Lumo Kodit Oyj

Good morning ladies and gentlemen and welcome to Koyamo's interim report of January-September's news conference. My name is Maija Hongas and I'm manager of investor relations here at Koyamo. I have a pleasure to welcome our CFO Erik Kelt and CEO Jani Nieminen to present our results in a second. But first of all, it's good to mention that after the presentation, we have time for questions. As we are able to host guests today as a live, we'll be taking the questions first from the room and after that from the conference call line. And final questions will be taken from the chat. But without further ado, the stage is yours, Jani.

Thank you, Maja. Good morning. Nice to be here and provide color on Koyamo's Q3 results. As we've been saying prior, this year has been in line with our expectations. COVID-19 pandemic has had a temporary impact to urbanization and rental apartment markets. We have seen that our occupancy is temporarily lower and because of that like for like growth has been flat. During the summer, Delta variant and so-called fourth wave of COVID-19 created uncertainty for sufficient vaccination level. As it now seems, this 80% vaccination level will be reached during the next couple of days or at least weeks. Already we have seen that rental apartment market has been returning back to basically normal in Turku and Tampere regions. Here in Helsinki region we have seen this impact of uncertainty, even though since August we have witnessed a rapid increase with open job opportunities and lack of workforce, especially in service industries. So, a positive indication that as soon as vaccination level will be reached, and this uncertainty level goes a bit down, urbanization will continue towards Helsinki region, and we do estimate that long-term megatrends creating demand for new rental apartments in the biggest cities are still valid. Moving towards the operational environment, it's easy to say that since last spring, Finnish economy has been recovering well, despite of pandemic. On the other hand, we witnessed during the summer a rapid increase concerning construction costs. Even though there has been this increase, construction volumes have been picking up speed. I mean the number of new residential startups. We have seen that there is an increasing number of build-to-sell projects. At this point, it's good to keep in mind that all projects under construction here in Koyamo have a fixed pricing, so this construction cost increase has no impact towards our net initial yields. In the market otherwise, what we've seen is that a lot of home buyers have been moving. There's an increase concerning old dwellings. Of course, big regional differences and micro location differences. We see that low interest rates and consumer confidence, high level, is backing up this home buying. On the other hand, what has been happening and we still estimate forward is that rents are still going up between 1.7 to 1.8 percent in the market. Moving to page Five, so as I said, we do believe that and estimate that long-term megatrends creating demand for rental apartments in the biggest cities are still valid. There will be an increasing number of small households, meaning one and two percent households, and they do typically live in rental apartments. Urbanization will continue according to MDI estimates done in the summer. What will happen here in Finland is that urbanization will continue in all three scenarios they provided. In the market otherwise, what we have seen is that there is still a lot of interest towards Finnish rental apartment market from international investors. There have been several transactions made this year, typically all done by international players, some ongoing portfolio processes, and it seems that the yields paid are quite aggressive. On the right-hand bottom side, we see that these megatrends creating the atmosphere and people's values towards rental apartments have been still the same. In all the big cities, the number of households living in rental apartments has been all the time increasing. For example, in Helsinki, Turku and Tampere, half of the households today live in rental apartments. Moving to page six, concerning the operational environment. As I said, COVID-19 has caused a discontinuity to urbanization, especially here in Helsinki region, where we see positive signs since August, job opportunities started picking up speed and there's a lack of working force. As soon as these restrictions will be removed and we have the sufficient vaccination level that is estimated to have a positive impact towards urbanization. There has been now a higher number of built-to-sell projects and construction volume seems to be picking up speed towards the end of this year. On the other hand, It's focusing towards the biggest cities and most important part there is that it seems that a bigger portion of those startups are really built to sell projects and estimates are that this increase in construction volumes seems to be leveling off next year. Of course, increasing construction costs and the amount of materials available could hurt the volumes in a short time as well and bring down the high volumes. Digging a bit deeper to our Q3 figures we are still providing profitable growth our total revenue grew by 1.8% to elements there. Most of all, important is that we are still completing a lot of apartments this year and last year. That provides growth. On the other hand, we have been quite systematic with our renting processes. So even though like for like growth was flat, we have been increasing our like for like rents by 2.1%. Net rental income 196.7 million was improved by 1.5 percent comparing the comparison period some comments there still valid the same reason so we did have a cold winter last winter with a lot of snow we have been having a higher intensity in cleaning because of COVID-19. On the other hand, we have slightly less repairs. FFO improved by 1.1%. The fair value of investment properties today, 7.6 billion euros, is because of our strong growth. combined with the positive change in fair values this year. Gross investments 258.1 million this year so far are mostly new development projects. The amount there invested is 228.9 million euros. As I said, we are still providing profitable growth, so profit excluding changes in fair value, 131.9 million euros was improved from corresponding period by 6.4 percent. And then profit before taxes, 616 million euros, there's of course the impact of changes in fair values of investment properties, that amount is 484.1 million euros. Moving to page eight. We are providing strong growth. We have been so far this year completing 820 apartments, started 818 apartments. At the moment we have 2,624 apartments under construction, all projects located here in Helsinki region. So we do have a really strong pipeline providing future growth. All the locations are here in Helsinki region at the moment having an excellent micro location, close to public transportation, close to services. The net initial yield still concerning our projects under development is either 4% or above 4%, so actually it means that we are still providing a really strong development gain as well as those projects will be completed. And even though there has been this cost increase all our projects do have fixed pricing as well the binding agreements with construction companies providing additional 800 apartments so the cost increase risk is carried by construction companies Moving to page 10 not much additional new color on so-called metropolia properties other than the first projects we are getting ready to start those projects hopefully later this year meaning Abrahaminka to one Agrikolankatu 1 and then the zoning should be completed concerning Albertinkatu 40 and Eerikinkatu 36, so called Kottoraisenkortteli. Then some small delays because of municipality decision making and the zoning process with a couple of projects, but by next year we hope that we are able to start most of the projects. Couple of words concerning our way of operating. We are providing additional value for our customers. We have the platform in place providing a lot of services. Customers still really happy with our way of providing customer experience. So actually, for example, the Net Promoter Score concerning our digital services is 63. and roughly 70% of our customers are using so-called MyLumo services, so mobile, digital services. You are able to take care of your daily issues, ordering services, and get a lot of information from us. What we have seen happening in a customer base is slight changes, Students were active in the market in the summer, so actually there's an increase of 1% points with customers below 25 years, and on the other hand, a 1% point increase with one-person households. On the other hand, a slight decrease concerning one-person, single-parent households, so one-person points there change downwards. Sustainability plays an important role for Koyama. We have always said that it's a part of our DNA. Sustainability work is proceeding nicely. Our Crespi score improved by seven points, and we earned three stars. We also achieved the highest A-level rating concerning public disclosure assessment, and EPRA gave us silver award concerning sustainability reporting. We are moving with our sustainability roadmap, providing by 2030 all our properties with zero carbon. Already today, we are using no carbon electricity in all our properties. At this point, I would pass the word to Erik. Please, Erik.

Thank you, Jani, and good morning everybody from my side as well. So page 14, our top line grew by 5.2 million euros year to date, and the growth during the Q3 was 1.8 million euros, and as Jani mentioned, the like for like. was flat but 2.1% positive impact for rents and what charges increases, occupancy rate minus 2% impact and then others minus 0.2%. So the growth was driven pretty much by the growth of the property portfolio. Entry and tally income grew 2.9 million euros, and the growth during the Q3 was actually 3.3 million euros. Maintenance year-to-date 3.9 million euros, higher than in corresponding period, but it's good to note that during Q1 the weather played a role there, so the heating and snow together was more than 2 million euros. higher than in corresponding periods and then COVID-19 related items so cleaning and water consumption more than 1 million euros higher than corresponding period. So maintenance cost during Q3 was actually flat and repairs 1.4 million euros lower than in corresponding periods. 15. So the profit excluding changing values up by 7.9 million euros and the whole year changing fair values positive figure 616 million euros during Q3. the increase was 17.9 million euros. We kept the yield requirements unchanged during Q3, and there was no ending restriction during Q3, so the positive impact was pretty much due to the development gain from the finalized developments. So, we are still above this budgeted 20%. development gain level. So FFO up by 1.2 million euros during Q3. FFO was 45 million euros, growth there 3 million euros. Net rental income contributed 2.9 million euros HCE expenses was 1.6 million euros lower than in corresponding periods. We achieved some savings due to the COVID-19. Financial expenses up by 2.7 million euros, and the reason behind that is that the loan portfolio is much bigger than in the corresponding period. Cash tax is reflecting, of course, the better result, so up 1.9 million euros from the corresponding period. The formula used the calculation was changed during the review period regarding the current taxes of disposals and of course comparison figures was adjusted respectively. Previously actually we excluding the loss and profit from sale on investment properties from the calculation but we included the cash taxes of the property disposals and we received feedback from the special international investors that it's not a balanced situation, that we should actually exclude both items, and that's what we changed now. And the timing for that change was good, because it has no material impact for comparison figures. Page 16, financial occupancy rate, as Jani mentioned. The uncertainty related to vaccination and removing existing restrictions was delayed, the migration towards the Helsinki region. We've already seen improvement in our occupancy rate figures in Turku and Tampere. I think we've already covered that like for like, so page 18. Our investments, €258.1 million, by far the biggest portion there. Our developments, modernisation investments, €7.7 million, and capitalised borrowing costs, €4.2 million. Repairs, €1.4 million less than in corresponding periods. Modernisation investments, €12.4 million less than in corresponding periods. That decline in modernization investments is pretty much a timing issue, so we haven't started any bigger projects during Q3 or Q2 actually, and that plays a role, so it's a pretty much timing question. Page 19, fair value investment properties. up by the year end 743.6 million euros, investments 262 million euros and profit on fair value of investment properties 484 million euros. We still have 2,127 apartments where we have restrictions regarding the valuation and those restrictions will gradually end by 2024 and there's going to be an uplift in value between 140 and 160 million euros and the ending restriction is back-weighted. So, we have already invested €411.9 million for apartments under construction, and €233 million to be invested to complete those ongoing developments, providing 2,624 apartments, binding agreements, €163.4 million to be invested to provide 796 apartments. On top of that, we have, of course, this metropolia portfolio and land and existing properties where the idea is to demolish existing properties and to build, replace it with a new one. We estimate that investments in developments project amount to about 350 to 380 million euros this year and all our ongoing developments and land bank located here in Helsinki region. Equity ratio and Alontu value, page 21, we have there very strong figures actually, and we are well in line with our strategic targets to have equity ratio above 40 and loan-to-value below 50%. Page 22 showing strong growth in EPRANRV 19.32 at the end of Q3. We have still quite strong capital financial key figures. Average cost of debt 1.8%, including cost of derivatives. Hedging ratio quite high, above 90%. Average interest rate and average loan maturities clearly above four years. We didn't make any new financial arrangement during Q3, and there's no need for additional financing this year, There's no refinancing needs for actually 2022 or beginning of 2023. There's one 200 million euros bond that will mature in 2023, but it's not time to do anything actually for that. So no major refinancing needs for a couple of years to come. We are quite cash rich, so cash and cash equivalents and financial assets together more than 380 million euros. Credit lines committed unused 300 million euros and commercial paper program 250 million euros, 50 million euros outstanding commercial papers at the end of Q3. Page 24, carbon notes regarding our strategic KPIs, so top line growth 1.8%, investments 258 million euros FFO against total revenue above 39%, so clearly above our... 36% target and we still have property taxes allocated in calculated already in this figure so the Q4 portion of whole years property taxes is 2.75 million euros. Loan to value equity ratio well in line with our target as already discussed. net promoter score 20. Here it's good to note that our digital NPS is 63 and it's not included in this figure. And although this NPS figure such as came down during this year, so the all questions regarding customer satisfaction has actually improved during this year. And then we have noted that this coming down of NPS is quite a universal phenomenon across the board. Page 26, our outlook unchanged, so we estimate that the top line growth will be between 2 and 4% and the FFO between 150 and 158 million euros. So there has been a delay in lifting COVID-19 restrictions affecting the rate of migration And that of course plays a role there for the top line and that's why we estimate that we will hit the low end of that top line range. Key consideration regarding FFO is of course top line development plays a role there. Weather during Q4 is going to play a role there. the timing of repair projects will play a role there, and we don't need any additional financing for the remaining part of this year. And it's good to keep in mind that there are some seasonalities regarding the maintenance cost, of course. They are mainly related to weather. Dividend policy, page 27, no changes there, so the dividend policy. is to pay at least 60 percent of FFO provided groups. Equity ratio is above 40 percent. Now, I hand it over to Jani. Thank you, Erik.