Citycon Q3: Successful opening of Iso Omena’s extension and bond issuance support earnings

Citycon Oyj   Stock Exchange Release   20 October 2016 at 09:00 hrs
JULY—SEPTEMBER 2016
- Gross rental income decreased to EUR 61.9 million (Q3/2015: 65.9) mainly due
to the non-core property divestments in Finland and Sweden during 2015 and 2016,
which decreased gross rental income by EUR 4.4 million. The divestments also
decreased net rental income by EUR 3.9 million, while the Norwegian business
unit (with the comparable exchange rates) and the opening of the first part of
the Iso Omena extension increased net rental income by EUR 1.6 million.
- EPRA Earnings decreased by EUR 0.3 million, or 0.9%, to EUR 38.6 million,
especially due to the property divestments. EPRA Earnings per share (basic) was
EUR 0.043 (EUR 0.046).
- Earnings per share increased to EUR 0.04 (0.03) mainly due to higher gains on
sale and lower financial costs.
- The company specifies its outlook relating to EPRA Operating profit, EPRA
Earnings and EPRA Earnings per share.

JANUARY—SEPTEMBER 2016
- Gross rental income increased to EUR 187.3 million (Q1—Q3/2015: 158.6) mainly
due to the acquisition the of Norwegian business unit. Gross rental income of
Citycon’s Norwegian operations amounted to EUR 63.0 million (21.2). The
acquisition also increased net rental income by EUR 36.6 million.
- EPRA Earnings increased by EUR 16.8 million, or 17.5%, to EUR 113.2 million,
especially due to the Norwegian acquisition. EPRA Earnings per share (basic)
decreased slightly to EUR 0.127 (0.136) due to the higher number of shares.
- Earnings per share (basic) increased to EUR 0.14 (0.12). The increase was
mainly a result of higher fair value gains and gains on sale.

KEY FIGURES
+--------------+----+-------+-------+----+----------+----------+----+-------+
|              |    |Q3/2016|Q3/2015|%1) |Q1–Q3/2016|Q1–Q3/2015|%1) |2015   |
+--------------+----+-------+-------+----+----------+----------+----+-------+
|Net rental    |MEUR|56.8   |59.7   |-5.0|169.0     |142.1     |18.9|199.6  |
|income        |    |       |       |    |          |          |    |       |
+--------------+----+-------+-------+----+----------+----------+----+-------+
|Direct        |MEUR|50.2   |54.7   |-8.2|148.6     |127.2     |16.9|175.4  |
|Operating     |    |       |       |    |          |          |    |       |
|profit 2)     |    |       |       |    |          |          |    |       |
+--------------+----+-------+-------+----+----------+----------+----+-------+
|Earnings      |EUR |0.04   |0.03   |14.5|0.14      |0.12      |19.7|0.14   |
|per share     |    |       |       |    |          |          |    |       |
|(basic)       |    |       |       |    |          |          |    |       |
+--------------+----+-------+-------+----+----------+----------+----+-------+
|Fair value    |MEUR|4,354.8|4,036.1|7.9 |4,354.8   |4,036.1   |7.9 |4,091.6|
|of investment |    |       |       |    |          |          |    |       |
|properties    |    |       |       |    |          |          |    |       |
+--------------+----+-------+-------+----+----------+----------+----+-------+
|Loan to       |%   |46.2   |45.2   |2.3 |46.2      |45.2      |2.3 |45.7   |
|Value (LTV) 2)|    |       |       |    |          |          |    |       |
+--------------+----+-------+-------+----+----------+----------+----+-------+
|EPRA          |    |       |       |    |          |          |    |       |
|based         |    |       |       |    |          |          |    |       |
|key figures 2)|    |       |       |    |          |          |    |       |
+--------------+----+-------+-------+----+----------+----------+----+-------+
|EPRA          |MEUR|38.6   |38.9   |-0.9|113.2     |96.4      |17.5|130.8  |
|Earnings      |    |       |       |    |          |          |    |       |
+--------------+----+-------+-------+----+----------+----------+----+-------+
|EPRA          |EUR |0.043  |0.046  |-4.9|0.127     |0.136     |-6.3|0.173  |
|Earnings      |    |       |       |    |          |          |    |       |
|per share     |    |       |       |    |          |          |    |       |
|(basic)       |    |       |       |    |          |          |    |       |
+--------------+----+-------+-------+----+----------+----------+----+-------+
|EPRA          |EUR |2.83   |2.70   |4.8 |2.83      |2.70      |4.8 |2.74   |
|NAV           |    |       |       |    |          |          |    |       |
|per share     |    |       |       |    |          |          |    |       |
+--------------+----+-------+-------+----+----------+----------+----+-------+
1) Change from previous year. Change-% is calculated from exact figures.
2) Citycon presents alternative performance measures according to the European
Securities and Markets Authority (ESMA) new guidelines. More information is
presented in Basis of Preparation and Accounting Policies in notes to the
accounts.

CEO, MARCEL KOKKEEL:
The first three quarters of 2016 were a period of continued stable performance.
Like-for-like net rental income growth including pro forma Norway and Kista
Galleria was 0.6%, and the occupancy rate decreased slightly to 96.0% mainly due
to operations in Finland. After more than one full year of operations, the
acquisition in Norway has demonstrated it is a strong contributor to Citycon’s
result with like-for-like net rental income growth of 3.4% for this year. This
indicates the quality of the portfolio and the successful integration of the
Norwegian operations. The subdued economic environment and the bankruptcy of the
Anttila department store chain in Q3 means we are still facing some challenges
in the Finnish operations. However, we see some early positive signs and expect
gradual improvement in sentiment, especially in the Helsinki area.

A clear highlight of the quarter was the opening of the first part of the Iso
Omena extension in Espoo. Since the opening, footfall has increased by 30%, even
though the new metro line is yet to start running. With the second phase to be
completed in April 2017, Iso Omena will be the true benchmark for a modern way
of shopping, with four strong groceries, global fashion brands, municipal
services and a diverse offering of quality food and beverage.

Iso Omena is the largest development in Citycon’s history and serves as a
concrete example of how we utilise our urban locations to generate earnings
growth. Citycon continuously evaluates (re)development and extension potential
in its existing portfolio, and aims to invest EUR 150-200 million p.a. in
developments. These investments will be financed in principle through recycling
of capital.

In August, Citycon issued a 10-year Eurobond at a record low fixed 1.25% coupon.
The successful placement demonstrates Citycon’s good credit quality and will
reduce Citycon’s average cost of debt going forward as well as increase the
average maturity to close to six years.

BUSINESS ENVIRONMENT
There were no major changes in Citycon’s macroeconomic environment during the
third quarter of 2016. Citycon’s operating countries are still on diverging
courses: the business environment in Norway, Sweden, Estonia and Denmark remains
strong or relatively strong, while the Finnish economy is still showing weaker
growth. However, the growth pace in Nordic economies is expected to gradually
converge.

In 2016, the European Commission forecasts Euro area GDP growth to reach 1.6%.
Sweden and Estonia are showing stronger growth figures than the Euro area
average while Norway and Denmark are predicted to grow slightly below the Euro
area forecast. The GDP growth for Finland is still expected to remain modest,
although the trend is positive also in Finland. Finland’s GDP growth is
dependent on domestic demand, structural reforms and recovery of the country’s
stagnating export markets.

BUSINESS ENVIRONMENT KEY FIGURES
+--------------------+-------+------+------+-------+-------+----+
|%                   |Finland|Norway|Sweden|Estonia|Denmark|Euro|
|                    |       |      |      |       |       |area|
+--------------------+-------+------+------+-------+-------+----+
|GDP growth          |    0.7|   1.2|   3.4|    1.9|    1.2| 1.6|
|forecast for 2016   |       |      |      |       |       |    |
+--------------------+-------+------+------+-------+-------+----+
|Unemployment,       |    8.8|   5.0|   7.2|    6.8|    6.2|10.1|
|August 2016         |       |      |      |       |       |    |
+--------------------+-------+------+------+-------+-------+----+
|Retail sales growth,|    0.4|   2.9|   3.9|    5.0|   -0.3| 0.6|
|Jan–August 2016     |       |      |      |       |       |    |
+--------------------+-------+------+------+-------+-------+----+
Sources: European Commission, Eurostat, Statistics
Finland/Norway/Sweden/Estonia/Denmark

The unemployment rates in all of Citycon’s operating countries remain below the
Euro area average (10.1%). During the first nine months of 2016, consumer
confidence levels have remained positive in Finland, Sweden and Denmark, while
the consumer confidence in Norway, Estonia and on average in the Euro area is
still slightly negative. Especially in Finland, Sweden and Estonia, the trend in
consumer confidence is positive. (Source: Eurostat) During January-September,
consumer prices have remained relatively unchanged compared to the previous year
in all of Citycon’s operating countries with the exception of Norway (3.6%),
where prices have increased. (Source: Statistics
Finland/Norway/Sweden/Estonia/Denmark)

Retail sales growth for the first eight months of 2016 has been strong in
Estonia, Sweden and Norway, positive in Finland, but mildly negative in Denmark.
(Source: Statistics Finland/Norway/Sweden/Estonia/Denmark)

In Finland, prime shopping centre rents have decreased compared to the previous
year and are forecast to remain stable in 2017. In Norway, prime rents are
forecast to remain unchanged. In Sweden, prime shopping centre rents are
forecast to increase during the year while in Estonia rents have decreased and
downward pressure on rents is expected to continue due to intensifying
competition. (Source: JLL)

In Finland, the demand for prime properties remains strong and the demand for
secondary properties has also been evident. In Norway, the investment market is
expected to remain strong. In Sweden, the prime shopping centre yields have
moved in and stabilised during the last year. In Estonia, prime yields are
expected to continue decreasing. (Source: JLL)

RISKS AND UNCERTAINTIES
The most significant near-term risks and uncertainties in Citycon's business
operations are associated with the general development of the economy and
consumer confidence in the Nordic countries and Estonia and how this affects the
fair values, occupancy rates and rental levels of the shopping centres and
thereby Citycon’s financial result. Especially a weaker economic recovery in
Finland could hamper the achievement of the set financial objectives.

The main risks that can materially affect Citycon's business and financial
results, along with its main risk management actions, are presented in detail on
pages 60—61 in the Annual and Sustainability Report 2015, in the Financial
Statements 2015 and on Citycon’s website in the Corporate Governance section. No
material changes are estimated to have taken place during the year in the risks
described.

DIVIDEND AND EQUITY REPAYMENT
Citycon’s dividend paid in 2016 for the financial year 2015 and equity
repayments in 2016:
+--------------------------------------------+------------+-------+
|Dividends and equity repayments paid on 30 September 2016        |
+--------------------------------------------+------------+-------+
|Dividend                                    |EUR / share |0.01   |
+--------------------------------------------+------------+-------+
|   (record date 18 March 2016,              |            |       |
|   payment date 29 March 2016) 1)           |            |       |
+--------------------------------------------+------------+-------+
|Equity repayment Q1                         |EUR / share |0.0275 |
+--------------------------------------------+------------+-------+
|   (record date 18 March 2016,              |            |       |
|   payment date 29 March 2016) 1)           |            |       |
+--------------------------------------------+------------+-------+
|Equity repayment Q2                         |EUR / share |0.0375 |
+--------------------------------------------+------------+-------+
|   (record date 22 June 2016,               |            |       |
|   payment date 30 June 2016) 2)            |            |       |
+--------------------------------------------+------------+-------+
|Equity repayment Q3                         |EUR / share |0.0375 |
+--------------------------------------------+------------+-------+
|   (record date 23 September 2016,          |            |       |
|   payment date 30 September 2016) 2)       |            |       |
+--------------------------------------------+------------+-------+
|                                                                 |
+--------------------------------------------+------------+-------+
|Remaining Board's authorisation for equity repayment 3)          |
+--------------------------------------------+------------+-------+
|Equity repayment Q4 maximum                 |EUR / share |0.0375 |
+--------------------------------------------+------------+-------+
|   (possible payment date 30 December 2016) |            |       |
+--------------------------------------------+------------+-------+
1) AGM 2016 decision.
2) Board decision based on the authorisation issued by the AGM 2016.
3) Unless the Board of Directors decides otherwise for a justified reason, the
authorisation granted by AGM 2016 can be used to distribute equity repayment
three times. Following equity repayments of 30 June 2016 and 30 September 2016,
the payment date of the possible further equity repayment in 2016 will be 30
December 2016. The equity repayment will be paid to a shareholder registered in
the company’s shareholders’ register maintained by Euroclear Finland Ltd on the
record date for the equity repayment. The Board of Directors will decide on the
record date in connection with each equity repayment decision. Citycon shall
make separate announcements of such Board resolutions.

OUTLOOK
The company specifies its outlook. Citycon forecasts the 2016 Direct Operating
profit to change by EUR 16 to 23 million (previously 17–26) and EPRA Earnings to
change by EUR 13 to 20 million (previously 11–20) from the previous year.
Additionally, the company expects EPRA EPS (basic) to be EUR 0.16–0.17
(previously 0.1575–0.1725).

These estimates are also based on the existing property portfolio as well as on
the prevailing level of inflation, the EUR—SEK and EUR—NOK exchange rates, and
current interest rates. Premises taken offline for planned or ongoing
(re)development projects reduce net rental income during the year.

Financial calendar
Citycon 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 2016 on Thursday, 9 February 2017 at about 9:00 a.m.

Citycon Oyj’s Annual General Meeting 2017 will be held in Helsinki, Finland, on
Wednesday, 22 March 2017 starting at 12:00 noon.

Citycon will issue three interim reports during the financial year 2017 in
accordance with the following schedule:
  January–March 2017 on Thursday, 20 April 2017 at about 9:00 a.m.
  January–June 2017 on Thursday, 13 July 2017 at about 9:00 a.m.
  January–September 2017 on Thursday, 19 October 2017 at about 9:00 a.m.

Helsinki, 19 October 2016
Citycon Oyj
Board of Directors

For further information, please contact:
Eero Sihvonen, Executive VP and CFO
Tel. +358 50 557 9137
eero.sihvonen@citycon.com

Henrica Ginström, VP, IR and Communications
Tel. +358 50 554 4296
henrica.ginstrom@citycon.com

Citycon is an owner, developer and manager of urban grocery-anchored shopping
centres in the Nordic and Baltic region, managing assets that total almost EUR 5
billion and with market capitalisation of over EUR 2 billion. Citycon is the No.
1 shopping centre owner in Finland and Estonia and among the market leaders in
Norway and Sweden. Citycon has also established a foothold in Denmark.

Citycon has investment-grade credit ratings from Moody's (Baa1) and Standard &
Poor's (BBB). Citycon Oyj’s share is listed in Nasdaq Helsinki.

www.citycon.com