"The current operating environment validated the stability of the markets Citycon operates within as well as our strategy that focuses on community based urban hubs. Our tenant mix, that is heavily reliant on municipality and grocery anchor tenants, brings resilience to our portfolio which was reflected in our Q2 results.
Our centres located in the Nordics remained open throughout the quarter. The legitimate government restrictions temporarily affected our footfall. We were pleased to see that while footfall declined, average spend per consumer increased in our centres. Acknowledging the large variance in resilience across tenant sectors, however, we offered certain short-term easements to some tenants suffering the most in order to support their businesses through the exceptionally challenging times. This affected Citycon’s results and our like-for-like net rental income declined by 4.1%. COVID-19 also put increased pressure on real estate valuations that declined by 2.1%. The decline in valuations remained modest considering the circumstances and reflects the resilience of our portfolio and strategy that focuses on grocery-anchored mixed-use centres.
The Nordics are proving their strength as a stable operating environment. This was demonstrated by the significant government support programs implemented in all operating countries. In addition to direct subsidies to overcome the crisis, the holistic approach to support society both socially and economically place both individuals and businesses in a solid position to move forward after the crisis. All this, combined with our strategy, positively affected our rent collection rates that remained significantly stronger throughout the first half of the year compared to industry average, being 93% to date. Also, footfall has already recovered to 95% of 2019 level and we are seeing a pick-up in leasing activity. We have recently approved three separate deals with different municipalities at market rents which also improves our credit risk profile. It is apparent that April was the bottom of the trough and that the business has been improving steadily since then.
Citycon remained committed towards our strategy and long-term targets throughout the crisis. We successfully issued a tap bond to further improve our liquidity position. We were delighted to see our order book three times oversubscribed. As a result, we decided to increase the size of the tap issue from original target of 150 MEUR to 200 MEUR. Simultaneously, we were able to tighten the pricing. This proves our ability to access capital even under difficult financial market conditions. The proceeds were used to repay maturing short-term debt and RCF that was used in order to temporarily improve our liquidity. Additionally, Citycon’s board showed its commitment to strengthen the credit profile by adjusting 2020 dividend. We have also started to investigate the opportunity to offer our shareholders an option to receive stock instead of dividends in the future. These actions together with solid operational performance were rewarded with an investment grade credit rating from Fitch, issued in May 2020, as well as affirmed credit ratings from Standard & Poor’s and Moody’s.
While the operational environment is expected to remain challenging, Citycon is well-positioned to move forward and our team has continued to make progress on the strategic focus areas. In June 2020, we announced the recruitment of a Director, Residential Development and our near-term plans for residential development project in Oasen, Norway. These are concrete steps in our strategy to capitalise on the residential potential of our centres. Recognised zoning and permitting opportunities of 320,000 square meters generate value creation potential with little capital expenditure, and residential development is therefore highly attractive. Increased focus on residential projects also further strengthens our position as an owner of urban hubs in line with our mixed-use strategy. We are confident that as a result of these steady efforts and working together with our stakeholders, Citycon is in a prime position to achieve its targets. Combined with the improved visibility on current result, we feel confident with our business and see it is our duty to reissue our guidance for 2020.“
Source: Citycon's Interim Report Q2/2020