Citycon Oyj, Finland’s second-largest real estate company, and the Canada Pension Plan Investment Board agreed to buy a shopping mall outside Stockholm for 4.6 billion kronor ($704 million).
Kista Galleria, a property with leasable space of 90,000 square meters (969,000 square feet), was sold by DNB Livsforsikring, a unit of DNB ASA, according to a statement to the Helsinki exchange today. The purchasers will each own half of the mall.
“This strategic acquisition offers us a unique opportunity to increase our relevance in the eyes of international retailers,” Marcel Kokkeel, chief executive officer of Citycon said in the statement. It will also “increase the quality of our portfolio and at the same time substantially strengthen our position and market share in Sweden.”
Sweden’s economy has averted a recession even as the euro area, its main trade partner, contracts. Even so, the decline in trade is costing jobs in the Nordic region’s biggest economy, causing consumer confidence to decline for the fifth month.
Citycon expects the first-year net yield to reach about 5.5 percent. The occupancy rate at the mall is 98 percent, with tenants including Europe’s second-biggest clothing retailer Hennes & Mauritz AB and department store Aahlens. The mall had about 18.1 million visitors last year.
The mall is bigger than any of the properties in Citycon’s portfolio, which includes 38 shopping centers and 40 other retail properties. Net rental income from Sweden will account for 40 percent of the total after the acquisition, compared with 25 percent before, Citycon said.
Citycon shares fell 1.2 percent to 2.58 euros at 1:30 p.m. in Helsinki.
Half of the purchase price will be financed jointly by Citycon and CPPIB using a stand-alone asset-backed five-year loan. Citycon will use cash and existing credit lines to pay the rest of its share, and is considering refinancing 50 percent of its investment by issuing new equity.
“The involvement of CPPIB adds a seal of quality to this acquisition and also to Citycon as a professional manager of shopping centers in the Nordics,” said Nils Styf, Citycon’s chief investment officer. “Both parties see potential in partnering also for other investment opportunities.”