Stability in an unstable world
Citycon continued to demonstrate the strength and stability of its portfolio in the COVID-19 environment. The strong operational figures reflect our convenient urban hub strategy, which is focused on necessity and municipal services tenants while operating in the strongest cities in the Nordic countries that have outperformed during the COVID-19 pandemic.
The strong operational performance was reflected in Citycon’s financials. Total NRI adjusted for FX rates was -2.2% after three quarters. Our like-for-like net rental income decline also remained relatively modest being -4.7% for the same period (also adjusted for FX rates). The decline was mainly driven by lower volume-based revenue such as parking fees, specialty leasing and volume-based leases that suffer from lower footfall. Our core business remains fundamentally strong and stable. While there were no new COVID-19 related discounts granted to tenants during Q3, discounts given in Q2 slightly affected net rental income. At the same time, our rent collection remained strong, YTD collection rate standing currently at 94% and Q3 at 93%. The decline in fair values remained modest being -0.6%. This again reflects the resilience of our mixed-use strategy and the stability it brings to our business. Our loan-to-value (LTV) slightly increased to 46.8% at the end of the third quarter. Strengthening the balance sheet continues to be one of our top priorities and we are taking steps to lower our LTV-ratios, including monitoring the disposal market and acting accordingly.
Footfall remained on a stable level after a recovery in late Q2 and early Q3. More importantly, tenant sales were strong as a result of 15% higher average purchase per customer in the third quarter. After Q3, total sales in our centers were 0.3% ahead of last year’s corresponding period. This reflects changes in consumer habits as people follow government recommendations and mainly visit with a clear intention to spend. Having said this, we see there are clear differences across tenant sectors. This highlights our tenant mix which is based on a large share of necessity tenants such as groceries, pharmacies, municipal and health services. Not only are these sectors and tenants doing well in this changed environment, but they also bring footfall to our centers which benefits our other tenants. We are pleased to see that leasing activity has been strong in 2020. As of Q3 we have approximately 175,000 sq.m. of new leases commencing in 2020 compared to 113,000 sq.m. during corresponding period in 2019.
Even during the crisis, we have remained focused on our goal of urbanization/densification. We strongly believe in our mixed-use strategy and further diversifying our urban hubs. The majority of our assets are located in top cities with strong existing urbanization and direct connection to the most important transportation hubs. These areas continue to demonstrate significant demand for new residential and office space. Not only does this densification increase the number of people using the services of our centers, it also opens new opportunities for Citycon which already owns prime locations in these areas. Gaining additional building rights for approximately 500,000 sq.m. in our existing locations untaps value of approximately 200 MEUR with minimal capital investment over the next several years. Therefore, working pro-actively and closely with municipalities and progressing our zoning and permitting initiatives has continued to be a top priority for Citycon.
Citycon’s third quarter performance continued to show the stability of the portfolio. While our strategy and geographic positioning lend themselves to these results, that would not be possible without our team’s commitment to the success of the company. We expect challenging times to continue, but the past two quarters have provided the ultimate “stress test” for our strategy which, thus far, has proven successful. These results allow us to tighten our guidance towards the high end of the range previously communicated.
Source: Citycon's Interim Report Q3/2020