During the period the company refinanced practically all material bank loans due in 2012 or 2013. In addition leasing operations have developed positively, the first three quarters of the year showed like-for-like net rental income growth of 5.3 per cent.


 Summary of the Third Quarter of 2012 Compared with the Second Quarter of the Year

 - Turnover increased to EUR 60.9 million (Q2/2012: EUR 58.4 million).

 - Net rental income increased by EUR 2.9 million, or 7.4 per cent, to EUR 42.6 million (EUR 39.7 million), mainly due to completed (re)development projects, lower property operating expenses and the acquisition of the Albertslund shopping centre. 

 - EPRA operating profit increased by EUR 4.2 million, or 12.6 per cent to EUR 37.3 million (EUR 33.1
million) due to higher net rental income and lower direct administrative expenses. Direct administrative expenses were lower by EUR 1.2 million mainly due to lower restructuring costs, lower non cash option expense and a reduction in various administrative expenses.  EPRA earnings per share increased to EUR 0.06 (EUR 0.05). EPRA key figures exclude non-recurring items such as fair value changes of investment properties.  

 - The fair value gain of investment properties was EUR 13.8 million (EUR 0.1 million) and the fair value of investment properties totalled EUR 2,695.5 million (EUR 2,602.0 million). The average net yield requirement for investment properties was 6.3 per cent (6.4%) the decrease was mainly due to roundings.


 Summary of January – September of 2012 Compared with the Corresponding Period of 2011

 - Turnover increased to EUR 177.1 million (Q1-Q3/2011: EUR 161.0 million).

 - Net rental income increased by EUR 12.9 million, or 12.1 per cent, to EUR 119.9 million (EUR 107.0 million). Completion of redevelopment projects and the acquisitions of the Kristiine, Högdalen Centrum, Arabia and Albertslund shopping centres increased net rental income by EUR 9.5 million.

 - Net rental income from like-for-like properties increased by EUR 4.4 million, or 5.3 per cent, excluding the impact of the strengthened Swedish krona.

 - Earnings per share were EUR 0.20 (EUR 0.07).

 - EPRA EPS (basic) increased to EUR 0.17 (EUR 0.15).

 - Net cash from operating activities per share decreased to EUR 0.15 (EUR 0.21) due to timing issues and higher exceptional items in the comparison period.

 - The company specifies its guidance regarding turnover, EPRA operating profit and EPRA earnings.


 Key Figures


    IFRS based key figures






    Change-% 1)


    Turnover, EUR million








    Net rental income, EUR million








    Profit/loss attributable to parent company shareholders, EUR million








    Earnings per share (basic), EUR 2)








    Net cash from operating activities per share, EUR 2)








    Fair value of investment properties, EUR million






    Equity ratio, %








    EPRA based key figures






    Change-% 1)


    EPRA operating profit, EUR million








    % of turnover








    EPRA Earnings, EUR million








    EPRA Earnings per share (basic), EUR 2)








    EPRA NAV per share, EUR







    EPRA NNNAV per share, EUR














    1) Change-% is calculated from exact figures and refers to the change between 2012 and 2011.

    2) Result per share key figures have been calculated with the issue-adjusted number of shares resulting from the rights issue initiated on September 17, 2012.











 CEO’s Comment

 Comments from Citycon Oyj’s Chief Executive Officer Marcel Kokkeel on the first three quarters of 2012:


 ”The first nine months showed further improvements in rental growth: we were able to increase our like-for-like net rental income by 5.3 per cent. Especially our shopping centre portfolio showed good numbers: like-for-like net rental income growth was 6.7 per cent. 


 Our leasing efforts continued to bring positive results: during the period, we signed a lease agreement with a franchise partner of Debenhams to bring the department store chain to the Estonian market and open a store in Rocca al Mare. We also signed a letter of intent to bring Debenhams to the planned Iso Omena extension. Also Hennes & Mauritz will enter the Estonian market; H&M will open two stores in our centres in Tallinn.

 Refinancing and diversification of funding sources have continued to be under focus. After a successful issue of the EUR 150 million domestic bond in May, we signed in September a EUR 360 million long-term unsecured credit facility agreement with a Nordic bank group. These successfully arranged refinancing transactions demonstrate Citycon's access to capital and strength of our core bank relationships. Following the loan transaction practically all material bank loans due 2013 have been refinanced and Citycon’s average debt maturity is extended.  After successful refinancing we also decided on a EUR 90.7 million rights issue to improve the company‘s financial flexibility. The proceeds will be used for further added value activities in our shopping centres included i.e. to finance our redevelopment projects, possible selective acquisitions, to strengthen the balance sheet and pay down debt.

 We also entered the Danish market during the summer. Citycon invests primarily in two types of shopping centres: larger regional shopping centres like Iso Omena, Koskikeskus and Rocca al Mare as well as smaller locally dominant grocery anchored shopping centres with high barrier to entry. Albertslund Centrum fits into the latter category perfectly.  We consider this entry as a cautious step into a new country within our core markets.

 The company will maintain its focus on further income enhancement and solid cash flows going forward.“


 Main Events


 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 loan period is on average five years. The drawdown of the new loan and repayment of the facilities that will be refinanced with the new loan will take place during Q4.

 In May, the company issued a EUR 150 million senior unsecured domestic bond. The five-year bond matures on 11 May 2017. The bond carries fixed annual interest at the rate of 4.25 per cent, payable annually.

 In September the company started a rights issue to raise approximately EUR 90.7 million based on the authorisation granted at the Annual General Meeting on 21 March 2012. The subscription period was 17 September until 1 October. The rights issue does neither impact shareholders’ equity nor the cash equivalents reported in this interim report, but the result per share key figures have been calculated with the issue-adjusted number of shares.


 Citycon has continued the repurchases of its convertible capital bonds of 2006.


 Leasing Activity

 The economic occupancy rate was 96.5 per cent (96.6%). The economic occupancy rate for the entire property portfolio was 95.4 per cent (95.4%).

 At the end of September Citycon signed an agreement with the British department store Debenhams. The group will open its first store in Estonia in Citycon’s Rocca al Mare in the autumn of 2013.

 During the period Citycon signed a contract with Hennes & Mauritz regarding the opening of two stores in Tallinn in order to bring the chain into the Estonian market. The stores will be opened in autumn 2013 at the latest.


 Acquisitions and Disposals

 On 2 August, the company sold all the shares in Drabanten bostäder AB for approximately SEK 50.0 million (approx. EUR 5.6 million) to Bostadsrättsföreningen Stinsen 107-111. The sold company owns 47 apartments in Tumba Centrum in the municipality of Botkyrka in Sweden. The aggregate gross leasable area of the apartments is approximately 3,600 square meters.

 On 2 July, Citycon acquired the Citytalo property, located in Oulu, Northern Finland, at a purchase price of EUR 13.5 million from the local parish union and private owners. Situated in the heart of Oulu’s city centre, the Citytalo property is right next to shopping centre Galleria, owned by Citycon. Citytalo has a total leasable area of around 2,800 square metres. The premises are fully leased, with Clas Ohlson, Gina Tricot and DinSko as anchor tenants. The extension and redevelopment project of shopping centre Galleria, currently being planned, is the main reason for acquiring the Citytalo property.

 On 2 July Citycon acquired 25 per cent of shopping centre Strömpilen and retail property called Länken located in Umeå, Sweden for about SEK 121 million (approx. EUR 13.8 million) from Balticgruppen AB. Citycon acquired 75 per cent of the properties in June 2007 and the seller Balticgruppen AB remained as a minority owner with 25 per cent share. At the time of signing the initial purchase agreement the parties entered into a shareholders’ agreement, whereby the minority owner was granted the right to sell its share to Citycon within a certain period of time. The realised transaction was related to this agreement. The transaction price has been defined on the basis of the agreement and is in line with the current value of the property. After the transaction Citycon owns the shopping centre Strömpilen and the retail property Länken in their entirety.

 On 16 May, Citycon agreed to sell all the shares in Citycon Jakobsberg Bostäder 3 AB for SEK 90.0 million (approx. EUR 10.0 million) to Lärjungen Lägenheter 18 AB, which is owned by Akelius Lägenheter AB. The transaction was closed on 2 July 2012. The sold company owns 129 apartments in Jakobsbergs Centrum in the municipality of Järfälla in Sweden. The aggregate gross leasable area of the apartments is approximately 9,800 square metres. Citycon recognises a gain on sale of approximately EUR 2.9 million on the transaction.

 On 7 June, Citycon signed an agreement to purchase shopping centre Albertslund Centrum in the Greater Copenhagen area in Denmark from the municipality of Albertslund for DKK 181 million (approx. EUR 24 million). The transaction was closed on 1 July 2012. This is the company’s first acquisition in Denmark. The shopping centre’s gross leasable area is currently approximately 16,000 square metres. The transaction also includes a grocery store extension, which will be purchased upon its completion at the end of 2014. The extension will increase the GLA to approximately 20,000 square metres. The occupancy rate of the shopping centre is 97.5 per cent. More information on the transaction is available in the stock exchange release issued on 7 June 2012.

 In April, Citycon acquired shopping centre Arabia in Helsinki, Finland, for EUR 19.5 million from Tapiola Group. Shopping centre Arabia is located some four kilometres north-east from Helsinki CBD on a lot owned by the City of Helsinki. This shopping centre has a gross leasable area of approximately 14,000 square metres, with 11,400 square metres of retail premises. The shopping centre houses more than 30 stores and its occupancy rate at the time of the acquisition stood at 93.0 per cent. More information on the transaction is available in the stock exchange release issued on 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. Following the acquisition, the company owns shopping centre Koskikeskus in its entirety, which will facilitate the smooth completion of the redevelopment project going on in the centre.


 The company divested six non-core properties, three in Sweden and three in Finland.

 Redevelopment projects

 The redevelopment project of shopping centre Koskikeskus in Tampere is Citycon’s largest on-going project, involving an estimated investment of EUR 37.9 million. The project is proceeding as planned and the opening of the renewed Koskikeskus will be celebrated in mid-November. The shopping centre is open and serves customers during the entire project.


 Shopping centre Magistral in Tallinn reopened for business in May after the completion of an eight-month renovation and extension project. The property was fully leased out. The leasable area of the shopping centre increased by 2,200 square metres to 11,700 square metres.


 The last part of the development project carried out at shopping centre Myllypuron Ostari in Myllypuro, Helsinki, was completed in May.

 Other events

 Citycon’s Baltic Countries -business segment has been renamed ”Baltic Countries and New Business”. Albertslund Centrum, acquired in Denmark, belongs to this segment in addition to the centres in the Baltic countries. Harri Holmström will continue as the head of this segment.


 Marko Juhokas has been appointed Citycon Oyj’s Senior Vice President, Finnish Operations, and member of the Corporate Management Committee. Mr. Juhokas was previously the Property Development Director at Citycon and he started in his new position on 16 July. Michael Schönach, Citycon’s Executive Vice President, Finnish Operations, and member of the Corporate Management Committee left his position in the company as of 15 May 2012. Further, Nils Styf was appointed Citycon Oyj’s Chief Investment Officer and member of the Corporate Management Committee. He took up his position in June.

 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 Citycon’s third consecutive Gold Award in the Financial Best Practices series. The company also won gold for Sustainability Best Practices, a new award series.

 Citycon changed its Group structure as of 1 April 2012. The change was executed through business transfers where Citycon’s Finnish real estate operations were transferred to two new holding companies, Citycon Finland Oy and Etelä-Suomen Kauppakiinteistöt Oy. Following the business transfers these companies own, manage and maintain Citycon’s properties in Finland. This change will not impact any of Citycon’s other operations.


 Events after the Reporting Period

 On 7 September 2012, the Board of Directors of the Citycon resolved, based on the authorisation of the Annual General Meeting on 21 March 2012, to issue a maximum of 49,032,002 new shares. The shares issued in the rights issue represented approximately 17.6 per cent of the total shares and voting rights in the Citycon before the offering and approximately 15.0 per cent of the total shares and voting rights in the company after the rights issue. All offered 49,032,002 shares were subscribed for in the rights issue between 17 September 2012 and 1 October 2012. On 5 October 2012 the Board of Directors of Citycon approved all primary subscriptions made in the rights issue and the secondary subscriptions made by Citycon's shareholders or other investors in proportion to their subscription rights exercised in accordance with the primary subscription right, all in accordance with the terms and conditions of the rights issue.


 Shares subscribed for in the primary subscription have been subject to public trading on NASDAQ OMX Helsinki Ltd. since 2 October 2012 as interim shares. All shares subscribed for in the rights issue were registered in the Finnish Trade Register on 8 October 2012 after which the interim shares were combined with Citycon's existing class of shares. The new shares have been subject to public trading on NASDAQ OMX Helsinki Ltd. together with the other Citycon shares starting on 9 October 2012.      


 Shareholders of the Company, who were registered in the shareholders’ register maintained by Euroclear Finland Ltd on the record date of 12 September 2012, have automatically received one freely transferable subscription right for every one share owned on the record date. Each 17 subscription rights entitled holders to subscribe for three shares.

 Citycon has repurchased its subordinated convertible capital bonds issued on 2 August 2006 for a repurchase price of 100.40 per cent of face value. The face value repurchased by the company amounted to EUR 1.45 million corresponding to 29 bonds with face value of EUR 50,000 corresponding to approximately eight per cent of the aggregate amount of the convertible bonds due 2013. The deal was executed on 9 October 2012.


 Citycon continues to focus on increasing both its net cash flow from operating activities and its direct operating profit. In order to implement this strategy, the company is pursuing value-added activities, selected acquisitions and proactive asset management.


 Initiation of planned projects will be carefully evaluated against strict pre-leasing criteria. Citycon intends to continue the divestment of its non-core properties, in order to improve its property portfolio and strengthen its financial position as well as continues to examine the properties’ sales strategies in order to maximise their value through proactive management and leasing.


 In 2012, Citycon expects to continue generating solid cash flow and anticipates that its turnover will grow by EUR 16–21 million compared with EUR 13-19 million announced in the second quarter results. The change in the turnover estimate is mainly based on changes in timing of tenant specific projects in the Baltic Countries, and the company’s turnover outlook has not changed. The company expects its EPRA operating profit to grow by EUR 14–19 million (EUR 12–18 million announced on 11 July 2012) compared with the previous year, based on the existing property portfolio including recent acquisitions and divestments. The company expects its EPRA earnings to increase by EUR 6–11 million from the previous year (EUR 5–11 million announced on 11 July 2012). After the rights offering executed in September- October 2012, the company forecasts that it’s EPRA EPS (basic) will be EUR 0.195-0.215 based on the existing property portfolio and increased number of shares compared with the earlier announced figure of EUR 0.21–0.23. The company announced this change in its stock exchange release related to the rights offering on 7 September 2012.


 The company’s estimates are based on the current property portfolio, already completed (re)development projects and those that will be completed in the future, as well as on the prevailing level of inflation and the euro-krona exchange rate, and current interest rates. Properties taken offline for planned development projects will reduce net rental income during the year.


 Business Environment

 On the whole, the first nine months of the year have been a period of economic uncertainty, although positive signs have been seen thanks to retail growth in Citycon's operating countries. During the year, the uncertainty in the markets has mounted due to the government debt situation in some Eurozone countries.

 Retail sales grew in Finland, Sweden and Estonia. The total retail sales growth rate for the first eight months was 5.1 per cent in Finland, 2.4 per cent in Sweden and 8.0 per cent in Estonia. (Sources: Statistics Finland, Statistiska Central Byrån, Statistics Estonia.)

 Household consumer confidence remained positive in the Nordic countries, especially in Sweden and Denmark. In Finland the household consumer confidence indicator fell rapidly in July, but remains positive, unlike in Estonia and Lithuania (Eurostat).

 Retail sales growth and the inflation rate are key factors for Citycon's business and have an impact on the rents from retail premises. Consumer prices continued to rise during the year in all of Citycon's operating countries. In August, inflation was 2.7 per cent in Finland, 0.7 per cent in Sweden, 2.6 per cent in Denmark, 3.8 per cent in Estonia and 3.3 per cent in Lithuania. (Statistics Finland, Statistiska Central Byrån, Statistics Denmark, Statistics Estonia, Statistics Lithuania.)

 In Finland, Sweden and Denmark, seasonally adjusted unemployment is lower than the European Union average (10.5%): at the end of August, the adjusted unemployment rate was 7.9 per cent in Finland and 7.8 per cent in Sweden and 8.0 per cent in Denmark. In Estonia and Lithuania, the unemployment rates remain high: at the end of June, 10.1 per cent in Estonia and 13.2 per cent in Lithuania. (Eurostat)


 The instability of the financial market in Europe is affecting the availability and margins of debt financing.


 Property Market

 Demand for investment has been increasing in the Finnish property investment market but the scant supply of prime assets has limited transactional activities. During the past three quarters the retail investment volume has however already reached and exceeded the low levels of 2011. As a result of strong investment demand, shopping centre prime yields have remained stable but the secondary 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 for the first three quarters of 2012 was lower than in the previous year being only about 40 per cent of the transaction volume of the first three quarters of 2011. Also it is unlikely that the high retail property transaction volume for 2011 will be achieved. Prime yields for shopping centres have remained stable over the past four quarters.

 Despite global turmoil the outlook for Estonian retail is positive. Vacancy rates in shopping centres are close to zero and rents have increased along with inflation. Also the retail property investment market has picked up and retail yields have dropped below 8 per cent.

 (Source: Jones Lang LaSalle Finland Oy)

 Tenants’ Sales and Footfall in Citycon’s Shopping Centres

 During the period, total sales in Citycon’s shopping centres grew by 6 per cent and the footfall increased by 2 per cent, year-on-year. Sales growth was seen in all of the company’s operating countries: 5 per cent in Finland, 6 per cent in Sweden and 14 per cent in the Baltic Countries and New Business. The footfall increased by 1 per cent in Finland, by 4 per cent in Sweden and 4 per cent in the Baltic Countries and New Business. Positive developments in sales and footfall are mainly attributable to redevelopment projects completed in recent years. Like-for-like shopping centre sales grew by 4 per cent and footfall by 1 per cent. All sales and footfall numbers are approximations.

 Short-Term Risks and Uncertainties

 Citycon’s Board of Directors considers the company’s major short-term risks and uncertainties to be associated with economic development in the company’s operating regions, which affects demand, vacancy rates and market rents in retail premises. In addition, key near-term risks include rising financial expenses due to higher loan margins, reduced availability of debt financing and the fair value development of properties in uncertain economic conditions.

 Although the financial crisis’ effects 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 on consumer confidence and behaviour, inevitably affect demand for retail premises. The instability of the Eurozone has continued in 2012, which has made forecasting financial growth difficult. 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 difficult, and vacancy rates rise.

 Implementation of Citycon's growth strategy requires new financing, which means that risks associated with the availability and cost of financing are of fundamental importance to the company. Although the Nordic banks’ willingness to lend money to real estate companies continues to be moderate, the availability of financing is limited and loan margins have remained at a high level or even increased further. 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 financing, and to limit the availability of long-term bank loans. This will probably raise the cost of Citycon's new loan financing. So far this change in margins has been mitigated by reduced underlying base rates and Citycon’s active financing policy. Over the next few years, Citycon will have to refinance loan agreements that were signed at low margins before the financial crisis, and consequently, the margins on these loans will rise. Such a rise in loan margins is likely to push Citycon's average interest rate upwards in the future, even if market interest rates remain largely unchanged. The EUR 360 million credit facility agreement signed with Nordic banks in September decreased the refinancing risk for 2012 and 2013 considerably. The credit includes the refinancing 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 financing, but there are no guarantees that such alternative funding sources would be available in the future at cost efficient prices.

 The fair value development of investment properties continues to be characterised by high uncertainty caused by the harsh economic conditions. Several factors affect the fair value of the investment properties owned by Citycon, such as general and local economic development, interest rate levels, foreseeable inflation, the market rent trend, vacancy rates, property investors' yield requirements and the competitive environment. This uncertainty is reflected most strongly on retail properties that are located outside major cities, or which are otherwise less attractive, because investor demand is not currently focused on these properties, and banks are not particularly keen to offer financing for such projects. Yet, at the same time, the fair value of the best shopping centres, which attract 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 40-42 of the Financial Statements for 2011, and on pages 73–74 of the Annual Report for 2011.


 The Interim Report for the period 1 January–30 September 2012 in its entirety is enclosed to this release and it is also available on the corporate website at www.citycon.com.


 Helsinki, 9 October 2012


 Citycon Oyj

 Board of Directors


 Financial Reporting Schedule and AGM 2013

 Citycon Oyj will release its full-year financial report as well as financial statements and the report by the Board of Directors for the period 1 January–31 December 2012 on Wednesday, 6 February 2013.

 Citycon’s Annual General Meeting will be held in Helsinki, Finland, on Thursday, 21 March 2013 starting at 3.00 p.m.

 Citycon will issue three interim reports during the financial year 2013 in accordance with the following schedule:

 January–March 2013 on Wednesday, 24 April 2013 at about 9.00 a.m.,

 January–June 2013 on Wednesday, 10 July 2013 at about 9.00 a.m. and

 January–September 2013 on Wednesday, 16 October 2013 at about 9.00 a.m.


 For more investor information, please visit the corporate website at www.citycon.com.


 For further information, please contact:

 Marcel Kokkeel, CEO

 Tel. +358 20 766 4521 or +358 40 154 6760



 Eero Sihvonen, Executive Vice President and CFO

 Tel. +358 20 766 4459 or +358 50 557 9137




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