Lumo Kodit Oyj

Good morning, ladies and gentlemen, and welcome to Kojamo's Half-Year Reports news conference. My name is Maija Hongas, and I'm manager of investor relations here at Kojamo. Today's presenters are familiar faces, Jani Nieminen, our CEO, and Erik Hjelt, CFO. After the presentation, we will have some time for questions, and first, we will be taking the questions from the conference call line. After that, we will answer questions from the chat. But without further ado, let's get started. The stage is yours, Jani.

Thank you, and good morning, everybody. As we start, in order to provide some color on our H1 figures, it's easy to start by saying that the first six months has been in line with our expectations. COVID-19 has had an impact to urbanization and rental apartments market. That means that our financial occupancy is temporarily lower, and our like-for-like growth has been moderate. On the other hand, we see that the biggest trends for long-term demand for rental apartments are still valid. Urbanization will continue, as will the number of small households. At the same time during last year a couple of years and this year we have seen a lot of foreign interest towards portfolio deals and a lot of deals have been now completed providing information to valuators and we have seen yield compression in the market reflecting our fair values as well. In During the summer as expected we saw positive signs meaning a high number of new tenant agreements in July and as estimated it seems that students are moving towards the university cities and on the other hand we have seen that There's a lack of employees in service businesses, especially here in Helsinki region, and that will mean that urbanization will continue. Moving forward to the topics more detailed, we look at the operational environment, The estimates are that the easing of pandemic is expected to have a positive impact to Finnish economic growth. The vaccination coverage is already quite good here in Finland and proceeding well. Yesterday, the levels were that 69.3% had already received the first vaccination and 43.5% the second vaccination. The number of residential startups has been a bit higher than expected, seems to be high, but not meeting the highest volume from prior years. What we saw during the summer has been a rapid and quite significant increase concerning construction costs, especially timber and steel, and that may have an impact if to be continued towards the volumes. In a market we see that all the estimates are that rents are still increasing as well the housing prices. A lot of homes have been bought and of course we see as these estimates on the table on the right hand side a lot of differences between areas and micro locations concerning housing prices. In June we received a new information concerning forecast and scenarios concerning population growth after pandemic, and according to all three scenarios provided by MDI, urbanization is expected to continue, especially here in Helsinki region. So, big cities will be growing during the next couple of decades. That combined with the fact that we still have an increasing number of small households, meaning one and two percent households changes in values concerning owning things, there are these long-term trends in place for demand of new rental homes in the biggest cities. And as I said, we have seen transactions concerning portfolio deals this year providing data and impacting values as a result of yield compression provided in our figures as well. It seems that the same trend still continues so in all the big cities the number of households living in rental apartments is increasing and as prior in cities like Helsinki, Turku and Tampere, actually more households live in rental apartments than in owner occupied apartments. As I said, COVID-19 has had an impact and it seems that It has created a point of discontinuity to urbanization, especially here in Helsinki region. But on the other hand, as I said, all the scenarios provide the same information. As pandemic is easing off, urbanization will continue and may even pick up speed. Housing production seems to be remaining in fairly high level, not reaching the highest values. What we see is the number of build-to-sell projects increasing and the increasing of construction cost of course may end up providing a little less production for rental apartments and on the other hand, increasing the number of build-to-sell projects And my opinion is that most probably this construction cost increase will settle down at some point. If it would keep on going, that would have an impact. to overall volumes providing built-to-sell projects as well. But as all the estimates are providing the same data, urbanization will continue, the housing production volumes are focusing towards the biggest cities and towards Helsinki region. Providing some color on our H1 figures, We've been able to create growth throughout the pandemic. Total revenue is still growing 1.8%. Of course, it's a combination of two things. One is the completion of new apartments and the other part is our capability to create like-for-like growth. Erik will go deeper in the like-for-like figures. It's important to notice that we are still able to increase our rents. The like-for-like rental growth combined with water charges has been 2.1% and we expected mid to long term that we are still creating like-for-like growth between 2.1 to 2.5% a year. On the other hand, comparing our net rental income and FFO against the comparison year to pick up some topics there. Of course, we have to keep in mind still that last winter was cold and we had a lot of snow. COVID-19 has created a situation where we have been increasing the intensity of cleaning. So these two aspects have increased the amount of maintenance cost. And on the other hand, as we are growing and investing, the loan portfolio has been increasing as well. The fair value of investment properties at the moment, 7.5 billion euros now, providing data that we are growing there's a strong growth combined with a positive change in fair values as a reflection of yield compression. Gross investments 176.5 million euros are mainly new development projects. Profit excluding changes in fair value increased 4.5%, and of course, combined this result with the positive impact concerning fair value of investment properties, €466 million provided a result of profit before taxes close to €550 million. So, in the big picture, no surprises in the figures, we are still proceeding as planned. Still the strategy is to grow our capability is combine different approaches We have the strong capability to create new development projects either based on our own land or by buying projects from construction companies. The second part of the growth is still that we are able to convert buildings into our apartments. And then the remaining aspect is that we are following the market closely, buying portfolios if we find something matching our parameters. During H1, we've been completing 441 apartments and starting 610 apartments. At the moment, the pipeline is really strong. We have more than roughly 2,800 apartments under construction. All the projects located here in Helsinki region meeting our criteria. high-quality micro-locations along with public transportation and services, all the projects having fixed prices, so we don't carry the risk of increasing construction costs, all the projects providing the net initial yield of 4%, roughly, or above 4%. And actually, as we've been providing information, we are budgeting in a development gain of roughly 20%, as it now has been we've been reaching numbers above 20 percent. Some slight changes concerning our estimates of completion of projects actually meaning that some of the binding commitments with construction companies, there's been timing issues concerning zoning or municipality decision making, so these projects may always end up to be completed a month or a couple of months prior or delayed a couple of months. But we do have a really solid and strong pipeline towards the future. A couple of words concerning Metropolia properties, which we have and what we see as a huge potential for us providing 1,000 apartments in the city center Helsinki. Now the zoning has been completed concerning a couple of locations like Abrahaminkatu and Agrikalankatu, and our estimate is that we are able to start those projects later this year or in the beginning of next year. then a couple of the remaining projects, mainly the zoning, should be completed by the end of this year. I guess one of the smallest projects, Sofia Lehdonkatu, it seems that the zoning will be completed next year. That property is actually connected to the property besides owned by the city of Helsinki and there are discussions on how to proceed with the zoning. A couple of words concerning what's been happening in the market service-wise and in a customer base. We are still proceeding with our capabilities providing services and digital services. We are really happy that more than 70% of our customers are using myeloma services and actually the net promoter score concerning digital services has been really high. The last figures have been 67. On the other hand, we've been creating a couple of new services and providing now a bigger capacity concerning broadband services. Then what's been happening in the market, we've seen a point of discontinuity concerning urbanization. On the other hand, if we look deeper, we see that customers between 25 and 34 years have been moving more often than usually and then the number of customers below 25 actually we've been making a bit more tenant agreements here in Helsinki region but on the other hand the tenant turnover has been abnormal high there probably because of people renting the apartments in order to start studying, then moving back to the parents and not being able to decide what to do. Some of the single parent households are looking for more affordable solution moving towards the parts of capital region where apartments are cheaper. On the other hand, trying to find solutions outside Helsinki region. Now, we would ask Erik to join and provide more detailed data. Please, Erik.

Thank you, Joani, and good morning, everybody, from my side as well. So, page 13, total revenue, the growth there was 3.5 million euros, and like for like rental growth contributed point 4 million euros and then completed apartments around 3 million euros. And we completed 3,096 apartments during Q2 this year. Net rental income down by 0.4 million euros. Total revenue growth was 3.5 million euros as mentioned. So maintenance cost growth was 3.8 million euros and repairs was flat. So any maintenance cost increase was coming from actually from two sources. One was related to the weather. So heating and taking snow from one place to another increased the cost 2.7 million euros, especially during Q1. And then the second part is related to COVID-19, so people spending more time in their apartments, so that increases their cleaning costs and water costs in total around 800,000 euros. Page 14, profit before taxes. Of course, the bigger figure there is the profit on fair value on investment properties. So now the yield compression is really visible in our figures, 290 million euros during Q2 and 421 million euros in H1 and the yield compression compared to Q1 was 22 basis points and compared to Q4 2020 was 32 basis points. Ending restrictions, actually there was no ending restrictions during Q2, but the H1 figure is 12.5 million euros. Development gain, so we completed six projects during Q2 this year, development gain above 30 million euros, and as Jani mentioned, the development gain there was above this 20% on average, what we have anticipated. Modernization investments, of course, a negative figure. They are 4.9 million euros during H1. FFO, so down by 2.5 million euros. Net return on income, negative 0.4 as mentioned. SGA expenses, a positive figure, 0.9 million euros. There are some savings related to COVID-19. Finance expenses up 2.3 million euros mainly because of the bigger interest bearing liabilities by 160 million euros from a corresponding period and more than 300 million euros from the Q8 2020. And gas taxes growth was 0.4 million euros. Our financial occupancy rate, that was clearly impacted because of the third wave of COVID-19, so that is the main driver behind that declining financial occupancy rate. And the like-for-like rental growth was moderate during H1 as anticipated. And as Jani mentioned, the vaccination has proceeded here in Finland well, so almost 70% of the population has got their first shot. And the authorities have increased, they estimate what is the sufficient vaccination level. Previously they estimated that 70% is enough. Now the estimates are that the level should be somewhere between 80 and 90 percent. As estimated, the students are the first movers, so many universities here in Finland have informed that they are going to increase the portion of in-person studies, and that has a clear impact for demand. What comes to the service sector, so there's a message from service companies that there's a shortage of workforce there. So we think that that actually tells two stories. One is that there's growing demand towards services, so people are willing to spend more money for services. And those people who lost their jobs and moved outside Helsinki region used to work for non-service sector has not really returned in a big scale yet. So this remains to be seen when this really happened. Most likely the restrictions will be removed and on back of sufficient vaccination level and that this of course helped but it has slightly postponed. It's good to note that in July and first half of August, we have made more new lease agreements than we made last year during July and August. Tenant turnover slightly elevated. We have noted that especially people under the age of 25 and one-parent families are rotating. pretty much explains the elevated tenant turnover. Rent receivables flat, so only 1.3% of total revenue. Page 16, our like-for-like rental income. So on the positive side, rent increases and increases water charges we've been increasing the rents pretty much in a normal manner contributing 2.1 percent for for like for like rental growth and the the occupancy rate has a impact for a negative impact for like for like rental growth so negative 1.7 percent but 0.2% other impacts, so it's a portion of several small items, slightly lower capacity. We have some commercial space, so in those spaces sauna fees and car parking fees. Now saunas are open and people are traveling more, so that means that We've seen that sauna fees and car parking fees are increasing. So in total, like for like rental income growth, positive 0.2%. Page 17, gross investments, by far the biggest portion is our development investments, almost 169 million euros, modernization investments, 4.2%. 9 million euros and capitalized borrowing cost 2.8 million euros. Modernization investment and repairs, so repairs flat and modernization investments done by 5.7 million euros mainly due to the timing of some projects. So, in the corresponding period, we had a couple of larger projects, and during H1 this year, we haven't started a bigger organization project. In total, of course, we keep our properties in good condition as earlier. Page 18, fair value of investment properties, so main drivers of course are investments and changing fair value of investment properties, as mentioned. Number of apartments by valuation class, so this 2180... includes 2123 apartments where we still have restrictions regarding the valuation and those restrictions will gradually end by 2024 and contribute uplifted values between 140 and 160 million euros in total. Page 19, shown left-hand side column, apartments and the construction, 2,793 apartments, a little more than 400 million euros already invested, and a little more than 2,050 million euros to be invested in order to complete these ongoing developments. In the mid-column, finding lease agreements, binding agreements at construction companies apartments 829 and the investment cost there will be 171 million euros and then metropolia case providing us roughly 1000 apartments and others so really land bank poor land and plots and existing building providing roughly 1400 apartments We estimate that investments in development project this year is going to be between 370 and 420 million euros. And it's good to note that all these projects are located in Helsinki region. Page 20, our equity ratio and loan-to-value figures strong and well in line with our strategy targets to have equity ratio above 40 and loan-to-value below 50. Page 21, EPRA NRV growth 18.1%, so 1.86 euros per share. Page 22, we have strong financial key figures, so average interest rate, fixed interest rate period and average loan maturity slightly increased, 4.7 and 4.6 years, and average interest rate down to 1.8. 62% of total loan portfolio of 3 billion euros already from bond market, a hedging ratio at the end of H1 92% and we are quite cash rich, so 435 million euros cash and cash equivalents and financial assets. Credit lines 300 million euros committed unused. In May we issued our inaugural green bond, AGS maturity 350 million euros, carrying a coupon of 0.875 and the proceedings from that green bond will be used for to finance and or refinance so-called next to zero energy buildings. Page 23, our strategy KPIs, couple notes there. So, the FFO against total revenue 35.6. It's good to note that because of the IFRIC 21, the whole year's property taxes are included or booked in Q1. and the portion of Q3 and Q4 is 5.5 million euros, and if you calculate those into this equation, so the FFO against total revenue would be 38.4. Net promoter score 22. It's quite an interesting situation actually, because all our customer satisfaction KPIs have improved, but the recommendation part of the question has just came down. And we have looked at this figure and what might be the reason behind this decline. and we think that the reason is simply COVID-19. So people are spending more time in their apartments and they are sick and tired for COVID-19 and that is reflected in this recommendation part. And we noted that this actually goes for all industries internationally. So, whether it's hotel, airline, car rental or whatever industry, net promoter scores seem to have come down during COVID-19. It's funny actually that this has been the case even for those industries that for services people are not able to use because of COVID-19, and their recommendation figures came down. But that's how it is. So we think that it's important to keep up our work, and after the COVID-19 this figure will be improving. Page 25, our outlook slightly specified. So now we estimate that the top line growth will be between 2 and 4%. And this specification of top line reflects the uncertainties related to fourth phase of COVID-19 and especially Delta variant. And as mentioned, so the authorities have increased, they estimate what is the sufficient vaccination level, previously they estimated that 70% is enough, now they estimate that the sufficient vaccination level is somewhere between 80 and 90, and of course to remove all remaining restrictions regarding COVID-19 requires that vaccination level will be sufficient and we still estimate that on back of this sufficient vaccination level and the migration will gradually be there again and the first sign of that is already visible for the amount of new lease agreements made in during July and first half of August so the student has already started to make lease agreements and some increases in other part of the market as So the specification is related to the slightly postponed recovery from COVID-19. And we specified our FFO guidance as well. So now we estimate that the FFO will be between 150 and 158 million euros. And the biggest impact for H2, FF4 will be from the weather. So whether it's going to be cold or not cold, whether we are going to get snow in that early stage, that plays a role there, of course. Repair projects and the timing plays a role there for FF4 during H2 this year. And of course, total revenue growth plays a role there as well. We anticipated no additional financing to be made in the second half of this year, given the strong cash position of the company, and we estimate that SGA expenses is going to be the same level as last year. Page 26, no changes in dividend policy, so 60% FFO to be paid dividend, providing that equity ratio above 40%, and that is the case. And at this stage, I will hand it back to Jani.

Thank you, Erik. a couple words to wrap this up before the Q&A. I think one of the big messages is that we are still proceeding in line with our strategy, well in line actually. We do have a really strong project portfolio providing future growth and as we see the impact of COVID-19 towards urbanization as temporary, we've been all the time able to increase the rent levels, and we do still believe that we are able to increase our rent levels, and occupancy will recover as urbanization will continue as expected. So, of course, some uncertainties because of Delta variant and the fourth wave of COVID-19, but on the other hand, as I said, it seems that the vaccination levels are proceeding well and now we already have a good level of vaccination. We have seen positive signs like a high number of new tenant agreements in July and the first part of August. So actually no big surprises concerning H1 and we see our future as positive, but thank you.

Thank you, Jani and Erik. And now we have time for the questions. And first, we will be taking the questions from the conference call line. So, moderator, please, we are ready.

Thank you. If you wish to ask a question, please dial 01 on your telephone keypad now to enter the queue. Once your name is announced, you can ask your question. If you find that's answered before it's your turn to speak, you can dial 02 to cancel. Our first question comes from the line of Antti Kiseniemi of SEB. Please go ahead. Your line is open.

Hi, guys, and thanks for taking my questions. I have a couple of them, so I will take them one by one, if that's okay. First, starting with the guidance. I mean, it was slightly cut. Could you elaborate a bit on the reasons behind it? Is it mostly due to the fact that Finland is still in partial lockdown mode and the sufficient vaccination levels have been raised? Or are you seeing that your students are moving in to the big cities slower than you expected? Or are there any effects from postponed projects or anything like this? So any caller would be helpful. Thanks.

Hi, Anssi. The specification is related to the COVID-19 situation. So, as mentioned, the authority has increased the amount, what they feel that is sufficient vaccination level. Previously, they say that 70% is enough. Now, because of the fourth wave and especially related to Delta variant, they estimate that 80 to 90% is sufficient. And of course, on the back of the sufficient vaccination level, the remaining light restrictions will be removed. And so that means that the opening of the economy, if you like, has slightly been postponed because of this COVID-19. So, this is the reason behind the specification. And as mentioned, we've already seen that students are moving. So, we estimated earlier that they are going to be the first movers, and that's something we've seen already. So, as Jani mentioned, the amount of new lease agreements during July and first half of August has been quite high. And we've seen that the first sign of inter-country migration as well and the positive signs are that of course it's not positive that service sector is complaining that they are shortage of working force but it's a positive in a sense that there seems to be growing demand for services and of course that means working needs working force so hopefully that that will create people moving back to Helsinki region, once they are sure that they have jobs. And that's related to COVID-19 and sufficient vaccination level as well. So, this is the background for specification.

Okay, thanks for that. Then on fair values, there was a yield compression, especially in the capital region. Was there a certain kind of portfolio the yields were?

taken down or is it widespread and also your compression happened also outside Helsinki region so any particular cities there thanks Jani here hi Anssi Erik can provide more detail color of course we have seen transactions made here in Finnish markets and all the transactions have been made with quite aggressive yields. They've been including properties in Helsinki region and other big cities as well. So, as we've been providing information prior, We have seen what's been happening in the market so have been the brokers and valuators and until now they've been feeling that there has been not enough data because those ongoing processes hadn't been completed but now several portfolio deals have been completed during the summer, and sufficient data. So, the yield compression came in mainly here in capital region, and a couple of bigger cities like Turku and Tampere.

Okay, thanks. Then on development gains, you highlighted that they have been above 20% that you basically use as some kind of a threshold or ambition level? Could you give us a little bit more details? Is it 21% or 29%? What's the right figure here?

It's closer to the later figures, so it's also about 25%.

Okay, thanks for that.

In addition to that, as we provided the information, we still have the same information to provide you that all our ongoing project and binding agreements are providing project with the net initial yield of rough 4% or above 4%. And now the valuation yield has seen a yield compression.

Okay, thanks for the clarification. Then the last theme is transactions. Any interesting portfolios out there? What is the current situation? And kind of the other part of the story, it's divestments. I mean, we have seen a lot of changes in the environment, especially coming tighter regulation and ambitions from European Union. Fit for 55 on energy efficiency and CO2 emissions, etc. Has this changed your view, how you look at the portfolio or how you would like to divest some of the, let's say, non-core assets? What's the word on that?

You included a couple of subjects there. First of all, to provide a piece of comment concerning accusations, it seems that there were several ongoing processes which were completed during the summer and as it seems that at least here in Finland everybody's intention is to create the world to be completed before the summer holidays and after the summer holidays new things start happening so mainly no new big processes were started just before the holiday season and of course we now estimate that some of the processes will come to the market and some opportunities will come to the market and we are following the market closely. If we find something appealing enough, we are already unable to move fast. Then on the other hand, what comes to the question of disposals and energy efficiency, we've been providing information and our new sustainability program If we think about that, we've been providing the information that we are able to carry out our sustainability targets without any extra investment. So the energy efficiency part has always been a part of investment decision making in our company. So we are well in line with our sustainability program and strategy.

OK, thank you for that. That's all for me. Thanks.

Thank you. Our next question comes from the line of Svante Korfos of Nordea. Please go ahead. Your line is open.

Thank you. Good morning, Svante from Nordea. I hope you can hear me. Yeah. Good. Yes, a couple of questions from me, getting back to the yield compression. Capital region declined 25 basis points from 3.76 to 3.51. And those reference deals, could you open a bit more? Is it a new apartments, a combination of new and old apartments? And how is the kind of adjustment made to your a bit older stock?

Most of the portfolios have been located around Helsinki, Helsinki region and a couple of other big cities as well. Mainly projects have been including properties built after 2010 or after 2000. most often including a couple of properties built prior to that. So, of course, we have been having this discussion with our valuation experts and the valuation is meeting our criteria in our portfolio. As there was yield compression, there were slight adjustments on the other hand towards the older housing stock. So, meaning properties, older than 15 years, so they have now a bigger burden because of the age of the building. So, it should be reflecting correctly our portfolio.

Okay, thank you. And on new apartments, are the yields still starting at three, or have you seen deals done at high twos?

The biggest transactions made this year have been either three or three and a really low figure.

Okay, thank you. Then the increasing construction costs, have they in any way affected or will they affect your 4% yield on cost assumption going forward, because I guess the rents do not, you cannot pass that increase on to the rents.

Yeah, thank you for that question. It's an important one. Of course, first important thing to note is that all the ongoing projects, all the binding agreements have been done with a fixed price. So there we have a good visibility of the pricing. Then what comes to possible new projects, probably there is an increase in construction costs in all those negotiations as this increase has been stepping in. On the other hand, it happened likewise a couple of years ago And even during that period of time, we were able to find projects meeting our criteria. So it may end up in a situation where we have to work a bit harder go through a bit more projects in order to find suitable projects for us. We may end up finding new approaches like we did a couple of years ago. So not negotiating one project at the time but asking on the other hand for example what are you able to provide us with 100 million euros or something like that. So I do believe that we are able to find new approaches and find projects for us. On the other hand, if this increase would continue, it may create a situation where construction companies actually end up having challenges and that may end up opening possibilities and potential for us. So, of course, we are following the market closely, but we are quite confident that we are able to proceed with our strategy.

Okay, thanks. And the development gains that you earlier talked about, 20% now closer to 30 than 20%, is it purely yield compression or is there any other factors playing in on that?

During the first half of this year, we completed six projects. And if you look at those projects, it's a combination of these two things. So yield compression, of course, plays a role, but it looked that those were quite, how would I say, nice projects. So it's a combination of these two things, what we've seen during the H1 this year.

Thanks. And Erik, perhaps a question to you. Will the lower yields affect the apartments under restrictions? Could you remind about that? There was a bit bad line when you talked about, but I think it was 140 and 160 million total left. But if the yield...

Correct, so 140 to 160 million euros, and we haven't recalculated any new values based on yield compression there.

Okay, so that's based on old assumptions. Okay, and then perhaps a question regarding the net promoter score declining. Do you have any feeling about, I mean, you increase your rent by sending a letter or email stating that the rent goes up by this much. Do you think that that could have an impact on the NPS score?

Of course, theoretically it could happen, but as Erik provided information, it's actually an unusual situation. So all the most important KPIs providing customer satisfaction data, they've been improving. So actually customers have been providing us data that they are satisfied. But at the same time, the NPS score has been coming down and as we've been digging this issue, we found an international study providing information that that has been actually happening throughout the world in different industries during COVID-19, that NPS scores have been coming down quite significantly. And so, in our eyes, it's more like people being spending more time in the apartments having worries about the current situation and so the stress levels have been higher and as people are spending more time at home they notice things that and noises from neighbors which they wouldn't here normally if they were working outside of the home, and this uncertainty probably has created the decrease of the net promoter score.

Okay, thanks a lot. That's all from me. Thank you.

Thank you. Our next question comes from the line of Andreas Tuomi of Green Street Advisors. Please go ahead, your line is open.

Good morning. I was just wondering, where do you expect occupancy trending by end of this year, just based on the leasing activity you're seeing in July and August already? And how does the leasing volumes in July and August of this year compare to the same period in 2019?

So the amount of new lease agreements made during July and first half of August this year was higher compared to last year's July and August. And those figures were higher than what we saw in 2019. So they are quite positive figures. We haven't really guided the occupancy rate for the whole year and of course it plays a big role how this COVID-19 goes from here and hopefully this positive trend will continue. So, that is going to play a role there. It's good to note that these new lease agreements, of course, contribute for occupancy rate with slight delay. So, those lease agreements made in July usually comes into the fourth August. So, that comes with a delay, that impact. So, we don't think that The relevant point is actually to try to calculate where the occupancy rate will land at the end of this year. The key point is that we are able to make new lease agreements and what is going to happen in the long run. And as discussed earlier, we think that after this COVID-19 thing goes away and we get rid of all these light restrictions that we still have, the migration will gradually a bigger speed and we've already seen the first sign of that and the things are going to normalize. All estimates are that the urbanization will go on at least with the same speed as before the COVID-19 and there are estimates that that could be even stronger after this COVID-19. So we think that these are the key factors when we look at the era after the COVID-19 and hopefully on back of this sufficient vaccination level whether it's 80 or 90 percent so we are closing that those figures actually quite fast.

And are you able to give an indication where the releasing spreads on the you know the contract that you're signing now versus the old rent levels?

On average, we've been able to make the new lease agreements on the same rent level as the expired one, or slightly above that.

Thanks very much. That's all from me.

Thank you. We have one further question in the queue, so just as a reminder to participants, if you do wish to ask a question, please dial 01 on your telephone keypads now. And the next question comes from the line of Mattias Rautima of Danske Bank. Please go ahead. Your line is open.

Yes, good morning. Mattias Rautima from Danske Bank. I still have two questions left from my side. So first one relates to the strategy. How do you choose to handle this short-term negative trend in the leasing market? And you don't report the occupancy rate for Q2. But if I calculate it correctly from the H1 figure, it says that your occupancy was down by over one percentage point in Q2, which is a weaker performance compared to your main competitor, Sato. Could you explain why the performance is so much different or have you chosen a different strategy?

Thank you for the question. Of course, on the other hand, I guess it's probably better to focus on providing information and discussions concerning our figures and not been focusing on other companies, but on a higher level to provide some information. If you do look at their figures, in my opinion, there's a slightly different approach and confidence concerning strategy. We've been able to increase the rents, we've been able to increase the total revenues, we do believe that we are well in line with our strategy, we are able to provide added value for our customers concerning the pricing and we do believe that COVID-19 has provided only a point of discontinuity concerning urbanization, so a temporary decrease concerning occupancy is only temporary and that will recover when and as the urbanization will continue.

Okay, thank you. That was helpful. And the second question relates to the yield requirements. So you said that there had been these pending deals that have now, these reference deals, and they have been now made and agreed. Does this valuation yield now reflect to the deals made in July? For example, this tallery deal, does it reflect that? And follow up here, the yield level is quite low already in Helsinki area. Do you see, what is your feeling when you look at the potential deals in the market? Is there more yield compression coming? How do you see it?

Well I think of course first of all we do believe that the valuation is always done properly and providing correct information and our outside expert has all the data available so they do have a good understanding of what's going on in Finland, and what kind of transactions have been made in our markets. So, the valuation should and is reflecting correctly the values of our properties. And these deals done have been including properties in Helsinki, in Helsinki surroundings as well, in other big cities like Turku and Tampere regions. It remains to be seen what will happen concerning future portfolio deals. We do see a lot of appetite towards the Finnish market, and I guess in a way it's good to keep in mind that even though we've now seen a yield compression here in Finland, it seems that still our yields here in Finland are really attractive compared to yield levels in other European countries like in Stockholm or Berlin. So that probably still provides a lot of international appetite towards the Finnish market.

Okay, thank you very much. That was all from my side.

Thank you. And there are no further questions from the phones at this time.

Thank you very much. Next, we have two questions from the chat. The first one goes, how are the yield valuation of the portfolio now comparing to prices in the private rental market in Helsinki?

I think there's been an increasing number of individuals owning a couple of apartments, renting them out and in a way that plays an important role providing supply in the market and they operate a bit differently they most often handle the apartments by themselves and they seem to be using leverage as well and owning one or two apartments using leverage it plays an important role for the investor to keep the apartment rented at all times and most probably it seems that they've been adjusting the price level instead of keeping the apartment vacant but on the other hand the latest statistics provide the information that actually the rent levels have been increasing in Helsinki region 0.9 percent so there are no decreases and concerning the valuation of apartments owned by individuals we don't have a color there They don't provide that kind of data. So I guess an individual owning the apartment remembers the price they paid for the apartment and then it remains to be seen what's the value if or when they will sell it.

Talking with the brokers, they estimate that the prices of apartments, so basically individuals buying and selling apartments, has increased in the last 12 months as well. So the trend is pointing towards the same direction as on yield-based valuation.

There was indication that housing price increases could be even 45% here in Helsinki region.

And the next question is that as schools are starting for the next semester, how has the rental market been so far in Q3 and to what level are students renting in the market?

So as mentioned, in July and first half of August, we have made more new lease agreements than we made in July and August last year. And that's also more than in July and August 2019. So there has been a positive trend and students seem to be active on the market right now. So, that's visible in our figures, and it's important to note that students typically take from the market moderate apartments as well. So, that will have an impact for the supply in the market as well. So, positive impact for the market in general, and we have got students as new clients as well.

Thank you. It appears that we don't have any more questions, so it's time to thank you all for participating in this event. And our Q3 report will be published on the 4th of November, so we hope that we will hear and see you then. Thank you very much.