Citycon hosted its bi-annual Capital Markets Day in Stockholm on Monday 2 and Tuesday 3 September 2019. The purpose of the day was to give the investor community a strategic update from Citycon’s new management. The event in Stockholm was attended by around 25 investors and sell-side analysts together with a good attendance of online viewers.
The Capital Markets Day was kicked off by asset tours of Citycon’s two largest shopping centres in Sweden: Liljeholmstorget Galleria and Kista Galleria in Stockholm. The participants had the chance to tour the shopping centres and their surroundings and hear about the long-term development potential in both assets. Citycon has significant long-term plans to densify the urban area around both assets into more mixed-use urban spaces. The plans for Liljeholmstorget Galleria have progressed further and the potential development project could include up to 170 apartments in addition to retail expansion of the existing shopping centre.
During the afternoon, Citycon’s current management – CEO F. Scott Ball, CFO and EVP Eero Sihvonen, COO Henrica Ginström and CDO Erik Lennhammar – gave an update on Citycon’s short and long-term priorities. Citycon’s CEO and COO started in their positions in January 2019, while CDO Erik Lennhammar joined Citycon in August 2019, so the majority of the Corporate Management committee is new. CFO Eero Sihvonen is a long-serving Cityconner and has been with the company since 2005. The Capital Markets Day was also a great way for us to introduce our relatively new management to the capital markets.
The three main messages of the Capital Markets Day were the following:
1) Citycon has a stable and solid business model
In a world where retail is not in vogue, it is important to make a distinction between different modes of retail instead of putting all retail real estate companies in the same basket. Citycon has a solid and stable business model with a diversified tenant mix focusing on groceries and other daily services. As a result, we are much less dependent on fashion operators, which clearly differentiates us from many of our peers. All Citycon shopping centres are connected to public transportation and our shopping centres attract over 170 million visitors annually, which illustrates how closely the shopping centres are linked to their surrounding communities.
2) Short-term focus is to maximise asset values
In the short-term, Citycon’s aim is to maximise the value of the current portfolio. Several short-term focus areas were discussed at the Capital Markets Day: how to control the cost side, namely operational costs as well as capital expenditure while at the same time finding new income streams, particularly from specialty/common area leasing. Citycon has implemented a new organisation during this year and we have taken concrete steps in order to improve our asset management and harmonise processes across our operating countries.
3) Long-term, portfolio offers significant densification potential
Citycon has assets in urban locations across the Nordics, which offer a lot of potential for densification. In the long term, our ambition is to become a mixed-use urban real estate developer and owner as opposed to being a pure retail player. During the Capital Markets Day, we discussed what kind of opportunities the portfolio offers and how we could take advantage of these opportunities. The company is still in its early stages, but based on a preliminary assessment, up to 4,500 apartments (subject to zoning approval) could be built within our current portfolio. The long-term aim is to create additional value to the stakeholders in addition to an already functioning and stable business model. With a new team in place, we are currently looking at how to best exploit these opportunities.
The CMD received positive feedback from the investor community that it had increased confidence in the company’s ability to create value for stakeholders and that the new management is taking steps in the right direction.
The presentations of the day as well as the live recording are available on Citycon’s Investor Relations website at https://www.citycon.com/cmd2019. In any IR-related questions, please feel free to reach out to Citycon’s IR team.