Lumo Kodit Oyj

Good morning, ladies and gentlemen, and welcome to Kojamo's full year results news conference. My name is Niina Sairto. I'm responsible for investor relations. Our CEO Jani Nieminen and CFO Erik Hjelt will shortly present last year's figures and also give outlook for this year. After their presentation, you will have a chance to ask questions. We will take first questions from the phone line and then from the chat. But now we can start. Jani, I would like to invite you over here.

Thank you, Nina. Good morning. I'll start by saying Always nice to be here providing some color concerning Koyama operations. Today, we start by providing a bit of color, what's been going on last year, what's the operational environment and what's the summary. In my eyes, then, Erik, as a CFO, will provide a bit more detailed color concerning financial development. Last year, I would say, A good starting point is that we actually had a really strong year with our strategic targets. All the key figures are really well in line with our strategic targets. Operationally, our numbers are solid and we created profitable growth. On the other hand, it's easy to say that 2022 can be seen from two standpoints. On the other hand, as COVID-19 restrictions were lifted, urbanization continued during the summer and that had a positive impact and a positive turn in the occupancy towards the year end. On the other hand, of course, Russian invasion to Ukraine has had a negative impact to the operational environment. inflation has been increasing, interest levels have been increasing, and that has been impacting the operation. As we've been saying, we have been stopping temporarily our new investments. On the other hand, this new environment had as well an impact on our valuation of investment properties. There is good to keep in mind that actually it's now based on environmental factors, not actual deals done in the market. In this environment it's been really a positive and important thing that our balance sheet is strong. we have been using all the time multiple sources for financing, our hedging ratio has been high and because of that the impact of interest levels increasing has been really limited. Then moving forward to the operational environment It is to say that the big outlook in the global economy at the moment is bleak and cloudy. Mild recession might come. On the other hand, here in Finland, It's good to keep in mind that on the other hand, we see a really low consumer confidence. On the other hand, still, the employment situation remains really good. And on the other hand, I would say it's good to keep in mind that typically, when consumer confidence goes down, it has a really quick impact to housing sales, so owner-occupied market, and sooner or later a positive impact towards rental homes and rental demand. If we look at the industry key figures, residential startups, there has been a rapid stopping in the market, they've been sharply going down, the number of new startups, still no exact figure from last year, but I would say clearly below 40,000 apartments have been started last year. Official estimate still for this year for residential startups, 36,000 apartments. I would say, I would be surprised if the first number will not be two. So, clearly below 30,000 apartments here in Finland will be started this year. And of course, that will have an impact towards the coming supply starting 2024. Construction increases, cost increases have been leveling off. Of course, there are some materials still increasing like concrete. On the other hand, sharply falling volume should and will impact this material cost and bring the construction cost down. But as we've been seeing in the market, Koyama is not investing in new construction cases and neither are the construction companies actually starting any build to sell projects. Operational environment, we've been saying all the time throughout COVID-19, that we see a temporary impact towards urbanization. Starting last year during the summer, we have seen that urbanization is continuing, and actually, according to the latest estimates, The biggest cities had a positive net migration. Actually, the top ten cities, which grew last year through net migration, were the places where Kojamo has rental apartments and where Kojamo invests, so capital region there. The biggest growing part of Finland, then Turku and Tampere as well. So megatrend is still valid, urbanization creating long-term demand in the market. On the other hand, we do see still an increasing number of small households, meaning one and two person households, and they tend to typically live in rental apartments. Even though they are not the latest statistic concerning 2022, it's been the same trend throughout the last 10 years, that the portion of households living in rental apartments have been increasing every year in the biggest cities, and it's good to keep in mind that even though people tend to think that Finland is owner-occupied home country, in cities like Helsinki, Turku and Tampere, actually more households live in rental apartments than in owner-occupied homes. As I said, urbanization, talking about page seven, urbanization started to continue. I checked out the latest estimate from Statistics Finland, So the pure net migration in Helsinki, Vantaa, Espoo last year was 15,600 people. And so the population growth has been bigger. Residential startups volumes have been coming down and actually will decrease this year. And if we look at the chart on the bottom left hand corner, I tend to believe that we are going 10 years back in the time, meaning the volumes of 2013 or 2014, and that will have an impact in the residential market starting 2024. A really limited new supply coming to the market, starting 2024, and that will of course create the possibility to increase the rents as the demand is growing and the supply is going down sharply in the market. Homebuyers have been really careful. According to the marketing information, it's down 80%, so basically construction companies don't have the capability to start up any build-to-sell projects. Homebuyers are really careful. They either stay put in their current home, but now the interest levels are increasing, and on the other hand, in the owner-occupied buildings, the maintenance increases are facing the inhabitants during this spring, and that will create pressure in owner-occupied apartments. And in that sense, actually rental apartments are becoming more and more competitive, As I said, our operational key figures were strong. We were able to create total revenue growth by 5.5%, ending up to 413 million. That's a combination of three aspects. At the end of 2022, we were able to create positive like-for-like growth. We made an acquisition of 1,000 apartments roughly last year, and then, of course, we've been completing new apartments both last year and 2021, and apartments completed 2021 have been providing revenues the full year last year, and then, of course, close to 1,400 apartments completed last year created revenue growth. that provided a positive starting point for the net rental income, and the increase was 6.8%, so profitable growth. If we compare net rental margins, 2022 it was 67.8, as the comparison year was 67%. Some aspects there, of course, maintenance, cost increases there because of the electricity prices, the impact was 1.4 million euros, then heating 1.3 million euros increase, property taxes a bit more than half a million euros and then some cost savings concerning repairs. and then funds from operations we were able to increase by five percent of course we do have a slightly bigger loan portfolio for example there record high gross investments 501 million euros. It's a combination of new development projects that provided investments of 270 million euros, then quite a large acquisition after some years, we were able to find a portfolio matching our parameters, and then of course modernization investments. So these are the three topics there. fair value of investment properties now 8.2 billion euros. There of course a positive impact because of the gross investments of 500 million euros. On the other hand because of the inflation and interest level environment there was a yield requirement change in the valuation, and that created a negative impact of 682 million euros, and that's how we ended up with 8.2 billion euros. profit excluding changes in value, strong performance there, 182 million euros improvement by 5.2%, and then because of these changes in value of investment properties, profit before tax is now 500 billion euros negative this year, there is good to keep in mind that a year ago the comparison figure was 1.1 billion euros positive. We've been following the market and proceeding with our strategy really consistently throughout the years. We were able to find a portfolio matching our parameters last year. So we acquired 985 apartments and completed 1300 apartments. On the other hand, we already saw during the first part of the year, the change in operational environment. we're a bit more demanding with our parameters, and then as we move towards this autumn, we stopped making new investment decisions, and that's why we started 477 apartments last year, and today we have under construction 1800 apartments. Concerning those 1800 apartments under construction, it's good to keep in mind that we still have really good development gains. They vary between 15 and 20 percent as we complete those projects. All the projects are proceeding as planned. All the projects have fixed pricing and excellent micro locations. One project in Turku, one project in Tampere, and all the other projects located here in capital region. A couple of examples of buildings we've been completing and apartments we've been completing during Q4 last year. For example, Tenderinlenkki in Pasila close to Mall Tripla, brilliant project. Vantaan Pyhtäänkorventia close to airport, and then Ruukkupolku in Myyrmäki. For us, it's been all the time important that in our strategy, we want to be customer's number one choice. And we do believe in creating added value for our customers by combining apartments, common spaces and services, services provided digitally or physically. We've been providing new services now For example, our potential customers are helped by an AI-based apartment agent that helps you to find a new home, a Luma home, according to your parameters and your wishes. On the other hand, as we see this operational model and strategy really important, we made some changes in the management team and management team responsibilities. We combined a new task for Chief Experience Officer, taking care of customer experience, customer insight and data, so customer understanding, creating the concept of LUMO, and then combining that to marketing and communication. We will continue on creating new services for our customers and creating added value for our customers. And now as we move forward, Erik will join and provide more detailed color. Here is a good example of what Koyama can provide for our customers. A building in Annankatu 5, Building was originally built in 1885, totally renovated, 2021 completed. Sad to say that today no vacant apartments there, but the building is superb. Thank you.

Thank you, Jani, and good morning everybody from my side as well. So, page 14, our top line growth was 21.6 million euros, and the like-for-like rental growth turned positive. during Q4, so 0.3%. Rents and water charges increases contributed 2.2%. Positive figure, occupancy rate negative 1.9%, another 0.1%. Last year, we acquired this portfolio June, and that contributed 4 million euros for the top line. last year, so the growth in top line came through pretty much thanks to those completed apartments, so 2022 completed apartments and of course second half of 2021 completed apartments played a role there as well. Our net rental income growth was 17.8 million euros maintenance expenses up by 6.2% and made growing items there, as Jani already mentioned, electricity, heating, water and property taxes. If we look at maintenance expenses, euros per square meter per month, there the growth was 2.2%. So, the growing portfolio, of course, played a role there. And repairs were down 2.2 million euros. So, page 15, if we first look at the change in fair values, looking backwards, it's good to know that during 2018-2021, the profit in change in fair value on investment properties was 2.8 billion euros, and now the loss 682 million euros, so the net is still positive, more than 2.1 billion euros. In theory, the valuation should be made based on evidence from the market. In Finnish property market, there were no major transactions during Q4, and these adapted yields in the valuation is based on opinion of external valuator. And the yield expansion was point 3-4% and now the total portfolio yield is 3.97% and that of course should reflect the current market conditions. If you look profit before taxes, excluding change in fair values, it's good to note that on the finance expenses side, there was 5.4 million euros positive impact because of value changes. Then if you look FFO, up by 7.6 million euros. Net rental income, of course, the biggest contributor there, 17.8 million euros. SG expenses, up by 5.8 million euros. Financing expenses up by 4.6 million euros on FFO level, and then gas taxes down by 2.8 million euros. SG expenses, couple notes there. One is that, of course, when we compare the figures for 2021, there were some savings because of the COVID-19. Inflation plays a role there as well, and there we had some one-off items, if you like, so some external experts used for some transactions. Of course, there are some costs, We tested external sales forces that of course played a role there. And then we are renewing our ERP system and all this plays a role for SGA expenses last year. Finance expenses are up because of the PicoLoan portfolio, what we have in our balance sheet. Page 16, so financial occupancy rate for the whole year cumulative, 92% at the end of September. Year-to-day figure was 91.7. If you look only Q4, there the occupancy rate was already 93%. And tenant turnover came down by 2.2%, and that reflects on its side as well, the restrictions that ended last year. Like I think we already covered, so page 18, gross investments, 501.6 million euros. There, of course, the acquisition plays a role and those development process that we completed and that are still ongoing. If you look at modernization investments and repairs put together, the growth there is 8.3 million euros, repairs down 2.2 million euros, as already mentioned, and modernization investments up by 10.6 million euros. So we've been taking good care of all the properties that we have in our portfolio. For the time being, we will make no new investment decisions due to the uncertainty in the market. So we have a strong balance sheet. and we like to keep it that way. And all ongoing process will be completed as agreed, and they are proceeding according to our plans. Page 19, fair value investment properties. Of course, there's these investments on the positive side, and then the change in fair value on the negative side. On the right-hand side, we still have 1,680 apartments, where we have restrictions regarding the valuation, and those restrictions will gradually end by 2024, and the uplift in the value will be somewhere between 100 and 110 million euros. Page 20, if you look at these ongoing developments from the euro perspective, so 293 million euros already invested, and 168 million euros to be invested in order to complete these ongoing developments. In total, 1,804 apartments, and that includes 119 apartments under binding agreements. We estimate that the total investment in developments this year will be between 160 and 190 million euros. Phase 21. Of course equity ratio loan-to-value changed slightly because of the value change in property portfolio, but we still have quite sizable buffer against our targets, so the target is to have equity ratio above 40% for 0% and loan-to-value to be below 55-0%. If you look only value perspective, so the buffer against this 50% loan-to-value level is 1 billion euros. So as said, we have quite sizable buffer against those levels. Strong balance sheet there. APRA NRV reflects, of course, the result at the end of last year, 19.53 euros per share. Our financing position is strong. Our cash position includes 190 million euros cash and cash equivalents, 104 million euros financial assets. And on top of that, we have 300 million euros committed unused credit lines in place. Average cost of financing, 1.9. including the cost of derivatives, and the hedging ratio is still quite high, 84%. We don't have any major financing needs for the next 12 months, and those maturing loans are pretty much already covered. And in December, we made a new refinancing of 50 million euros with Danske Bank, unsecured. three years with two one-year extension options unsecured at that point of time. Our strategic KPIs, H24, actually all of them are in line with our targets, so top line growth 5.5%, investments more than 100 million euros FFO against total revenue, almost 39 percent. Loan-to-value equity ratio strong, as I said, and in line with our strategy, providing us a large buffer against our target levels, and net promoter score strong, 45. Then on page... Next page, we have the outlook for 2023. So we estimate that the top line growth will be between 7 and 10 percent, and we estimate that the FFO will be between 153 and 165 million euros. If you look at first the top line growth outlook, so to hit this 7 percent, so the low end of that range, that is covered by increased rents and water charges in normal manner, acquisitions completed 2022, now contributing top line for the whole year, completed developments 2022 and developments to be completed this year. And then to get closer to this upper end of that range, of course, then requires that we will improve our occupancy. And that's, of course, a target for the company. FFO level. That outlook reflects the top line growth outlook. And there are some, of course, assumptions. If you look at the midpoint of that FFL range, that requires to have a normal weather for 2023, to increase the maintenance expenses by 10%, to have repairs in line with figures in 2022, SGA expenses increased according to inflation, gas taxes to remain on the current level between 11 and 13%, and refinancing at the current pricing, current interest rate environment. So these are assumptions in the midpoint of that FFO target. And then one additional note that this outlook, FFO outlook, doesn't take into account the potential premature funding of the Eurobond due 2024. Because we don't know the timing of that, we don't know what is the price when we will renew that one. Dividend policy. So, the board of directors proposes a dividend, 0.39 euros per share, And that's in line with the dividend policy of the company and growth for last year's figure. At this stage, back to Jani.