Kojamo Plc

Welcome, this is Koyamos third quarter result webcast. I'm Nina Sartor from Investor Relations. Today's presenter is our interim CEO Eric Yeld. Eric is going to go through the result and then as usual we have Q&A. You can send questions via chat or in case you want to ask the questions yourself, you can click the hand sign on the screen and then you just wait for your turn in the queue. Now we can start the presentation. I'll hand over to you Eric.

Thank you Nina and good morning everybody. I'm excited to discuss about Koyamos Q3 figures. Page 4 we have in a nutshell what happened during the Q3 and our total revenue and net rental income increased both actually by .1% from the corresponding period. Our finance occupancy rate decreased from the corresponding period but the occupancy rate third quarter improved compared to second quarter. So our occupancy rate is not on a satisfactory level but during the Q3 we moved into the right direction. There's still oversupply in the market but it turned to a decline and that caused with all bigger cities so Helsinki, Espoo, Vantaa, Turku and Tampere. Our FFO decreased to the increase in finance expenses and maintenance expenses. Our average cost of financing declined from the Q2 but it's still a higher level compared to last year corresponding period. And maintenance expenses increased mainly because of the cold weather especially during the first four quarters, fourth month in this year. There was no shifting or change in fair values of investment properties during the Q3. Our saving program is proceeding according to plan both cost items so repairs and savings and repairs and STA expenses as well as investments are all in line with our plan. And our balance sheet remained strong and our liquidity situation is good and the next financing is about to refinance the 2026 maturing loans. If you then look operating in an environment so GDP growth in Finland is on a negative territory. Inflation below the 2% target was set by the central bank 1.8 is the estimate for inflation. So Finnish economy is continuing this year but turned towards the growth has already began here in Finland. So page 6 if you look at the supply side so estimates are that 17 000 new apartments will be started this year and that's whole country and all unit types. And if you then look more important figure for us is non-subsidized apartments so the startup is estimated to be only 2 000. It used to be about 20 000 so this 2 000 this is very very low figure. And discussions with the construction companies indicates that in the near future they are not starting any major new projects. So that actually means that once these ongoing developments completed there's not going to be any significant supply new supply to the market 2025-2026. And as we know that it takes roughly 18 months to complete a new development product it can go as long as 27 before we see any any meaningful new supply coming to the market. On the demand side of course these mega trends are still valid so the development household size decline in unfortunately in Finland organization is there still and the fact is that in the owned occupied homes migration already quite strong here in Finland so we are already on a level -COVID-19 levels so that the population growth in this growth areas is there already. And the immigration that the migration is strong as well so there are different estimates how many people are moving towards Finland but it varies between 30 and 40 000 people moving and most of them go to the Helsinki region. So the demand side is strong estimated to be strong going forward as well. Then if you look more detailed our financial figures so total revenue growth 10.2 million euros -to-date and 1.7 million euros during Q3 compared to comparison period. Biggest contributor for top line growth was completed apartments so earlier this year and last year completed apartment 11.9 million euros for -to-date and 3.5 million for Q3 and rents and occupancy was a negative impact 2.7 million euros here today I come to the lack for lack rental growth later. As rental income grew 6.8 million euros 2.6 million euros during Q3 the growth was mainly because of the the cost side growth was mainly because of the increased maintenance expenses 6 million euros and the growth of the portfolio was impacted 1.6 million euros heating and water 4.2 million euros and as said especially during the first four months in this year because of the harsh winter and property taxes up by 1.3 million euros. Net rental income margin remained stable so 67.4 percent same as in corresponding period. Profit before taxes if you look without without value changes so it's a negative 20.3 million euros net rental income as said on a positive side then finance expenses increased by 29.5 million euros it's it increased but it's good to keep in mind that in corresponding period this was 8.7 million euros profit from the repurchase of the bonds but if you were excluding that so the finance expenses increased nevertheless and STI expenses decreased by 4.1 million euros. Then couple notes regarding the FFO compared to profit before taxes so FFO side finance expenses was 28.5 million euros higher than in corresponding period and cash tax is 3.4 million euros lower than in corresponding period. Finance occupancy rate as said declined from the corresponding period but improved during the Q3 compared to Q2 and there's still oversupply in the market and there's not that much of a tailwind yet for improving occupancy but the improvement has come through because of our own activities we are so we've been we've been doing some some changes in in especially in in sales management and and resources better responding for for the evening and weekend demand from the from the customer side especially. Like for like growth so impact of rent and water charges positive 0.9 percent impact of occupancy rate negative 0.9 percent and then negative 0.4 percent other impacts and and that comes through because now we are more flexible what comes to the pricing regarding to support the improvement of occupancy so we have done some price reductions in in those apartments that has been vacant very long time and then we have some campaigns so one one month free period in in in those some of those about apartments that has been vacant quite some time so in total like for like rental growth was negative 0.4 percent. As part of the saving program investment decreased significantly so gross investments 21.6 million euros almost 140 million euros down from the corresponding period we started about one new development program that's that's based on previous binding agreement so back in the days 119 apartments will be completed in Helsinki in the beginning beginning of 2026 but no other other ongoing developments and and for time being we don't do any new investment decisions. Monetization investment and repairs both down according to the saving program in total 22.7 million euros 7 4.7 million euros on the repair side and 18 million euros on the organization investment side. Fair values didn't change significantly at the end of Q3 we kept valuation parameters unchanged due to the fact that there was limited amount of transactions in the in the market in H1 valuation we took into account all three actually all three transactions completed by the end of Q1 in the market and they were all taken into account in the H1 valuation. There was couple of small portfolios completed in completed during Q3 and there the pricing is pretty much in line with what we saw during the H1 and there's still 404 apartments coming out of the restrictions and there will be an uplift in in the value when those restrictions ends by the end of this year between 20 and 40 million euros. Loan to value equity ratio strong in line with the current public rating PAA2 and we have quite sizeable buffer against the maximum level for of a loan to value to 50 percent and actually loan to value equity ratio pretty much unchanged from H1 figures. Loan maturity is 24 and 25 already covered we have quite strong cash position roughly 350 million euros and the idea of osco used those that cash to pay back the bond maturing first quarter 2025 and then that means actually that that the next financing need is actually to refinance the 2026 maturing loan. The average interest rate in our portfolio came down it's now three percent at the end of H1 it was 3.2 and hedging ratio high 93 percent. In autumn a more is confirmed our rating PAA2 with negative outlooks so that's a positive sign as well. FNRV 18.34 euros per share and then our outlook we kept our outlook unchanged so we estimate that the plan growth will be between two and four percent and the FFO will be between 142 to 152 million euros so unchanged outlook there. So at this point happy to answer any any questions there might be.

Okay we can start from the phone line when you hear your name please check that your microphone is unmuted. So first one on the line is Andres Tolme from Green Street go ahead Andres.

It's a combination of price reductions in some apartments that have been vacant quite long time and impact of some campaigns so rent free areas to support the renting. So it's a little bit challenging to say what is the market vacancy it's improving clearly not that much because there's still oversupply in the market and as I said during the Q3 our occupancy moved into right direction and since then we've been making quite nice amount of new lease agreement so and this is there's still oversupply in the market but we are moving into right direction given the actions we've taken inside the company.

Construction at the moment it still feels like there's quite a lot of completions to come in 2025 so do you think it's fair to say that actually the rental tension will get better only in 2026 or are you seeing anything that would suggest that it could actually happen in 2025?

So in the market there's the construction companies they still have quite a large amount of unsold apartments but they are of course meant to be to be sold for for for individuals as we speak yes there is some ongoing developments but the big portion of that is actually social housing and they are chasing the rules for for social housing and that's why all these social housing players try to start as many projects this year as possible so even social housing developments will come down next year and the amount of non-subsidized rental apartment part of the market ongoing is actually quite low and then if you take the estimates of the population growth in these growth areas and if you take the amount of startups and the ongoing process so there's a pretty clear view what is going to be finalized next year so that indicates that we will be in equilibrium in perhaps after the summer next year and by that I mean that the vacant apartments in portals will be on the roughly on the same level what we saw before COVID-19 that level. Thank

you.

Okay then next question comes from Selin Sohin from Parkleys. Go ahead Selin.

Hi Eric my first question is on disposals so remember when you announced the saving programs you also said you could be looking at disposing as part of it. When November so is it fair to assume that no disposal is happening this year also if you could comment on the transaction market and my second question is when do you think you can update the market on your search for a new CEO. Thank you.

Thank you for the questions so yes we are looking disposal still we are not in a position that we have to sell anything but our aim is to dispose moderate amount of properties a couple of smaller transactions are already almost signed if I may say so and it remains to be seen when we we are able to complete them and there are several ongoing discussions but it's too early to say when something really be completed but that's something we are working on and then the CEO the process started recruitment started after the announcement last month early last month and then there is a headhunter involved in that process and that's ongoing process. It remains to be seen when the candidate is there and how long it takes before the one can start here and I'm agreed to take care of this position as long as needed so when the new one is coming in.

Thank you Eric.

Thank you Selin. No further questions there so I have a couple of questions here in the chat so Eric can you provide some color on the like for like assumption in this year's guidance?

In this guidance in the midpoint of the guidance to like for like assumption is is in line what we've seen yesterday.

Then about market rental market can you comment what type of rental incentives they are

used? So typically there are rent free period in the beginning of the lease agreement between two months up to one month in our case. We've seen in the market some competitors offers even two months rent free period but in our case typically is from two weeks to one month.

Okay thanks. Then about financing what are your plans for 26 maturities?

So our preference is clearly to return to the point market. In our case it's always been important we have access of different sources of financing of course we looked at all options but our preference is clearly to return to the point market. The market as such has moved into our direction so swaps came down and and stress tightening and the market seems to function in very well. Perhaps for us the switch for timing wise would be Q1 next year but as said our preference is clearly to return to the point market.

Thanks and then the final question today what do you see in transaction market and foreign investor interest?

So the transaction market this is really still muted so the volumes are very very low. When discussing with brokers we got the impression that they are still international investors who are scanning the market but for various reasons those discussions haven't really lead to transactions. During Q3 we saw three smaller portfolio transactions in the resi market here in Finland. The sellers were mainly actually two out of three where they were open end resi funds and the buyers was a private equity or fund type of international players.

Okay thank you so that was all for today thank you all for joining our full year numbers will be released in February 13th so I hope to see you then now I wish you all a great week bye bye.

Thank you bye.