Lumo Kodit Oyj

Good morning, ladies and gentlemen, and welcome to Kojamo's Q3 results webcast. Today's presenters will be Jani Nieminen, CEO, and Erkielt, CFO. And my name is Maija Hongas, and I'm manager of investor relations here at Kojamo. After today's presentation, we will have some time for questions. First, we will be taking questions from the conference call line, and after that, from the chat. But let's get started. Please, Jani.

Thank you, Maija, and good morning. on my side as well and welcome to get some color on what's been going on this year. In a big picture I would put it in a few words in such a manner that the impact of COVID-19 has been limited and in Finland the situation is relatively good compared to many other countries. All our essential operations have been running in a normal manner, and the construction projects are proceeding as planned. According to the estimates, urbanization will continue, and that creates, of course, demand for new homes in the biggest cities. We have a really strong pipeline, and we are well in line with our growth strategy. Moving forward to the operating environment, of course, the COVID-19 pandemic has contracted the Finnish economy, but I would say less than in most European economies. Of course, Finland is a small export-driven country, and difficulties in other European countries and other countries as well would have an impact towards the Finnish export economy. On the housing market, it seems that the impact of COVID-19 will be temporary and urbanization will continue as I provided the information. So actually what it means is that the population growth forecast in the biggest cities creates a demand for new homes. Annually, roughly 35,000 apartments should be completed in these biggest cities on an annual basis. We have seen that during the last couple of years, the number of new building permits has been declining, and it seems that COVID-19 pandemic has accelerated that phenomena. So, according to the latest estimates, only 28,000 apartments will be started here in Finland this year. And on the other hand, if we keep in mind that urbanization creates a lot of demand, it seems that even though this year there has been temporarily a lot of supply in the market because of a lot of completed new projects has been there. On the other hand, 2021, 2022, there will be less completed apartments, and it seems that the supply will not meet the annual demand for the urbanization and the demand there. We see that some of the construction companies are facing challenges in order to get financing for owner-occupied projects. So even if the market has been challenging, there will be demand, a long-term demand, And there are at the moment no new estimates concerning the housing prices or rents. But on the other hand, I see that these existing estimates seem still being valid. So positive increases both on rents and housing prices in the biggest cities, especially in Helsinki region. Of course, as I said, we see that Urbanization will continue as we combine urbanization and the development of household sizing, actually meaning the growing number of one- and two-person households. That is the main driver creating demand for new homes in the biggest cities. And today, we have the official data showing that already in Helsinki, Tampere, and Turku, more households live in rental apartments actually than in owner-occupied homes. That's a global phenomenon. Rental homes are popular in the biggest cities. On the other hand, of course, people seem to value the high quality micro location along with the public transportation. And there has been changes in people's preferences Customers are choosing rental apartments because of the freedom. They don't want to tie themselves with owner-occupied homes and housing loans, and they're choosing rental apartments along with the public transportation and good services. Of course, the pandemic had an impact towards the owner-occupied housing market, but it seems that after the summer holiday, there has been some positive signs and housing trade has picked up a bit of speed. But on the other hand, we see that in the market, there is a bit less homes for sale. And typically, it seems that As the consumer confidence goes down and the uncertainty increases, people tend to postpone decisions making buying homes and they tend to increase the activities towards rental homes. In the big picture, of course, on the lower right-hand side, we noticed that Helsinki, Turku and Tampere, as I said, more households in rental apartments today than in owner-occupied homes. On the other hand, the portion of households living in rental apartments has been growing in all the biggest cities. So, I mean, in all the focus areas where our company is operating. Most of the households living in rental apartments in Helsinki, Turku and Tampere region are our main focus areas. Today, more than 73% of the housing assets located in Helsinki region, and if we combine Helsinki region, Turku and Tampere regions, more than 87% today of our assets are located in these three main growth areas. Of course, we saw that during COVID-19, especially during H1, there was more supply in the market and less demand. We knew already that a lot of construction projects will be completed to the market this year. We saw that during H1, for example, here in Helsinki region, quite many apartments used for, for example, Airbnb business were converted to longer rental business by individuals. And so actually what it means that the impact was the biggest here in Helsinki region towards the occupancy and the supply. On the other hand, we have seen that already starting from July, we had a really high number of new tenant agreements and we've been on a really good level both August and September and October. So, I would say that towards the occupancy, the biggest hit was during May and July, and now, as those new tenant agreements are becoming to provide money as people are moving in, that has a positive impact towards the occupancy. Here are the key figures and still a really solid year, providing profitable growth. If we first take a look at the total revenue, of course, the growth is combination of new completed apartments and like for like growth. Like-for-like growth at the end of Q3 was 1.7%, and inside there it's good to note that if we combine the positive impact of rents and water charges, that's 2.4%, so actually the occupancy impact was negative 0.7%. Both the rental income and FFO was increasing more than the total revenue so a really solid profitable growth we've been able to operate quite cost efficient of course we have the benefit of mild weather last winter but overall in the big picture our people are doing extremely good work We have a good amount of gross investments, €264 million. There, of course, the biggest portion is new development projects, a bit more than €229 million, acquisitions, roughly €8 million, and then modernization investments, €27 million. profit excluding changes in fair values, 124 million euros, three percent better than last year, and then we received a net gain in fair values of 74.1 million euros, providing profit before taxes, 198 million euros. We have a growth strategy and at the moment we do have a record high number of new apartments under construction. This year we have already completed 340 apartments. We have started the construction of more than 1500 apartments. And at the end of Q3, we had a bit more than 2,500 apartments under construction, all here in Helsinki region. And I would note that, of course, after Q3, we already provided information of starting two projects here in Helsinki region, providing additional 234 apartments. And these two projects are outside our binding agreements with construction companies. So a really solid, strong project pipeline. For us, it's really important that we are able to grow using multiple sources. So we are creating projects based on our own land bank. We are buying new development projects from construction companies. In those cases, we are buying both the land and the project from the construction companies. then we have the capability of converting premises into apartments, like the Metropolia case. And then, of course, if we find suitable acquisition targets, we are able and ready to move fast. At the moment, as I mentioned, all construction projects located in Helsinki region, all the metropolitan properties that the zoning process is proceeding, located in city center Helsinki. I would say really high quality micro locations, and of course, we are quite happy with these investments providing the net initial yield of four or above four percent. It's good to know that that the amount of new completed apartments will be growing starting next year, providing more than 1300 completed apartments, and that of course will be visible in our growth. Here in Koyamo, we believe that LUMO is providing special customer experience providing easy and effortless living and a lot of different services the net net internet business i would i mean online selling has still been growing Roughly half of the new customers are coming from online store. Good to know that at the same time we've been combining so-called old web store and Luma.fi pages, so now customers really have an easy access. And as we combine these two features, it seems that we've been able to increase the number of tenant agreements done by our own people as well. Next month we will have our first investor day and we will provide more color on our digital roadmap. This year we've been also working and putting a lot of effort in creating our sustainability program and that will be published December the 2nd. And of course, we are really pleased that EPRA recognized both our financial statements and sustainability report. At this point, I would ask Erik to continue and provide more detailed information. Thank you.

Thank you, Jooni, and good morning, everybody, from my side as well. On page 15, the total revenue growth was 2.3%, and in euro-wise, 6.5 million euros, and like-for-like growth, 1.7%, contributed approximately 4.3%. 5 million euros for that growth, and as Jani mentioned, the impact of rent increases and water charges was positive for life-for-life growth, 2.4%, and occupancy rate a negative 0.7%. And the remaining part of the growth, 2 million euros, came as a net of completed apartments, disposals and acquisitions. We showed 74.1 million euros profit on fair value investment properties, and two-thirds of that came through thanks to the ending restrictions of apartments, and one-third generated by the development gain. So, we are well on track, providing approximately 20 percent development gain when completing these ongoing developments. The profit before taxes excluding value changes grow 3.1 million euros, net rental income contributed 6.6 million euros, SGA expenses slightly above from the corresponding period, 0.7 million euros, and finance expenses 2.3 million euros more than in the corresponding period, given the fact that the loan portfolio was much higher than in the corresponding period. Page 16, net rental income growth 3.5%, 6.6 million euros. Total revenue growth was 6.5 million euros. Maintenance expenses 0.9 million euros less than in corresponding period and repairs 0.8 million euros higher level than in corresponding period. And maintenance expenses, there was actually two different things behind those figures. One was that, as Jani mentioned, the mild weather in the beginning of this year, that contributed 2 million euros savings in maintenance expenses. And what we've seen during the COVID-19 is that people are spending actually more time at home, remote working and such. So, water expenses was 0.1%. 8 million euros higher than in corresponding period, and cleaning was 0.7 million euros higher. Repairs was slightly higher than in corresponding period, given the fact that when COVID-19 eased somewhat, we started some additional repair projects. NOI margin was in Q3, 71.5, and in year-to-date, 67.6%. And FFO, healthy growth, 7% there, €7.4 million, net rental income contributed €6.6 million, STA expensive on a negative side, €7.7 million, finance sales altogether. 3.5 million euros, and gas tax savings, actually, 3.7 million euros, given the fact that during this year, we haven't made any major disposal, and in the corresponding period, there was quite sizable disposal, leading to paid taxes slightly elevated in the corresponding period. And other operating income expenses contributed 1.4 million euros for the FFO. Page 17, financial occupancy rate flat compared to H1, and as Jani explained, now we have been able to make more lease agreements, and they are coming into force in slight delay, so the occupancy rate is slightly improving, given the higher amount of new lease agreements. Tenant turnover slightly elevated, most likely given the fact that people are slightly moving more given the COVID-19. Page 18, gross investments 264 million euros, mainly development investments 236.2 million euros, acquisitions 7.7 million euros and Modernization investments, 20.1 million euros. And modernized investments and repairs put together, 0.7 million euros less than in corresponding period. Repairs, 0.8 million euros higher. And modernization investment, 1.5 million euros less than in corresponding period. Going forward, we expect modernisation investments and repairs put together to be between 60 and 70 million euros, and this year we are heading in the midpoint, close to midpoint of that range. Page 19, fair value investment properties, 6.6 billion euros. Main contributors, their developments and acquisitions, as well as profit on fair value investment properties. At the end of OQ3, we still had 2,529 apartments where we have restrictions regarding valuation, and those restrictions will end gradually by the end of 2024. and that will provide us somewhere between 180 to 200 million euros value uplift. 40% of that will come through in 2024, a little more than 10% remaining part of this year, and other is split quite evenly for years 2021, 22 and 23. We had only 326 apartments at the end of Q3, where we have restrictions regarding and those restrictions will end by the end of this year. During this year, we actually have participated in two processes to acquire your midsize portfolios, one before the summer break, and we concluded that we are not willing to pay the price that was finally asked, and we dropped out from that process. Funny enough, that transaction hasn't been closed yet, so we don't know the exact outcome. And lately, we actually participated in another one, mid-size portfolio transaction, and just recently, we decided to drop out there as well, given the fact that the indications are that that transaction will be finalized in mid-three yield, and we were not ready to pay those prices. So, most likely, we are not able to do make property transactions this year that will have an impact for Topline, given these couple of transactions where the prices were so high that we were not ready to pay those prices. Page 20, on the left-hand side column, 2,532 apartments covering, we have already invested 326 million euros, and to complete those developments, little less than 300 million euros to be invested. 1,062 apartments where we have binding agreements with construction companies. There we have fixed-priced agreements, and that will take a little more than 233 million euros to build those apartments. And on the right-hand side, our land bank, if you like, so there we have pure land, then there we have some plots where we have existing residential buildings that will be demolished and then build a new one, and then this metropolia case, as Jani mentioned. All of these plots and real estate development reserve are located in Helsinki region, and we estimated that 320 to 350 million euros investments this year. Loan-to-value, page 21, and equity ratio well in line with our targets. Page 22, equity per share and especially EBRA NAV per share improved nicely, growth from the corresponding period more than 30%, and we are now trading roughly with the 13% premium against EBRA NAV. Page 23, we have quite strong financial key figures. Average interest rate, including the cost of derivatives, 1.8%, and hedging ratio plus 89 at the end of Q3. Average interest rate fixed period and average loan maturity, close to five years. And total loan portfolio, a little more than three billion euros, 55% of those are bonds. and outstanding commercial papers, 50 million euros. We were quite cash rich, so we wanted to make, given the strong development pipeline, so we wanted to adapt EuroPoint market before the summer break, and we still have money left of that transaction, if you like, so almost 500 million euros cash and financial assets. And on top of that, we have 300 million euros committed unused credit lines in place. Page 24, strategic KPIs, annual growth, year-to-date 2.3, where we have a strategic target to be between 4 and 5 percent. And the like-for-like growth here this year, 1.7, as Jani mentioned. In short term, we expect rent increases to be above and water charges increases to be above 2%, but given the fact that how like for like calculation is made, of course, the occupancy rate will have a negative impact in short term there. but in mid to long term we expect the like-for-like growth to be between 2.1 and 2.5 percent and then we take into account the ongoing developments and especially those that will be complete in 2021 almost 400 apartments And they will, of course, contribute to revenue growth and will take our revenue growth on or above the strategic target, what we have here on page 24. Annual investments, nicely in line with the target already. FFO total revenue, 39.6, well above our strategic target, 38.6. a loan-to-value equity ratio in line with our target, and net promoter score strong 36%. Page 26, our outlook. So we are one of the few companies that actually have kept giving outlook during this whole COVID-19 period. And we still are doing that. And we kept our outlook unchanged. And it's good to note, of course, that this outlook means that our total revenue will increase, and that's quite rare at this time as well. So we are very proud that we are able to increase our top line and keep our outlook unchanged. Given the fact that it's unlikely that we are able to find a portfolio to be acquired that will have an impact for the top line this year, given that we are already at this point of the year, so most likely we are going to hit the lower end of this top line. range. FFO guidance, if we take the midpoint of that range, so there we have a couple of assumptions to hit that midpoint. One is that the weather is going to be so-called normal weather, and the remaining part of this year, that repair projects will proceed as planned. SG expenses will be on the same level as the corresponding period. and no disposal, meaning that no additional cash taxes to be paid, and no additional financial arrangement this year as not needed, given the sizable cash what we at the moment still have. And dividend policy, no change is there, so 60% of FFO to be paid dividend. So at this point, I hand it back to Jani. Thank you, Erik.