Citycon teams up with Canadians to buy giant mall in Stockholm

Finnish listed retail specialist Citycon is joining forces with the Canada Pension Plan Investment Board (CPPIB) to acquire the Kista Galleria shopping centre in Stockholm for around EUR 526 mln (SEK 4.6 bn).

Citycon and the Canadian pension fund have jointly agreed to buy the mall from DNB Livsforsikring ASA, part of DNB Group, the largest financial group in Norway. Citycon expects the first-year net yield to be 5.5%. The transaction is the largest single property transaction of 2012 in the Swedish market.

Under the terms of the transaction, the shopping centre will be owned on an equal basis by Citycon and CPPIB. The transaction is expected to be finalised in January 2013.

Kista Galleria offers 90,000 m² of gross leasable area including 60,000 m² of retail space and the remaining 30,000 m² comprising a hotel, student housing, healthcare premises and municipal services. The centre has an annual footfall of 18.1 million visitors and annual sales of EUR 280 mln.

The scheme underwent a complete renovation and large extension in 2002 and was further expanded in 2009.

'The strength of Kista Galleria is its location and traffic connections,' said Marcel Kokkeel, Citycon's CEO. 'This strategic acquisition offers us a unique opportunity to increase our relevance in the eyes of international retailers, increase the quality of our portfolio and at the same time substantially strengthen our position and market share in Sweden where we already have nine shopping centres.'

The acquisition will also help Citycon balance its portfolio geographically, increasing Sweden’s share of the portfolio from 25% to 40% in terms of net rental income.

Kista Galleria will be Citycon’s largest shopping centre by GLA. For CPPIB, the deal is the first direct property investment in the Nordic countries. Citycon will be responsible for the asset and property management of the shopping centre based on market terms.

'Both parties see potential in partnering also for other investment opportunities,' commented Nils Styf, Citycon’s chief investment officer.

Citycon and CPPIB will jointly finance half of the acquisition with a stand-alone, asset-backed loan financing based on five years maturity, and Citycon will finance the remainder of its share from its existing lines of credit and cash. Citycon is also considering possibilities to refinance up to 50% of the company’s investment by issuing new equity through a capital increase.

After the acquisition, Citycon will own a total of 38 shopping centres and 40 other retail properties with a value of EUR 3.2 bn. In addition, the company manages and leases two other shopping centres without owning them.

Catella advised DnB Liv on the sale.

Leimdörfer acted as sole financial adviser, Jones Lang LaSalle as retail property adviser and Roschier as legal adviser to Citycon and CPPIB in the transaction.