Good morning, everyone, and welcome to Citycon's full year 2020 result audio cast. We have today published our 2020 financial statements. These can be found from our webpage under the Investors sections as usual. My name is Laura Jauhiainen, I'm the Vice President of Strategy and Investor Relations at Citycon. With me in the audio cast today, you have our CEO, Mr. Scott Ball, and our CFO and Executive Vice President, Mr. Eero Sihvonen. We'll kick off with the presentation of the 2020 results and the highlights for the year. There will be a Q&A session once Scott and Eero have finalized their parts in the presentation. Scott, please go ahead.
Thank you, Laura, and good morning, everyone. It's a pleasure to present Citycon's Q4 results, which again outperformed the sector even during the greatest stress test we've experienced as a company. I will start with a summary of Q4 results and the highlights of the year. Eero will go through the financial overview, and I will end with a review of our strategy of diversification through densification, as well as our focus for the year. Citycon's outperformance in the COVID-19 environment reflects our urban hub strategy, which relies on a high proportion of necessity tenants and public services. Our full-year rent collection was strong throughout the year and averaged 96%. I would like to point out that the reporting practice on this metric differs between companies. Some show a number that's been adjusted for rent relief.
Our number is a total cash collection number, which has not been adjusted for rent relief or any other corresponding items. Net rental income adjusted for exchange rates declined by 3% compared to 2019, and -5.5% using historical exchange rates. Our like-for-like NRI declined by 5.9%. This drop was a result of COVID-19 and weaker exchange rates. EPRA EPS was EUR 0.77 per share and was in the upper half of our guidance, which we reinstated in Q3. The valuation decline was relatively modest compared to our peers, and for Q4 was -0.9% and -3.5% for the full year. This again demonstrates the resilience of our portfolio and the fact that our tenant mix truly differentiates Citycon from other players in the commercial real estate sector.
We also continued managing our administrative costs lower, and this year they declined by an additional 3.2% on top of the 4% decline last year. Total tenant sales increased by 2.5% in our centers. We saw footfall drop by 12% following government restrictions and recommendations. However, the average purchase increased by 16% as people visited with a clear intention to make purchases. We also made significant progress in renewing our financial facilities. Citycon issued a tap bond of EUR 200 million and a green bond of NOK 800 million. Additionally, Citycon's revolving credit facility of EUR 500 million was renewed and extended. These transactions were done under challenging market conditions, which demonstrates our access to the financial markets. Towards the year-end, we saw our credit spreads tightening as a reflection of our strong operational performance, and they continued to tighten even further in 2021.
The company also focused on strengthening the balance sheet last year. This was demonstrated by the decision in the spring to adjust the dividend on a long-term basis. I should point out that Citycon continued to pay a dividend every quarter, and the dividend yield remains attractive. In line with strengthening our balance sheet, we continued our capital recycling initiative with a divestment of three assets in the Stockholm area. In addition to strengthening the balance sheet and providing financial flexibility. The deal was done above the appraised values confirming both the value and the liquidity of our portfolio. We also made progress in our strategy of diversification through densification, which aims at adding other uses, primarily residential, to our urban hubs. This creates synergies with our retail real estate. Construction of Lippulaiva progressed as planned, and we reached several important milestones.
A construction agreement for four of the eight residential towers was signed, and the building rights of two residential towers were sold in December. Lippulaiva will be a showcase of our strategy that capitalizes on the densification potential around our existing assets and will include 500 apartment units when we are complete. In addition, we launched a new densification project in connection with our existing asset in Liljeholmen. In cooperation with the City of Stockholm, this new project will be comprised of residential, office, and healthcare premises supplementing the existing retail and train terminal. Behind the scenes, we continued our work to realize the identified building right potential of EUR 200 million in connection to our existing assets and strengthening our resourcing for this strategic transformation. We hired a Director for residential business and recently established a strategy function to support the transformation and maximize value creation.
Our mixed-use strategy provides an attractive value proposition for current and potential tenants. This resulted in a record-high leasing activity in 2020, which was a 12% increase over last year in the amount of leases signed. This also includes a significant number of municipal deals, which is in line with our strategy. Strong operational and financial results highlight the resilience of Citycon's mixed-use strategy and necessity-based tenant mix. It demonstrates that we are truly a different player in the commercial real estate sector. With our strong operating KPIs, including rent collection, tenant sales, NRI performance, and modest valuation declines. You could argue that our assets represent their own unique asset class. Our geography is also important, as the Nordics have taken a holistic approach to dealing with the pandemic.
As you can see on this slide, the Nordics are expected to clearly outperform the eurozone again in 2021, in the most important metrics describing economic environment and forecasting consumer purchase behavior. As mentioned previously, our total tenant sales increased 2.5% on a year-on-year basis, which highlights the difference that the tenant mix makes in our business. Footfall dropped following government restrictions, and the full year decline was 12%. Despite lower footfall, tenant sales have increased because of the 12% higher average consumer spend per visit. As mentioned, the part of our strategy is focusing on increasing our share of necessity and municipal tenants. This adds to the resilience of our portfolio and brings stability to business and cash flows. Over 35% of our GRI comes from stable necessity tenants, and only a very small portion of leases are turnover-based.
In line with our mixed-use strategy, the public sector is a growing part of our business. Currently, public sector and healthcare services account for 8% of our contracted GLA, with strong credit behind these leases. We intend to increase this proportion of public services even further. Mixed-use hubs provide an attractive value proposition for tenants, which resulted in strong leasing activity this year. This is an important leading indicator of our business and future results. Leasing activity in Q4 continued on a strong level after a slowdown earlier in the year. At the end of the year, we leased 199,000 sq m of new leases, which is the highest number in the company's history. We signed several important deals with municipalities, including the new Espoo City Library in Lippulaiva . As a result, contracted municipal leases stand at 8%.
We also contracted with several grocery deals such as Lidl in Columbus, and a long-term renewal contract for Prisma in Iso Omena, which highlights our key tenants' willingness to commit to our centers over long term. As we examine our 2020 operations and the impact of COVID-19, we note a few items. The impact of rent discounts granted in Q2 was approximately EUR 500,000 for the quarter. No new COVID-19 discounts were given after Q2. EPRA EPS was EUR 0.77. It was in the upper half of the guidance reinstated in Q3. 100% of our centers remained open in 2020, though some tenants were forced to close due to mandated restrictions in some markets. Retail occupancy at year-end was 94.3%. The valuation decline remained modest relative to peers, and Q4 valuations were flat when looking at 100% owned operating assets.
Citycon forecasts the 2021 direct operating profit to be in a range of EUR 170 million-EUR 188 million. EPRA EPS to be EUR 0.65-EUR 0.75, and adjusted EPRA EPS to be EUR 0.558-EUR 0.658. With that, I'd like to turn it over to Eero.
Thank you, Scott. As Scott mentioned, we had indeed a strong quarter and a strong year overall. I will be giving you a short update of the numbers and results. You will be able to find a lot more details from the financial statements release, which were also published today. I will start by giving an overview of the most important numbers, and then after that, going a little bit deeper with certain bridge reviews. First of all, for the quarter Q4, we had a net rental income, which was EUR 49.9 million. That was 6.7% below previous year's level or EUR 5.6 million below. On the EPRA earnings level, we ended up the quarter at EUR 32 million, and that was EUR 3.6 million before previous year's level, i.e., 10% approximately.
Both of these numbers represent a very good achievement, taking into account the pandemic situation and also the fact that particularly Norwegian crown was quite weak over the year. I will be going through those impacts in a little bit more detail going forward. Our Net Reinstatement Value was EUR 11.48, which was 7.8% below last year's level. I will describe the new EPRA KPI Net Reinstatement Value in a bit more detail later. Turning over to the full year financials, net rental income for the year ended up at EUR 205.4 million, which is EUR 12 million below last year's level, 5.5% with exact foreign exchange rates and 3.0% taking away the impact of the weak Norwegian krone, mainly the impact of currencies overall. EPRA earnings ended up at EUR 136.6 million, that was EUR 9 million below previous year's level.
We had EPRA earnings, which was closer to previous year than the net rental income due to the savings in finance costs due to somewhat lower SG&A. The company continued very tight cost control over the year. Also somewhat lower taxes, which of course is normal in a year where also the earnings were slightly lower. The adjusted EPRA earnings was down a bit more, highlighting the fact that we issued the hybrid bond late in 2019. I will start the analysis of the results with the impact of foreign exchange. You can see on the graph that actually both Swedish and Norwegian currencies reduced in value quite substantially when the pandemic started late in March in this geography.
Since then, both currencies have strengthened back, and particularly Swedish krona is actually now stronger than where it was in the beginning of the year, whilst the Norwegian krone continues to be below the beginning of the year level. During the quarter, we had positive translation gains due to the fact that both currencies strengthened against the euro for the quarter, the impact of the translation gains for the quarter was +EUR 65 million, leaving the translation result for the whole year as -EUR 30 million approximately. To the net rental income bridge, first of the two bridges, and there by the type of movements in portfolio. As mentioned, our net rental income ended up at EUR 205 million approximately. The impact of two centers that we acquired in Norway, Stovner and Torvbyen, was approximately EUR 8.6 million +.
Disposals completed in 2019 had an impact of EUR 2.4 million. Like-for-like approximately a -EUR 10 million, which again is a very good achievement in the circumstances. As mentioned already, foreign exchange had an impact of approximately EUR 5.9 million on net rental income. Turning over to the other bridge, i.e. the impacts of COVID on our net rental income. Of course, these are not exact audited figures, there's nothing that can be audited as such, but are based on the best estimate of management, to give you additional guidance on which line items exactly were impacted. In our case, as can be seen, the COVID impact is extremely moderate compared and much lower than that of most other players.
The impacts related to gross rents, capital rents, our occupancy has stayed at a good level, but naturally slightly lower than compared to the situation prior to the pandemic. Rental discounts have been granted to some extent, the impact of that is EUR 1.6 million, i.e. fairly low. Credit loss provisions due to the pandemic have been increased by approximately EUR 3.3 million. Overall, this gives a bridge of all the COVID-related impacts, which total approximately EUR 13.5 million for the year. Fair value changes. Like mentioned earlier by Scott, we had a very modest change in fair values reflecting our business model, reflecting the fact that we are in the Nordics. And our business is based on grocery-anchored, necessity-based shopping centers in the Nordics.
Furthermore, our property values have been sort of approved to be right by the recent transaction, which we announced just a few weeks back. Overall, the 100% or the majority-owned portfolio had an impact of EUR 36.5 million for the quarter, and for the full year, EUR 146.9 million. Including Kista 50%, those numbers were EUR 51.1 million and EUR 179 million respectively. As can be seen, the average valuation cap rate of our portfolio is now approximately 20 basis points wider compared to where it was one year ago. Additionally, of course, the market rents used in the valuation are now slightly changed as well. Overall, a very good valuation result. Turning over to the new EPRA KPI, EPRA Net Reinstatement Value. As you might know, EPRA has modified their net asset value KPIs, and the former NAV and triple net NAV are not going to be used anymore.
For the first time, w e published EPRA KPI, and we have chosen Net Reinstatement Value to be that KPI that we mostly are following. Naturally, we disclose all of these three KPIs, also Net Tangible Assets and Net Disposal Value, and the details of them can be found on page 22 of the release. As such, our Net Reinstatement Value ended up at EUR 11.48, and the only difference between former NAV is the real estate transfer taxes that in this NRV are added back. The main financing metrics, we continue to be in compliance with essentially most of our targets, including portfolio hedge rates. The fact that most of our financing is mainly unsecured, 95.4% is unsecured. We have one drawing on the revolving credit facility. I will come to that in a while. Our loan-to-value was more or less the same as previous quarter, 46.9%.
In a while, I will show the impact of the disposed centers to that loan-to-value. Financing key figures on next page. I think that the main message here is that adjusted with the full impact of the three divested centers here in Sweden, loan-to-value is expected to be at 45% exactly, assuming a year-end balance sheet as a basis and making no other adjustment apart from the fact that the proceeds of this transaction are assumed to be used towards debt repayment. We had a quite successful and busy program regarding refinancing already in 2020. Actually, we have taken care of most of the refinancing agenda already. We only have a very modest maturities in 2021, and the next maturity is in September 2022 when we have a EUR 255 million bond maturing.
During last quarter, we successfully issued another green bond, NOK 800 million , approximately EUR 80 million issued on 13th of November. As importantly, we also renewed our EUR 500 million revolving credit facilities for another 3.5 years. Current financing needs are extremely limited, and we have enjoyed quite nice bond spread tightening over the last few weeks and months. Liquidity position continues to be very good, as can be seen here, syndicated revolving credit facility unutilized EUR 405 million means that EUR 95 million is utilized, and that EUR 95 million will be repaid with the proceeds from the transaction, as already mentioned. My final topic is outlook for 2021. As mentioned, we have a very predictable business model based on necessity and grocery-anchored business model.
As such, we have utilized the same process as previous years and indeed will be giving outlook, and even the range is exactly the same as previous years in this so early in the year. We will, of course, naturally come back to the guidance and tighten it as the year goes by. Current guidance, the starting guidance is direct operating profit EUR 170 million-EUR 188 million, EPS EUR 0.651-EUR 0.751, and adjusted EPRA EPS EUR 0.558-EUR 0.658. Of course, this assumes that there is no major second wave lockdown or other restrictions resulting in very significant store closures, and such things have not happened before in the pandemic either. These naturally are the most important assumptions behind as well as the fairly stable FX rates. Back to you, Scott.
Thank you, Eero. As you can see, a very busy year on the financing front. My hats off to Eero and Ben and the team. They really did an amazing job this year. As mentioned, we continued our capital recycling efforts. A lot of that work was done in 2020. It culminated in an announcement just a couple of weeks ago that we are selling three non-core properties in the Stockholm area for EUR 447 million. It's important to point out that the gross purchase price exceeded the appraised values. The deal is expected to close in the first quarter. The proceeds will be used, as Eero mentioned, to strengthen the balance sheet. It also increases our financial flexibility, which allows direct capital for our strategic transformation of the company. The purchase price confirms, I think, both the value and the liquidity of our portfolio.
A few words about our diversification through densification strategy. We own assets in prime locations with direct connection to the most important transportation hubs. These are natural places to gain new building rights as cities seek further densification. Furthermore, existing and strong relationships with these municipalities and working with area development make Citycon the preferred partner. We also have a proven track record for creating award-winning destinations and are known for developing green assets with innovative energy and recycling solutions that are important for the Nordic community hubs. For Citycon, densification provides an attractive growth-oriented business on top of our already stable retail assets, and also provides significant portfolio diversification. It also increases the number of people in the catchment area, creating synergies with the existing retail portfolio, and balances intraday fluctuation of customers in our centers.
As part of our strategy, we envision that the future mix of the company will be 40% residential and office, 20% necessity goods, and 40% retail. Capital recycling continues to remain a strategic priority for Citycon. This means shifting the portfolio further towards mixed use through capitalizing on the densification potential around our existing assets. As mentioned, this would be complemented with making selective disposals of non-core assets. It is important to highlight, as you will see later in the presentation, that the value creation from densification starts in the zoning phase once sellable billing rights are received and prior to potential capital outlays. Another important point to emphasize is that the planning and zoning process allow a case-by-case decision-making on actual execution of the individual developments. All decisions can be made gradually, balance sheet allowing.
As mentioned earlier, these projects create value upon completion of the planning and zoning phase through the building rights. This value creation in connection to our existing locations is estimated at EUR 200 million, which equates to approximately EUR 1.12 per share. Advanced planning and zoning requires minimal CapEx. Decisions on whether to invest or cash in on building rights is made at a later stage in the process. We already control the sites, which makes this essentially free land for Citycon. Execution and building will involve a case-by-case decision on how to proceed with individual developments. Depending on the site, we may choose to develop it ourselves or to partner up on a JV, or simply sell the building rights outright. Lippulaiva is a prime example of an urban hub combining residential with retail and services. Lippulaiva's construction progressed significantly in 2020.
The new Lippulaiva, located in direct connection to a metro station, is scheduled to open in spring of 2022. Lippulaiva will be a modern urban hub in a wealthy and growing suburban area in the Helsinki metropolitan area. The development combines necessity goods and retail with public services and a significant residential component. During 2020, several important milestones were achieved. This includes signing a contract with the construction company, Skanska, to build four of Lippulaiva's permitted eight housing blocks. We also sold building rights for two of those blocks to the construction company, Hausia. This covers in total, six of their permitted eight housing blocks planned for the development project, and Citycon will hold the rights to develop the remaining two. In total, when finished, this area will comprise 500 housing units.
In addition to the progress made in construction, several important leasing contracts were signed, including a new Espoo City Library. As a result, our pre-leased rate at the center stands at 70%, with another 3% at lease execution and another 9% in direct discussions. This is 1.5 years out ahead of opening. A new area development project in Liljeholmen is another showcase of our transformation strategy. Liljeholmen is a well-connected suburban area in the heart of Stockholm. It is located next to Södermalm and is expected to grow substantially in the future. Citycon has established assets in the area and currently holds a mixed-use urban hub comprised of retail with a large proportion of necessity tenants and healthcare services. Liljeholmen will include new areas totaling approximately 70,000 sq m to accommodate the needs of future residents and office workers.
New developed space is distributed between residential, office, services, culture, and public meeting spaces. The project is currently in the zoning phase, and construction is planned in phases starting from 2023. These densification plans are done in close partnership with the City of Stockholm. In 2021, we will continue building on top of these strong results. We anticipate continued operational outperformance as the pandemic continues. The company will continue to expand its necessity-based municipal service offering. Municipal services in our centers provide for logical locations for vaccination centers, and we currently have four in place with more to come. Continued capital recycling, strengthening the balance sheet, and managing the cost of debt downward will continue to be priorities for us. The company will also continue to advance its diversification through densification strategy. Targeted value delivered through zoning is EUR 1 million for 2021 and approximately EUR 60 million for 2022.
We expect to bring Lippulaiva online in the first half of 2022. Finally, as Eero laid out, we are providing guidance for the full year 2021, which actually shows growth over the prior year. With that, I'd like to thank you and hand it back over to Laura.
Thank you, Scott and Eero, for the presentation. Now it's time for the questions, and we turn the audio line on. Operator, please go ahead.
Thank you. If you do wish to ask a question, please press zero one on telephone keypad. If you do wish to withdraw your question, you can do so by pressing zero two on telephone keypad. Our first question comes from the line of Tobias Kaj from ABG. Please go ahead. Your line is open.
Yes, thank you. Good morning. Your report is 5.9% decline in like-for-like net rental income for the full year. It was 4.7% down year- to- date in Q3. What was the figure in Q4? It indicates that it's like 8%, 9% down in the fourth quarter. Is that correct?
The reduction in Q4 was indeed larger. It was probably in the order of 8% or 9% down. Yes.
What do you expect for Q1? Do you expect a similar figure?
I think that we are giving the full year guidance on operating profit level, but we are not giving anything more detailed than that for obvious reasons. Forecasting on a quarterly basis would be very difficult. Of course, as you will be able to see in Q4, we had a slightly higher credit loss provisions compared to last year. The main reason probably was to slightly increase the credit loss provisions that were taken at the end of the year.
Yeah. I would point out that we still finished the year in the upper half of our guidance. What occurred in Q4 was nothing that was not already kind of planned out and assumed.
Is it fair to assume that the like-for-like is close to zero or even positive for kind of offices and necessity and so on? For the 57% of the portfolio, which is retail, is it more than 10% down for the full year?
It's a very detailed question already. Of course, world is easier for groceries, grocery operators, and a little bit less easier for the others. We have not given such detailed descriptions.
In Sweden, taking into account in those figures?
All the regions, of course, all the countries are within our figures, of course, yes.
Yeah, also the divestments, the effect of the divestments is included?
Well, the divestments only take place in 2021. The divestments are reduced from our guidance in 2021, if that's the question.
They're in the guidance, if that's your question.
Okay, perfect. Do you expect to do any more divestments during 2021?
Yeah, I think as I've said ever since I got here, we've made a practice of not committing in advance to a specific number of divestments. That we are not forced sellers, and that if the market is appropriate, we will sell at the appropriate pricing. I think we've delivered on that promise consistently over the last two years. That being said, we are always considering divestment of non-core assets. We continually look at that, but we are not going to commit to a specific number as we have not in the last two years.
Okay.
I think as Tobias said, I don't want to overpromise. We're going to be very consistent about that. I think we've demonstrated our ability to do this over the last two years.
Yeah. You have had a very high activity of signing lease contracts during 2020. When you do renegotiation, can you say what is normally the outcome of a renegotiation within retail?
Yeah, I think, again, it is really dependent on which sector of the mix you're talking about. We've had strong success in renewing our grocery store operators at rents that are higher and getting extended term. Our new deals with municipal tenants also tend to be longer term, with great credit behind it, and at market rents. Not surprisingly, fashion tenants are struggling, therefore those conversations are a bit more difficult. We're fortunate that fashion makes up a smaller portion of our business as compared to peers, frankly, I think that's a contributing factor to our outperformance. We haven't faced some of the same headwinds that our peers have faced. That being said, obviously, we do have some of it in our shopping centers, therefore, we do have to deal with those tenants as those renewals come up. It's really kind of a mixed bag.
If you have to average it out, I think if you look at our guidance for next year, we are showing growth. We are predicting rental growth, but it's a mixed bag depending on which sector of the business you're talking about.
Okay. That's all from me. Thank you.
Thank you.
Thank you. Our next question comes from the line of Niko Levikari from ABN AMRO. Please go ahead.
Okay. Hi, good morning, everyone. Thank you for the presentation. I had a small follow-up. Maybe we can kick off with the ERV negative impact of the - 3.1% in 2020. I appreciate the comments from the management that you already said it's a bit of a mixed bag. But can you comment or elaborate a bit more if there was a particular segment that was driving this impact? And what is your expectations regarding 2021? Do you expect to see a reversion to positive renewals and relettings impact? Or do you still see that the market rents are pushing this down?
Yes, as can be seen from our valuation result, in our case, the impact of ERVs is much less, again, reflecting the stable business model, again, reflecting the fact that we have more groceries and we have more municipal businesses. It's a very difficult question.
I guess what I would add on is, we announced two weeks ago this transaction in Sweden at pricing that is above our value. Therefore, I think the struggle the appraisers have had is there's been no transparency into pricing in the market because there's been so few transactions. Therefore, I think this transaction gains additional importance, because it is at least a benchmark that everybody can point to. I think it probably helps the whole sector, quite frankly, not just Citycon. It is a transaction you can point to that demonstrates that values have held up. I think that we never know. It's somewhat out of our hands. When you look at our Q4, obviously, as mentioned, our 100% owned centers were close to flat.
I think it demonstrates, at least directionally, that any negative impact on valuation declines is at least moving in the right direction. I think our transaction, hopefully, is reinforcement to keep these values where they're at, and maybe even start to see some cap rate compression. Quite frankly, when you think about where interest rates are in the spread, it's historical right now in terms of the spread. I would argue that that should mean that there should start to see some cap rate compression. We haven't seen it yet, I hope it's coming.
Okay. Well, thank you for that. Regarding the scrip dividend then. I just wanted to get a confirmation or a bit of clarity on that. Are you still intending to make the proposition to the AGM that this will be, let's say, unlimited in each of the quarterly payments? I.e., you can have the whole quarterly payment paid out as shares instead of the cash payout?
It will not probably be part of.
Can you elaborate on that?
Yeah, it will probably not be part of the AGM yet because the technical preparations still continue, and the technical preparations, due to reasons that we have no control, seem to take a little bit more time. The background being that the Finnish Euroclear system was not ready for a quick implementation of the scrip dividend. Unfortunately, slight time out at least will be needed here.
Our intention is still to move forward.
Indeed, yeah.
As Eero said, we're at the mercy of.
Exactly.
Euroclear Finland.
Okay. That's not something I can now expect to happen in 2021? Sorry.
Call Euroclear Finland and ask them. We anticipate it will be.
Yeah, we certainly do hope so.
Okay. Maybe as a small follow-up on the CapEx plans for Lippulaiva. Can you comment a bit on the total CapEx that you envision for the project? That seems to be still be open, at least when I look at the Q4 filing?
We are planning to give more guidance on that and more clarity, call it next quarter, due to the fact that we are nearing the point where we know all the details about the residentials and other bits and pieces. It would not be proper before that to give you a very, very rough estimate. Bear with us another quarter, and you will have more details.
Yeah. I think I'll just add on to that. As Eero said, in Q1, we should be able to provide that detail. We have made progress, as mentioned, on six of the eight, but we're still sorting out the last two, which will obviously have an impact to move the needle on that. Stand by, and we will give you that detail in Q1.
Okay. Last question from my side. I appreciate that obviously the waivers impact was very limited in 2020 when you really compare with Citycon compared to your peers. What indication can you give, for example, for 2021? Can I put in on top of my figures, let's say a couple of million impact, assuming you indeed follow this IFRS 16?
I'm sorry. When you say waivers, you mean like rent discounts provided or?
Oh, yes. Indeed.
Again, I would point out, we did give some rent discounts in Q2 at the kind of worst point or the bottom of the pandemic, if you will. Since then, we have not given any, and we are not.
Okay. Fine.
We are not underwriting any moving forward, so.
Yeah. Therefore, just technically the same sort of discounts apply in accounting because we needed to do the straight lining. That's probably a fair assumption.
Okay. Yeah, it's probably very limited. Okay, that's it from my side then.
Great. Thank you.
Thanks.
Thank you. Once again, if you do wish to ask a question, please press zero on your telephone keypad now. Our next question comes from the line of Sun, Allison from Green Street. Please go ahead. Your line is open.
Hi. Good morning, gentlemen. Three questions from my side. Question number one is about your Swedish asset disposal. It's a great sell, but can you maybe just give us more additional color, like how much it is above the book value, and what's the reason for this disposal? Is it because you want to do the asset management or you see better returns elsewhere? The second question is about the non-core asset disposal you just mentioned. Can I ask, what's the criteria for making those disposal candidates, if there's any? The last question is a more general one on the capital allocation. What's your priorities right now? Is that deleveraging or I understand you have cut down your development pipeline in the first half last year, but still, compared with the total asset, it's still quite sizable. What do you think on that front?
Are you going to keep cutting or actually start to looking for opportunistic acquisitions, opportunities in the future? Thank you.
Okay. Hopefully, I can remember your questions now. You're testing my memory very early in the morning. First question was.
Sorry.
Why did we sell the three assets in Sweden?
Yeah.
Yeah.
More so if it's above book value, by how much?
Yeah. These were deemed non-core assets. They're great assets. There's nothing wrong with them. I think Niam has picked up some good assets. However, they're smaller, and when you think about our criteria for how we think about our portfolio, we want it to be a direct connection to transportation, preferably train. We want it to be in the heart of the city that we operate in. Excuse me, and we want some scale and the ability for further densification. I think these assets probably missed the mark as it relates to the size because they were smaller. Frankly, as we look at our portfolio and we look at our densification opportunities, I think if you were to compare this to, say, Liljeholmen, which is also in the South side of Stockholm. Liljeholmen is much larger scale.
There's much kind of bigger bang for our buck, if you will, in terms of the development opportunity there and the densification. As we prioritize our pipeline, that kind of becomes one of the benchmarks we use when we think about whether we want to sell an asset or not. Did that answer your question?
Yeah. That helps. If you can give any more details on the Swedish asset disposal. I know you mentioned the yield is like 5.7%, but how much is above the book value? If you can give us that detail.
The book value was a bit of a moving target because these assets actually saw a value increase from Q3- Q4. I think it's because there was some transparency as it relates to pricing because we had multiple offers for this portfolio. I would say multiple offers that were above our book value. It depends on if you want to say what was the book value, comparing it to Q3 or to Q4. We've tended to just say it's above our book value because it was kind of fluctuating. Whichever metric you use, the pricing was still above that value.
Okay. Got you. Maybe in terms of asset allocation, what's your priority right now?
Yeah.
Versus the development pipeline?
Again, our immediate priority is getting these building rights, which doesn't require much in the way of CapEx. That creates EUR 200 million of added value. Well, I guess some small portion of that is now on our books. EUR 25 million or something like that has now been recognized. Again, there's tremendous value creation there without a significant CapEx spend before we actually execute on the development. I think if you were to use Lippulaiva as an example, as we look at each of these development opportunities, we will make the determination based upon balance sheet and other considerations, whether we want to develop these ourselves or whether we want to sell the building rights or whether we want to JV. At Lippulaiva, we've made a decision to have some combination of those choices.
We've sold two of the building rights, and we're developing four of the building rights ourselves. It's going to be kind of as we go and as we continue to make progress on our balance sheet, we'll make the determination on what we want to do. We have been approached by numerous operators as well as developers who are interested in potential JVs with us in a number of assets that we are working on right now. I think there will clearly be some instances where that makes sense for us, where we contribute basically the building rights and the land, and they bring capital to the table. I think that will make sense for us in a number of assets. We are in fact exploring that in a number of those assets.
Yeah. Okay, got it. Thank you very much.
Great. Thank you.
Thank you. We have a follow-up question from Niko Levikari from ABN AMRO. Please go ahead, your line is open.
Yeah. Hi, just a small follow-up regarding the scrip dividend. Have you received any indication from your largest shareholders that they will be taking part in the scrip dividend, i.e., taking the shares instead of the cash once this becomes available? Just that is it.
It's a bit early to go into that, but we certainly hope so that that would be the case.
The only thing I would add to that is.
Okay.
They sit on our Board, and the Board has approved this. You can make whatever determination you want to make with that, but you can ask them.
Okay. Thank you.
Thank you. We have no more questions from the line. I will hand it back to our speakers.
Thank you for all the questions. If there are any further questions, please feel free to contact myself or Eero. We're happy to answer any of the questions you potentially might have. Thank you also for attending today's call, and have a great day, everyone.
Thank you.