di Judi Seebus, Editor in Chief di Property EU
On Monday Helsinki-listed Citycon announced it has acquired Sektor Gruppen, Norway’s second-largest shopping centre owner and manager, in a move that will make it the largest listed shopping centre specialist in the Nordics and the third-largest listed mall operator in continental Europe. The €1.5 bn acquisition – by far the biggest property deal in the Nordics so far this year and the biggest property transaction in Norway ever – will give Citycon exposure to the strong Norwegian market and other parts of the Nordic region.
The acquisition lifts Citycon’s gross asset value (GAV) by nearly 50%, from €3.4 bn to € 4.9 bn. In one fell swoop the Finnish company gains immediate critical mass in Norway and a strong position in one the fastest growing and wealthiest economies in Europe. Following the merger, which is expected to complete later this summer, Norway will become Citycon’s biggest market after its home market Finland, followed by Sweden and Estonia. Prior to the merger, Sweden was Citycon’s second-biggest market.
The change in country hierarchy is good news from the perspective of potential revenue growth. At a hefty €31,700 per capita, purchasing power in Norway is higher than any other country in Scandinavia and more than twice the European average. Sweden and Denmark lag with a roughly similar figure of around €21,000. By comparison the European average is significantly lower at €12,900.
While the takeover of Sektor Gruppen fills a major gap in Citycon’s Nordic platform, there is still a big hole left. Indeed, Denmark is pretty much a virgin terrain for the Finnish company, despite the fact that this Nordic neighbour is one of the most attractive markets in Europe with a purchasing power per capita that is higher than that of its own home market.
Citycon’s Danish lights are still quite dim
Citycon has what it describes as an ‘established foothold’ in the Danish market, but its share is virtually negligible at 2% of the total portfolio. By contrast, the Baltics (Estonia, Latvia and Lithuania) make up 7% of Citycon’s total portfolio with a combined population of 6 million. Denmark matches that figure on its own.
The Helsinki-based company entered Denmark in January 2012 with the acquisition of Albertslund Centrum in Greater Copenhagen from the local municipality for DKK 181 mln (€24 mln). The shopping centre comprises 16,000 m2 of leaseable area and the transaction included a grocery store extension which Citycon bought when it was completed at end-2014. Earlier this year it expanded its presence in Denmark with the purchase of the Straedet mall project in Copenhagen from local developer TK Development in a forward-funding deal expected to be worth €75 mln. Citycon will acquire the grocery-anchored, open-air shopping centre at a fixed 6.25% net initial yield.
Citycon is not the only listed retail specialist with a relatively thin presence on the ground in Denmark. Sector heavyweight Unibail-Rodamco has a number of big shopping centres in Sweden, but only one in the Danish market: the 59,000 m2 Fisketorvet mall in Copenhagen which was acquired in 2000. By contrast, French peer Klépierre is well-represented in the country. The Paris-listed REIT, which earlier this year completed the takeover of its smaller Dutch rival Corio, owns 16 shopping centres in Denmark through its Nordic subsidiary Steen & Strom.
Three of Klépierre’s shopping centres in Denmark are in the three largest cities in the country: Fields (74,000 m2 GLA) in Copenhagen; Viva (42,000 m2) in Odense and a smaller centre Bruun (30,000 m2) in Aarhus. Together Klépierre’s Danish centres attract 66 million visitors annually, generating a turnover of €1.7 bn.
According to the 2015 Copenhagen property report published by JLL’s Danish partner Sadolin Albaek, shopping centres in Denmark are in strong demand, but transaction activity is weak due to the ‘very limited’ supply. Large-sized shopping centres are owned by a handful of investors who are not very active on the seller side. Aside from Klépierre, through its Nordic subsidiary Steen & Strom, the largest owners are Danica Ejendomme (the property arm of pension fund Danica), Dades and NREP (Nordic Real Estate Partners). The latter has in recent years spearheaded activity in the secondary market via a series of acquisitions for its retail-oriented funds.