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Allan Saunderson is managing editor of Property Finance Europe and a contributor to GlobeSt.com.

HELSINKI, FINLAND-Shopping center developer and investor Citycon saw first half net rental income from like-for-like properties grow 2.1% despite challenging market conditions, while occupancy rates decreased but aggregate sales held at the same year-ago level. It posted a pre-tax loss of €29 million for the first half of this year, including a €59 million depreciation across the assets.

However the group, majority-owned by two Finnish insurance institutions and the Israeli listed firm Gazit Globe through its Gazit Europe unit, held to its forecast of a rise in the full-year direct result and net cash from operating activities.

First half turnover rose by 3.3% to €91.5 million due to growth in leasable area, particularly at Rocca al Mare, a re-development in the Lithuanian capital of Tallinn, plus other retail developments – though vacancies rose. Earnings per share came in at a loss of €0.11, narrower than the loss in 1H08 of €0.21. Fair value depreciations had a significant impact on earnings per share, while occupancy dipped to 94.8% from 95.7%. Net cash reached €0.19, up from €0.12 in June 2008. The group’s balance sheet rose slightly to €2.1bn, and it had liquidity at end-June of €243m, including unused debt facilities and cash. However, the equity ratio fell to 36.2% from 42.1% in June 2008, and compared to its long term target of 40%.

Noting challenging market conditions, Citycon CEO Petri Olkinuora said occupancy rates fell due to declining demand but aggregate sales held at the first-half 2008 level. “The financial position remained good and the decrease in financial expenses continued as a result of lower interest rates,” he added.

Looking forward Citycon will focus on value-added activities while cautiously monitoring the market for potential acquisitions and continuing to divest non-core properties to improve the portfolio and strengthen the financial position. Citycon is also considering alternative property financing sources.

“The company expects its full-year direct result and net cash from operating activities to increase and net rental income to remain stable as a result of redevelopment projects coming online, active shopping centre management as well as lower interest rates,” Citycon said in a statement.

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