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Edited Transcript of CTY1S.HE earnings conference call or presentation 6-Feb-20 8:00am GMT

Q4 2019 Citycon Oyj Earnings Call

Helsinki Feb 13, 2020 (Thomson StreetEvents) -- Edited Transcript of Citycon Oyj earnings conference call or presentation Thursday, February 6, 2020 at 8:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Eero T. Sihvonen

Citycon Oyj - Executive VP & CFO

* F. Scott Ball

Citycon Oyj - CEO

* Valtteri Piri

Citycon Oyj - Legal and IR Specialist

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Conference Call Participants

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* Anssi Kiviniemi

SEB, Research Division - Analyst

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Presentation

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Valtteri Piri, Citycon Oyj - Legal and IR Specialist [1]

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Good morning, and welcome to Citycon's Q4 2019 and Full Year 2019 Results Audiocast. Today, we published our financial statement release as well as the financial statements 2019. Additionally, Citycon's corporate governance statements were also published this morning. All material is available on Citycon's website under Investors.

My name is Valtteri Piri, and I'm Citycon's IR and Legal Specialist. With me in the call is our CEO, Scott Ball; as well as our CFO, Eero Sihvonen. Scott will start the audiocast by a brief overview of 2019, and he will also talk shortly about the transaction announced yesterday, followed by Eero's review the operative and financial figures of the year. Scott will conclude the presentation by talking about Citycon's key focus areas for upcoming year. (Operator Instructions) Scott, please go ahead.

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F. Scott Ball, Citycon Oyj - CEO [2]

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Thank you, and good morning, everyone. I'm pleased to present the Q4 and 2019 full year results. I'll go through a short summary of 2019 and the key highlights of the quarter, after which I'll present the operational figures.

I'll also talk shortly about the portfolio acquisition that was announced yesterday. This will be followed by a more comprehensive financial overview by Eero, and I will conclude by saying a few remarks about our priorities going forward.

This is my first year as Citycon's CEO. And firstly, I have to say I'm extremely proud of the progress our team has made during this year. Some of the highlights of the year and the last quarter include our EPRA EPS increased to EUR 0.818. Our net rental income increased by 1.2% to EUR 217.4 million, while administrative expenses continued to decline significantly year-on-year.

We improved our operational performance during the year, and we were able to grow our like-for-like net rental income in all of our business units. We were very pleased that the overall leasing spread was positive. Occupancy rates increased slightly from Q3 2019 levels and was strong at 95.5%. Both tenant sales and footfall showed growth.

In November, Citycon launched a green financing framework, and later in the same month we issued a EUR 350 million green hybrid bond. We are pleased with the successful execution of this transaction, which is an important milestone in strengthening our balance sheet. As a result, our loan-to-value improved significantly to 42.4% in IFRS. In line with these results, the Board's dividend proposal to the Annual General Meeting is EUR 0.65, which corresponds roughly to 80% payout ratio of EPRA EPS.

Looking at our portfolio operating metrics, footfall and tenant sales grew clearly. Furthermore, both like-for-like footfall and like-for-like tenant sales developed positively. As I noted before, occupancy at our shopping centers remained strong at 95.5%, and we realized slight growth from Q3 2019. We have a very stable business model, with resilient tenant mix, and this is visible in our occupancy rate, which has been almost within 100 basis points during the last several years.

Average rents of leases started increase significantly, from 22.5% in 2018 to 26.0% in 2019. Leasing spreads were positive during the quarter, driven by Sweden and Estonia. And leasing spreads remained stable in Finland and Norway.

During 2019, we continued our journey towards carbon neutrality by 2030. Sustainability for us is about carbon neutrality, accessibility, convenience and safety and integrating these throughout the company. Looking at short-term targets of our sustainability strategy, I'm pleased to see that we are back on track towards increasing our energy efficiency. The energy intensity at our shopping centers decreased by 7% last year. One concrete example on our sustainability action is that in November we opened the world's largest solar park with snow-melting technology on the roof of the shopping center downtown in Porsgrunn, Norway. It has 8,000 square meters of solar panels, which produce energy equivalent to the consumption of about 100 apartments. This solar park brings the total number of solar panels to almost 6,800 throughout our portfolio.

In November, our flagship shopping center, Iso Omena renewed its BREEAM In-Use certificate with the score of excellent in both building management and asset performance. This [comprised] BREEAM In-Use management score in Finland.

At the end of 2019, 84% of our shopping centers were BREEAM In-Use certified. According to our sustainability strategy, all of our assets aim to be BREEAM In-Use certified by the end of 2020.

I strongly believe that profitability and sustainability go hand-in-hand, both enable us to contribute in a positive way to our customers in the local communities where we operate. With our green financing framework and green hybrid bond, we are also able to integrate sustainability objectives into our financing activity. The framework and the bond will further support Citycon's profile as forerunner in sustainability and enable us to broaden our investor base.

As we disclosed yesterday, we signed an agreement to expand our ownership of 3 shopping centers in Norway. The portfolio includes Stovner Senter in Oslo; Torvbyen, close to Olso; and Markedet in Western Norway. With the acquisition, the remaining portion of this portfolio, we will strengthen our position in Norway. We have owned and managed these assets since 2015, with 20% ownership. And after the transaction, we will have full ownership of all 3 assets. We see significant value in this portfolio and are already in the process of selling Markedet, the smallest of the 3.

This is a very unique opportunity for us to expand our position in Norway at a very extremely attractive price. The transaction cost was approximately EUR 145 million.

As we have managed the portfolio over the past 5 years with 20% ownership, we know the assets very well. With our extensive knowledge and full ownership of these assets, we believe we can create value for our shareholders. Stovner, which represents more than half of the portfolio's total value, checks the boxes that we believe are important for successful shopping center: urban location, population growth, public transportation and dominant size. This asset has footfall of almost 5 million visitors and very strong sales figures.

On the other hand, Torvbyen has a dominant position in [its catchment] area and has a high occupancy rate. And as mentioned before, we are in the process of selling Markedet. The share purchase agreement is already signed, and closing is expected before the end of the month. This will slightly affect our loan-to-value, but we'll remain in the range of our target loan-to-value level of 40% to 45%.

A strong balance sheet and maintaining the value to ratio below 45% remains a key priority for the company also in the future. This is a very accretive transaction for us, and we're very excited about it.

I will now hand this over to Eero to go through the financial figures for Q4 in 2019 in more detail.

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Eero T. Sihvonen, Citycon Oyj - Executive VP & CFO [3]

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Thank you, Scott. This is Eero, Eero Sihvonen, CFO. Continuing for the Q4 2019 and full year financials, as Scott mentioned, Q4 was a good, solid quarter operationally as was the full year, and the management continued our efforts and concentrated on those actions that way within our control. And as a result, occupancy stayed at a very good level and was actually over higher than previous quarter.

We had a positive like-for-like. We had lower SG&A compared to last year. We had positive leasing spread and also both positive footfall and sales. So all KP -- operational KPIs actually did develop positively.

I will start from Q4 financials, and basically net rental income stayed at the same level essentially as last year, whilst operating profit improved by EUR 3 million. And that has to do with the fact that, as mentioned, our SG&A was clearly below last year's level. Particularly during last quarter, SG&A was, like, EUR 3 million. The admin costs were, like, EUR 3 million below previous year's level. Quarterly EPRA earnings were also ahead of last year, EUR 1.4 million or 4.3% higher, and we ended up having a solid EUR 0.20 per share in terms of EPRA EPS. And EPRA NAV per share ended at EUR 12.28.

And then moving to the full year financials. In terms of net rental income, we were EUR 2.5 million higher than last year. I will come back to the bridge of net rental income in a while. Operating profit was EUR 5.5 million higher than last year at EUR 193.5 million. And for the full year, EPRA EPS ended at EUR 0.818 per share, and that is 1.5% higher than last year. And actually, with stable FX, we would have been, like, 3.3% over last year, but due to the fact that both Swedish krone (sic) krona and Norwegian krone were weaker than last year, we actually were 1.5% over last year.

And the EPRA -- sorry, net rental income bridge, as mentioned on Page 11, so here, you can see that the redevelopment projects coming online, particularly Mlndal and Gothenburg, Sweden increased net rental income by EUR 3.8 million. We did sell some noncore assets also to manage our balance sheet and to improve the quality of our portfolio, and the impact of that was minus 6.2%.

We had a positive like-for-like development in rents, and approximately EUR 900,000 was the result. And then everything else together impacted by EUR 3.8 million. And this is a net between basically a EUR 3 million of negative FX and EUR 7 million positive impact by IAS 16 standard. And the impact of currencies is also detailed here.

Then the EPRA cost ratio, as mentioned, we had a very tight cost control throughout the year and concentrated on those facts and factors that the management could have an impact on, and particularly proud we are about the fact that we were able, again, to reduce the EPRA cost ratio. And at least for me, EPRA cost ratio is very important in the sense that different companies categorize their cost items a bit differently between operating expenses and admin expenses, and EPRA cost ratio is really plan to capture all of that. And I would say that our cost ratios now are at very low on a competitive level, and development has been very good.

Then moving over to fair value changes, and here I would just like to highlight that we do have a very stable business model. Our operational and other KPIs, early indicators, are positive, like, like-for-like rental income, occupancy, sales, footfall. So therefore, the main reason for the negative valuation result for the full year and particularly for the fourth quarter has to do with the very negative valuation sentiment that currently is there out in the markets.

And if we look at the components of the valuation result, which ended up at a negative EUR 57 million for the quarter and EUR 121.9 million for the year, the changeover last year really is in Sweden. As in 2018 the valuation was still positive, but 2019 the Sweden valuation result was negative by EUR 32 million in -- for the full year and by EUR 22.7 million for the last quarter.

We also did publish our financial review. And in the financial review, you will find additional details, and there you will see also that the average valuation cap rate in Sweden actually increased by approximately 20 basis points through the year. And overall, I would say that our valuation is very -- valuations are very realistic. And in Finland/Estonia, actually, the situation now is already better than it was in 2018, partly because we started earlier and partly because our portfolio in Sweden -- in Finland is now at a better quality level following our early disposals.

The average yield requirement actually stayed the same compared to 1 year ago at 5.3%. It has to do -- that has to do with the fact that in Finland, we actually have a different appraisal and their view -- their market values are very close to the ones by the previous appraisal, but their cap rate view is a little bit lower than the previous appraisals, whilst their market rental view is a little bit lower on the other hand.

Then moving over to EPRA net asset value development bridge. And here, you can see the components of EPRA net asset value in EPRA NAV development. It has to do a lot with indirect results, i.e., valuations, whilst naturally EPRA earnings were EUR 0.82 positive. The only -- and now again, EPRA NAV ended up at EUR 12.28. Triple net NAV reduced more than a single NAV and that had to do with the low interest rates, which in turn increase the value of our bonds, so secondary value of our bonds was higher. And as a result, triple net NAV reduced more.

Then turning over to financing matters and the first green financing framework. And like Scott mentioned, we are particularly proud about our sustainability efforts. And we are also proud about green financing framework that we did set up and integrating our company's sustainability targets with our financing activities, and we did put the financing -- the green financing framework into action and did issue green hybrids. And we may, in the future -- we will certainly, in the future, use this green financing framework to issue other debt securities in green form, so that will most likely continue.

Then just a few words about the green hybrid bond that we issued in November. And green hybrid or basically hybrid bond is deeply subordinated securities that are senior only to ordinary share capital. We issued basically these green hybrid bonds to improve our balance sheet and to take away the near-term refinancing risk out of the equation and to extend the average debt maturities and actually our debt maturity profile looks very good. Right now, we don't have any major substantial refinancing risks anytime soon. And in the appendix, you will see the debt maturity table following the hybrid issuance.

So in practice, concurrently with the hybrid bond issuance, we arranged a tender for our existing short-term bonds. And we were able to very nicely repay most of the bonds maturing in the near future.

Then about impact of hybrid issuance on Citycon's financial reporting, IFRS treats hybrids as 100% equity. And credit rating agencies give hybrids so-called equity credit for 50%. So in rating agency calculations, 50% of the equity is -- sorry, 50% of hybrid is equity and 50% is debt. And we will naturally continue reporting hybrid as IFRS requires. So it will have no major impacts on P&L, but our P&L will be better as the coupons will not be recorded in P&L, but rather booked against equity. And it will, of course, mean that our balance sheet has improved quite substantially. And cash flow-wise, they will be only the short first coupon in 2020. And the full coupons will be paid in 2021 and onwards.

Financing targets-wise, we are now clearly within our own target of loan-to-value in the middle, more or less exactly, 42.4%, following the hybrid issuance. And in general, we have stable financing targets and stable financing factors, which are matched with a conservative business model.

As Scott mentioned, the acquisition of the Norwegian centers will have an approximately 1 percentage point impact on loan-to-value. As a result, also, the amount of our interest-bearing debt did decline because we paid back debt with the hybrid issuance. And at the end of the year, our interest-bearing debt ended up at EUR 1.8 billion approximately. The average loan maturity was 4.6 years. And you can see the very positive development of LTV from close to 50% to current 42.4%.

We have -- following the hybrid issuance, we have also updated our guidance practice. And as per the best practice, we also will give investors, analysts and shareholders an adjusted EPRA EPS. So going forward, the guidance will include -- the outlook guidance will include direct operating profit as before and EPRA EPS, same way as before, but additionally also the adjusted EPRA EPS. And the adjusted EPRA EPS is, as mentioned, after the impact of all coupon expenses from the hybrid, i.e. capital securities.

Then moving over to the guidance to the outlook. And here, I will start by mentioning that in the outlook text, there was 1 additional unnecessary word and that word will be corrected. So the outlook second paragraph included word million that should not have been there. So basically, the EPRA EPS range is EUR 0.72 to EUR 0.82 and not EUR 0.72 million, EUR 0.82 million. So this million in both language version English and Finnish will be corrected. But all of the numbers are correct. So nothing to worry about there.

So in terms of guidance, we -- our guidance outlook, operating profit-wise is EUR 191 million to EUR 209 million. In terms of EPRA EPS, the guidance is EUR 0.815 to EUR 0.915, and adjusted EPRA EPS EUR 0.72 to EUR 0.82. And naturally, going forward, we will narrow the guidance. And for your convenience, we have also calculated EPRA EPS guidance without hybrid issuance and bond buyback, so-called comparable EPRA EPS, and that would be EUR 0.76 and EUR 0.86. And the impact of the Norwegian acquisition have already been included in this guidance figures.

With this, I will stop and back to you, Scott.

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F. Scott Ball, Citycon Oyj - CEO [4]

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Thank you, Eero. I'd like to share a few thoughts with you on the company's focus in 2020. In 2020, we'll continue to intensify our focus on maximizing the value of the assets by continued proactive asset management. During 2019, we implemented a new organization. And with this clear organization, we're now better able to focus on all parts of the business as well as finding synergies from our pan-Nordic reach.

In 2020, our aim is dramatically increase our income from specialty income. Our large footfall numbers provide a great starting point for capitalizing on this traffic. With our strengthened team, we are now looking at how we can best take advantage of the numerous densification opportunities that we have in our portfolio across the country. Our midterm strategy is to become a mixed-use urban real estate investor and owner. Lippulaiva will be our first big mixed-use project.

After the hybrid, we're now in the range of our target loan-to-value of 40% to 45%. A strong balance sheet and maintaining the loan-to-value ratio below 45% remains a key priority for the company also in the future. At the same time, we will continue thoughtful dispositions of noncore assets at appropriate pricing levels.

As previously mentioned, our strategy going forward is to focus on developing mixed-use space and densifying the urban environment around our shopping centers. While retail forms the foundation of Citycon's business model, we are also looking to diversify our income stream. We have a residential portfolio of planned or approved building rights of approximately 4,500 units. This presents great opportunity for us, which we will leverage, as we densify the urban assets. We have identified 320 million -- excuse me, 320,000 square meters of opportunity within the existing portfolio. Of that number, approximately 60,000 square meters is already zoned, 130,000 square meters is in -- somewhere in the zoning process. And then the other remaining 130,000 square meters, we are at the beginning stages of. It's important for you to note that only a small part of this is in our current valuations. The additional value will be realized as we achieve these zoning approvals.

As mentioned previously, we're in the process of developing Lippulaiva in the Helsinki Metropolitan area. Skanska was chosen as our main contractor for the shopping center part, and they took over the site on the 4th of December. The contract value with Skanska is approximately EUR 170 million. Moreover, the zoning for the whole project, including the residential, is now valid and nonappealable. We're very excited about the project and enjoy a strong relationship with the city of Espoo in the metro. We are confident we will become the new heart for the fast-growing area of Espoonlahti in Espoo.

Lippulaiva is an excellent example of how Citycon is putting its new mixed-use strategy into practice. This means focusing more on developing mixed-use projects and densifying the urban environment around the shopping centers. Lippulaiva ticked all the boxes that we believe are important for successful shopping center: urban location, population growth, public transportation. And remember, this asset will fit right on top of the metro, just as we have in Iso Omena. It's dominant -- it will be dominant in size, and we have opportunities for densification.

We have building rights for 8 residential buildings, which will amount to 31,000 square meters of building rights. That means approximately 500 apartments. Now we're in the process of deciding the optimum mix of various rental and what will Citycon share will be. Lippulaiva is a great example of the direction that we're moving in into the future.

So with that, I'd like to hand it back over to Valtteri. Thank you.

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Valtteri Piri, Citycon Oyj - Legal and IR Specialist [5]

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Many thanks for Scott and Eero for the presentation. Now we have time for questions. And now we turn the audio line on. Operator, please go ahead.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question we have is from the line of Anssi Kiviniemi from SEB.

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Anssi Kiviniemi, SEB, Research Division - Analyst [2]

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It's Anssi from SEB. A couple of questions from my side. First of all, starting with the fair value losses. They were quite big in historical terms in Q4. Could you elaborate a little bit more on where did they come from? Are those isolated individual assets? Or are the yields creeping up slowly? Do you see that kind of trend emerging?

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Eero T. Sihvonen, Citycon Oyj - Executive VP & CFO [3]

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Yes. This is Eero. As mentioned, I would say, maybe the main change is that now, also, the Swedish valuation market was clearly more challenging, and there were some transactions that had taken place earlier in Sweden like comparison. So I -- in Sweden across the board, we had slightly higher cap rates. So -- we did not have as such any major problem assets, and all of our assets are performing like operationally well, so that was not the issue. So again, I would like to reiterate that it was mainly the result of the more negative valuation outlook that was there.

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F. Scott Ball, Citycon Oyj - CEO [4]

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Yes. I would add to that. It's interesting, when you look at the performance in Sweden, the market rents were actually better. It was cap rates. And candidly, I think the comparisons that Eero mentioned were with assets that were in smaller markets and maybe different types of assets. But I do believe there's a lack of transparency for the appraisers to clearly understand what's happening with assets of the quality that we have. And so it becomes a very difficult conversation with them around cap rates. And I would say that we fundamentally have a disagreement with them in terms of what we think the appropriate cap rate should be for these assets. But it is what it is, so...

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Anssi Kiviniemi, SEB, Research Division - Analyst [5]

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Okay. Then the second question is on the acquisitions or you increasing your stake into your Norwegian assets. What should we read from it? I mean you have pretty strongly highlighted that you are a net seller of assets. Has that kind of -- has this picture changed in some way? Or should we expect divestments coming around the corner sooner?

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F. Scott Ball, Citycon Oyj - CEO [6]

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Yes. That's a great question. Thank you for asking it. I want to be really clear, this was an opportunistic purchase. We already owned a piece of these assets. Our JV partner was in a position where they wanted to exit the market, and we were the logical buyer of these assets. We were able to pick them up at an extremely attractive price. And Stovner is an asset that we have long coveted. And so we simply are increasing our ownership stake in some shopping centers that we already own a piece of.

And as mentioned previously, we're going to sell 1 of the 3 before the month is over. That being said, we're not a buyer. We're not out there looking for acquisitions in the marketplace. We are still a net seller, but this was truly an opportunity that we just could not pass up, and we were able to buy these at such a significant discount that it would have been foolish not to do this. And as mentioned previously, this will be accretive for us year 1. So we just think it was just a great opportunity, very unique, though.

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Anssi Kiviniemi, SEB, Research Division - Analyst [7]

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Okay. And you highlighted the attractive price there, so probably there's going to be some fair value gains made with these acquisitions in Q1 or...

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Eero T. Sihvonen, Citycon Oyj - Executive VP & CFO [8]

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I don't think we can promise anything in that respect. But again, it was a very nice price.

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Anssi Kiviniemi, SEB, Research Division - Analyst [9]

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Good. Then a question on the dividend. You have now capped it to EUR 0.65, same as last year. But is there any reason to believe you're not going to pay the full amount during the year?

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Eero T. Sihvonen, Citycon Oyj - Executive VP & CFO [10]

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I think that the question is whether we would pay the full amount. So we -- this is the proposal to the AGM. So assuming that the AGM would approve it, I don't think that there would be any other reason not to pay.

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Anssi Kiviniemi, SEB, Research Division - Analyst [11]

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Okay. That's pretty straightforward. Then last question is on investments. You have 1 larger development project ongoing, Lippulaiva. How should we read on the investments in 2020 and perhaps also in '21? Will they increase kind of -- do you indicate the CapEx level that we could run our models in a right way?

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Eero T. Sihvonen, Citycon Oyj - Executive VP & CFO [12]

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Yes. Well, we are still working on -- Scott, go ahead.

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F. Scott Ball, Citycon Oyj - CEO [13]

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Sorry, go ahead, Eero, my apologies.

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Eero T. Sihvonen, Citycon Oyj - Executive VP & CFO [14]

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No worries, no worries.

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F. Scott Ball, Citycon Oyj - CEO [15]

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I think it's -- listen, we mentioned we have the densification effort going on. We have to go get the zonings for this before we can begin the build-out of it. We are in the process of expanding the development team. We've made a couple of hires. We've got a couple of more people that we are looking to bring on. But their focus will really be on getting the zoning approvals. And then at that point, we will decide whether we should sell those rights or if we should JV and partner up with someone or if we should develop them ourselves. And it will be an asset-by-asset kind of determination. For 2020, I don't think you should expect, as you run your models, I don't think there's anything that would be different than what we've already provided in 2021 as these ramp up. There may be an increase in CapEx, but it will be dependent on our decision on what we think is most profitable for the company. It may be that we sell these rights and don't do it ourselves and simply take the cash. But that will be a determination we make on an asset-by-asset basis as we get the zoning approvals.

Eero, I don't know if you want to add something to that?

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Eero T. Sihvonen, Citycon Oyj - Executive VP & CFO [16]

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Yes. I would just like to add that now, of course, '20 and '21 are the years for very active construction. So we will spend probably a bit more money in '20 and '21 compared to '19, but we will come back to the details a bit later when we have a clearer picture on the exact expenditure.

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Operator [17]

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The next question we have is from the line of [Alle Bona] from BMO.

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Unidentified Analyst, [18]

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Can you hear me?

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F. Scott Ball, Citycon Oyj - CEO [19]

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Yes.

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Unidentified Analyst, [20]

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Okay. The first question was, first of all, yes, congratulations for the set of results and the positive like-for-like and a good control over cost. The first question I had was, on Monday, there was an announcement of Gresvig, a Norwegian retailer, going bankrupt. I just wanted to check whether you had any exposure to that tenant?

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Eero T. Sihvonen, Citycon Oyj - Executive VP & CFO [21]

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Yes. Maybe I can take that. We have exposure to them. And for those who do not know, Gresvig is the franchisee -- franchise operator for Intersport in Norway. And additionally, they have 2 other sports chains. And yes, we have exposure to them, and we are in discussions with them and several -- or basically the next of the company who is probably going to take over, we are in discussions with them and some other players how to arrange. So I don't have any comment on the full exposure yet, but -- how much that is and what the impact will be. But generally, the answer is positive. We had exposure to them. But it's not like -- most likely, it's not going to be a drama.

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F. Scott Ball, Citycon Oyj - CEO [22]

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Yes, and I would add to that. The units we have are -- they're more productive units. So as Eero mentioned, we are in conversations, not only with them, but with others who have proactively reached out to us sniffing an opportunity as well. So we do have some exposure. We don't -- we feel pretty good about what we're going to be able to do with it.

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Unidentified Analyst, [23]

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Okay. Great. That's good to know. And just -- is it possible to quantify it? Roughly, how much is it of the Norwegian or total rent growth?

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Eero T. Sihvonen, Citycon Oyj - Executive VP & CFO [24]

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Not right now.

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Unidentified Analyst, [25]

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Okay. The second question I had is just to understand the adjusted EPRA EPS guidance, which is basically flat to minus 11%. If you're expecting the top line like-for-like rental growth to remain fairly stable, like it was in '19, and again, there's been a significant reduction in administrative costs. Is the whole delta, the 11%, likely to come from the hybrid interest expenses?

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Eero T. Sihvonen, Citycon Oyj - Executive VP & CFO [26]

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Yes. The whole delta between EPRA earnings and adjusted EPRA earnings is coming from hybrid. And I think it's very easy for you and others to calculate, the coupon is 4.5% and the amount is EUR 350 million, so slightly below EUR 16 million is the total impact on EPRA -- adjusted EPRA.

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Unidentified Analyst, [27]

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Okay. And just to be clear, the dividend is now based on the adjusted EPRA EPS. Is that right?

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Eero T. Sihvonen, Citycon Oyj - Executive VP & CFO [28]

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Yes. Well, we will take that into account when defining the dividend. For sure, yes.

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Unidentified Analyst, [29]

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Okay. No. I thought there was an 80% payout ratio; that's -- that 80% is based on the normal EPRA or adjusted EPRA EPS?

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Eero T. Sihvonen, Citycon Oyj - Executive VP & CFO [30]

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It's based on normal.

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Unidentified Analyst, [31]

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Okay, okay. The -- two final questions on the hybrid. It's obviously an extremely efficient tool to strengthen the balance sheet. Is there any room for you to issue more in the future to deliver?

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Eero T. Sihvonen, Citycon Oyj - Executive VP & CFO [32]

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Well, market-wise, there would be room. But the other thing is that there is demand. And actually, our hybrid is now trading much lower, so issuing a new hybrid now would be clearly cheap, but I think that we would need to look at our situation and look at the other alternative options. So right now, we are not working on any additional issuances of hybrid.

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Unidentified Analyst, [33]

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Okay. And the very final one, would it be possible to report, I was looking at the full financial report, the adjusted LTV? All I was able to find was a 42% IFRS. Just to have an idea, where is the LTV currently is on the basis that investors and rating agencies are looking at it, which is probably 50% equity component, 50% debt?

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Eero T. Sihvonen, Citycon Oyj - Executive VP & CFO [34]

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Yes. If I remember right, it's approximately 46.4%, the way that the rating agencies reported. But we look into reporting that or at least adding it to our presentations. That's a very good point.

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Operator [35]

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(Operator Instructions) At this time, there are no further questions. I'd like to hand back to the speakers for any closing comments.

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Valtteri Piri, Citycon Oyj - Legal and IR Specialist [36]

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Many thanks for the questions. If there are any further questions, please reach out me or Eero. Thank you for the call, and we wish you all very nice day.