | 6 | 0.26 | 0.05 | 0.33 | -0.15 | -0.54 |
| Earnings per share,diluted, EUR 1) | 7 | 0.26 | 0.05 | 0.33 | -0.15 | -0.54 |
| Net cash from operating activities per share, EUR 1) | 8 | 0.21 | 0.25 | 0.09 | 0.29 | 0.21 |
| Equity per share, EUR | 9 | 3.11 | 3.25 | 3.47 | 3.31 | 3.62 |
| P/E (price/earnings) ratio 1) | 10 | 10 | 48 | 9 | -20 | -3 |
| Return from invested unrestricted equity fund per share, EUR 1) | 0.11 2) | 0.11 | 0.10 | 0.10 | 0.10 | |
| Dividend per share, EUR 1) | 0.04 2) | 0.04 | 0.04 | 0.04 | 0.04 | |
| Dividend and return from invested unrestricted equity fund per share total, EUR 1) | 0.15 2) | 0.14 | 0.13 | 0.13 | 0.13 | |
| Dividend and return of equity per earnings, % | 11 | 57.9 | 300.7 | 40.8 | -90.2 | -24.9 |
| Eff ective dividend and return of equity yield, % | 12 | 5.8 | 6.3 | 4.4 | 4.6 | 8.0 |
| Operative key ratios | ||||||
| Net rental yield, % | 13 | 6.4 | 6.0 | 5.8 | 6.1 | 5.8 |
| Occupancy rate (economic), % | 15 | 95.7 | 95.5 | 95.1 | 95.0 | 96.0 |
| Citycon's GLA, sq.m. | 1,000,270 | 994,730 | 942,280 | 961,150 | 937,650 | |
| Personnel (at the end of the period) | 129 | 136 | 129 | 119 | 113 |
1) Per share result key fi gures have been calculated with the issue-adjusted number of shares resulting from the rights issue executed in 2012. 2) Board proposal
Formulas are available on page 62.
| EUR million | 2012 | 2011 | 2010 | 2009 | 2008 |
|---|---|---|---|---|---|
| Turnover | |||||
| Finland | 143.2 | 132.5 | 126.5 | 131.3 | 126.8 |
| Sweden | 63.1 | 60.1 | 52.8 | 41.0 | 41.9 |
| Baltic Countries and New Business | 32.8 | 24.5 | 16.7 | 14.0 | 9.6 |
| Total | 239.2 | 217.1 | 195.9 | 186.3 | 178.3 |
| Net rental income | |||||
| Finland | 98.2 | 90.5 | 86.7 | 92.4 | 90.9 |
| Sweden | 39.2 | 35.4 | 28.7 | 23.2 | 24.1 |
| Baltic Countries and New Business | 24.6 | 18.4 | 11.8 | 9.8 | 6.8 |
| Total | 162.0 | 144.3 | 127.2 | 125.4 | 121.8 |
| EPRA operating profi t | |||||
| Finland | 89.3 | 83.2 | 80.9 | 86.3 | 85.4 |
| Sweden | 34.0 | 30.4 | 24.1 | 20.0 | 21.0 |
| Baltic Countries and New Business | 23.7 | 17.1 | 10.6 | 8.8 | 6.2 |
| Other | -11.4 | -13.4 | -10.5 | -7.4 | -7.3 |
| Total | 135.7 | 117.4 | 105.0 | 107.7 | 105.3 |
| Operating profi t/loss | |||||
| Finland | 87.5 | 42.3 | 107.5 | 21.2 | -62.9 |
| Sweden | 48.2 | 32.4 | 46.7 | 0.3 | -49.1 |
| Baltic Countries and New Business | 39.1 | 20.5 | 14.1 | -3.8 | 14.4 |
| Other | -11.4 | -13.4 | -10.5 | -7.4 | -7.4 |
| Total | 163.4 | 81.8 | 157.7 | 10.3 | -105.0 |
| EUR million | Note 1 Jan.-31 Dec. 2012 1 Jan.-31 Dec. 2011 | ||
|---|---|---|---|
| Gross rental income | 26.9 | 102.8 | |
| Service charge income | 1.3 | 4.4 | |
| Turnover | 2 | 28.2 | 107.3 |
| Property operating expenses | 18.4 | 55.1 | |
| Other expenses from leasing operations | 3 | 0.0 | 0.3 |
| Net rental income | 9.8 | 51.9 | |
| Administrative expenses | 4, 5 | 11.5 | 32.7 |
| Other operating income and expenses | 6 | -0.2 | 2.2 |
| Operating profi t | -1.9 | 21.3 | |
| Financial income | 91.9 | 101.1 | |
| Financial expenses | -100.0 | -116.4 | |
| Net fi nancial income and expenses | 7 | -8.1 | -15.3 |
| Loss/profi t before appropriations and taxes | -10.1 | 6.0 | |
| Group contributions | 27.1 | - | |
| Income tax expense/benefi t | 8 | 0.0 | -1.6 |
| Profi t/loss for the period | 17.0 | 7.6 |
| EUR million | Note | 31 Dec. 2012 | 31 Dec. 2011 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Intangible assets | 9 | 0.5 | 24.5 |
| Tangible assets | 10 | 8.3 | 31.0 |
| Investments | |||
| Shares in subsidiaries | 11 | 1,226.8 | 1,252.6 |
| Shares in associated companies | 12 | - | 33.0 |
| Other investments | 13 | 858.6 | 699.4 |
| Total investments | 2,085.4 | 1,985.0 | |
| Total non-current assets | 2,094.2 | 2,040.4 | |
| Current assets | |||
| Long-term receivables | 15 | - | 1.6 |
| Short-term receivables | 15 | 72.0 | 28.8 |
| Cash and cash equivalents | 16.6 | 63.6 | |
| Total current assets | 88.6 | 94.1 | |
| Total assets | 2,182.7 | 2,134.6 |
| EUR million | Note | 31 Dec. 2012 | 31 Dec. 2011 |
|---|---|---|---|
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||
| Shareholders' equity | 16 | ||
| Share capital | 259.6 | 259.6 | |
| Share premium fund | 133.1 | 133.1 | |
| Invested unrestricted equity fund | 337.3 | 277.2 | |
| Retained earnings | 0.4 | 3.9 | |
| Profi t/loss for the period | 17.0 | 7.6 | |
| Total shareholders' equity | 747.3 | 681.3 | |
| Liabilities | 17 | ||
| Long-term liabilities | |||
| Convertible capital loan 1/2006 | - | 68.1 | |
| Bond 1/2009 | 39.7 | 39.6 | |
| Bond 1/2012 | 149.5 | - | |
| Other long-term liabilities | 1,074.0 | 1,088.1 | |
| Total long-term liabilities | 1,263.3 | 1,195.8 | |
| Short-term liabilities | |||
| Convertible capital loan 1/2006 | 39.1 | - | |
| Other short-term liabilities | 133.0 | 257.5 | |
| Total short-term liabilities | 172.1 | 257.5 | |
| Total liabilities | 1,435.4 | 1,453.3 | |
| Total liabilities and shareholders' equity | 2,182.7 | 2,134.6 |
| EUR million | 1 Jan.-31 Dec. 2012 1 Jan.-31 Dec. 2011 | |
|---|---|---|
| Cash fl ow from operating activities | ||
| Loss/profi t before taxes | -10.1 | 6.0 |
| Adjustments: | ||
| Depreciation and impairment loss | 0.3 | 12.0 |
| Non-cash property operating expenses | 8.7 | 21.8 |
| Net fi nancial income and expenses | 8.1 | 15.3 |
| Loss/gain on sale and on liquidation of shares in subsidiaries and other investments |
0.2 | 0.7 |
| Cash fl ow before change in working capital | 7.1 | 55.9 |
| Change in working capital | 10.5 | 4.6 |
| Cash generated from operations | 17.6 | 60.4 |
| Interest expense and other fi nancial expenses paid | -55.0 | -93.6 |
| Interest income and other fi nancial income received | 73.7 | 52.7 |
| Realized exchange rate losses and gains | -0.4 | 10.8 |
| Income taxes received | - | 7.4 |
| Net cash fl ow from operating activities | 35.8 | 37.6 |
| Cash fl ow used in investing activities | ||
| Investment in tangible and intangible assets | -3.8 | -18.0 |
| Proceeds from sale of tangible assets | - | 0.7 |
| Loans granted | -220.8 | -122.1 |
| Repayments of loans receivable | 57.6 | 335.6 |
| Increase in subsidiary shares | - | -792.0 |
| Decrease in subsidiary shares | 25.6 | 390.3 |
| Purchase of minority and associated companies' shares | - | -0.3 |
| Decrease in and sale of associated companies' shares | 33.9 | 1.8 |
| Net cash used in investing activities | -107.5 | -204.0 |
| Cash fl ow from fi nancing activities | ||
| Proceeds from rights and share issue | 90.7 | 99.7 |
| Sale of treasury shares | - | 0.4 |
| Proceeds from short-term loans | 115.3 | 135.6 |
| Repayments of short-term loans | -131.5 | -98.8 |
| Proceeds from long-term loans | 599.6 | 582.2 |
| Repayments of long-term loans | -600.6 | -470.4 |
| Dividends paid and return from the invested unrestricted equity fund | -41.7 | -34.3 |
| Net cash from fi nancing activities | 31.7 | 214.4 |
| Net change in cash and cash equivalents | -40.0 | 48.0 |
| Cash and cash equivalents at period-start | 40.4 | -7.6 |
| Cash and cash equivalents at period-end 1) | 0.4 | 40.4 |
1) Cash and cash equivalents of Citycon Oyj included the Group cash pool as at 31 December 2012 and at 31 December 2011, in which the parent company's bank account can have a negative balance. Cash pool balance of EUR -16.2 million as at 31 December 2012 and EUR -23.3 million as at 31 December 2011 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.
Citycon Oyj has changed its Group structure as of 1 April 2012. Citycon's Finnish real estate operations were transferred from Citycon Oyj through business transfer to two new holding companies Citycon Finland Oy and Etelä-Suomen Kauppakiinteistöt Oy. Aft er the business transfer, Citycon Oyj was left with the group functions and headquarter personnel. Therefore, the fi nancial periods 2012 and 2011 are not comparable.
The income statement is presented in accordance with the function-based format and it includes both gross and net rental income.
Non-current assets are recognized in the balance sheet at acquisition cost less impairment losses and depreciation/amortisation.
The buildings' acquisition cost is depreciated annually on a straight line basis at 2–4 per cent. Repair costs are expensed as incurred.
Other non-current assets include capitalised costs related to the acquisition of properties, which are amortised over three years, and tenant improvements, which are amortised during the lease term. Machinery and equipment is depreciated at 25 percent annually, using the reducing balance method of depreciation. The machinery and equipment category includes also technical equipment in buildings and the depreciation is made accordingly.
The company's employee pension cover is based on statutory pension insurance.
Receivables and payables denominated in foreign currencies as well as forward rate agreements are measured at the exchange rate quoted on the balance sheet date. Any exchange rate 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 hundreds thousands of euros; this may cause minor discrepancies between the sum totals and the sums of individual fi gures as given.
| EUR million | 2012 | 2011 |
|---|---|---|
| Turnover by business segments: | ||
| Shopping centres | ||
| Helsinki Metropolitan Area | 8.3 | 32.4 |
| Other areas in Finland | 12.0 | 47.9 |
| Other retail properties | 7.9 | 27.0 |
| Total | 28.2 | 107.3 |
Geographically the parent company's turnover is generated in Finland. Parent company turnover includes the following administrative fees received from Group companies:
| EUR million | 2012 | 2011 |
|---|---|---|
| Administrative fees from Group companies | 0.3 | 0.9 |
| EUR million | 2012 | 2011 |
|---|---|---|
| Tenant improvements and commissions | 0.0 | 0.2 |
| Credit losses | 0.0 | 0.2 |
| Total | 0.0 | 0.3 |
| EUR million | 2012 | 2011 |
|---|---|---|
| Average number of employees during period | 42 | 86 |
| Personnel expenses | ||
| Wages and salaries | 5.8 | 10.0 |
| Pension charges | 0.9 | 1.2 |
| Other social charges | 0.3 | 0.4 |
| Total | 6.9 | 11.6 |
The items presented above include non-recurring personnel expenses of EUR 0.1 million (EUR 1.2 million in 2011) arising from employment terminations.
| The following depreciation and amortisation as well as impairments are included in the administra tive expenses: |
||
|---|---|---|
| Amortisation on intangible assets | 0.2 | 4.7 |
| Depreciation on buildings and constructions | 0.0 | 0.5 |
| Depreciation on machinery and equipment | 0.0 | 0.3 |
| Impairment of shares in subsidiaries and in | ||
| associated companies | - | 6.6 |
| Total | 0.3 | 12.0 |
| EUR million | 2012 | 2011 |
|---|---|---|
| Loss/gain on sale of shares in subsidiaries and other investments |
-0.6 | -4.1 |
| Liquidation of the MREC Myllypuro shopping Centre |
- | 3.4 |
| Leasing and asset management fees from Group companies |
0.1 | 2.8 |
| Other operating income | 0.3 | 0.1 |
| Total | -0.2 | 2.2 |
| EUR million | 2012 | 2011 |
|---|---|---|
| Dividend income | ||
| From Group companies | 19.5 | 11.7 |
| From others | 0.0 | 0.0 |
| Total | 19.5 | 11.7 |
| Interest and other fi nancial income | ||
| From Group companies | 38.3 | 32.5 |
| Foreign exchange gains | 33.8 | 53.7 |
| Other interest and fi nancial income | 0.3 | 3.3 |
| Total | 72.4 | 89.4 |
| Total fi nancial income | 91.9 | 101.1 |
| Interest and other fi nancial expenses | ||
| To Group companies | 5.2 | 8.0 |
| Foreign exchange losses | 33.9 | 53.6 |
| Loss from convertible bond buybacks | 0.9 | - |
| Interest and other fi nancial expenses | 60.0 | 54.8 |
| Total fi nancial expenses | 100.0 | 116.4 |
| Net fi nancial income and expenses | -8.1 | -15.3 |
| Me | 2012 | 2011 |
|---|---|---|
| Current taxes | - | - |
| Deferred tax benefi t | 0.0 | -1.6 |
| Income taxes | 0.0 | -1.6 |
| EUR million | 2012 | 2011 |
|---|---|---|
| Intangible rights | ||
| Acquisition cost 1 Jan. | 2.5 | 2.0 |
| Additions during the period | 0.3 | 0.5 |
| Transfer of business | -1.1 | - |
| Accumulated acquisition costs 31 Dec. | 1.7 | 2.5 |
| Accumulated depreciation 1 Jan. | -1.5 | -1.2 |
| Transfer of business | 0.4 | - |
| Depreciation for the period | -0.2 | -0.3 |
| Accumulated depreciation 31 Dec. | -1.3 | -1.5 |
| Net carrying amount 31 Dec. | 0.4 | 1.0 |
| Connection fees | ||
| Acquisition cost 1 Jan. | 0.2 | 0.2 |
| Transfer of business | -0.2 | - |
| Net carrying amount 31 Dec. | - | 0.2 |
| Tenant improvements and other non-current assets |
||
| Acquisition cost 1 Jan. | 39.5 | 23.7 |
| Additions during the period | 0.1 | 15.8 |
| Transfer of business | -38.2 | - |
| Accumulated acquisition costs 31 Dec. | 1.5 | 39.5 |
| Accumulated depreciation 1 Jan. | -16.3 | -11.9 |
| Transfer of business | 15.0 | - |
| Depreciation for the period | 0.0 | -4.3 |
| Accumulated depreciation 31 Dec. | -1.3 | -16.3 |
| Net carrying amount 31 Dec. | 0.1 | 23.2 |
| Total intangible assets 31 Dec. | 0.5 | 24.5 |
9. INTANGIBLE ASSETS
| EUR million | 2012 | 2011 |
|---|---|---|
| Land | ||
| Acquisition cost 1 Jan. | 3.2 | 3.3 |
| Reductions during the period | - | -0.1 |
| Transfer of business | -3.2 | - |
| Net carrying amount 31 Dec. | - | 3.2 |
| Buildings and constructions | ||
| Acquisition cost 1 Jan. | 69.1 | 68.7 |
| Additions during the period | - | 0.4 |
| Transfer of business | -69.0 | - |
| Accumulated acquisition costs 31 Dec. | 0.1 | 69.1 |
| Accumulated depreciation 1 Jan. | -45.1 | -44.6 |
| Transfer of business | 44.9 | - |
| Depreciation for the period | - | -0.5 |
| Accumulated depreciation 31 Dec. | -0.1 | -45.1 |
| Net carrying amount 31 Dec. | - | 24.0 |
| Machinery and equipment | ||
| Acquisition cost 1 Jan. | 5.9 | 5.7 |
| Additions during the period | 0.4 | 0.2 |
| Transfer of business | -5.2 | - |
| Accumulated acquisition costs 31 Dec. | 1.1 | 5.9 |
| Accumulated depreciation 1 Jan. | -5.0 | -4.7 |
| Transfer of business | 4.4 | - |
| Depreciation for the period | 0.0 | -0.3 |
| Accumulated depreciation 31 Dec. | -0.6 | -5.0 |
| 1.0 | ||
| Machinery and equipment also include technical | ||
| Other tangible assets | ||
| Acquisition cost 1 Jan. | 0.2 | 0.2 |
| Additions during the period | 0.0 | - |
| Transfer of business | -0.2 | - |
| Accumulated acquisition costs 31 Dec. | 0.0 | 0.2 |
| Net carrying amount 31 Dec. equipment in buildings. |
0.4 |
| PA R EN T C |
|
|---|---|
| O M PA N |
|
| Y C A S H F |
|
| LO W S TA |
|
| T EM EN T, F A |
|
| S |
| EUR million | 2012 | 2011 | 14. SUBSIDIARIES AND ASSOCIATED COMPANIES | |
|---|---|---|---|---|
| Accumulated depreciation 1 Jan. | -0.2 | -0.2 | ||
| Transfer of business | 0.2 | - | ||
| Accumulated depreciation 31 Dec. | 0.0 | -0.2 | the Consolidated Financial Statements. | |
| Net carrying amount 31 Dec. | 0.0 | 0.1 | 15. LONG-TERM AND SHORT-TERM RECEIVABLES | |
| Construction in progress | ||||
| Acquisition cost 1 Jan. | 2.7 | 2.2 | Long-term receivables from outside the Group | |
| Additions during the period | 7.1 | 0.5 | ||
| Transfer of business | -2.0 | - | ||
| Net carrying amount 31 Dec. | 7.8 | 2.7 | ||
| Receivables from outside the Group | ||||
| Total tangible assets 31 Dec. | 8.3 | 31.0 |
| EUR million | 2012 | 2011 |
|---|---|---|
| Acquisition cost 1 Jan. | 1,252.6 | 857.5 |
| Additions during the period | 314.5 | 654.6 |
| Impairment of shares | - | -5.2 |
| Reductions during the period | - | -254.7 |
| Transfer of business | -340.2 | 0.3 |
| Net carrying amount 31 Dec. | 1,226.8 | 1,252.6 |
| EUR million | 2012 | 2011 |
|---|---|---|
| Acquisition cost 1 Jan. | 33.0 | 34.8 |
| Impairment of shares | - | -1.4 |
| Reductions during the period | - | -0.4 |
| Transfer of business | -33.0 | - |
| Net carrying amount 31 Dec. | - | 33.0 |
| EUR million | 2012 | 2011 |
|---|---|---|
| Minority holdings | ||
| Acquisition cost 1 Jan. | 0.9 | 0.9 |
| Additions during the period | - | 0.3 |
| Transfer of business | -0.9 | -0.3 |
| Net carrying amount 31 Dec. | - | 0.9 |
| Loan receivables from Group companies | 858.6 | 698.5 |
| Other receivables from outside the Group | 0.0 | - |
| Total other investments 31 Dec. | 858.6 | 699.4 |
| Total investments 31 Dec. | 2,085.4 | 1,985.0 |
Parent company's subsidiaries and associated companies are presented in the Note 33 Related Party Transactions in the Notes to the Consolidated Financial Statements.
| 15. LONG-TERM AND SHORT-TERM RECEIVABLES EUR million |
2012 | 2011 |
|---|---|---|
| Long-term receivables from outside the Group | ||
| Deferred tax assets | - | 1.6 |
| Total long-term receivables | - | 1.6 |
| Receivables from outside the Group | ||
| Trade receivables | 0.2 | 2.0 |
| Other receivables | 1.3 | 1.8 |
| Accrued income and prepaid expenses | 0.1 | 1.2 |
| Total | 1.7 | 5.0 |
| Receivables from Group companies | ||
| Trade receivables | 4.8 | 1.2 |
| Loan receivables | 0.1 | -0.1 |
| Maintenance charge receivables | - | 4.5 |
| Other receivables | 36.7 | 13.5 |
| Total other receivables | 36.8 | 17.9 |
| Interest receivables | 1.6 | 1.7 |
| Other accrued income and prepaid expenses | 0.0 | 2.9 |
| Total accrued income and prepaid expenses | 1.6 | 4.7 |
| Group contributions receivables | 27.1 | - |
| Total | 70.3 | 23.8 |
| Total short-term receivables | 72.0 | 28.8 |
| 2012 | 2011 |
|---|---|
| 259.6 | 259.6 |
| 259.6 | 259.6 |
| 133.1 | 133.1 |
| 133.1 | 133.1 |
| 277.2 | 201.5 |
| 90.7 | 99.7 |
| - | 0.4 |
| -24.5 | |
| 337.3 | 277.2 |
| 11.5 | 13.6 |
| -11.1 | -9.8 |
| 17.0 | 7.6 |
| 17.3 | 11.5 |
| 747.3 | 681.3 |
| -30.6 |
| EUR million | 2012 | 2011 |
|---|---|---|
| Long-term interest-bearing liabilities | ||
| Convertible capital loan 1/2006 1) | - | 68.1 |
| Bond 1/2009 | 39.7 | 39.6 |
| Bond 1/2012 | 149.5 | - |
| Loans from fi nancial institutions, which are | ||
| converted into fi xed rates through inter | ||
| est-rate swaps | 1,021.7 | 1,005.4 |
| tied to market interest rates | 70.9 | 97.7 |
| Total | 1,092.7 | 1,103.1 |
| Current portion of interest-bearing | ||
| liabilities | -27.5 | -25.0 |
| Total | 1,065.2 | 1,078.1 |
| Loans from Group companies | 8.8 | 9.9 |
| Total long-term liabilities | 1,263.3 | 1,195.8 |
| Loans maturing later than 5 years | 150.1 | 64.6 |
| EUR million | |
|---|---|
| Short-term interest-be | |
| Convertible capital le | |
| Commercial papers | |
| Loans from financial | |
| Current portion of in | |
| Loans from Group co | |
| Total | |
| Short-term non-interes | |
| Payables to outside | |
| Advances received | |
| Accounts payable | |
| Derivative financ | |
| Other payables | |
| Total other payables | |
| Interest liability | |
| Other accruals | |
| Total accruals | |
| Total | |
| 1) | The terms and condition |
| Loans in the Notes to th | |
| EUR million | |
| Payables to Group c | |
| Accounts payable | |
| Charge-for-finan | |
| Other payables |
| B) Short-term liabilities EUR million |
2012 | 2011 | |
|---|---|---|---|
| Short-term interest-bearing liabilities | |||
| Convertible capital loan 1/2006 1) | 39.1 | - | |
| Commercial papers | 32.5 | 48.7 | |
| Loans from fi nancial institutions | - | 108.8 | |
| Current portion of interest-bearing liabilities | 27.5 | 25.0 | |
| Loans from Group companies | 52.1 | 40.7 | |
| Total | 151.2 | 223.2 | |
| Short-term non-interest-bearing liabilities | |||
| Payables to outside the Group | |||
| Advances received | - | 0.2 | |
| Accounts payable | 0.5 | 1.6 | |
| Derivative fi nancial instruments | 0.7 | 0.1 | |
| Other payables | 3.8 | 0.2 | |
| Total other payables | 4.5 | 0.3 | |
| Interest liability | 9.0 | 5.4 | |
| Other accruals | 2.4 | 4.3 | |
| Total accruals | 11.5 | 9.7 | |
| Total | 16.5 | 11.7 | |
| 1) The terms and conditions of convertible capital loan are presented in Note 28 Loans in the Notes to the Consolidated Financial Statements. |
|||
| EUR million | 2012 | 2011 | |
| Payables to Group companies | |||
| Accounts payable | 0.0 | 0.0 | |
| Charge-for-fi nancial cost payables | - | 1.9 | |
| Other payables | 1.6 | 20.7 |
The parent company doesn't have any mortgages nor given secu-
rities.
| EUR million | 2012 | 2011 |
|---|---|---|
| Payables on lease commitments | ||
| Maturing next fi nancial year | 0.6 | 0.8 |
| Maturing later | 0.3 | 0.4 |
| Total | 0.9 | 1.2 |
Citycon's fi nance leases mainly apply to computer hardware, machinery and equipment, cars and offi ce premises.
| EUR million | 2012 | 2011 |
|---|---|---|
| Bank guarantees | 63.7 | 39.2 |
| Of which on behalf of Group companies | 53.0 | 34.5 |
| EUR million | 2012 | 2011 | 2012 | 5 year review period10 year rewiev period 2011 |
|---|---|---|---|---|
| Property investment (net) | - | 0.9 | - | 0.8 |
| VAT of property investment (100%) |
- | 0.2 | - | 0.2 |
| out of which VAT has been deduct ed on the date of completion |
- | 0.2 | - | 0.1 |
| Annual amount under review | - | 0.0 | - | 0.0 |
| VAT refund liability at 31 Dec. | - | 0.0 | - | 0.1 |
All Group external derivative fi nancial instruments in Citycon are executed by the parent company Citycon Oyj. Derivative fi nancial instruments held with external counterparties are presented in Note 23. Derivative Financial Instruments in the Notes to the Consolidated Financial Statements. In addition Citycon Oyj had an internal foreign exchange derivative on 31 December 2012 with a fair value of EUR -1.5 million and a nominal amount of EUR 626.3 million.
Total other payables 1.6 22.6 Accruals 2.9 0.0 Total 4.5 22.6
Total short-term liabilities 172.1 257.5
Total liabilities 1,435.4 1,453.3
| Name | Number of shares | Percentage of shares and votes |
|---|---|---|
| Ilmarinen Mutual Pension Insurance Company | 29,344,735 | 8.98 |
| The State Pension Fund of Finland | 2,300,000 | 0.70 |
| OP Bank Group Pension Fund | 1,942,699 | 0.59 |
| Sijoitusrahasto Aktia Capital | 1,735,245 | 0.53 |
| Folketrygdfondet | 1,495,292 | 0.46 |
| Odin Finland | 1,494,401 | 0.46 |
| Mutual Insurance Company Pension-Fennia | 1,048,297 | 0.32 |
| Sijoitusrahasto Taaleritehdas Arvo Markka Osake | 970,001 | 0.30 |
| Sijoitusrahasto Evli Suomi Pienyhtiöt | 945,638 | 0.29 |
| OP Bank Group Pension Foundation | 872,465 | 0.27 |
| 10 biggest, total | 42,148,773 | 12.89 |
| Nominee-registered shares | ||
| Danske Bank Plc | 115,865,849 | 35.45 |
| Evli Bank Plc | 44,194,144 | 13.52 |
| Skandinaviska Enskilda Banken AB | 41,441,696 | 12.68 |
| Nordea Bank Finland Plc | 30,819,872 | 9.43 |
| Svenska Handelsbanken AB (publ), fi lial verksamheten i Finland | 17,101,902 | 5.23 |
| Other nominee-registered shares | 1,357,619 | 0.42 |
| Nominee-registered shares, total | 250,781,082 | 76.72 |
| Others | 33,950,157 | 10.39 |
| Shares, total | 326,880,012 | 100.00 |
Gazit-Globe Ltd. has informed the company that the number of shares held by it on 31 December 2012 amounts to 160,199,639 shares accounting for 49.0 per cent of the shares and voting rights in the company at the year-end of 2012. Gazit-Globe Ltd.'s shareholding is nominee-registered.
The company did not receive any notifi cations of changes in shareholding during the year 2012.
| Number of owners | Percentage of | owners Number of shares | Percentage of shares and votes |
|
|---|---|---|---|---|
| Financial and insurance corporations | 51 | 0.71 | 257,445,417 | 78.76 |
| Corporations | 558 | 7.77 | 9,345,021 | 2.86 |
| Households | 6,425 | 89.52 | 17,535,192 | 5.36 |
| General government | 12 | 0.17 | 34,320,703 | 10.50 |
| Foreign | 59 | 0.82 | 6,383,633 | 1.95 |
| Non-profi t institutions | 72 | 1.00 | 1,850,046 | 0.57 |
| Total | 7,177 | 100.00 | 326,880,012 | 100.00 |
| of which nominee-registered | 13 | 250,781,082 | 76.72 | |
| Issued stock, total | 326,880,012 |
| Number of owners | Percentage of | Percentage of shares and votes |
|
|---|---|---|---|
| 0.01 | |||
| 0.41 | |||
| 2.01 | |||
| 0.99 | |||
| 376 | 5.24 | 7,640,085 | 2.34 |
| 45 | 0.63 | 3,214,926 | 0.98 |
| 40 | 0.56 | 9,527,616 | 2.91 |
| 9 | 0.13 | 6,514,650 | 1.99 |
| 12 | 0.17 | 288,784,132 | 88.35 |
| 7,177 | 100.00 | 326,880,012 | 100.00 |
| 13 | 250,781,082 | 76.72 | |
| 326,880,012 | |||
| 580 2,874 2,781 460 |
8.08 40.04 38.75 6.41 |
owners Number of shares 30,676 1,355,949 6,571,878 3,240,100 |
| Formula | 2012 | 2011 | 2010 | 2009 | 2008 | |
|---|---|---|---|---|---|---|
| Share price, transactions, EUR | ||||||
| Low | 2.12 | 2.02 | 2.29 | 1.3 | 1.26 | |
| High | 2.71 | 3.41 | 3.31 | 3.16 | 4.28 | |
| Average | 16 | 2.43 | 2.77 | 2.84 | 1.99 | 2.94 |
| Market capitalisation, EUR million | 17 | 840.1 | 641.7 | 753.3 | 649.9 | 371.3 |
| Share trading volume | ||||||
| No. of shares traded as of year-start, 1,000 | 81,975 | 97,483 114,974 149,340 150,852 | ||||
| Percentage of total | 25.1 | 35.1 | 47.0 | 67.0 | 68.3 | |
| Average number of shares, 1,000 1) | 298 ,091 | 269,676 236,841 229,457 229,411 | ||||
| Average number of shares, diluted, 1,000 1) | 313,202 | 287,420 255,171 248,627 256,642 | ||||
| Number of shares on 31. Dec., 1,000 | 326,880 | 277,811 244,565 221,060 220,999 |
1) Calculation of the number of shares is presented in Note 16. Earnings per share. Number of shares has been issue-adjusted resulting from the rights issue executed in 2012.
| Equity ratio, % Shareholders' equity | |||
|---|---|---|---|
| 1) | Balance sheet total - advances received | X 100 | |
| 2) | Gearing, % | Interest-bearing liabilities - cash and cash equivalents | X 100 |
| Shareholders' equity | |||
| 3) | Return on equity (ROE), % | Profi t/loss for the period | X 100 |
| Shareholders' equity (weighted average) | |||
| 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-interest-bearing liabilities)/2 |
X 100 |
| 5) | Quick ratio Current assets Short-term liabilities |
||
| 6) | Earnings per share (EPS), EUR | Profi t/loss for the period att ributable to parent company shareholders | X 100 |
| Average number of shares for the period | |||
| 7) | Earnings per share, diluted, EUR | Profi t/loss for the period att ributable to parent company shareholders | X 100 |
| Diluted average number of shares for the period | |||
| 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 |
| Leased space | |||
| 14) | Occupancy rate, %, sq.m. | Leasable space | X 100 |
| Rental income as per leases | |||
| 15) | Occupancy rate (economic), % | Estimated market rent of vacant premises + rental income as per leases | X 100 |
| Value of shares traded (EUR) | |||
| 16) | Average share price, 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 2012
In Helsinki, on 5 February 2013
Chaim Katzman Ronen Ashkenazi
Roger Kempe Kirsi Komi
Bernd Knobloch Claes Ott osson
CEO
Marcel Kokkeel
We have today submitt ed the report on the conducted audit.
In Helsinki, on 5 February 2013
Ernst & Young Oy Authorized Public Accountants
Tuija Korpelainen Authorized Public Accountant
Jorma Sonninen Per-Håkan Westin
Yuval Yanai Ariella Zochovitzky
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, 2012. 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, together with the consolidated fi nancial statements included therein, and the report of the Board of Directors give a true and fair view of the fi nancial performance and fi nancial position of the company in accordance with the laws and regulations governing the preparation of the fi nancial statements and the report of the Board of Directors in Finland. The information in the report of the Board of Directors is consistent with the information in the fi nancial statements.
Helsinki, 5 February 2013
Ernst & Young Oy Authorized Public Accountants
Tuija Korpelainen Authorized Public Accountant
| Property | Address | Built in / renovated in |
Holding, % | Citycon's GLA, sq.m. |
Occupancy rate, %, sq.m. 1) |
Economic Occupancy rate, %, EUR 1) |
|||
|---|---|---|---|---|---|---|---|---|---|
| FINLAND | |||||||||
| SHOPPING CENTRES, HELSINKI METROPOLITAN AREA | |||||||||
| 1 | Arabia | 14,000 | 89.3 | 92.7 | |||||
| Helsingin Hämeentie 109-111 Koy | Hämeentie 109-111 | 00550 | HELSINKI | 1960/2002 | 100% | ||||
| 2 | Columbus | 20,900 | 97.3 | 97.5 | |||||
| Kauppakeskus Columbus Koy | Vuotie 45 | 00980 | HELSINKI | 1997/2007 | 100% | ||||
| 3 | Espoontori | 17,100 | 84.6 | 86.7 | |||||
| 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% | ||||
| 4 | Heikintori | 6,300 | 70.0 | 82.4 | |||||
| Heikintori Oy | Kauppamiehentie 1 | 02100 | ESPOO | 1968 | 69% | ||||
| 5 | Iso Omena | 63,000 | 99.7 | 99.8 | |||||
| Big Apple Top Oy | Piispansilta 9 | 02230 | ESPOO | 2001/2012 | 60% | ||||
| 6 | Isomyyri | 10,800 | 84.6 | 86.3 | |||||
| Myyrmäen Kauppakeskus Koy | Liesitori 1 | 01600 | VANTAA | 1987 | 74% | ||||
| Liesikujan Autopaikat Oy | Liesikuja 2 | 01600 | VANTAA | 1987 | 8% | ||||
| 7 | Lippulaiva | 19,000 | 98.4 | 99.0 | |||||
| Lippulaiva Koy | Espoonlahdenkatu 4 | 02320 | ESPOO | 1993/2007 | 100% | ||||
| 8 | Martinlaakson Ostari | 7,400 | 94.8 | 96.8 | |||||
| Martinlaakson Kivivuorentie 4 Koy | Kivivuorentie 4 | 01620 | VANTAA | 2011 | 100% | ||||
| 9 | Myllypuron Ostari | 7,400 | 83.8 | 85.3 | |||||
| Kivensilmänkuja 1 Koy | Kivensilmänkuja 1 | 00920 | HELSINKI | 2011/2012 | 100% | ||||
| 10 | Myyrmanni | 39,700 | 94.4 | 96.4 | |||||
| Myyrmanni Koy | Iskoskuja 3 | 01600 | VANTAA | 1994/2007/2011 | 100% | ||||
| Myyrmäen Autopaikoitus Oy | Iskoskuja 3 | 01600 | VANTAA | 1994 | 63% | ||||
| 11 | Tikkuri | 13,300 | 93.1 | 97.1 | |||||
| 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 | |||
| SHOPPING CENTRES, OTHER AREAS IN FINLAND | |||||||||
| 12 | Duo | 13,500 | 98.6 | 99.1 | |||||
| Hervannan Liikekeskus Oy | Insinöörinkatu 23 | 33720 | TAMPERE | 1979 | 79% | 5,200 | |||
| Tampereen Hermanni Koy | Pietilänkatu 2 | 33720 | TAMPERE | 2007 | 100% | 8,300 | |||
| 13 | Forum | 16,700 | 98.1 | 99.5 | |||||
| Jyväskylän Forum Koy | Asemakatu 5 | 40100 | JYVÄSKYLÄ | 1953/1972/1980/1991/2010 | 100% |
| Property | Address | Built in / renovated in |
Holding, % | Citycon's GLA, sq.m. |
Occupancy rate, %, sq.m. 1) |
Economic Occupancy rate, %, EUR 1) |
|||
|---|---|---|---|---|---|---|---|---|---|
| 14 | Galleria | 6,400 | 96.4 | 98.3 | |||||
| Oulun Galleria Koy | Isokatu 23 | 90100 | OULU | 1987 | 100% | 3,400 | |||
| Oulun Isokatu 20 Koy | Isokatu 20 | 90100 | OULU | 1967/1993/1998 | 100% | 1,500 | |||
| Oulun Isokatu 22 Koy | Isokatu 22 | 90100 | OULU | 1967/1993/1998 | 100% | 1,500 | |||
| 15 | IsoKarhu | 14,900 | 97.3 | 99.4 | |||||
| Kauppakeskus IsoKarhu Oy | Yrjönkatu 14 | 28100 | PORI | 1972/2001/2004 | 100% | ||||
| 16 | IsoKristiina | 19,400 | 89.0 | 92.2 | |||||
| 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 | plot | 100% | |||||
| 17 | Jyväskeskus | 5,800 | 90.2 | 94.3 | |||||
| Jyväskylän Kauppakatu 31 Koy | Kauppakatu 31 | 40100 | JYVÄSKYLÄ | 1955/1993 | 100% | ||||
| 18 | Koskikara | 5,800 | 85.1 | 89.2 | |||||
| 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 | |||
| 19 | Koskikeskus | 34,300 | 100.0 | 100.0 | |||||
| Tampereen Koskikeskus Koy | Hatanpään valtatie 1 | 33100 | TAMPERE | 1988/1995/2012- | 100% | ||||
| 20 | Linjuri | 9,200 | 100.0 | 100.0 | |||||
| Linjurin Kauppakeskus Koy | Vilhonkatu 14 | 24100 | SALO | 1993/2007 | 89% | ||||
| 21 | Sampokeskus | 13,800 | 85.4 | 92.0 | |||||
| Rovaniemen Sampotalo | Maakuntakatu 29-31 | 96200 | ROVANIEMI | 1990 | 100% | 11,700 | |||
| Lintulankulma Koy | Rovakatu 28 | 96200 | ROVANIEMI | 1989/1990 | 100% | 2,100 | |||
| 22 | Torikeskus | Kauppatori 1 | 60100 | SEINÄJOKI | 1992/2007 | 100% | 11,700 | 93.8 | 95.9 |
| 23 | Trio | 45,700 | 91.9 | 92.2 | |||||
| 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 | |||
| Hansaparkki Koy | Kauppakatu 10 | 15140 | LAHTI | 1992 | 36% |
| OTHER RETAIL PROPERTIES, HELSINKI METROPOLITAN AREA | |
|---|---|
| 1 | Aseman Ostari | 4,000 | 83.5 | 92.3 | |||||
|---|---|---|---|---|---|---|---|---|---|
| Kirkkonummen Liikekeskus Oy | Asematie 3 | 02400 | KIRKKONUMMI | 1991/2011 | 67% | ||||
| 2 | Asolantien Liikekiinteistö Oy | Asolanväylä 50 | 01360 | VANTAA | 1986 | 100% | 1,800 | 100.0 | 100.0 |
| 3 | Espoon Louhenkulma Koy | Louhentie 2 | 02130 | ESPOO | 1963 | 50% | 880 | 100.0 | 100.0 |
| 4 | Hakunilan Keskus | 3,780 | 96.7 | 96.2 | |||||
| Hakucenter Koy | Laukkarinne 6 | 01200 | VANTAA | 1986 | 19% | 780 | |||
| Hakunilan Keskus Oy | Laukkarinne 4 | 01200 | VANTAA | 1982 | 41% | 3,000 | |||
| 5 | Kontulan Asemakeskus Koy | Keinulaudankuja 4 | 00940 | HELSINKI | 1988/2007 | 35% | 4,500 | 100.0 | 100.0 |
| 6 | Laajasalon Liikekeskus | 2,660 | 100.0 | 100.0 | |||||
| Laajasalon Liikekeskus Oy | Yliskyläntie 3 | 00840 | HELSINKI | 1972/1995 | 50% | 2,300 | |||
| Kuvernöörintie 8 Koy | Kuvernöörintie 8 | 00840 | HELSINKI | 1982 | 100% | 360 | |||
| 7 | Lautt asaaren Liikekeskus Oy | Lautt asaarentie 28-30 | 00200 | HELSINKI | 1970 | 24% | 1,500 | 100.0 | 100.0 |
| 8 | Länsi-Keskus Koy | Pihatörmä 1 | 02210 | ESPOO | 1989 | 41% | 7,800 | 90.2 | 88.8 |
| 9 | Minkkikuja 4 Koy | Minkkikuja 4 | 01450 | VANTAA | 1989 | 100% | 2,300 | 100.0 | 100.0 |
| Property | Address | Built in / renovated in |
Holding, % | Citycon's GLA, sq.m. |
Occupancy rate, %, sq.m. 1) |
Economic Occupancy rate, %, EUR 1) |
|||
|---|---|---|---|---|---|---|---|---|---|
| 10 | Pihlajamäen liiketalo Oy | Meripihkatie 1 | 00710 | HELSINKI | 1970 | 43% | 1,700 | 84.3 | 66.6 |
| 11 | Salpausseläntie 11 Koy | Salpausseläntie 11 | 00710 | HELSINKI | 1973 | 31% | 600 | 0.0 | 0.0 |
| 12 | Sampotori | Heikintori, Kauppamiehentie 1 | 02100 | ESPOO | plot | 100% | 50 | 100.0 | 100.0 |
| 13 | Sinikalliontie 1 Koy | Sinikalliontie 1 | 02630 | ESPOO | 1964/1992 | 100% | 15,700 | 96.8 | 98.7 |
| 14 | Soukan Itäinentorni As Oy | Soukantie 16 | 02360 | ESPOO | 1972 | 27% | 1,600 | 100.0 | 100.0 |
| 15 | Talvikkitie 7-9 Koy | Talvikkitie 7-9 | 01300 | VANTAA | 1989 | 100% | 9,700 | 97.8 | 96.9 |
| 16 | Ultima Oy | Äyritie 1 | 01510 | VANTAA | plot | 100% | |||
| 17 | Vantaan Laajavuorenkuja 2 Koy | Laajavuorenkuja 2 | 01620 | VANTAA | 1976 | 100% | 2,000 | 100.0 | 100.0 |
| 18 | Vantaan Säästötalo Koy | Kielotie 20 | 01300 | VANTAA | 1983 | 61% | 3,800 | 96.9 | 98.0 |
| 19 | Wavulinintie 1 Koy | Wavulinintie 1 | 00210 | HELSINKI | 1950/1992 | 100% | 1,700 | 51.3 | 21.8 |
| OTHER RETAIL PROPERTIES, OTHER AREAS IN FINLAND | |||||||||
| 20 | Forssan Hämeentie 3 Koy | Hämeentie 3 | 31100 | FORSSA | 1978 | 100% | 4,500 | 0.0 | 0.0 |
| 21 | Kaarinan Liiketalo Koy | Oskarinaukio 5 | 20780 | KAARINA | 1979/1982 | 100% | 9,200 | 95.0 | 96.3 |
| 22 | Karjaan Ratakatu 59 Koy | Ratakatu 59 | 10320 | KARJAA | 1993 | 100% | 3,100 | 100.0 | 100.0 |
| 23 | Kotkan Keskuskatu 11 Koy | Keskuskatu 11 | 48100 | KOTKA | 1976 | 100% | 4,300 | 54.5 | 59.0 |
| 24 | Kuopion Kauppakatu 41 Koy | Kauppakatu 41 | 70100 | KUOPIO | 1977 | 100% | 11,200 | 96.0 | 97.4 |
| 25 | Kuusankosken Kauppakatu 7 Koy | Kauppakatu 7 | 45700 | KUUSANKOSKI | 1980 | 100% | 2,100 | 100.0 | 100.0 |
| 26 | Lahden Kauppakatu 13 Koy | Kauppakatu 13 | 15140 | LAHTI | 1971 | 100% | 8,600 | 100.0 | 100.0 |
| 27 | Lentolan Perusyhtiö Oy | Mäkirinteentie 4 | 36220 | KANGASALA | 2007 | 100% | 11,900 | 93.5 | 94.1 |
| 28 | Lillinkulma Koy | Jännekatu 2-4 | 20760 | PIISPANRISTI | 2007 | 100% | 7,400 | 75.0 | 76.7 |
| 29 | Orimatt ilan Markkinatalo Oy | Erkontie 3 | 16300 | ORIMATTILA | 1983 | 77% | 3,100 | 89.7 | 90.5 |
| 30 | Porin Asema-aukio Koy | Satakunnankatu 23 | 28130 | PORI | 1957/1993 | 100% | 18,900 | 48.2 | 38.8 |
| 31 | Porin Isolinnankatu 18 Koy | Isolinnankatu 18 | 28100 | PORI | 1986/2012 | 100% | 5,300 | 61.7 | 68.1 |
| 32 | Puijonlaakson Palvelukeskus Koy | Sammakkolammentie 6 | 70200 | KUOPIO | 1971 | 31% | 1,500 | 100.0 | 100.0 |
| 33 | Runeberginkatu 33 Koy | Runeberginkatu 33 | 06100 | PORVOO | 1988 | 100% | 6,300 | 100.0 | 100.0 |
| 34 | Säkylän Liiketalo Koy | Pyhäjärventie 3 | 27800 | SÄKYLÄ | 1969 | 100% | 1,200 | 100.0 | 100.0 |
| 35 | Vaakalintu Koy | Keskuskatu 15 | 11100 | RIIHIMÄKI | 1980 | 96% | 6,700 | 100.0 | 100.0 |
| 36 | Varkauden Relanderinkatu 30 Koy | Relanderinkatu 28-34 | 78200 | VARKAUS | 1990 | 100% | 8,200 | 100.0 | 100.0 |
| 59 | FINLAND TOTAL | 595,670 | 91.5 | 95.3 | |||||
| SWEDEN | |||||||||
| SHOPPING CENTRES, STOCKHOLM AREA AND UMEÅ | |||||||||
| 1 | Fruängen Centrum | Fruängsgången | 12952 | HÄGERSTERN | 1965 | 100% | 14,900 | 91.4 | 92.8 |
| 2 | Högdalen Centrum | 19,300 | 95.9 | 98.0 | |||||
| Citycon Högdalen Centrum AB | Högdalsgången 1-38 | 12454 | BANDHAGEN | 1959/1995 | 100% | ||||
| 3 | Jakobsbergs Centrum | 45,400 | 95.9 | 96.9 | |||||
| Citycon Jakobsbergs Centrum AB | Tornérplatsen 30 | 17730 | JÄRFALLA | 1959/1993 | 100% | ||||
| 4 | Liljeholmstorget Galleria | 40,900 | 98.6 | 97.9 | |||||
| Citycon Liljeholmstorget Galleria AB | Liljeholmstorget 7 | 11763 | STOCKHOLM | 1973/1986/2007/2008/2009 | 100% | ||||
| 5 | Strömpilen | 26,700 | 98.3 | 98.3 | |||||
| Strömpilen AB | Strömpilsplatsen | 90743 | UMEÅ | 1927/1997 | 100% | ||||
| 6 | Tumba Centrum | 25,500 | 97.4 | 97.5 | |||||
| Citycon Tumba Centrumfastigheter AB Tumba Torg 115 | 14730 | BOTKYRKA | 1954/2000 | 100% |
| Property | Address | Built in / renovated in |
Holding, % | Citycon's GLA, sq.m. |
Occupancy rate, %, sq.m. 1) |
Economic Occupancy rate, %, EUR 1) |
|||
|---|---|---|---|---|---|---|---|---|---|
| 7 | Åkermyntan Centrum | Drivbänksvägen 1 | 16574 | HÄSSELBY | 1977/2012 | 100% | 9,500 | 94.0 | 96.0 |
| 8 | Åkersberga Centrum | 27,500 | 81.7 | 86.9 | |||||
| Åkersberga Centrum AB | Storängstorget | 18430 | ÅKERSBERGA | 1985/1995/1996/2010/2011 | 75% | ||||
| SHOPPING CENTRES, GOTHENBURG AREA | |||||||||
| 9 | Stenungs Torg | 36,400 | 94.8 | 95.7 | |||||
| Stenungs Torg Fastighets AB | Östra Köpmansgatan 2-16, 18A-C 44430 | STENUNGSUND | 1967/1993 | 100% | |||||
| OTHER RETAIL PROPERTIES, STOCKHOLM AREA AND UMEÅ | |||||||||
| 1 | Kallhäll | Skarprätt arvägen 36-38 | 17677 | JÄRFALLA | 1991 | 100% | 3,700 | 63.4 | 73.6 |
| 2 | Länken | Gräddvägen 1-2 | 90620 | UMEÅ | 1978/2004/2006 | 100% | 7,300 | 100.0 | 100.0 |
| OTHER RETAIL PROPERTIES, GOTHENBURG AREA | |||||||||
| 3 | Backa | Backavägen 3-5 | 41705 | GOTHENBURG | 1990 | 100% | 7,800 | 29.1 | 25.9 |
| 4 | Hindås | Hindås Stationväg 41-47 | 43063 | HINDÅS | 1978/1999 | 100% | 1,600 | 100.0 | 100.0 |
| 5 | Lindome | Almåsgången | 43730 | LINDOME | 1974 | 100% | 7,800 | 96.8 | 97.2 |
| 14 | SWEDEN TOTAL | 274,300 | 92.6 | 94.7 | |||||
| BALTIC COUNTRIES AND NEW BUSINESS | |||||||||
| ESTONIA, SHOPPING CENTRES | |||||||||
| 1 | Kristiine Keskus | 42,700 | 100.0 | 100.0 | |||||
| Kristiine Keskus Oü | Endla 45 | 10615 | TALLINN | 1999-2002/2010 | 100% | ||||
| 2 | Magistral | 11,700 | 100.0 | 100.0 | |||||
| Magistral Kaubanduskeskuse Oü | Sõpruse pst 201/203 | 13419 | TALLINN | 2000/2012 | 100% | ||||
| 3 | Rocca al Mare | 53,300 | 100.0 | 100.0 | |||||
| Rocca al Mare Kaubanduskeskuse AS | Paldiski mnt 102 | 13522 | TALLINN | 1998/2000/2007-2009 | 100% | ||||
| LITHUANIA, SHOPPING CENTRES | |||||||||
| 4 | Mandarinas | 7,900 | 100.0 | 100.0 | |||||
| UAB Prekybos Centras Mandarinas | Ateities g. 91 | 06324 | VILNIUS | 2005 | 100% | ||||
| DENMARK, SHOPPING CENTRES | |||||||||
| 5 | Albertslund Centrum | 14,700 | 95.2 | 95.5 | |||||
| Albertslund Centrum ApS | Stationstorvet 23 | 2620 | ALBERTSLUND | 1965 | 100% | ||||
| 5 | BALTIC COUNTRIES AND NEW BUSINESS, TOTAL | 130,300 | 99.5 | 99.6 | |||||
| 78 | TOTAL ALL | 1 000 270 | 92.8 | 95.7 |
1) Formulas are available on page XXX.
In accordance with our instructions as the External Valuer of Citycon Oyj ("Company"), we have carried out a fair valuation of the Properties held within the Company's investment property portfolio as at 31 December 2012, to arrive at our opinion of fair value (no allowance was made for the typical purchaser's costs).
Fair value is defi ned by the International Accounting Standards Board (IASB) as:
"The price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants on the measurement date."
The International Valuation Standards Board (IVSB) considers that defi nitions of fair value are generally consistent with market value, and we confi rm that the fair value reported is eff ectively the same as our opinion of the market value.
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 our provision of this advice.
We carried out inspections of each of the properties during September-December 2011. We also re-inspected 35 properties during 2012 and we also inspected all the properties acquired in 2012. We have not measured the properties but have relied on the leasable areas supplied to us by the Company. We have not read copies of the leases or of other related documents, but have relied on the tenancy information provided by the Company, which refl ects the latest available tenancy position.
The valuations were carried out by local Jones Lang LaSalle offi ces in Finland and Sweden. In Estonia, Lithuania and Denmark, we were supported in the delivery of our advice by local affi liates.
This report is addressed to and may be relied upon by the Company. It has no other purpose and should not be relied on by any other person or entity. No responsibility whatsoever is accepted on the part of 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.
The economic picture across Europe remains mixed and economic growth projections for 2012 indicate recession in Southern Europe, mild contraction in the Benelux countries and the UK, whilst Germany and the Nordics are expected to see some growth and some of the CEE countries relatively strong growth. Projections for 2013 point to improved growth rates in a number of countries, although it is still expected to remain weak. The strongest growth in 2013 is expected in Central and Eastern Europe, the Nordic countries and Turkey.
In 2011, GDP increased by 2.7% according to Statistics Finland, which means that Finland clearly outperformed the eurozone average. In the third quarter of 2012, GDP growth was -0.1% compared the previous quarter and -1.2% compared to Q3 2011. For 2013, all the current forecasts promise expansion but the variance is wide, from 0.5% up to 2.5%. Exports in Finland continued to increase by 2.4% in Q3 2012 compared to the previous quarter, but dropped 1.8% from Q3 2011.
Consumer confi dence in the economy was 3.5 in December, which is low compared to the long-term average (12.6). However, it was higher than previous months (November 1.0 and October -1.6). Confi dence in retail decreased during autumn 2012. The confi dence indicator was -9 in December while the long-term average is 0. Despite this weak confi dence level, retail sales rose by 4.9% and volume by 1.7% in November (year-on-year).
GDP growth was 3.9% in 2011, easily surpassing the EU average (1.5%). GDP growth has been driven by increasing exports, household consumption and business investment, all of which have been assisted by relatively low interest rates and the government's expansive economic policies. Looking ahead, GDP growth for Sweden in 2012 was forecast to be around 0.8% and then 1.5% in 2013, compared with eurozone forecasts of -0.4% in 2012 and -0.2% in 2013.
Over the last decade, from a European perspective, private consumption growth for Sweden has been well above the average for the European Union. In the period 2001 to 2011, real private consumption growth was 14.1% in the EU and 23.1% in Sweden, and over the next fi ve years real private consumption growth is forecast to be slightly in excess of the EU average, according to Global Insight.
Retail sales in Sweden have performed well in recent years and are forecast to outperform most other Western European countries in the period 2011-2015. In 2011, nominal retail sales increased by 0.8%, of which non-daily goods decreased by 0.5% and daily goods increased by 2.5%. An increase of 2.0% in total nominal retail sales for Sweden is currently forecast for 2012 by HUI, up from the 1.3% forecast in Q1 2012. Reasons for this upward adjustment include the fact that the rate of redundancies and unemployment are not as severe as expected at the beginning of the year.
Economic growth in Estonia slowed as expected in 2012, but it has remained above the eurozone average. Estonia's economic growth in Q3 2012, according to revised results, was 3.5%, mainly supported by domestic demand. The Bank of Estonia forecasts the annual GDP real growth rate to reach 2.9% and to grow by 3.0% in 2013 and by 4.0% in 2014. Demand in Estonia's exports markets is expected to grow by 3.2% in 2013 and by 5.6% in 2014.
Infl ation in 2012 was 4.3%, predominantly due to an increase in energy and food prices. The infl ation forecasts for 2013 and 2014 are 3.6% and 2.4% respectively.
In November 2012, revenues from the sales of retail trade enterprises amounted to EUR 446 million, of which the retail sales of goods accounted for 80%. Compared to November 2011, the revenues from sales increased by 9% at current prices, while the average growth during the fi rst eleven months of 2012 was 15%.
Lithuanian economic growth has signifi cantly exceeded that of the eurozone countries. Economic activity increased due to signifi cantly higher value added in agriculture and industry. However, with expectations of economic growth weakening worldwide, weaker economic prospects are expected in Lithuania as well. The Bank of Lithuania forecasts an annual GDP real growth rate of 3.0% in 2012 and 3.1% in 2013. With consumer
confi dence below its average level for more than a decade, it is anticipated that private consumption will grow relatively slowly in 2013. Annual infl ation should stand at 3.2% in 2012 and 2.8% in 2013.
In November 2012, the revenues of retail trade enterprises grew by 5.1% year-on-year at constant prices. During the eleven months of 2012 (January–November), the revenues of enterprises trading in food products increased by 1.4% over the year at constant prices, and of those trading in non-food products revenues increased by 11.3%.
While the crisis in Europe drags on, its eff ects are placing the Danish economy under increasing pressure. According to forecasts, Danish year-on-year GDP growth slipped into negative territory in 2012 but it is predicted to recover in 2013, driven mainly by an increase in consumer spending and exports as well as continued growth in commercial investment volumes.
Hopes that 2012 would mark the beginning of the end of the Danish economic downturn and the start of stable growth were quashed in the early months of the year when it became evident that the European sovereign debt crisis continued to take its toll on Danish economy. In recent years, Danish exports have come under severe pressure because multiple key trading partners were hit very hard by the sovereign debt crisis. Irrespective of these diffi cult circumstances, Danish businesses have been able to post stable growth fi gures throughout the crisis, serving as an important driver of Danish GDP growth. In addition, the Danish government initiative to introduce the tax-free withdrawal of early retirement savings in 2012 helped to spur consumer spending, even at a time when the economy had come to a near-standstill. However, this positive trend was countered by a negative trend in net exports, suggesting that the increase in consumer spending has been absorbed largely by imported goods, such as cars. Overall, GDP growth was projected to stand at -0.5% in 2012, followed by an increase of 0.7% in 2013 and 1.6% in 2014.
Retail sales stayed at a low level in 2012. At the end of November retail sales were down 2% measured on quantity and around 0.5% measured on value year-on-year. Retail sales are still aff ected by the negative trend in the overall economic growth fi gures, which makes people reluctant to spend money because they worry about the future.
Source: Statistics authorities, research institutes and banks
Overall, the Finnish property investment market has witnessed low levels of transactions since the slowdown in in the fi rst half of 2008. Although investment demand has been increasing, the scarce supply of prime assets continues to limit transactional activity. During 2012, retail investment volumes briefl y exceeded the low levels of 2011, ending up at EUR 400 million. The forecast for 2013 does not indicate any big changes in the market.
The polarisation of the market seems to be continuing. Demand for core assets remains strong, as equity-rich investors keep looking for safe havens, while tightening fi nancing conditions are affecting the business logic of value added and opportunistic investors. Consequently, shopping centre prime yields have remained stable or have even slightly decreased, but the secondary yields are facing upward pressure.
As a consequence of relatively strong retail sales development, retail rents have also been increasing. However, rental growth has been focused on the prime locations, except in the retail warehouse sector where the overall rental growth seems to be over. At the same time, occupier demand is strongest in prime high street and shopping centre units.
The retail property transaction volume in Q4 2012 was some SEK 7.6 billion, which is higher than the SEK 6.8 billion of retail property transacted in Q4 2011. However, in 2012 the retail property transaction volume was lower than in 2011. In 2011, some SEK 16.1 billion of retail property was transacted, which compares with the SEK 13.4 billion in 2012. Around 80% of the retail property transaction volume in Q4 2012 were transactions where either the purchaser or the vendor was an international investor.
Investors' interest is strong for retail property in a good location and with good specifi cation, with relatively strong tenants and low vacancy rates. However, retail properties which do not meet some or all of these criteria will be more diffi cult to sell.
Yields for prime shopping centres are currently in the region of 5.50% and 6.25% for prime retail warehouse parks. These yields have generally remained stable since mid-2011, although the prime yield for retail warehouse parks has increased by 25 bps in this quarter.
Recently, prime retail rental growth has been in line with or slightly in excess of infl ation, while secondary retail rental growth has generally been fl at or slightly negative. In recent months, shopping centre rental growth has tended to surpass rental growth in external retail warehouse parks. The combination of lower economic and retail sales growth as well as the development of more retail accommodation has meant that recent retail rental growth has been lower than what has oft en been seen in Sweden over the last decade.
The Estonian consumer confi dence indicator in December 2012 was higher compared to the year-end level of 2011 and reached the long-term average level. The sentiment of retail trade enterprises was clearly above 10-year indicator average, supported by rising demand. Strong sales encourages demand for retail space, especially in central Tallinn areas and professionally managed modern shopping centres. The average vacancy rates in Tallinn shopping centres is close to zero, while retail rents have risen in line with infl ation.
Retail developers are adding approximately 100,000 square metres of new retail space to the Tallinn market over the next 24 months. This volume includes the launch of two new centres – one in East Tallinn and the other in the city centre, plus the expansion of existing shopping centre stock. All in all there is over 500,000 square metres of retail space in the early planning phase, but the market will not absorb such a volume and only professional developers can realise their projects over multiple years. Major grocery chains expand their business in the hyper- and supermarket segments. Neighbourhood shopping also has growth potential in residential areas.
The investment market has been active in the retail segment; besides transactions in the super- and hypermarket segment, there was one larger EUR 21.5 million shopping centre transaction in Tallinn in Q3 (GLA 21,500 sq m). The other similar-sized shopping centre transaction is in the closing phase and will be fi nalised in January 2013. As the transaction market has strengthened, retail yields have dropped below 8%.
Vilnius' retail property market is growing, as three retail projects with a total GLA of 60,000 sq m are planned in the near future due to international fashion retailers entering the market and domestic retailers keeping pace with rising competition. A large IKEA store with a GLA of 30,000 sq m will open its doors in 2013. Retailer expansion and new brands entering the market have cut vacancy rates in prime shopping centres to a minimum. Rent reductions are running out and rents are increasing in line with infl ation. A large gap persists between rent rates in prime and secondary centres.
Until mid-2012, the interest from international investors was focused mainly on Estonia, but gradually demand is spreading across the Baltics, including Vilnius. The last quarter of 2012 brought about a EUR 25 million retail transaction, as Swedish investment fund East Capital acquired Gedimino Street 9, a 17,000 sq m high street shopping mall in the centre of Vilnius. The prime shopping centre yields stand close to 8.0% and the increase in investment activity will probably lead to further yield reductions.
Investment activity in commercial real estate was fairly low again in 2012. The total transaction volume was at the same level as in 2011, but the retail share of the total volume dropped signifi cantly. In 2011 the retail transaction volume was around 30% of the total investment volume, but in 2012 this number was close to 15%. The primary reason was that one of the landmark properties in Copenhagen – Illum shopping centre – was traded in 2011 and this deal alone was DKK 1.6bn. There were no massive deals of this kind in 2012 in the retail segment and therefore the share of retail investment has dropped.
The primary focus in 2012 in the retail investment market was on high street properties in Copenhagen. There has been a growing interest, particularly from foreign investors, in this type of asset and yield is down to 4.75% for prime assets in Copenhagen. In the shopping centre market, liquidity is still low because a large number of the shopping centres are owned by only two dominant investors who are very eager to sell properties. The yield for prime shopping centres was around 5-5.5% by the end of 2012 and it has been fl at for last 12 months.
We have adopted a 10-year cash fl ow model as a main valuation method. This model was provided by the Company. Cash fl ows are calculated based on information from existing lease agreements. For the period aft er the expiry of these agreements, our market evaluation of the estimated rental value (ERV) 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 aft er the start of the assumed new lease, results in the Eff ective Gross Rental Income. Eff ective Gross Rental Income less operating expenses (including 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 income stream's present value.
The residual value at the end of the 10-year cash fl ow period is calculated by using an exit yield to capitalise the 11th year bottom-level cash fl ow. The value of the property is calculated as the 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 usable building rights).
Development projects are included in the valuation of the portfolio, in line with information received from representatives of the Company. Based on the applied valuation model, future rental income is based on fi nalised rental agreements and rental projections for the valued development project. Correspondingly, the development period is considered a period when premises generate no or 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 a development project increases automatically as investments are committ ed and the opening day of the renewed premises approaches.
The property portfolio consists mainly of retail properties located in Finland, Sweden, Estonia, Lithuania and Denmark. Citycon Oyj fully or partly owns a total of 76 properties, of which 57 are located in Finland, 14 in Sweden, three in Estonia, one in Lithuania and one in Denmark. The core of the portfolio consists of 37 shopping centre properties, which comprise 91.4% of the portfolio's leasable area and represent most of its value. In addition to the shopping centres, there are other retail and development properties.
Since the previous valuation, two properties have been included in the external valuation; Citytalo Shopping Centre, located in Oulu, Finland, which is part of Galleria, a property Citycon previously owned, and Albertslund Shopping Centre, located in Copenhagen, Denmark.
The total fair value of the portfolio in Q4 2012 was approximately EUR 2,704 million. Comparing the Q3 2012 fair value of the portfolio, the fair value increased by EUR 48 million, i.e. 1.8% and the weighted average yield requirement of the portfolio has remained at 6.3%. The increase in fair value is mainly driven by investments made in Q4 and new properties (Albertslund and Citytalo).
In the table on the next page, weighted average yields (weighted by the value of the property) are presented. Citycon's portfolio includes only a few relatively valuable properties compared to the rest of the portfolio. This means that weighted averages are highly infl uenced by changes in these few properties. Iso Omena is the portfolio's most valuable property.
The fair value of the Finnish portfolio is EUR 1,652 million and it increased by 1.8% (EUR 29.8 million), compared to the Q3 value. Compared to Q3 fi gures the weighted yield requirement (6.2%) has decreased by 10 bps, and the weighted initial yield (6.2%) and the reversionary yield (6.8%) have stayed the same. The change in the value of the Finnish portfolio is mainly due to the value increase in shopping centre properties.
The fair value of the Swedish portfolio is EUR 736 million, meaning that the portfolio's value has decreased by 0.6% since Q3. The decrease in value is mainly due to the weakening of the Swedish krona. The weighted average yield requirement for the Swedish portfolio increased by 10 bsp, now being at 6.0%. The weighted average initial yield has decreased by 10 bps (5.6%) and the weighted average reversionary yield (6.6%) remained unchanged.
The value of the Baltic countries and the new business portfolio in Denmark is EUR 316 million. Compared to the Q3 value, this represents a 7.5% increase in value. The increase in value is mainly due to the addition of Albertslund in this portfolio. The weighted average yield requirement of the portfolio has decreased by 20 bps, now being 7.7%. The weighted average initial yield decreased by 30 bps, now being 7.9% and the weighted average reversionary yield increased to 8.2% by 20 bps.
A sensitivity analysis of the portfolio's fair value was carried out by creating a summary cash fl ow based on individual cash fl ow calculations. Changes in fair value were tested by modifying the key input parameters of the calculations. The parameters tested were yield requirement, estimated rental value and operating expenses. The current fair value of the properties was used as a starting point for the analysis, which was performed by changing one parameter at a time while all the others remain unchanged, and then calculating the corresponding fair value of the total portfolio. Sensitivity analysis is a simplifi ed model, intended to support one's understanding of the value eff ect of diff erent parameters on the valuation. The fi gure below gives the results of the analysis.
As seen in the fi gure above, the value of the portfolio is most sensitive to the changes in estimated rental value and yield requirement. A 10% increase in estimated rental value leads to a change of around 14% in value, while a 10% fall in the yield requirement causes an increase of around 11% in value. Changes in expenses have more modest eff ect on the value than other parameters.
We are of the opinion that the aggregate of the fair value, free of liabilities and debt, of the properties in the subject portfolio as at 31 December 2012, is approximately EUR 2,704,000,000 (Two Thousand Seven Hundred and Four Million Euros)
In Helsinki and Stockholm, 16 January 2013 Yours faithfully
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
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