Citycon has had an active and eventful first quarter of 2019 both in terms of investor relations and other activities.
New management started
As announced earlier, Citycon’s new CEO F. Scott Ball took over as CEO on January 1, 2019. Scott has an extensive track record in the shopping centre industry and a particularly strong background in asset management. At the same time, Citycon’s new Chief Operating Officer Henrica Ginström started in her new position. Henrica has been with the company for almost eight years, most recently as a Commercial Director in Norway. As a company, we are very excited to receive fresh ideas to further improve our customers’ shopping experiences and to leverage Scott’s extensive background from the North American retail markets.
The new management of Citycon has really hit the ground running, initiating an organization change during the first quarter of 2019. The new organisation will increase operational accountability, enable us to focus on and grow specific parts of our business – namely, specialty leasing – and allow us to take advantage of our pan-Nordic scale, such as in purchasing.
Annual General Meeting held in March – Reverse split conducted on the Citycon share
Citycon’s Annual General Meeting was held on March 13 in Iso Omena shopping centre in Espoo, Finland. This AGM was the first one we held in one of our shopping centres – and more specifically, in a cinema in one of our shopping centres! We had over 354 shareholders present either in person or via representatives. Our CEO F. Scott Ball and CFO and Executive Vice President Eero Sihvonen gave presentations to Citycon’s shareholders on the company’s financial development as well as operational performance in 2018. The recording of the presentations can be viewed here.
Among other things, the AGM approved the Board of Directors’ proposal of a reverse split on the Citycon share. The number of outstanding shares in Citycon was reduced by merging each five shares into one share, and trading with the new shares started on March 18. We have been asked about the reasoning behind the reverse split. The aim of the reverse split is to increase the appeal of the Citycon share and give some flexibility in connection with fund distributions going forward. Of course, this is only one tool in the toolbox to increase the appeal of the Citycon share.
Investor activity during the quarter – investros interested in new management's priorities
The general market sentiment towards retail real estate shares has been negative over the past few years. However, the share price performance of retail real estate shares has been very positive over the past three months. This has likely been supported by the good general market sentiment, expectations of continued low interest rates as well as the high dividend yield the retail real estate sector offers.
During the first quarter, we met with investors on roadshows and conferences in Helsinki, Amsterdam, London and Miami and had several interesting discussions with the capital markets. In addition to discussions around the outlook of the industry, the capital markets had several Citycon-specific topics. Citycon’s loan-to-value level raised some questions among the investors as it is slightly beyond the company’s own target range. Interestingly, we have seen a clear divergence between investors regarding their approach to an optimal leverage ratio: Anglo-Saxon investors seemed to prefer lower leverage, while Swedish investors especially seemed to put more focus on cash flow generation. Citycon’s target is to reduce the leverage to our own target range of 40-45% in the mid-term by recycling capital.
Investors have also showed great interest towards our new management and their key focus areas going forward. As a result, we also arranged a lunch in February for analysts following Citycon to allow them to meet with our new CEO, F. Scott Ball. The importance of further strengthening Citycon’s asset management, stringent focus on capital expenditure as well as the opportunities arising from the new organisation were discussed during the lunch.
We will publish our Interim Report for January-March 2019 on Wednesday, April 17 and we are looking forward to catching up with the capital markets after that!
IR and Communications Director