Citycon Oyj clarifies its strategy. The company’s mission is to become better, stronger and bigger in order to achieve a leading position in the shopping centre business in the Nordic and Baltic regions.
• Better: Focus on improving profitability by enhancing operational performance
• Stronger: Divest non-core properties and bring joint venture partners into selected core properties to recycle capital and strengthen the balance sheet
• Bigger: Grow through extension and redevelopment of existing shopping centres as well as selective mergers and acquisitions in order to become more efficient and more relevant to stakeholders
Currently, Citycon is a market leader in Finland. While the company intends to retain this position, it also aims to increase the relative importance of other countries included in its strategy. Apart from Finland, currently the company also owns shopping centres in Sweden, Estonia and Lithuania. Going forward, Norway, Denmark and Latvia will also be included in the strategy. Citycon will concentrate on competitive shopping centres located in winning cities.
“We are a focused retail real estate company in a focused area. The key rationale for our expansion plan is to further improve the retail space offering and to better serve retailers with a wider product offering. Several international retail chains seek further expansion or entrance into the Nordic and Baltic markets. Potential newcomers prefer to partner with a leader who can provide them with strong retail positions and top locations. Citycon has the expertise to be that leader. We know how to connect customer flows with strong retail and real estate cash flows. This knowledge forms the basis of the company’s growth strategy,” says CEO Marcel Kokkeel.
Changes in the Portfolio
Currently Citycon owns 36 shopping centres and 46 other properties. The company will define which properties are core in the current portfolio and will concentrate on shopping centres going forward. The clarified strategy includes divestment of non-core assets and acceleration of planned redevelopments of its existing strategic shopping centres. Citycon also seeks acquisition targets in which value can be added by active management.
The ownership structure of the current property portfolio may be subject to changes by, for example, including joint-venture investors in Citycon’s core shopping centres. In addition, Citycon may take over the management of more shopping centres partially owned by other investors. Through these measures, Citycon aims to double its owned or partially owned assets under management in five years.
“Much of the emphasis will be on Citycon’s unique knowhow to manage shopping centres rather than to simply own them 100 per cent. We see a trend of equity sources trying to find expertise. By leveraging Citycon’s shopping centre expertise, we can further enhance our operating platform and optimise our capital structure,“ says Kokkeel.
To implement the growth strategy, the company will need both equity and debt. Citycon will use a range of financing sources depending on what is cost-efficient. “Citycon has great access to both the debt and equity capital markets. Innovative and cost efficient financing solutions reflect the role of financing as a core competence. Citycon is also focused on providing investors with solid returns. Strong balance sheet and optimized capital structure are the keys,” says Eero Sihvonen, Executive Vice President and Chief Financial Officer of Citycon. The updated strategy aims to manage profitable growth and to maximize total return to shareholders through dividend distribution and property value increases.
A key part of Citycon’s clarified strategy is improving the direct result from operations. Costs will be controlled even more closely and the company will strive for stronger rental growth. Marketing has a key role in this effort for stronger rental growth. The company will further focus on improving the occupancy rates by implementing appealing marketing programs and bringing in new retailers. Internal targets have been set for improvement of metrics across the property portfolio.
Marcel Kokkeel continues: “The winners in the shopping centre industry will be those who are able to select best locations and combine them with best tenant mix and customer services. Citycon will certainly be one of them, aiming to be the best in class in the Nordic and Baltic region. We want to be the benchmark in the areas in which we operate. By becoming better, we will improve the direct result per share; by improving the balance sheet, we will be stronger; and ultimately these foundations will allow us to achieve our vision of doubling the portfolio over the next five years.”
Helsinki, 13 July 2011
Chief Executive Officer (CEO)
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 40 557 9137