Shopping mall giant Citycon may do acquisitions in 'untapped' Nordic and Baltic regions
CITYCON, a Finnish owner of shopping malls, is preparing for acquisitions with a share sale that will also help boost its balance sheet.
"Over the last three and a half years we've put our house in good order," Chief Executive Officer Marcel Kokkeel said in Helsinki. "Now we're ready for the next step."
The real estate company is tapping into the trend for urban growth in the Nordic and Baltic countries. It runs 36 shopping centres mostly in the capital-city regions of Finland, Sweden, Denmark, Estonia and Lithuania, where recessions have hurt sales in recent years. The company focuses on malls people visit on a daily basis and plans to add holdings which include grocery stores in an effort to make shopping centres "more economy-proof", Kokkeel revealed.
Citycon is raising €400m, of which €300m will be used on repaying debt. Its debt to gross assets will probably drop below 45pc, Moody's Investors Service said as it placed Citycon's credit rating on review for upgrade. The current Baa3 credit grade is one step above junk.
The company has about €2.15bn of outstanding bonds, term loans and revolving credit facilities at the moment, including interest.
"We'll strengthen our balance sheet substantially – we want to be in the top league in Europe," Kokkeel said. "We also want to have a bit of a war chest to take advantage of the investment opportunities that the Nordic countries offer. As long as it's urban and grocery-anchored, we're interested."
The acquisition plans mark a significant change from last year, when chairman Chaim Katzman said that the company's Nordic expansion had been curbed owing to a lack of targets.
Citycon is seeking to attract retailers not yet present in the Nordic region, which has about 40pc fewer international retail brands than the European average, the company has said.
The region remains "relatively untapped" by international retailers, consultants Jones Lang LaSalle Inc said in a report last year.
"If we offer five or six top shopping centres in the capital cities in one go, I'm pretty sure they'll take it seriously," Kokkeel said. "This is the vision and strategy, we're not yet there."
Stockholm, the Nordic region's largest city, and surrounding towns will expand by about half a million inhabitants by 2030 from the current 2.16 million, according to a study last year. Helsinki and 13 neighbouring municipalities will add about 250,000 people by 2030, bringing the population to more than 1.6 million, the city forecast in September.
Citycon doesn't have plans to expand outside the Nordic and Baltic region, according to Kokkeel.
"We're not going to enter Russia," he said. "We want to manage a predictable cash flow. It's a choice for stability." (© Blooomberg)