Citycon Oyj (CTY1S) Earnings Call Transcript & Summary

Good afternoon, everyone. My name is Laura Jauhiainen, the Vice President for Strategy and Investor Relations. I would like to welcome you, everyone sitting in this room and to our viewers online, to our Capital Markets Day 2021. It's actually pretty amazing to have people sitting in this room that's today. When we started planning for this event roughly 6 months ago, it was quite unclear if you could actually have the physical meeting here today. Equally impressive is actually the construction site at Lippulaiva where we are located today. Once completed, the site will be coming online next year, 2022. It will be a showcase of our strategy, which is based on having a stable retail combined with residentials and offices, which, for us, will translate into growth and also diversification of the portfolio. Next, we will have a presentation from our management team. They will, in turn, be here to tell you about how we create value through both active asset management, new developments, but also capital recycling. After the presentation, there will be a Q&A session where you have the whole leadership team answering any questions you might have. We also are able to have questions online. So if you have any questions, people watching the online broadcast, please share your questions to us. So without further ado, let's welcome our CEO, Scott Ball. Scott, the floor is yours.

Thanks, Laura. I was expecting a standing ovation, but I guess not, so. As Laura said, and as we said at dinner last night, it's really great, the fact that we are meeting in person and that we get a chance to be together. I can't tell you the energy it brings to me just being in a room full of people after the last 18 months. So thank you for those of you who made the trip. Thank you as well to those of you who are online. Those of you online missed a great dinner last night and you missed a wonderful tour of this amazing project. But hopefully, soon you'll get a chance to get here and we can show you this project that we're so proud of. So the good news for you is, you're going to not have to hear too much from me today. I know I'm the one who always gets up here and talks and talks and talks and talks. The good news is I'm going to be very brief. And then the people who actually know a hell lot more about what's happening are going to stand up and give you their thoughts about what's happening in the company and where we're headed. And then I'll be back at the end to summarize. But I'm going to first give you maybe just a quick overview of Citycon. Most of you already know who we are. We are the largest Nordic player in the space that we're in. We're in the major cities in the Nordics with a direct connection to transportation. We like to say we're becoming mixed use, but we already are mixed use to some degree. We're just going to be a bit more intentional about it moving forward. And then I would also point out that we are investment grade. We have investment-grade ratings from the three top credit rating agencies. So we're in good shape there. As mentioned, in addition to the things I just listed, I think when you think about Citycon, I think the thing that should come to mind is that we are necessity based. We are classified as a retail company. And we like to say internally, there's retail and then there's retail. Our retail is different from the standpoint that we are heavily grocery-anchored and that we have a large influx of necessity-based tenants with a growing piece of that segment being municipal tenants. And so when you think about the creditworthiness of our leases, they're exceptionally strong, and I think that was proven throughout the pandemic. And speaking of stable and strong through the pandemic, we talked about this a bit on our Q3 call. But if you look at how we have our most recent NRI results compared to the same period in 2019, which is the period that we internally are comparing ourselves against because, quite frankly, last year was a bit of a mixed bag. But as you can see, I mean, we are within striking distance on NRI of the 2019 numbers. I should point out that, that's after disposals because we have sold some assets this year, and we'll talk about that a bit later. And then the other thing I think that points to the stability of this company and our business is the fact that our rent collections have always been, throughout the pandemic, really kind of the industry leader. And this is a number that I should point out is not adjusted. We're not backing out those tenants that we make special deals with or anything like that. This is a true collection number. And as you can see, in 2020, it was 96%, and we're 96% this year. So we never had the same dip that many of our peers both in Europe and North America had. And I would say that when we think about that, it's really twofold. One is the necessity-based tenant mix that we operate with, but it's also the fact that we operate in the Nordics. As most of you know, the Nordics took a bit of a softer approach to the pandemic and to restrictions than many of the other countries in Europe and in North America. And so we were the beneficiary of that, along with some government programs that provided assistance to our tenants. I should also point out that Citycon, well before my involvement in the company, has been a leader in sustainability. We have Kirsi here, who's going to speak a bit about that later on and she'll give you more details about that. But I think it's important for us when we talk about the company to just remind people that we have been a leader in that. Those of you on the tour today saw the geothermal plant that we are building here. It's quite impressive, and I think that just scratches the surface. But Kirsi will get into more of that later. The experienced leadership team. So I was joking earlier. It says 100 years of retail experience, but I think that experience has tilted a little to the left between Eero and I. But I think, listen, we're very fortunate -- I am very fortunate that I get to work with this group of people every day. Eero, who has been a rock at Citycon for all these years. Bret, who's coming in as our new CFO, really brings a ton of energy and is an amazing dancer, for those of you who haven't seen him dance yet. Henrica, who we were talking last night. Henrica was -- she came on in this new role the same time I did. And she has really transformed our asset management team. And she's going to talk a bit about that with some case studies that I think really drive home the point of everything she's been able to accomplish for us. Kirsi, the aforementioned Kirsi, who leads -- she's our Chief Information Officer, but also leads sustainability and also happens to lead our cross-function purchasing efforts and other initiatives. So Kirsi is kind of the jack of all trades. She can do anything. Literally, she can do anything. And then Erik, who joined us about 2 years ago and again, has really transformed our development team and what we're doing here. I think this site is a testament to that. This site, we were laughing 2 months ago, I think it was, that when I joined, this was a hole in the ground. And we toured this thing, and it was just one big hole. And as some of you know, we had gone through a couple of contractors. There had been some turmoil on this site. And I think Erik and the development team have done an amazing job of getting their arms around this and really creating what is going to be a fantastic project for Espoo. So that's the team that you're going to hear from later. Talked about the Nordics. I think there are some data points here that are interesting and kind of reinforce why the Nordics have outperformed and why they are projected to continue to outperform. As you can see, whether it be GDP, or debt, or unemployment, the Nordics clearly are leaders with it as compared to the rest of Europe. Inflation might be something that we're going to have to be a bit more concerned about here than in the rest of Europe. I think the good news for us is that we have a hedge against inflation a bit because of our indexation on 95% of our leases. So we're in pretty good shape there. A point about where we are in the Nordics. So not only do we operate in the Nordics, but as mentioned before, we're in the top tier cities here. And when you look at the areas that have the largest growth projected over the next 10 years, we're in 6 of the top 7. We're in all of them except for Malmo down there. So again, very well positioned to take advantage of what's happening in the growth region of these countries. A little bit about our model. And some of you have heard this over and over, so I apologize for being redundant, but I think it's worth driving home the point. So we've already established that we operate in these countries that are very strong economically. We're in the best cities in these countries. We have a necessity-based tenant mix. I would add on to that, on this necessity-based tenant mix, a big piece of that is municipal tenants. And because of that, we have the cities that we operate in are our tenants typically in our shopping centers or our urban hubs. And so we already have a relationship with them that exists even before potential development opportunities. But it's something that we put a lot of stock and value into, and spend a lot of time in terms of building these relationships, particularly as we go through the densification process and look for zoning and permitting. Next step in our value creation model here is looking at densification opportunities. A couple of years ago, we took a look at the entire portfolio, and we basically evaluated where we thought we could add further densification. And we came up with, I think, roughly 22 sites. At that point, we then stepped back and met with cities and said, okay, so if we're going to densify these sites, and the cities were very receptive to this, by the way. Because remember, you're operating in cities and countries that are very green and one way to become more green is to further densify sites, get more cars off the road. But we've been working with the cities to identify those uses that are most in need or what the market is demanding in those. And not surprisingly, many of those sites are geared towards residential, and we'll talk more about that in a bit. And then the last piece of this is the recycling of capital. You have seen that this year we sold four assets. I think total over EUR 250 million. We have been, I think, pretty deliberate in terms of transacting. I think we have said to the market that we will sell at pricing that we think is appropriate. We're not a forced seller, so we're not going to give stuff away. I know others in the business have had to sell at steep discounts. We have not done that. Everything we've sold has been at or above book value, which I think is interesting when you consider the fact that our stock is trading at a 40% discount to NAV, and we're selling stuff in NAV. So you might guess where this is going in future slides here in a minute, but recycling of capital is something that we talk about quite a lot with our management team. Again, this is a little bit redundant, but I think the thing to take away, and if I were to give you the punchline for the day, if you want to leave after I say this, you can just leave and you don't have to listen everything else. But it's basically, we have a very stable business model that's held up extremely well even in the worst of economic times, if you will, with this pandemic. So we've proven that this model works. There's not big fluctuation. It's just hums along. We couple that now with this growth initiative, if you will, where we're densifying these sites. So you've got a stable business with growth opportunity. And that's really our story. And as part of that, we're diversifying our income stream by adding other uses or intensifying our efforts in other uses. So with that, I'm going to turn it over to somebody who's much smarter than me, Henrica.

Thank you. So welcome also on my behalf to Lippulaiva. Walking in this morning to this large construction site, I hope you could see what we mean when we say that we're building the future, urban hubs. How we are transforming these unique locations into thriving communities with a seamless connection to the metro, extensive daily services, health and city services, daycare. But more than that, this will actually be the home to over 800 residents. We are creating a city in a city. And maybe even more important to also highlight is that this building will be carbon-neutral from day 1. My name is Henrica Ginström and I'm the COO at Citycon. I've been 10 years in the company, and the 3 last years, I have had the privilege to be the COO. At the last Capital Markets Day 2 years ago, you may remember we were talking a lot about operational excellence, how we are harmonizing our processes and policies, how we are procuring and allocating capital more efficiently. I would say we have come a long way since then. Today, we are working very streamlined across the Nordics. And we have a very strong operating team, which I'm very proud to present. A highly skilled and experienced pan-Nordic operating team. There are some familiar faces and some new faces. Jussi, Sanna and Peter, you may remember already from last Capital Markets Day and the asset tours. Jussi and Sanna also here today, and they have been touring here in Lippulaiva. And still today they will also tour with you Iso Omena and talk more about concretely how we are making all the things that we say now in practice. But also some new faces, Johan, Thalia and Tobias are new in the team since last Capital Markets Day, but they have all been long in the company and are all experienced, both within retail and real estate. Necessity-based tenant strategy provides stability. Already, for a few years, we have been working on future-proofing our tenant mix, how we're bringing in more groceries, more municipal services and health services, gyms, health care, quality food and beverage. And I think that also Scott shared a little bit KPIs about how we have been performing during these years. And I think this really shows that this works. We are very lucky because we have these unique locations, but we also know how to do this. We have the right team and we have the right connections. So why do we like necessity-based? The list is quite long. But in essence, these are long-term tenants. These are tenants that have great creditworthiness and they have stable market demand. In the end, they are very stable footfall drivers to our centers, and that means stable cash flow. So how has our tenant mix evolved? In line with our strategy, we have been increasing the share of groceries, services, and food and beverage, at the same time, decreasing the share of fashion. As you can see here in this table, going from 30% fashion in 2015 to 21% now in '21. And this trend will continue. We are working on this all the time. You will see it more in the case examples later on. It's good to note that as we are transforming the portfolio, the rent levels for groceries and services and offices is in line with the average rent of fashion. So as we are transforming, we are not giving in on the average rental level. Actually, what we're doing is that we are prolonging the lease lengths. As in the segments of groceries and services, usually, the lease length is on average longer than in the fashion segment. Leasing activity has been picking up for us very nicely. You can see here that we are 33% above in signed leases compared to 2019 level. And at the same time, you can see that the average rent has increased also, again, while transforming the portfolio. We have seen very stable demand within our core segments, the groceries, health care, necessities and municipals. The segment which has had most challenges is naturally the fashion segment. And that's where the tenants are evaluating how many different stores will they have. So it's not so much the store size, but the amount of stores that they are evaluating. And that has, in some cases, put some pressure on the fashion rents. At the same time, as you will see later on in some of the cases, that also provides us great opportunities to further transform our assets. Sales and footfall has been picking up very nicely, especially sales. As you can see, plus 6% like-for-like sales compared to 2019 now in Q3. That's a very strong number. And on the left-hand side, you can see that again, it's in our core segments where the development has been the strongest. Fashion is lagging a little bit behind, but not hugely behind, actually 2019 level. And it's also good to note how the average purchase has substantially increased since before the pandemic level. And now I will share with you some case examples of how we are transforming our portfolio. Already, at the last Capital Markets Day, I was presenting Columbus and how we are transforming the tenant mix there. And since then, we have continued to optimize the tenant mix. And we have done a targeted and cost efficient refurbishment. And we have sold a plot next to Columbus, making additional EUR 4 million profit. But all our efforts to create this true necessity-based everyday shopping center has been recognized. And now, in Q3, we did sign a deal to divest Columbus at a price which was EUR 10 million higher than the valuation at Q4 last year. And we think this shows that there is real demand for this type of everyday shopping center. The valuation of this is there. And I think it's very important that we separate between this kind of necessity-based everyday centers and then again, the traditional fashion-oriented shopping centers. In Myyrmanni, we are planning on doing something very similar as we did in Columbus. We are planning on substantially increasing the share of groceries and necessities. We are targeting over 60% in groceries and less than 5% in fashion. What we are doing is that we are replacing the nonperforming fashion tenants. And I think what we have seen from the Columbus example is the spillover effect it does have on other tenants also in the center. And by that, we also expect in Myyrmanni that we would have both yield compression and valuation gains when we are done with transforming the asset. In Oasen, we have a great example of how we're transforming the nature of one of our centers. We have now completed the first part of the transformation. We have just opened a 4,700 square meter health and youth service center by the Bergen municipality with direct access to our center. At the same time, we have opened up with a new entrance towards the new bus terminal, which will be connected to the new light rail, which will start operating during next year. Also, by this new entrance, we added on more quality food and beverage and more necessity services. The second phase of the transformation is now ongoing, and Erik and his team is working really hard now on realizing these building rights for adding both residential and offices. And when we're completed, I would say, Oasen has also become a true future urban hub. We have several other municipality deals, both executed and in the pipeline. This has been a true focus area for our asset management team and continues to be so. In addition to what I already mentioned on the necessity-based tenants, with these municipalities, what is interesting is that they usually do occupy B2C locations, but at market rent levels, and they usually sign very long leases. At the last Capital Markets Day, I mentioned Trio. I think we had just at that point opened a 1,000 square meter health and municipal services. And since then, we have extended it with 2,000 more square meters. So altogether, 3,000 square meters of municipal services in the second floor of Trio. And I think this is very usual. Usually, when you start the cooperation with the municipality, at some point it usually expands and this is a great example of that. In Iso Omena, we have a great example of a good location and great asset management. During this year, we have extended the leases of both hypermarkets, Prisma and Citymarket, altogether 23,000 square meters. We did 10-plus year extensions with both and with a positive rent uplift on top of the annual indexation. And it's also good to remember that these are strong rent levels in line with the average rent level at Iso Omena. And in Lippulaiva, we are copying the same winning tenant mix. We will have four different grocery stores, covering almost 45% of the gross leasable area. We will have private and public services, a kindergarten, the public library, where we're now sitting. We will have gyms and private health services. We will also have great restaurant offering, high-quality also restaurant offering. And there will be fashion, but fashion will be less than 5% and mainly catering to the daily needs. We are today 80% pre-leased. And I would say that we have seen strong demand, especially again in our core segments within the necessity-based and within food and beverage. Specialty leasing, this was also something that was mentioned in last Capital Markets Day as one of our focus areas, and it still continues to be one of our focus areas. As you can see here from 2019, we have added on 51% in income. And that has been during a COVID time, and this is a very footfall-sensitive business. And this shows to us that there is great growth potential within this. And on top of the additional revenue that we gained from this, I would say we've also learned how much more we can get both in terms of atmosphere and in terms of variation. This is a very flexible model, both for the tenant, but for us to get in new concepts. And I know Johan and his team has been working very hard on having more cooperation between leasing, specialty leasing and the center management. And that way we can optimize the use of every space within our shopping centers at all times. Also, during void times, we can gain additional income as this is a very easy start-up and low investment business. And I know we have many great examples where we have tried out the concept and then they have then opened a permanent store. Early on in the COVID pandemic, we were very proactive in contacting municipalities and offering them space within our centers for vaccination hubs. And we have been very successful also here. I think this is a great example when you combine specialty leasing cooperation with the municipalities and also social responsibility. In addition to bringing well-needed footfall and also income during the COVID time, I think the most important part is the cooperation that our teams have started with municipalities there in the centers. And we hope that will also increase future potential cooperation. And as a last example, the Carhub, where we're creating more leasable area. This is an example from Kista Galleria. They're in an unused parking garage area. We have now four different service providers within the car service. And this is additional GLA and additional income in unused space. This is a very successful concept that we're already planning on copying in our other centers in the Nordics. I have been sharing examples of how we're transforming the tenant mix within our existing centers, but as we now start adding on more asset classes, including resi, offices and hotels, it's even more evident that our locations will become more attractive. When we have new residentials, both the average and the total purchasing power will, by default, increase. And there will be life 24/7 around our centers. And that, again, will result into more demand for our daily services and food and beverage. Also, as we go into this, I think it's even more important that we operate efficiently and sustainably. And that is what Kirsi is going to share more about.

Hi. My name is Kirsi Simola-Laaksonen, and I serve as the Chief Information Officer in Citycon. I've been with the company for over 10 years. And one of the great things we have in Citycon is the great passion and professional people we have working together across countries, across functions. And in our team, we have a nice combination of skills and experience, ranging from IT to business process improvement and sustainability. But also, we have had the privilege of adding operational development into our mix. And there, we are building on the asset management efficiencies through operative procurement processes and also potential mapping. It is very important for us to work as one team across countries and also across functions to achieve our goals. And this is something that we are particularly proud of. We'll take a look at our sustainability initiatives in a moment, but first, a short recap on our main targets. We are committed to becoming carbon-neutral by 2030. We also are committed to being convenient and safe for our consumers, our customers and personnel. Also, on the governance side, we are committing to having transparent and compliant processes in place as evidenced today. One of our strategic goals that we have set for us ourselves in sustainability is achieving operational excellence. And Henrica mentioned that it has been a topic for several years and it's still valid. It still continues to be one. While we can impact income side indirectly with sustainability initiatives, we can make a direct impact on the costs and associated risks. Today, we are operating a hybrid procurement model. And there we can make sure that we have the purchasing power as a benefit for us. But still we can leave room for those local purchases where efficient and needed. We have also made several Pan-Nordic frame agreements. And this is something that we are really finding out to be a very effective tool for us. And this is, of course, in terms of leveraging that purchasing power, that's kind of self-evident. You get better service quality, you get reduced prices. That's one example in there. But also, if you need to amend your service levels, so the frame serves you well. If we think about the pandemic times, there has been various restrictions in various countries at various times. So these frame agreements have served us well in adapting to these changes. So very, very positive example for making sure that we get the best out. A practical example on centralized procurement is our elevator and escalator renewal and renovation agreement. And in this particular case, we have achieved 5% to 10% cost reductions per annum and also able to standardize the process itself. So very nice example, what we can achieve when we do these procurements in a centralized yet implement locally. This is kind of making overall sense. But if you think about the same thing from the center team's perspective. They are able to focus their time on those value-creating activities, and they are avoiding the duplication of efforts and creating center-specific solutions. So it's a win-win for all. We can continue to build on our efficiencies wherever we can harmonize our processes. And we do this by creating the concept, then we negotiate centrally, but we implement locally. And this is very important for us. And the optimal fit between central and local is the key for achieving our targets. In the harmonized way of working, one of the key to making sure that it's a joint success story is the fact that we share best practices, we share the learnings, but most importantly, we share the cumulative experience and knowledge that we have in the company. So that's the winning formula in this area. Here a great example is our security services, which was also centrally procured. But when we were harmonizing also the way we work in this very important area, we were able to achieve further efficiencies and learnings for the future years to come. I'm sure all of us have heard the saying that data is the new oil. And while we can debate on the accuracy of that statement, I'm sure we all agree on the fact that good quality, timely data is very valuable for business decision making. In Citycon, to achieve this, we have scaled down from over 60 systems to our current plus 20 systems in a period of 4 years. And by doing this, we have been able to have fit-for-purpose systems in use and get those famous apples-to-apples for business decision making. The work is not done yet. We continue to develop these systems to those evolving business needs. And a great example here is our latest addition to our system portfolio, which is a modern finance and HR platform called Workday. By doing this implementation, we have moved from the traditional weekly, monthly data into live data that we can use for business purposes. So really great example what we can achieve. While we continuously work on becoming more efficient in many areas of the business, we still keep our eye on the future, the years to come. And of course, we want to remain efficient in our operations in those years to come. And one of those most valuable things that we can do for ensuring this is building those long-term innovative partnerships. And the rationale behind this is that during that partnership, the service provider comes and learns how we do our business. They learn how we work, they understand our business logic, the industry itself, and therefore they are able to produce more relevant solutions for us, building value. We want to ensure that we are among forerunners in our industry when we pilot new solutions. That is one of the benefits in long-term partnerships that we can build. But also the fact that we get to share insights, and the insights on those future innovations to come, and that's where we can take a leap and make sure that we are among the first to adopt these things that will add business value also in the future. Here, a nice example is an innovative waste management system in Finland. And as an outcome of this project, we have been able to save EUR 100,000 per annum. And that may seem small to you. But if you think about leveraging that experience across similar opportunities, it actually accumulates to much more. So yet again, great example of what we can do when we pilot new things. Yet again, keeping my eye on the years to come, we also work firmly on our sustainability initiatives. In real estate, we tend to divide this between new builds, like Lippulaiva, and retrofitting. In the latter, we have been able to reduce our energy consumption by 15% since 2014. And this has been achieved by doing a large number of small energy investments. The reason why I'm highlighting this here is the fact that all actions count. And there is no single giant step that will make us achieve our targets. And sorry to be the fairy dust buster here, but there is no magic to achievement. Absolutely none. It's really about hard work, and making those solid consistent choices along the way. And in this manner, we can have great success stories. Also really nice to be able to say that this has been recognized. As you can see at the bottom of the slide, we have several certifications and acknowledgments in this area, supporting this way of working. A great example of retrofitting is solar panels. And today, we have solar panels in six of our centers and we are adding four more to the count by end of this year. And we are producing 4.3-gigawatt hours of solar electricity per annum. One of these is Downtown in Norway, and it's actually the world's largest solar park with snow melting technology. And in Downtown, we are actually producing the energy equivalent of 100 apartments per annum. And that translates into 15% of the center's needs on a yearly basis. So yet again, a really nice example, what we can achieve when we make energy efficiency investments. But still we are sustainable and able to reduce our operating expenses. A really great example. Sustainability is not always about technological advancements. It's also about adding things that are not technological and may seem even at times a bit small. But this is where we can also make a difference in our communities where we operate. A really nice example is the Wall of Kindness in Liljeholmen in Sweden. And literally, it's a wall. It's a wall where you can leave your excess clothing, your shoes, your toys for kids that you no longer need and they will be distributed to those who are in need. So a really great example of how we can make a difference in the communities where we operate. And we are privileged. We are privileged that we can make this kind of impact, whether it's ranging from energy saving investments to activities such as this, or even protecting the biodiversity with the bees on the rooftops. And we can do that together, step by step. And actually, it happens quite naturally, all this work. We have seen Lippulaiva today from the inside, and we can proudly say that it will be the most sustainable retail building in Europe. It's really exciting to be able to say that. You can probably see from the smile from everyone's faces that this is really a nice time to see it happening and it's really tangible. It's right here and now. Lippulaiva, for us, represents a great example, what we can do when we take sustainability into account when we're already planning these projects. It has a really amazing geothermal energy solution that Erik already explained on the asset tour today. And I'm not going to go into too many details because you can't get me stopping at that point in time because I get too excited on this topic, but this is something that we can do. And also, if you think about the fact that we are committed to becoming carbon-neutral by 2030. We are placing sustainability in the core of property development that Erik will tell more next about. But before that, I want to recap. We think that sustainable business is good business. We think that making these sound energy investments, such as in Lippulaiva or in downtown or any of our centers today for energy-efficient and environmentally certified buildings translates into high-quality buildings with low operating costs. We also think that making sure that we enable the access by public transportation, e-vehicles, cycling, that will translate into solid customer flows in our assets. But also supporting our local communities, whether it's with youth cooperation or even the rooftop bees, that you can actually see the end result and can have one with you when you leave, that is, in our minds, an investment to building more stable business environment. So with these words, over to Erik.

Thank you, Kirsi, Henrica, and welcome, everyone. It's really nice for me to be able to host this event here in Lippulaiva, in this construction site. I'm a development guy, and it's so nice that we're actually starting to see the final result here and what it will look like. We can actually see, we can feel, we can smell. And it's, especially for me, as responsible for the development department, it's really nice to be able to be here. My name is Erik Lennhammar. I am the Chief Development Officer at Citycon. I will talk a little bit about what we are working with on the development side, what we have done. Last time we met, it was 2 years ago, and I have been in the company for 2 months. So I hope I have a little bit more of insight this time. So what we're doing, and I will try to give you a view of our development portfolio, what it looks like. You have heard now from Kirsi, Henrica, all about the great work that we're doing on our existing assets. What, we, from the development side, trying to do is to see how can we add other asset classes to our already strong locations to make them even stronger. That's not a one man's job, it's a team effort. We work really closely with both Henrica's team and Kirsi's team about how is the best way of doing this. And we need all the local experience that we have in our company to get all the feedback to what should we add on these places, what should they be in the future. It's not that easy to say. Of course, we've based all the decisions on different analyses, on different knowledge that we have, how should we build the strongest places around our assets. Because if we manage to increase the different kind of asset classes to these spots, the better the retail part of our assets will be. So it's kind of a win-win solution. So that's what we're trying to do. We always have discussions and continuously discussion about how our team should look like, and we'll come back to that. Of course, Lippulaiva is the main construction site that we're working on currently. It is one of the biggest development in Finland or even in the Nordics, I dare to say. And as you see, we're getting closer and closer to opening. And we have a couple of months still. So of course, that's our main focus, to get this open and get everybody that lives in the neighborhood coming here and to shop and to see what we actually do. I will talk more about Lippulaiva later on. But we're also looking into the portfolio, what it looks like, how we can increase the opportunities and what kind of value we add to the company by our opportunities and strong locations where we are active. And that's one of the main topics and focus areas for my team, how can we develop and get all the zoning processes that we are in, into approved zoning so we get the building rights values into us. What we see is that we have today approximately EUR 275 million in values, only in building rights. If you get all the building rights into our books, that's the value. Then we can have a discussion on how to execute it. During the last year, we have also worked a little bit on divestments, which Scott talked about. Three assets in Sweden and one here in Finland just recently. Also showing the strength of our assets. The team that works with this is country-specific. We have Veronica in Sweden responsible for all the developments. Also, project developments and construction management, of course. We have Dag Helge Setekleiv, who will start working for us the 1st of January, replacing Fredrik that has moved on. Great contribution with a lot of experience from the Olav Thon Group. We have Katrina here in Finland, responsible for everything that happens here. And then we have Mikko Hentinen, responsible for the Head of Transactions. Then we have the new expert in our company, Kaveh Feliciano, which actually is here today that you met on the tour. He brings the knowledge and the experience about residentials, because that's where we saw that we need to build that experience into our organization. We, of course, have a huge experience in how we do the operational, retail, taking care of shopping center development. That's more or less all the other organization has worked with. But we also needed an expert when it comes to residentials, how to view it, how to manage it, how to buy the developments and kind of work with that side. So Kaveh is a great contribution to the organization and to the company. So if we go in a little bit to how we drive value creation. We have, except the people you already saw, approximately 20 people, which works, we have an extensive experience within development. And as I said, we work, of course, really closely with the existing operational team on all assets where we are. I mean, we mainly work with locations where we are already active. So we need to understand what is the local needs on all different centers where we are active and where we're looking on different possibilities. Then, of course, we have a lot of different discussion on how to execute on the projects. We have a lot of discussions with potential JV partners. Should we do everything ourselves? Some of that? Yes, absolutely. Can we do JVs and use the building rights that we develop as equity? We can, of course, discuss to sell the building right directly, but it's better for us that we see now, with declining and the compressed yields, especially when it comes to the residential area, not to sell them. How can we use them as equity to build a greater portfolio and to give our company a great platform going forward in the future. Then you see how we work with our GLA here. The current portfolio approximately consists of 1.2 million square meters leasable area. If we produce the sick amount of 600,000 square meters of building area that we have in our portfolio, 200,000 of those are condo buildings. So we didn't include them in this because the future portfolio is, of course, where we can visit out where we have the cash flow. So the future portfolio could be 1.6 million GLA, which declines, getting the retail part in our portfolio from 78% down to 61%. And that's what we're aiming for, to be a more mixed-use developer. And important to say here is that we're not transforming or converting the retail part of our assets. We're adding on other asset classes on top of our existing retail. The total portfolio that we're working on consists of approximately 20 projects and our overall portfolio has 37 different sites. So more than half of it has a development opportunity in some kind. We try to break it down here to see what it is. More or less all of those 20 projects have a residential component. It's only one, and it's Trekanten in Asker in Norway that actually don't have residential. Otherwise, we have a residential component in all our different locations. As you see, it's a little bit more residential than commercial. The commercial areas is, of course, retail and really a small part is retail. It's offices, it's health care. We have two hotels in our portfolio that we're working on to see how that can be executed. And then, as I said, the residential part is divided between rentals and condos. Why we don't only do rentals is because it's a question of demand where we are. In some of our locations, there is kind of significant amount of square meters of residentials. Then, if we're going to do all rentals, that will take several, several years. So it's better for us to see whether you can split that into rentals and condos because it's a better mix of inhabitants also when you're done. So that's why we have a split between what we want to do going forward. And then, of course, in Norway, the rental market is not that big. We are thinking about trying that market in the Oslo region, but not outside of Oslo because they need to get a little bit further in their rental view. They usually only have condos there. On other projects, approximately 50% is in Sweden, 25% is in Norway, and 25% is approximately in Finland and Estonia. If we break it down a little bit more to see what kind of projects we have and what it is, we like to call five of them the big 5. It is really big mixed-use projects that we see. It's a little bit closer to approved zoning. We are more advanced in the planning for those projects, or they have a really big mixed-use character that makes them a little bit more important for us. Of course, Lippulaiva is one of them. I don't need to go into details about that. I will come back to more pictures on Lippulaiva later on in the presentation. Liljeholmen is an asset located approximately 10 minutes from the City Center in Stockholm. I will talk more about Liljeholmen also going forward. We have offices, we have hotels and also residentials in the close surroundings to our already great shopping center, Liljeholmstorget there. Oasen, Henrica already talked about it. It's a project that we started. We have made the first phase and are in zoning process for the remaining part of that project. The general idea is to add residentials on top of the existing center and also refurbish and make the center a little bit better than it is today, but mainly approximately 20,000 residentials on top of that center. Trekanten, I mentioned, it's located in Asker outside of Oslo. On top of that center, we're looking in to add a hotel and approximately 10,000 square meter hotel, 10,000 square meter of offices. So that we're really close to zoning. We believe we can have zoning approved in the beginning of next year. And then we have Kista, where we are located and having our office in Sweden. It's a really big mixed-use project that we see that we can develop both the retail part of that center and also add health care, schools, offices and a lot of residentials in a really growing area where it happens a lot. Then, of course, we have the residential and the business that represents approximately half of the total CapEx volume that we're talking about. Many different places. One project that's worth mentioning here, I would say, is IsoMyyri in Vantaa, not that far away from here. Zoning that will be approved during next year. Huge project. More or less only residentials, small part of offices, which is really good for us. And it's also close to our other center in the same neighborhood called Myyrmanni, but that will strengthen that area significantly. So that, and Stenungstorg, I would raise also on the West Coast in Sweden, where we actually already have building rights approved. So we're working on one of the assets that will be teared down and then replaced by residentials as we speak. If you break down these kind of five projects also into seeing where the value comes to us as a company. The bars you see here is the building rights value that we get into our books when the zoning is approved. And for only these five projects, this represents EUR 100 million approximately. That comes kind of nearby, it's not that far away, which is really positive. On the other hand, you see the NRI growth, which is a little bit longer term. But development is a long-term business. It's not a quick fix, as you know. We need to run through the zoning. And then when you feel that, yes, we get the zoning, then you have another 4 or 5 years in construction. So it's a little bit long-term business, as you all know. But it's the value, which is really, really great. And Bret will come back to that later on also in his presentation. The NRI growth, and the NRI when we see the portfolio that we have, today, other than retail, is approximately 9%. We see that we can grow that to 30% by doing this portfolio and all this change that I have talked about, which is a good level. I mean, we want to have the diversified income stream from other asset classes, not remaining on retail. Saying again, we're not looking into converting retail square meters into other asset classes. We still have the retail that we have today, and that's really strong, and that's what we're working on every day with every leases with Henrica and Kirsi's teams, how make that stronger, making it more necessity-based and then we add on different asset classes. So we have a great mix of different assets. The building rights. This slide shows when the building rights come live, a little bit again about the value. The total value of the building rights in our portfolio that we're working on is approximately EUR 275 million. Comes live kind of similar year-by-year, as you say. What's interesting here is the pie chart, with the blue and dark red bars represent more than 50%, which is connected to condo and rentals. You see the retail part is 8%. And of course, we still work with retail. But what's important in our development is when we add an asset class next to a center that we have, we want to incorporate that into the center. So we have the natural flow of people going from all the different asset classes into the center, generate bigger footfall, making the day-to-day life for our tenants easier. That's the main purpose. So of course, it's some retail, but it's mostly how we connect the different asset classes to each other that represent those 8%. Here's also a slide showing approximately when different projects come live. And as you see in '22, we think Liljeholmen and Trekanten will come live together with IsoMyyri here in Finland. And this value that we actually create by getting all the things we're working on into zoning doesn't cost us that much. It's kind of what our organization is doing now, except the ones that work with Lippulaiva and the ongoing construction. But the main purpose right now is for the team to get all the ongoing zonings into approved billing rights. Of course, it's actually kind of cheap to get the great value into our books. A little bit about the residentials, just to show you where they are. We have ongoing construction when it comes to rentals here in Lippulaiva, which you saw when you were on our tour. We have four buildings ongoing. We have two other buildings that we will start in the coming year. We also have ongoing projects in Norway in Herkules, where we're building condos together with Peab in JV format. It's not a super big project, but it's anyway a project that we have worked with for a couple of years in different phases. So now we're doing, I think it's Phase 4 or 5, we're doing currently. It's approximately 80 units that we're constructing now. And as I said, of course, we're doing other commercial buildings also like hotels, offices, health care, municipality buildings. We need trying to add what we're having here in Lippulaiva. We're now currently in the library part. We want to have big libraries in our centers. That's exactly what we think is good. As we said, you see we're mainly focusing these projects to the main capital areas where we're located. So it's at Tallin, we have some in Finland, Stockholm and Oslo region. So I thought I'd show you some pictures about 3 of the project that we're working on. For you, that's present here in Lippulaiva. You saw it in real life, which is good for you. But this is actually a great example, Lippulaiva is a great example of how we execute on our strategy, how we want our centers to be in the future. It's directly connected to the metro station. And as you saw, we have two metro entrances in the center today. We have a lot of parking in the basement. We have two floors of shopping, a lot of grocery stores and municipality service. We have the library where we are now. We have a gym. We have a preschool, we have some offices and a lot of restaurants, of course. And on top of all that, we have 8 residential buildings consisting of approximately 30,000 building rights of residentials, whereof 6 of those, we will do as rentals on our own books, which is really good. This is how it looks today, for you that haven't been here. On the right-hand side, with the yellow cranes, you see the residentials that is ongoing. 2 out of 4 have reached their highest floor, so to say, and they would be opening up in the end of '22, and the beginning of '23. Here you have some pictures on the main entrance. You see the office on top of that, internal pictures with the material, and it's hard to describe. Everybody that was here, you got the feeling what it will look like and it's so nice to finally be able to imagine how it will look when all the tenants and all the lightening and all the people are here. This is an outside area showing the library with the seating areas in the south west, so you have sun here all evening, which would be really good for our restaurants. This is a picture out of one of the residential buildings. One other example, Liljeholmen. I talked a little bit about it before. It's close to Stockholm. We have Liljeholmstorget, a really successful shopping center today, close to 10 million visitors, located in a really strong area. This is the project. What we're looking at here is that we have the gray building in the middle. It's called [ Stabina ], which we're working on, and it's a health care building. So we will develop that one. And then we have a cooperation with Stockholm start about the metro station. You see the metro tracks on the right-hand side here. And we see the potential of covering that up and to be able to do an office and a hotel. So the yellow building on the left-hand side is the building that's already existing, that we will evacuate and refurbish and extend with three floors on top. Then we're covering up the metro tracks, giving us the ground to be able to produce the yellow building in the middle and the purple one in the background, which is the hotel. Then beside the track area, we will do two buildings or residentials facing the park Trekanten, which is really nice. At the same time, of course, we will take care of the square, all the surrounding areas into the center and see how we connect all these buildings to each other. So this is a really great project that we see, that we're working on currently. We think the zoning will be approved late '22 or early '23 and then the construction starts maybe a year after that. Only this project generates a building rights value of EUR 33 million when it's approved. And we have a really great cooperation with the municipality taking this forward. The last project I will show you is Trekanten in Norway. It's located in Asker, which is approximately 20 minutes by car from Oslo. We have an existing center here. Also, very successful, 3.5 million visitors every year. And it's hard to describe, but the center is underneath here. And what we're looking at is how we can put a hotel and another building on top of the existing center. And it will look something like this going forward. And you see in the backhand side, the hotel and the office. And this is from the other side. We also, in this project, have a really close cooperation with the municipality. We'll look like this going forward. Also here, we are really close to approved zoning. So it's a long process that we have worked a long time with the municipality in Asker. It will approximately generate a building rights value over EUR 11 million going forward. We think we can have the zoning approved in late '22, and the construction start in '23. Except all the developments that we're working on from my side, we're also working on the acquisition and divestment part and see how we can grow the portfolio even faster if we get the right opportunity, or if we can divest anything just to increase the value of our portfolio when it comes to the right kind of asset that we should have in our portfolio. Of course, we analyze everything that comes to the market. We look on more or less everything that comes when it comes to residentials. Also, offices, if it's in the right area. But also, of course, the same kind of assets that we have today where we see that we can have building rights, we have the same kind of necessity-based retail that we can work with, we have that experience and we are best-in-class in that area in our minds. Then, of course, when it comes to divestments, we need to review and see why we should sell it. It can be because it's noncore assets that we think that long term we should kind of divest it. Of course, it can be because of funding other investments going forward, or if we want to swap and we want to have a discussion with other partners to see how we can kind of work together. Just shortly about the investment criteria. I think I said it before, and I know Scott talked about it, we want to be in the top 2 cities in the regions where we are. Of course, we want to have the public transportation, we want to have where we see growth. We're really keen on locations where can we have the best kind of management, where are we today in combination with that. And of course, what is the tenant mix look like? How can we work with that? How can we develop it? And can we get additional building rights going forward, even though it's a long-term process? I end there. We will come to the financial criteria that is connected to that, but Bret will come to that in his part later on. So with that, I say thank you, and welcome Eero to the stage.

Yes. Thank you. Thank you, Erik. It's really great to be here today. Welcome, everybody, to Lippulaiva. It's great to see that my former home town of about 30 years will get such a great meeting place and such a great sort of urban hub. For me, this is quite a special Capital Markets Day, probably #6 Capital Markets Day I have been involved. That's very special because this will be my last Capital Markets Day with Citycon. I will be stepping down as of year-end, although I will still remain 6 months as a senior advisor to the company. And some of the good parts of that is that actually my successor, Mr. Bret McLeod, who is a very professional man and also a very good guy, will be taking over from me, and we have also split the financial presentation in two. So I will start, and more or less I will tell you about where the company is now from the angle of numbers and also maybe a little bit why equity investors, debt investors and also hybrid investors should be extremely interested in investing into a company like Citycon. And thank you organizing team for using old picture of mine. So that was very sort of thoughtful of you. So basically, from the financial perspective, where are we today? So the company has been refinanced. The refinancing is more or less complete. The balance sheet is in very good shape. We have ample liquidity. We have like the entire revolving credit facility of EUR 500 million, the committed credit facility is undrawn, and we have also additional liquidity sources and very well laddered maturity structure. So nothing basically of significance maturing prior to 2024. And essentially, all of our asset base is unencumbered. So balance sheet-wise and financially, otherwise, the company is in a great, great shape. Furthermore, we have a stable outlook from all three main rating agencies, and I will be talking about that a little bit more. So as of today, we are indeed an investment-grade company with low cost of debt and improved balance sheet following the recent hybrid issuance of EUR 350 million like in May, June. Our IFRS loan-to-value now is sub-40%, which I think is a pretty decent number. And we have ample headroom under all of our covenants. And the average cost of debt is 2.4% as we speak. And this cost of fund relates to totally fixed cost of debt. So we are essentially all fixed, meaning that as and when interest rates start to increase, we will not be one of the first companies to be worried about that. And also, when looking at our average cost of debt, you will need to bear in mind that we have also the Norwegian business and approximately 1/3 of our financing is in Norwegian krones, and Norwegian krones do have approximately 1% to 1.5 percentage points higher cost of funds, i.e., rate of interest. We do have ample different funding sources available. In practice, most of our debt financing has come recently from the bond markets, Eurobond markets mainly, and have been issued under the so-called euro medium-term note program. And most of that has been issued in green format, and I will be talking more about that in a while. And we have also been reasonably active issuer of hybrid securities, approximately EUR 700 million of hybrids on our balance sheet. The Nordic banks are all very strong, all doing well financially and are open for business. And we have, as our second alternative to the bond issuances always, the bank financing. And we still comply with our traditional relationship banking strategy, meaning that we have good relationships with all major Nordic banks, and they all participated in our recent revolving credit facility, which we renewed back in 2020. And as mentioned, this revolving credit facility consisting of two tranches, one unsecured EUR 250 million, and one secured EUR 250 million, are completely undrawn. We also have access to commercial paper markets, and the commercial paper is mainly there to complement all other sources. It's a very short-term form of financing, but does offer the lowest cost of funds available on market. So basically, we issue commercial paper at, call it, 10 basis points to a few tens of basis points. And it's also good to have your name in the markets, like a name recognition point of view is another reason why we do issue commercial paper every once in a while. And of course, asset sales are also available. I don't know if the spread between property yields and interest rates are at all-time high, but it is indeed very high. And this is, of course, one of the reasons which is boosting the property transaction markets in the Nordics, which are very healthy also in the retail sector. And we have transacted several times in the markets, as Scott and others already mentioned, and we have been able to do that at or above our existing book values. So indeed, the transaction markets are doing well. And this spread between property yields and interest cost is certainly supporting those. Our bond spreads are at or below pre-pandemic levels. And it happened to us, the thing that happened to most companies, i.e., our spreads widened substantially, if not dramatically, when the pandemic started like March, April 2020, but have since then clearly come down. And naturally, our recent hybrid issuance had a further sort of a narrowing impact on the spreads recently. And if we would now issue senior bonds, we are not in the need of financing right now, but if we would issue, 5 years fixed would be approximately 1%, maybe slightly above. And 7 years would be approximately 1.5% in terms of overall cost of debt fixed. And we have indeed been active on the capital markets. We have been one of the more active capital market participants here in the Nordics. And we actually started the bond issuance back in 2013 and have been one of the first Nordic bond issuers. And actually, '21 has been a particularly active year. We have issued EUR 350 million of hybrid securities, capital securities, and EUR 350 million of senior bonds. And also, this tells a lot about the state of the capital markets. They have been performing well. And also, we have been active in putting our balance sheet in order. And the balance sheet, indeed, is in great shape. And particularly via the hybrid issuance, we were able to redeem the nearest maturing '22 bonds, EUR 162 million. And we also substantially paid down the commercial paper. Only have EUR 10 million approximately outstanding now. So as mentioned, the balance sheet is in great shape, and we now have a stable outlook from all three rating agencies. We have also been one of the forerunners of sustainable financing. And the green financing actually has developed in a little bit strange manner because the previous 10 or even 15 years, green financing did not make a lot of difference and did not attract a lot of attention from the investors. But the last 2 or 3 years, things have changed. And now green securities attract bigger order books and more investment volumes, meaning that you normally can reach a so-called greenium, i.e., a premium between green and so-called brown issues, bonds or otherwise. And the extent of this is something like 5 to 15 basis points, meaning that you can save, on average, call it, EUR 100,000 for every EUR 100 million borrowed on an annual basis. So we are already talking about quite significant savings and significant sums of money being saved. Also, our bank facilities, like the revolving credit facility, is sustainability linked, meaning that our targets also and our performance against those targets have an impact to the margins. And so sustainability is very important for the whole company and also for the financing activities. Then Bret will be talking more about our capital allocation policies and how we decide which transaction is best for us at any particular point in time. But basically, this is not the time to raise equity because most companies, including us, are trading at significant discounts to net asset values, and raising equity would be prohibitively expensive as a result. And therefore, probably the most shareholder-friendly way of raising equity at the moment would be disposals, particularly because then you can crystallize the difference between book values and your trading values. The company has anyway traded at like close to 40% below book value. And if we can sell properties at book value, there is something that the private market has already figured out and public markets have not. And as such, we will be able to demonstrate the valuation and raise equity at like the best possible price. And we have been there active recently. And as can be seen, we have already transacted over EUR 250 million this year. And as mentioned, transaction markets have clearly improved as also Erik pointed out. So this is probably set to continue. And it has to do with the fact that there is retail and our necessity-based hubs, which provide stability, are also invoked by the investors. And it's quite important to note that we have approximately 35% of our rent roll consists of necessities, i.e., groceries, services, offices, residentials and others. And probably you have been already, at least those of you who have been touring the properties, have seen that public tenants are a very important and growing subset of our rent roll, providing not only credit but long-term leases and occupying some less desirable spaces. And the fact that our unexpired lease term is relatively low, approximately 3.2 years, offers upside now when the markets will be picking up and we will be coming out of the pandemic. So probably that is a great feature to have at this particular point in time. And we like to say that we provide stability in an unstable world or at least unstable environment. And particularly, our rent collection has been best-in-class throughout the pandemic and our rental collection numbers are unadjusted. So we haven't made any tweaks in the numbers. And throughout the pandemic, we have been able to collect at least like 95% of the rents and currently approximately 96%. Our occupancy has remained quite stable. Actually, we have given in a little bit in order to defend the rents. And so the rents are more or less exactly what they used to be, even somewhat higher in certain instances. And as a one tool to defend those, we have been giving away a nudge in retail occupancy and occupancy in general. But as you can see, even the occupancy has stayed extremely stable. And this probably means that we have performed in most of the KPIs better than the peers, whatever the peer set is, you are comparing us again. And in this particular comparison, it's net rental income development, either full first 9 months or then the third quarter net rental income in this case. If we use rent collection, it has the same end result. And probably, as mentioned, the peer group average in reality is even lower because many of our peers do adjust some of the numbers to certain items, which, as mentioned we do not. We could also have depicted here the sales development because the sales numbers are already up. But suffice to say that in footfall development, we are better than most of the peers. Probably last but not least, because of the stable business, we have been able to maintain a strong dividend, and current dividend yield is in excess of 7%, which is, to understate it, it's not bad. It's actually super good. And back in Q1 2020, there was a decision to basically adjust the dividend. We used to pay EUR 0.65 per year and current dividend payout is EUR 0.50 per year, i.e. EUR 0.38 for the first 9 months. And that corresponds approximately to 70% or 69% of the EPRA EPS, i.e., our dividends are covered. And with this, I will hand over to Bret, who will tell certain exciting things about the finance.

Thank you, Eero. And before I started, nice to see all of you today. I just wanted to take a moment to thank Eero for his years of service at the company, number one; but number two, for being such a gracious transfer of power of the CFO position over these last few months. I've only been here 90 days, but Eero has really helped me grow into the company and become comfortable and be welcomed. So I just wanted to take a minute. I think we should all stand up and give Eero applause for all these years of service as a 14-year CFO at our company. So thank you, Eero. Certainly big shoes to fill, and I think I'm very, very fortunate to be blessed with the balance sheet and the company and the stability that we have. So with that -- and one thing I'd say before I start, for my background a little bit. I am not from the retail business, but I've spent 15 years in the public markets at a company called Host Hotels & Resorts, which was an S&P 500 company back in the United States. And then interestingly enough, the last few years, I've been in the private investment world, so a CFO and Co-Founder of a private investment company. And I think what's really exciting for me, one is to be back in the public markets with all of you and to meet all of you. But also, I think that those few years in the private markets have helped bring, I think, something a little different to the table and to the team. And so really excited to be working with this group of people. So with that, we've all toured Lippulaiva, we've seen Lippulaiva, we're sitting in Lippulaiva. But I think the real question is what's going to be the impact of Lippulaiva and how is that going to impact our results over time? And the answer is, it's pretty substantial. In fact, as we look out and we think about our future stabilization of this center and what's going on here, we're looking at, over the next few years, approximately NRI of about EUR 21 million as this asset comes to stabilization. If you consider where we are -- sit today as a company, with NRI at about EUR 200 million based on our latest estimates in 2021, that represents over 11% increase in NRI from just this 1 center. And I think what's really fascinating for me is as you look at that number, where the EUR 17 million is going to be coming from the shopping center, as you guys have seen and saw on your tour, it's a very different type of shopping center. So it's only 4% fashion. So this is really what we like to call the blueprint of what we're building here at Citycon. And it's a really exciting asset for the company, and I think really impactful for our results as we look forward. Now I mentioned that Lippulaiva is a blueprint for what we're trying to do. And as Erik has talked about, we do have substantial development rights here at the company. Now these aren't development rights that are going to be in place today. And I think as Erik showed in his slides, it's development rights that we'll develop over time. But if you were just to apply what we think is a fairly conservative 5.5% development yield to the amount of development rights we have over the next, call it, 5 to 10 years, that amount is, again, pretty substantial. It's potentially EUR 77 million of incremental NRI or a 40% increase to what the company is today. Again, that's projected over time. But I think what's also most interesting, again, if you think about the composition of that new NRI and how it shapes the portfolio and transitions the portfolio over time, it's moving to a place where retail and necessity-based retail continues to be a core of our business, but we're bringing in a lot more residential and, frankly, other services that, again, as we've all said -- we've heard a lot of people say today, are enhancing the existing centers that we have and really making those centers better and creating value that way. One of the things as an investor, and I think as we've seen is that there is this widespread in the private markets today. And so when we think about development and how that can create value to our company, it's what we're sort of seeing here. If you look, retail spreads in the private markets are still fairly elevated. Residential right at the bottom are significantly lower. And so if we have the opportunity to develop on balance sheet over time our residential assets, we can create a lot of value that way. Similarly, there's actually a pretty significant -- it didn't used to be the case, but significant gap between office as well. Again, a significant gap lower than what we can do in the retail space. The other thing I'd say is if you look at residential yields specifically on the Nordics on the right, well, that has certainly trended towards 3%. We've seen recent transactions as low as 2%, depending on the market. So again, I think when we talk a bit about how we can create value with that spread between what we can develop at and what ultimately the market is, we think that's a really interesting data point for us to create value. And similarly, when you step and look into the public markets, you're seeing the exact same relationship, right? You're seeing residential is clearly trading at or above a premium to NAV, off to slightly lower, diversifies below that. And obviously, shopping centers, not quite getting the attention or the value for a variety of reasons that has hampered the public shopping center companies. So we think, again, from both the private side and the public side, there's a lot of value as we move up and become a more diversified company and focus on residential development. Now one of the things we try to do when we talk about the magnitude, and we mentioned there's potentially EUR 77 million of incremental NRI over time that we can add to our portfolio. But we're trying to put -- it's very obvious when you think that there's a spread where you can develop something at over 5 and sell it in the market at something like 3. Well, we tried to put some numbers around that when we just looked at what we have available to develop. And as you can see, residential, we can probably, in our mind, develop about EUR 37 million or just over half of the incremental NRI that we're going to produce there. And that can produce, when you think about the spread of 5.25% and over a market yield of 3.25%, can generate over EUR 400 million of value. Again, that's undiscounted value that's out in the future. But when you add it to what we think we can do at other in retail, it becomes a pretty significant number. And so that undiscounted value of EUR 550 million to EUR 600 million over time is real value creation and something that we think makes the growth story at Citycon interesting. The other thing that's really not in those numbers, while they're undiscounted, is you also have to think about the value that we'll be creating at our existing centers. Again, better footfall, better demand, better results at our core centers. Also another way we think we can take advantage of the spreads that exist today. So one of the things we've talked about a lot is we've got a stable business. And Eero mentioned this with the balance sheet, Scott talked about it, Henrica talked about it. And it's this investment-grade company. We've got a world where operations are getting better. We're starting to come out of the pandemic. We're starting to see some light at the tunnel -- at the end of the tunnel, and our operations have improved. We also pay a 7% dividend yield. So we think that's a pretty interesting and attractive feature of our core business. As I just talked about, we've also got the opportunity for some organic growth. Again, over a long period of time, the next 5, 10 years, the ability to not only add the EUR 21 million of Lippulaiva here to our company, but to also try and develop the building rights over time of initial EUR 77 million -- additional EUR 77 million. When you take that stable business and you add it to the organic growth and then you factor in what Eero and Scott and others have talked about that we're trading at a 40% discount to NRV, we think that that's a really interesting value point and a value opportunity and entry point for an investor. And frankly, as we're going to talk about in the next slide, we don't think that European retail has been differentiated the same way that it has in the United States. And we think that's also an opportunity for investors going forward. I think Eero mentioned this, but really, it's true, all retail is not created equal. And while I think the U.S. has started to catch on to this, having been there, I guess, 90 days ago, I have a bit more familiarity with it. But really, if you look at sort of the spreads and, thank our friends at Green Street for this, but the spreads between grocery-anchored centers and the traditional fashion centers, it's about 120 basis points in primary markets. That's a pretty significant spread. And if you also look to the right, what you'll see is the U.S. strip centers and grocery-anchored centers have really outperformed from the pandemic. That same dynamic hasn't happened here in Europe. And I think one of the things we keep harping on is that Citycon really is a differentiated type of retail company. We've got less fashion than our peers. We've got a higher mix of groceries. In fact, 60% of our top 10 tenants are grocery companies. So we really are differentiated. And yet, we haven't been getting that benefit, a recognition versus our peers in the public markets. And so that's one of the things that when we focus about where is a good point to enter, you'll see Citycon at the bottom has stayed pretty stable. But you'll see on the top, the U.S. strip centers has outperformed, and our peer group has outperformed as well. And if we think for an investor, it's a really interesting time to be investing at a compelling entry point with all the good things we have going on at the company. A step back, maybe a bit about some of the finance priorities. As Eero mentioned, we have a very strong team, we have very strong balance sheet. But for me, coming in and building on that is one of my key goals. And I think one of the things that we're really looking at doing going forward is, first, adding best-in-class support and processes to all our great teams from Henrica to Erik to Kirsi. The second is making sure that we have a very disciplined capital allocation framework, and I'll talk about that in a moment. And the third is being accountable and communicating. And I think it's having events like this and continue to communicate with our investors and our shareholders and stakeholders to ensure that you guys are understanding the story, and we're performing and executing as we say we will. So what I mean by best-in-class support and processes? The first thing we talked about was the implementation of Workday ERP. I actually, was part of my former company, we implemented Workday. It's one of those systems that I think will be great for the company, gives us a lot more efficiency, ability to use data across the organization and frankly, be able to put the right people in the right positions and allow them to do the right jobs at the right time. I think one of the other things that we're looking at in the finance organization is trying to help break down a little bit of organizational silos. Those things exist in every company. And so I think with the partnership of the folks we've had up here today, it's really ensuring that we have a key finance person in each of those groups to help the processes, particularly as we start to develop more and we start to grow the business that way. It's really giving the opportunity for the team to work together and across functions. Business analytics. Kirsi touched on this a little bit, but I think we do a great job at Citycon of historically reporting and looking backwards. I think one of the things we want to do with our ERP system and Workday is to start to use the data and the information that we collect at our centers to help us make forward-looking decisions. So to partner with the business folks, to partner with the leasing people, to partner with the asset managers, to partner with investments, to frankly help us get an edge so that we can make smarter investment decisions both on property, but frankly, externally, whether it's through acquisitions or development and really giving the people in our company the tools to execute appropriately. So disciplined capital allocation. I think this is really important. Erik talked about our investment criteria and what are the key things we look at for when we're making investments, whether it's investments or developments or the like. And I think, obviously, it's important to have the criteria but what's also important is to make sure that we're investing, and it sounds very simple, but to invest at our spread to our cost of capital, a risk-adjusted spread to our cost of capital. And that spread should change depending on the types of investments we're making. So for example, if it's an in-place acquisition, residential is something that is a lot less risky. We may have a smaller spread to our cost of capital and in-place acquisition than we would if it was some other type of segment. And so we've tried to put these things in place so that the organization can make those decisions and throughout the organization, these kind of thresholds can be followed so we can make great investments to further grow NRI and ultimately, EPRA EPS. I'd say the same thing on development. Again, these are longer-term investments potentially. And so obviously, given the length of time and the higher risk, we're looking to invest at higher spreads to our cost of capital. But every investment we make, we put through the same, I guess, meat grinder to make sure that it clears the thresholds. And I think the good news for us at Citycon is we have a lot of options and opportunities to grow and invest and create value. It's certainly through in-place acquisitions. It's through redevelopment of our existing centers. It's through obviously the development we've talked about at length here today. It's potentially through purchasing data or equity and clearly through paying dividends. And so whenever we think about capital allocation, we're always evaluating those options against one another and evaluating our investments through this capital allocation framework. Lastly, accountability, communication. These are why we have these events. For us, I think we do a great job at Citycon, and there's always room for improvement. So we'll continue to be looking as an organization to evolve our external reporting, really giving you all, the existing investors, the ability to evaluate what we're doing. But also, frankly, to help attract new investors to the story and to what we're doing here at Citycon. For us, we want to make sure we have an open dialogue with all of you. We want to have these events so we can give you insight into our business, but it's not just these events. It's hopefully we'll see you on the road, you're welcome to call. I mean, we really want to help you understand what we do and why. And then last but not least, because accountability is important, it's really good to be focused on ESG, and we're one of the sustainable leaders in Europe. And frankly, that's something that will be very, very much in focus for us as we go forward. So in summary, for the finance side, representing Eero in this, I would say we've got a great investment-grade company. We've got multiple and sustainable funding sources. We've got a stable business in stable markets. The Nordics are some of the most stable markets in the world. We've got a lot of really interesting organic growth opportunities, like the one we're sitting in right now. We've got multiple capital allocation levers to pull. And the finance team is going to continue to evolve in order to support this portfolio transformation that Erik, Scott, Henrica and the rest of the team have been building. Thank you very much. And with that, I'll turn it over to Scott.

Thanks, Bret. We're running, I guess, a bit late. So I will do the closing remarks very quickly. So we have time for some Q&A. I think if I were to sum this up in a nutshell, as said at the beginning, we have a very stable business. Hopefully, you've recognized that through the million slides that we showed you to reinforce the point that we have a unique opportunity in this portfolio with densification of existing sites or land that we already own and control. And that will be very transformative, both from a makeup of the company and income stream, but in terms of the actual results of the company as well. We did mention the fact that we are active as it relates to capital recycling. We didn't really touch on the fact that we announced in our Q3 call that we are looking to buy back shares as part of the proceeds from the Columbus transaction. Quite frankly, in my mind, there is no easier way for us to make money if we can sell assets at a price that's above book and then turn around and buy our stock back at a 40% premium -- excuse me, discount. That is good news for our shareholders. So we are focused on that, and we'll work on that. We've got EUR 270 million of building rights, and that's before we put a shovel on the ground just as we get the zoning and permitting in place. And that -- we think that we did look at -- somebody mentioned the Akelius transaction last night at dinner. We looked at buying a subset of that portfolio. Quite frankly, it was astounding to me, the pricing on that. God bless Roger Akelius. But I think when you start to see transactions at 2% cap, that's too rich for us. But what that means is these development rights we have are probably more valuable than we even anticipated. And quite frankly, there's a development premium associated with us doing this stuff ourselves that's even more significant than we thought. So I'm going to stop, and we're going to, I guess, move everybody up here so we can take questions. And again, I apologize, we've run over a little bit, but we still have 15 minutes for questions, and we're happy to stay as long as you guys want to stay, but we understand that we gave you a time line. So I think we're done in 15 minutes, if you want to.

Yes. So thank you, Scott. And we also welcome the rest of the leadership team. So there is some time for the questions. There are 2 ways you can ask a question. People here in this room, please raise your hand, and we will bring a microphone to you. And people online, you can submit your questions through the online portal. Yes. So Peter over there.

Peter Papadakos, Green Street. I have 2 questions. One, maybe it's for Henrica, I'm not sure. But just on the ongoing management of the residential rentals. So does Citycon need to hire people with expertise in ongoing property asset management? I'm a tenant, I have a complaint, who do I call? Do I start to get angry at my landlord because he's not answering the phone? So just talk to us a little bit about that as a strategy, and how many people are going to be added? And is it going to be impactful to the G&A? And then maybe second question. So you didn't have a slide on the sources and uses of funds between now and 2026. Can you just walk us a little bit through, okay, you have EUR 77 million of NRI, but you're going to lose, obviously, some NRI if you're going to sell to fund that pipeline. So how does that sort of look in terms of sources and uses of funds? And what's the NRI more on a net basis roughly?

So on the residential management question, I think we look at it in different steps of getting there. Eventually, when the scale will be big enough, we will add a separate residential business unit. But for now, how we look to do it is to have a partner, like the operating partner, with us. There are several different opportunities in the market. We are currently doing a tendering on that. And we would be leading those via our existing center management teams. So here in Lippulaiva, for example, the Commercial Director for this portfolio would also be running that, but we would have a very solid partner with us who has done the residential operational part. And also looking at it in the longer term, we would do the asset management internally. But it's a question of how much of the actual day-to-day will we go into and how much will we buy. There are specialized companies to do that kind of service. And for now, at least, we will do it that way.

I would point out, Peter. We do have some residential in our portfolio even today. And the way that's handled is really through the center teams as Henrica mentioned. But we do -- and it's typically the residential we have in student housing. We recognize that we're making a much bigger leap. So to Henrica's point, I think the idea is, let's have a partner that we can learn from, who can help us as we get the scale necessary to justify having this kind of in-house, if you will. Who wants to take the second question?

I could try. On the second part of the question, you're right, we didn't have sources and uses. I would say, as we think about sources and uses, obviously, investment-grade rating for us is important. So as we think about, and Eero alluded to it, I think where our cost of equity is today, you're correct. I think the sources would be primarily, over time, a component of asset sales, hopefully the cap rates we've seen, and some component of capital markets debt funding. To your point about the EUR 77 million, I don't think necessarily that's the part that shrinks, because the way we got there was we have EUR 1.4 billion to develop and that can, at a 5.5% cap rate, be EUR 77 million. You're correct that the EUR 200 million, which is our start, would need to go down some portion of that. I think it depends a bit on when these projects come online. I think a lot of the EUR 77 million NRI, as you saw from where the building rights are coming on, are likely back ended. So it's 2026 to 2030. So in the course between 2022 and 2026, most of that -- the Lippulaiva EUR 21 million, that's really going to be there, and that's going to be coming online. And the asset sales really aren't going to be impacted there. It would really be as we look forward past 2026. So the question -- the point I guess I'd make is the EUR 200 million will shrink. At what number? I don't know that we've disclosed that yet, but that EUR 77 million is a pretty decent number, we think, that will make -- more than make up for the amount that we lose on the base.

Yes. And I would add to that, Peter, I think the EUR 77 million is, if we just took our organic development opportunity and develop that and monetize that, you might have seen there was a slide in there that talked about ways that we might try to accelerate that. And I think Erik even alluded to the idea that we might, in fact, use some of these building rights as currency to try to expand our horizons, if you will, and do more. So we may not necessarily take all of those building rights and develop them all ourselves. And I think what Bret was trying to illustrate was if we did that, this is what it would mean. So [indiscernible] you were going to say?

Maybe just to add that, this was more like an illustration of the growth potential. And of course, like you mentioned, it's like a gross number. And additionally, there will be finance costs and there will be other things. So the net would be looking at differently and probably at this point of time and going into the details relating to the net would be quite difficult, and we haven't done that for this reason.

Any other questions from the audience? Well, you have time to think. I'll take one that has come online. So maybe this is a question actually for Erik. What makes you confident that the zoning processes will produce a desired outcome for Citycon?

It's depending on the team that we have on the ground working on these zonings. I mean, we always start -- when we start these processes together with the municipalities where we're active to discuss with them what is their view on the future, what is our view on the future, what can we contribute with, what can we do. So it's not kind of process where we start. And apparently, there is asset classes that we don't want to produce or building rights that we're not interested in. It's a discussion and negotiation together with them. What is it that we can do on this market? What is the demand? And of course, we always analyze base decisions when it comes to what we should have there. We can produce something that we doesn't have a demand for. So it's kind of natural the way we go and what we want to do. And sometimes we see that we don't find that kind of cooperations, maybe doesn't have the same view as the partners that we have as in all negotiations. Then we know that, and then we kind of focus on other stuff, or we kind of try to change their view.

I think it's important to say that the 20 assets that Erik talked about on the slide, we're already engaged in conversations with the city. This is not our wish list, if you will. We have already started the conversations with the city. So we have some level of comfort that the city is receptive to what we're trying to build. As Erik said, it may shift a bit in terms of what the pieces of that are. But we have a high degree of confidence. And as I mentioned, I think, at the beginning of this, we have -- the cities we operate in are very focused on green development and trying to do things that are really -- have a sustainable element to them. And if you think about the fact that we're in these -- already in these densely populated areas with the connection of transportation, we're the logical place in these. And we hear this from them every time we go talk to the city. So we're the logical place for there to be further development and further densification.

And one more thing from my side is that we have teams on our -- all assets that we have that continuously have discussions with municipality about different opportunities. What I presented here was the actual cases where we are active and have an ongoing discussion. It's not kind of a wish list as Scott said. It's actually processes where we find that we have this kind of cooperation together with the city. I mean -- and we rely on Henrica and all the operational team that we have on the ground having -- they have the discussion with municipality every week, every day, about what's happening in their local area, local market. We come in when we see that we can find something that is really attractive and where we can actually work in the long term.

Any questions? Okay, another one coming online. And this one is actually multidimensional. So I think many of you will be answering this one. What are the reasons behind the valuation gains during this year? And do you expect the trend to continue?

[indiscernible] I have a view. Listen, we honestly felt like the valuation declines that we saw in 2020 were not warranted. As we demonstrated in the slides that we showed to you, the performance of the portfolio held up extremely well, much better than the peer group. However, we were kind of being lumped in with all of retail. And we've had a bit of an education process with the appraisers, frankly, the sale of assets that we were able to accomplish this year. The 3 assets earlier this year in Sweden and Columbus have been data points that we've been able to show the appraisers. And the appraisers -- listen, I sympathize with them. They have a very difficult job, particularly last year when there was no transactional activity to point to. But I think the fact that we're able to provide these data points and say, look, clearly, the private market understands the value of these assets has helped us. And that's why we saw some slight improvement in '21. Honestly, the slight improvement we saw is still disappointing in my mind. I think there's much more -- much further for us to go there to claw back some of that value destruction that we had in 2020 that I don't believe was warranted. So my friends may differ, but...

Maybe just to add that, in general, in the Nordics, the transaction markets are performing well and they have improved and are improving. And our assets, like we several times mentioned, they are stable. They are necessity-based. They are grocery anchored. So there is good demand for those assets. And finally, the appraisers have basically noticed that.

I do think, too. We're -- also, if you think about where the world is going, and hopefully, this is an example of us all getting together and COVID, obviously, and the pandemic has been an issue, has been certainly much less than the Nordics. But it does feel like the world is starting to get a bit better. And so hopefully, that as well should be important for valuations going forward. And as I think Eero mentioned earlier, unique to us. A lot of our rents are tied to indexation. And so even as you see some inflationary things, which, again, can tell you that the economy is doing better, the world is doing better, that hopefully should help cash flows and underlying valuations as well.

The last point I'd make on this topic is if you look at the spreads between borrowing cost, real interest rates and cap rates, I mean, it's historically wide right now. And so that should return to the mean at some point. So as it relates to how do we think this is going to progress, I honestly am of the opinion that you'll start to see cap rates come back. And again, I think Bret had a slide showing the spreads and cap rates by the different asset classes. But again, if you look at even just to -- would it cost you to borrow money, that spread is historically wide and should shrink at some point.

Thank you. Unless there are any other questions coming from the audience, I think we could close today's session here. We did receive some more and are happy to answer those later on, but most of them were covered during these answers. So since we are over time, I would thank everyone for participating, and we will continue with an asset tour to Iso Omena next for those who are here. And we also thank everyone watching this online.

Thank you, everybody. Thank you, guys, for coming.

Thank you, very much.