Citycon enjoyed strong growth in its operational business in 2024 posting EUR 184 million in direct operating profit. On the back of this strong performance, total direct operating profit grew by +12.0% for Q1–Q4/2024, adjusted EPRA Earnings by +12.1% and total net rental income by +10.3% (all measured with comparable FX) compared to the same period in 2023. Excluding e.g. divested assets and acquisitions like-for-like net rental income grew +4.6% compared to year 2023 (in comparable FX).
Operational highlights
The retail occupancy rate increased +20 bps over the prior quarter to 95.3% and average rents increased 4.6% to 25.0 EUR/sq.m. The company signed over 175,000 sq.m. of leases during 2024, with new tenant openings including a 7,300 sq.m. Prisma hypermarket in Myyrmanni, a 3,200 sq.m. Selver grocery store in Rocca al Mare, an over 1,800 sq.m. gym at Rocca al Mare and the first Nike concept store in Helsinki suburban area in Iso Omena. In December, Citycon announced that it has signed a lease agreement with Terveystalo for an over 4,000 sq.m. medical centrehospital in Trio. The strong leasing results reflect the quality of our grocery/municipality anchored urban hubs and resulted in a rent collection rate of 99%.
In 2024, Citycon completed important measures to restructure its operations, reduce expenses, and improve its balance sheet. Actions to reduce costs included the outsourcing of accounting, and decentralization of dayto-day decision making to the country level. These actions completed in 2024 provide for a reduction in G&A overhead to approximately EUR 23 million for 2025 onwards. In addition, the company significantly reduced capital expenditures for 2024 and planned further reductions in capital expenditures for 2025 to approximately EUR 21 million.
Financial highlights
Additional measures were taken in 2024 to strengthen the balance sheet, including asset disposals of EUR 354 million with proceeds used to repay debt. Total divestments as of year-end 2024 reached EUR 475 million since the publication of our divestment target resulting in a 50% completion of our EUR 950 million target by 2026. We anticipate another approximately EUR 250 million divestments through 2025 and will likely hit our full divestment target in 2026.
The company also made the decision to suspend dividend payments, and repay short-term debt to push out the average maturity schedule. In addition, Citycon issued two new bonds during the year with outsized demand from the market as the bonds were seven and ten times oversubscribed, and further improved the debt maturity profile. These steps led S&P to reaffirm our investment grade rating on November 19. The expansion in yields impacted the valuation of the portfolio during 2024, which was partially offset by realized rent growth occurring in our assets resulting in an increase in the market rents used in the valuation models within all of our main markets. For the year, the book value of our assets decreased by EUR -74.6 million. As interest rates continue to decline, spreads should tighten which should positively impact valuations for 2025.
Citycon’s outlook for 2025
As we begin 2025, the new operating model is up and functioning, with country teams that now have full local P&L accountability as well as separate Board oversight for each country. While the company’s operational results are among some of the best within the peer group, Citycon still has room to further accelerate rent growth. The company’s occupancy cost ratio is one of the lowest in the industry at 9.4% and our tenants continue to experience sales growth (like-for-like +2.5% for 2024), which provides Citycon with ample headroom for compounding rent growth. Taken together, these factors give us confidence that 2025 results will continue to build on the strong performance in 2024 and our guidance reflects the ongoing belief in our unique necessity-based urban hubs. As a result, the outlook for 2025 EPRA EPS is in the range of EUR 0.41–0.53 and EPRA EPS excluding hybrid interests EUR 0.60–0.72.
CEO transition
Lastly, I want to welcome Mr. Oleg Zaslavsky to Citycon as the new CEO starting on the first of March. As a professional with 20 years of experience in the real estate sector, I am confident that he will bring valuable expertise to Citycon and lead the company towards even greater financial and operational results. I along with the rest of the Board of Directors will be supporting Mr. Zaslavsky during the transition period and moving forward.
F. Scott Ball
Vice Chairman and Interim Chief Executive Officer
Source: Citycon's Financial Statements Release Q1-Q4/2024