FINANCING IN CITYCON:
IG CREDIT RATINGS AND UNSECURED DEBT WITH LONG MATURITIES
SEB IG BOND SEMINAR 24 AUGUST 2017 BEN HELSING, GROUP TREASURER
21.8.2017
FINANCING IN CITYCON: IG CREDIT RATINGS AND UNSECURED DEBT WITH LONG - - PowerPoint PPT Presentation
21.8.2017 FINANCING IN CITYCON: IG CREDIT RATINGS AND UNSECURED DEBT WITH LONG MATURITIES SEB IG BOND SEMINAR 24 AUGUST 2017 BEN HELSING, GROUP TREASURER LEADING OWNER, MANAGER AND DEVELOPER OF SHOPPING CENTRES IN THE NORDICS AND BALTICS
IG CREDIT RATINGS AND UNSECURED DEBT WITH LONG MATURITIES
SEB IG BOND SEMINAR 24 AUGUST 2017 BEN HELSING, GROUP TREASURER
21.8.2017
Number of shopping centres
LEADING OWNER, MANAGER AND DEVELOPER OF SHOPPING CENTRES IN THE NORDICS AND BALTICS
9 19 19
2 1
NORWAY SWEDEN FINLAND ESTONIA DENMARK
– 50 shopping centres1) – 13 managed/rented assets – GLA 1.2 million sq.m. – 200 million visitors p.a. – Market cap EUR 2 billion – Credit ratings: Baa1 & BBB
Key figures 30 June 2017 2 1) Including Kista Galleria 2
Finland 36 % Norway 29% Sweden1) 28% Estonia and Denmark 7%
PORTFOLIO VALUE
5
EUR billion
145 100 80 970 340 205 140 95 300 260 210 155 150 340 140 125 95 90
TRUE PAN-NORDIC LEADER
3
FINLAND ESTONIA SWEDEN NORWAY
Retail GLA (thousand sq.m.) SPONDA ELO KEVA IDEAPARK
ATRIUM LJUNGBERG
UNIBAIL- RODAMCO OLAV THON STEEN &STROM STEEN & STROM SALTO SCALA ASTRI LINSTOW
#1
#3 #2 #2
OLAV THON
Source: Company reports, Pangea Property Partners analysis, as per April 2017 and Finnish Shopping Centres 2017. Includes only majority-owned shopping centres. Includes some assumptions on retail proportion out of total GLA, where retail data not available.
PURE RETAIL PLAYER FOCUSING ON NECESSITY-BASED SHOPPING CENTRES IN GROWING URBAN AREAS
4
MANAGE
throughout the shopping centre value chain
cross-border leasing team
DEVELOP
competitiveness
MEUR 150-200 p.a.
(re)developments and extensions, no greenfield sites
assets
OWN
shopping centres
Nordic and Baltic cities
and integrated with public transportation
90% OF CITYCON’S SHOPPING CENTRES ARE LOCATED IN CAPITAL OR MAIN CITIES
5 Note: Figures are for 2016
1) GLA updated as per April 2017 2) Kista Galleria (100%)
101,000 9 195
GLA, sq.m. Visitors, million Sales, MEUR
92,500 19 204 33,100 6 111 40,500 10 158 49,300 3 121
KISTA GALLERIA,
STOCKHOLM 2)
ISO OMENA,
HELSINKI AREA 1)
LILJEHOLMSTORGET GALLERIA, STOCKHOLM KOSKIKESKUS,
TAMPERE
HERKULES,
SKIEN
GROCERY
anchored
FOOD
& beverage Health & beauty Entertainment & enjoyment Linked to public transport Municipal services
FASHION
Enriching
crosspoints
STRONG GROCERY-ANCHORING ‒ OVER 100 GROCERY STORES 1)
7 As per 31 December 2016
1) Including Kista Galleria (50%)
24% 24% 18% 13% 9% 9% 2% 1% Home and leisure Fashion Groceries Services and offices Health and beauty Cafés and restaurants Specialty stores Department stores
Rental income
MEUR
CITYCON’S TRANSFORMATION 2011-2016: IMPROVED PORTFOLIO QUALITY
–More balanced Nordic portfolio, reduced Finnish exposure –Successful divestment of 49 assets (MEUR 350) –Improved occupancy to >96% and tenant diversification, e.g. Kesko 17%=>6.5% –Acceleration of urban developments c. MEUR 50 => MEUR 150 p.a.
8
Finland 37% Norway 28% Sweden1) 28% Estonia& Denmark 7%
5
EUR billion
Stronger property fundamentals
Finland 61% Sweden 28% Baltics 11%
2.5
EUR billion
19.7 22.8 2011 2016
AVERAGE RENT
32 84 2011 2016
AVERAGE VALUE OF PROPERTY
EUR/sq.m./mth MEUR
1) Including Kista Galleria 100%
CLEAR FOCUS, EXCEPTIONAL PLATFORM, STRONG CAPITAL BASE
ROBUST BALANCE SHEET, MODERATE LTV AND ASSETS LARGELY UNENCUMBERED
– Committed to a LTV target of 40-45%
STABLE INVESTMENT GRADE RATINGS
– Moody’s: Baa1 (negative) – S&P: BBB (stable)
LEADING OPERATOR AND DEVELOPER OF NORDIC SHOPPING CENTRES
– Retail experts with €5bn portfolio of urban, grocery-anchored shopping centres close to transport links
and where people live and work
FOCUS ON AFFLUENT AND STABLE NORDIC COUNTRIES SUPPORTIVE SHAREHOLDERS AND ACCESS TO CAPITAL MARKETS
– Shareholder base of globally recognized real estate investors: Gazit-Globe (43.9%) and CPPIB (15.0%) – Demonstrated access to equity markets with approx. €1.3 billion in new equity raised since 2012 – Only (re)developments and extensions, no greenfield sites
EARNINGS GROWTH UNDERPINNED BY CONSERVATIVE DEVELOPMENT PIPELINE
– Consistently high occupancy levels around 96% with a 3.3 year average lease term and with top 5
tenants representing only 19.7% of rental income
– Track record of very low losses from tenant defaults – approximately €1-1.5m per annum
CONSISTENTLY HIGH OCCUPANCY LEVELS FROM DIVERSIFIED TENANT BASE BRINGS A STABLE CASH FLOW 2 3 4 5 6 1 7
9
HIGHLIGHTS H1/2017
10
6.1% INCREASE IN EPRA EPS TO EUR 0.089
POSITIVE LIKE-FOR-LIKE NET RENTAL INCOME
FURTHER PORTFOLIO QUALITY UPGRADE
SUCCESSFUL SECOND PHASE OPENING IN ISO OMENA
MORE POSITIVE OUTLOOK, GUIDANCE SPECIFIED
FINANCIAL HIGHLIGHTS
11
1) Change from previous year (Q1-Q4/2015)
MEUR Q1-Q4/2016 %1) H1/2017 %1) Net rental income 224.9 12.7 116.0 3.3 Direct operating profit 198.5 13.2 103.0 4.7 EPRA Earnings 151.1 15.5 79.2 6.1 EPRA EPS (basic) 0.170
0.089 6.1 EPRA NAV per share 2.82 3.2 2.78
Fair value change 25.92) 253.2
46.6
4.1 Occupancy rate (economic), % 96.2 96.3
2) Excludes Kista Galleria fair value change + 11 MEUR (100%)
Finland Norway Sweden Estonia & Denmark Total Kista Galleria Adjusted total*
LIKE-FOR-LIKE NET RENTAL INCOME GROWTH 1)
STRONG LIKE-FOR-LIKE NRI GROWTH IN SWEDEN AND NORWAY COMPENSATES FOR WEAKER FINLAND
–Strong shopping centres in the Helsinki area (Iso Omena, Myyrmanni, Lippulaiva) all out of the like-for-like portfolio due to (re)development projects –Like-for-like portfolio in Finland represents 37% of the total value
12
1)Including Kista Galleria 50%. The adjusted total
including Kista Galleria 100% would be 1.7%. The width of each column refers to the weight
8.8%
4.9%
1.5% 2.4% 1.6%
…BUT NOW ALSO FINLAND FINALLY IS RECOVERING
–Finnish economy shows strong recovery (GDP forecast 2017: 2.5-3%) –Blackstone transaction when buying Sponda triggers unlocked shareholder value
13
KEY TARGET AREAS 2017 AND ONWARDS
14
FURTHER CAPITAL RECYCLING
coming 1.5 years. Mainly smaller, non-urban shopping centres in Finland and Norway.
bps over yield requirement
LONG-TERM LFL NRI GROWTH OF 100 BPS ABOVE INFLATION
LOAN TO VALUE TARGET 40-45%
URBAN DEVELOPMENTS PROGRESSING – SECOND PHASE OF ISO OMENA SUCCESSFULLY OPENED
15
City Area before/ after, sq.m. Expected investment, MEUR Cumulative investment, MEUR Yield on cost1), % Pre-leasing, % Completion target 1 Mölndal Galleria Gothenburg
60.0 (120.0) 34.9 ~6.5-7.0 70 Q3/2018 2 Lippulaiva Helsinki area 19,200/44,100 215.0 36.5 ~6.5 55 2021 3 Iso Omena Helsinki area 63,300/101,000 270.0 269.5 ~6.0 Total SC: 98 Completed: Q2/2017
1) Expected stabilised yield (3rd year after completion). Calculated on total development costs, also including financing and Citycon internal costs.
ONGOING/COMPLETED PROJECTS 1 2 3
DEVELOPMENT PIPELINE – URBAN LOCATIONS IN CAPITAL CITIES
16
City Area before/ after, sq.m. Expected investment, MEUR Target initiation/ completion
COMMITTED
Down Town Porsgrunn 38,000/46,000 75 2017/2020
PLANNED (UNCOMMITTED)
Tumba Centrum Stockholm 23,400/32,000 50 2018/2020 Kista Galleria Stockholm 92,500/111,000 801) 2019/2021 Oasen Bergen 31,300/43,300 80 2019/2021 Liljeholmstorget Galleria Stockholm 40,500/63,000 120 2020/2022 Trekanten Oslo 23,900/45,000 110 2020/2022
–Development investments of MEUR 150-200 p.a. sourced through capital recycling
1) Citycon’s share MEUR 40 (50%)
DOWN TOWN – SHOPPING CENTRE EXTENSION IN THE HEART OF THE CITY BY THE RIVERSIDE
17
–Strong existing shopping centre of 24,000 sq.m. with an integrated bus terminal –(Re)development and extension of 9,000 sq.m. retail with more shopping, restaurants and cafés –Additional residential to be built –Total development investment of 75 MEUR
ACQUISITION IN BERGEN – CREATING AN URBAN FLAGSHIP OF OASEN
18
–Sale and leaseback with insurance company Tryg (10 yrs contract) –Potential for retail extension 31,300 => 43,300 sq.m. and improved circulation –20,000 sq.m. resi potential –Urban area with strong demographics –New light rail in front of the centre
PLANS FOR TREKANTEN: TRANSFORMING NEIGHBOURHOOD CENTRE INTO A CITYCON FLAGSHIP IN NORWAY
BEFORE AFTER
FINANCING IN CITYCON: IG CREDIT RATINGS AND UNSECURED DEBT WITH LONG MATURITIES
MAIN FINANCING TARGETS
–Loan to Value 40-45%
47.3%
–Average maturity of loan portfolio > 5 yrs
5.0
–Debt portfolio's hedge ratio 70-90%
86%
–Strong investment-grade credit ratings
BBB/Baa1
–Financing mainly unsecured
95%
–Substantial liquidity buffer
MEUR 565
FINANCING MILESTONES 2012-2017
Equity issues to finance acquisitions, strengthen balance sheet, enable IG credit ratings and cheaper financing
– 10/2012: EUR 90 million rights issue – 3/2013: EUR 200 million rights issue – strengthen balance sheet to enable IG credit ratings and
finance Kista Galleria
– 6/2014: EUR 200 million directed share issue – CPPIB becomes a 15% shareholder – 7/2014: EUR 200 million rights issue – deleveraging leads to credit rating upgrades – 7/2015: EUR 600 million rights issue – to finance EUR 1,500 million acquisition of Sektor
Gruppen in Norway
– 5/2013: S&P and Moody’s investment grade credit ratings as one of first Nordic real estate
companies
– 7/2014: Both upgraded with one notch to BBB (S&P) and Baa2 (Moody’s) – 1/2016: Moody’s upgrade to Baa1 following Sektor acquisition
Investment-grade credit rating acquired
22 – 12/2014: All remaining bank debt refinanced with EUR 500 million committed unsecured
syndicated revolving credit facility. Five Nordic banks, maturity 5+2Y. Margin 90 bps.
All bank debt refinanced to decrease financing costs and improve available liquidity
FINANCING MILESTONES 2012-2017
Bond issues to lengthen average loan maturities and be less dependent on bank financing
23
Issued amount Interest, p.a. Spread Tenor Issue date
Eurobond EUR 350m 1.25% 100 BP 10 8/9/2016 Eurobond EUR 300m 2.375% 175 BP 7 16/9/2015 NOK bond NOK 1,400m 3.9% 183 BP 10 1/9/2015 NOK bond NOK 1,250m Nibor + 155 BP 155 BP 5.5 1/9/2015 Eurobond EUR 350m 2.50% 143 BP 10 1/10/2014 Eurobond EUR 500m 3.75% 245 BP 7 24/6/2013 Bond EUR 150m 4.25% 290 BP 5 11/5/2012
– 7/2017: Established a EUR 1,500 million multicurrency EMTN program. 8 Dealer banks. Same
covenant package and main terms as in outstanding bonds. Enables quicker bond issues and private placements. NOK bonds listed in Oslo, Eurobonds or SEK bonds listed in Ireland.
EMTN program
– 2015 : Increased limit of Finnish commercial paper program to EUR 400m. 4 Dealer banks. – 1/2017: Activated existing Swedish commercial paper program and increased limit to SEK
2,000m. 4 Dealer banks.
– 6/2017: Established a NOK commercial paper program. 4 Dealer banks.
Commercial paper programs
CONTINUED DECREASED AVERAGE INTEREST RATE
24
4.25 % 4.12 % 3.28 % 3.04 % 2.86 % 2.58% 2012 2013 2014 2015 2016 H1/2017
WEIGHTED AVERAGE INTEREST RATE
54.5% 49.3% 38.6% 45.7% 46.6% 47.3% 2012 2013 2014 2015 2016 H1/2017
LOAN TO VALUE (LTV)
STEADILY IMPROVED ICR
25
2.1x 2.4x 3.1x 3.8x 3.8x 2012 2013 2014 2015 2016 Years
INTEREST COVER RATIO
3.2 4.1 5.9 5.5 5.6 2012 2013 2014 2015 2016 Years
AVERAGE LOAN MATURITY
26
DEBT MATURITIES
3 104 235 113 388 31 500 131 300 350 146 350 315 50 100 150 200 250 300 350 400 450 500 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Loans Floating to fixed swaps Undrawn loan facilities Bonds Commercial Paper
86% OF DEBT FIXED RATE, VAST MAJORITY BONDS
27
DEBT BREAKDOWN BY TYPE DEBT BREAKDOWN BY CURRENCY
Bonds 81% CP 14% Bank term loan 5% Other 0%
2,199.1
EUR million
EUR 54% NOK 26% SEK 20%
2,199.1
EUR million
Part of EUR debt has been converted to SEK and NOK using cross-currency swaps
FINANCING KEY FIGURES
28 1) Including cross-currency swaps and interest rate swaps
30 JUN 2017 30 JUN 2016 31 DEC 2016 Interest bearing debt, fair value MEUR 2,199.1 2,055.5 2,191.5 Available liquidity MEUR 564.8 384.6 560.4 Average loan maturity years 5.0 5.0 5.6 Interest rate hedging ratio % 85.6 84.6 93.1 Weighted average interest rate1) % 2.58 3.02 2.86 Loan to Value (LTV) % 47.3 45.4 46.6 Financial covenant: Equity ratio (> 32.5%) % 46.8 48.5 47.3 Financial covenant: Interest cover ratio (> 1.8) % 3.8 3.6 3.8
THE FIRST NORDIC LISTED REAL ESTATE COMPANY WITH INVESTMENT GRADE CREDIT RATINGS
–BBB rating with stable outlook affirmed on 2 June 2016
“Citycon's strong business risk profile reflects our view of the company's €4.7 billion portfolio of resilient retail property assets, diversified across the Nordic region”
Ratings confirm successful execution of strategy and stable business model
–Baa1 rating was affirmed on 26 July 2017, but outlook was changed to negative due to leverage higher than target
“Citycon’s Baa1 long term issuer rating primarily reflects (i) its focus on urban, necessity-driven retail properties in strong and growing metropolitan locations in highly rated countries, (ii) the geographic diversification of its property portfolio across Finland, Norway and Sweden, (iii) its good market positions and franchise value in the Nordics’ shopping center market and (iv) a fully unencumbered asset base and good access to capital.”
STRONG SUPPORTIVE SHAREHOLDERS AND DEMONSTRATED ACCESS TO EQUITY FINANCING
30
75 99 91 200 197 604 36 35 134 63 100 206 100 200 300 400 500 600 700 Aug-05 Oct-05 Apr-06 Feb-07 Oct-07 Sep-10 Jul-11 Sep-12 Mar-13 Jun-14 Jul-14 Jul-15 Capital Raised €M Rights Issue Directed Share Issue
–Citycon has raised more than €1.8bn of equity since 2005 in a series of rights issues and directed share issues to finance growth, strengthen balance sheet and enable investment grade credit ratings –7/2015: 604m€ rights issue to finance the acquisition of Sektor Gruppen in Norway –113% oversubscription of which 99.52% was covered by primary subscription rights –Two largest owners Gazit-Globe Ltd. and CPP Investment Board Europe gave subscription undertaking for the issue but this was not utilized due to oversubscription –Gazit-Globe has participated in all rights issue transactions
citycon.com
DISCLAIMER
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