Operational performance accelerated in Q3/2024 continuing the trend throughout the year, resulting in a +13.7% total NRI increase in Q3/2024 against Q3/2023 and +11.2% YTD total NRI increase with comparable FX rates compared to the previous year. The strong operational result is due, in part to an increase in average rent/sq.m. which rose by +4.1% with comparable FX rates to 24.7 EUR/sq.m. (Q3/2023: 23.7 EUR/sq.m.). These results also include the acquisition of 100% of Kista and the divestments of two assets during the year. Further, retail occupancy grew slightly to 95.1% (Q3/2023: 94.9%). Leasing activity remains strong with 109,000 sq.m. new leases signed in Q1-Q3/2024. New tenants opened during 2024 include two major supermarkets 7,300 sq.m. Prisma grocery in Myyrmanni and Selver grocery in Rocca al Mare, Gym! fitness 1,800 sq.m. in Rocca al Mare, and the first Nike concept store in the Helsinki suburban area at Iso Omena. On the back of our operational performance we saw a EUR +14.7 million fair value gain in Q3/2024 and EUR +84.0 million in Q1-Q3/2024.
Our Q1-Q3/2024 EPRA EPS and adjusted EPRA EPS results were 0.476 EUR (-1.2%) and 0.386 EUR (+9.6%) respectively compared to the previous year. One-time items impacting the EPRA EPS and adjusted EPRA EPS include the two executed divestments, Kongssenteret and Trekanten, the EUR 48 million share issue, delayed consolidation of Kista by one month, delay of Barkarby handover as we are about to divest the residential property, and EUR 7.2 million in reorganisation and one-time costs, including severance costs. FX rates also impacted the results but was offset by EUR 2.7 million gain on hedging of the NOK.
Our commitment to the investment grade credit rating and strengthening our balance sheet remain key priorities for Citycon as we make continued progress growing our funds from operations and deleveraging the company. Our divestment criteria includes; selling retail assets outside capital cities, non-retail development, as well as properties where we have maximized the asset value. During the third quarter of 2024 the company completed the second divestment of the year at Trekanten in Norway resulting in YTD divestments of around EUR 145 million. Additionally, in October 2024 Citycon announced that it has signed an agreement to divest Barkarby in Sweden. Our remaining divestment pipeline contains approximately EUR 400 million under LOI or advanced negotiations, therefore we are confident that we will exceed the previously announced divestment targets, EUR 380 million as of 2024 year-end and EUR 950 million as of 2025 year-end. Divestment proceeds will be used to pay down debt and improve our debt metrics.
Moving into Q4/2024 we will accelerate the operational actions that we committed to for 2024, which includes reducing expenses to offset the increase in finance costs. We have completed the consolidation of corporate functions to Iso Omena and outsourcing of our accounting. In addition, we are planning to decentralize day-to-day decision making to the country level in order to improve results and to provide full P&L accountability to these teams. While our operational performance is consistent with the best performers of our peer group, we believe we have the opportunity to further accelerate this performance. Specifically, our occupancy cost ratios (OCR’s) continue to remain stubbornly low at 9.4% providing at least 200 basis point of headroom based upon a study we commissioned from Savills. We believe these moves will enable us to capture additional rents and make significant headway in increasing our OCR’s. These actions will also contribute to meeting our targeted run-rate G&A of approximately EUR 20 million moving into 2025. Lastly, capital expenses have been reduced from EUR 96 million to approximately EUR 40 million for this year. This reduction in capital spending will also accelerate into 2025, with planned spending to be approximately EUR 20 million.
Citycon owns true “fortress-like” assets that are irreplaceable. The locations of our real estate in the largest capital cities combined with the “bullet-proof” merchandising necessity goods and municipal services have generated strong performance with room to grow rents even faster. Our active and robust divestment pipeline will allow us to substantially improve our debt metrics as we pay down debt with proceeds from these sales. Moving forward we will further solidify our balance sheet while generating more production out of our remaining assets ultimately positioning us for sustainable growth.
Scott Ball
Interim Chief Executive Officer
Source: Citycon's Interim Report Q3/2024