Kojamo Plc

This is Koyamo and this is our Q1 result webcast. I am Niina Saito from Investor Relations. I have with me here today Erik Hjelt, our interim CEO. He will give us a presentation covering the Q1 result and also an update on the operating environment. Please be active. You can send questions via chat. And those joining over the phone lines can also ask live questions when we have the Q&A. after the presentation. Now I think we can give the floor to Erik. Welcome.

Thank you Nina and good morning everybody. So I'm really excited to discuss our latest result and operationally we had a very strong quarter. the improvement of our occupancy rate accelerated in the first quarter of this year. So total revenue and net rental income grew in the first quarter of this year. So total revenue growth was 0.9% and the net rental income growth was 3.7%. Our FFO decreased because of the effect of increased financial expenses, so net rental income grew 2.2 million euros, but on the FFO side, financial expenses grew 3.6 million euros. So, our occupancy rate has improved since last autumn, and the increase accelerated during the first quarter. And at the end of, or during the March actually, the occupancy was already 93.5. Our balance sheet remains strong and liquidity situation is very good. And following the successful issuance of 500 million euros in March, so now we can say that already 2026 material laws are covered. So, geovoltaical tension grew significantly in the beginning of this year. And that has, of course, an impact for the general economic environment. But since Kojama is operating only in Finland, and we don't have any export or import, so the direct impact of this geopolitical tension is not visible in our operations. So for us, it's more important what is happening in the rental resin market here in Finland. I'll come to that later as well. So operating environment, as said, so global economy is expected to be uncertain, to say the least. Finnish GDP growth is expected to be 1%, quite muted, but anyway growing, and inflation muted as well, so a little more than 1%, so giving in that sense a good background for our operations. So, operating environment, if you look first supply side, so already three years in a row, the resi startups in Finland has been historically low level, 2023 and 2024 below 20,000 units each year, and estimates for this year is around 20,000 as well. For us, more important is non-subsidized apartments. Resi startups and 2023-2024, each year it was way below 4,000, and estimates for this year non-subsidized apartment startup is 7,500. That estimate is given of Confederation of Finnish Construction Industry, If you look at releases from listed construction companies, this 7,500 may be quite an optimistic figure. Nevertheless, there are estimates that in Finland, we need 35,000 new apartments annually to cover the needs of the organization. So, these startup figures are way below that requirement. And as we know that it takes roughly 18 months once the process is completed, so it's pretty clear that second half of this year, 2026 and 2027, no major amount of new supply coming into the market. Moving to the next page, so the demand side, so the organization is already on the same level as it was before COVID-19 and actually city of Helsinki, for example, and the population growth there is even stronger than before COVID-19. And at the same time, the immigration according to Finnish standards has been quite strong. Finland estimates that this year 45,000 people are moving to Finland, next year 40,000. Most of these people that are coming to Finland are staying in Helsinki region. So if you combine, we are not giving any guidance here, but if you combine these two figures, so the volume of startups, resist startups and the population growth in these growth centers, we might be in a balanced situation by the end of this year. And when I say balanced situation, I mean that the available apartments in the public borders on the same level it was before COVID-19. Moving to page nine, total revenue grew 1 million euros, improving occupancy contributed 0.5 million euros, and then completed apartments another 0.5 million euros. Net rental income grew 2.2%, repairs was 0.2 million euros lower than in corresponding period, and maintenance was 1 million euros below corresponding period. Heating was 1.4 million euros down from the corresponding period due to the mild winter here in Finland. And electricity was 0.5 million euros below last year's figures during the Q1 as well. On the growing side, there was water and cleaning together roughly 1 million euros up. Moving to page 10, so profit before taxes excluding change in values, so net rental income contributed 2.2 million euros, SGA expenses same level as in corresponding period, and finance expenses on the BNL side up by 4.7 million euros. On the FFO side, finance expenses up by 3.6 million euros. Page 11, our occupancy has improved since last autumn. If we compare Q1 occupancy to Q4 last year, so the occupancy rate improved 1.2 percentage points, so quite strong improvement there. And if we take only the occupancy rate for March, it was already 93.5%. And during the April, we have made a good number of new lease agreements as well. And tenant turnover decreased from the last year, so corresponding period, down by 0.6%. And all this happened regardless of the fact that there's still oversupply in the market, and there's typical seasonality in the market. So what we've been actually doing, so the renting has been quite strong. There are several reasons behind that positive improvement there. So we are still increasing the rents for existing customers more than 1%, but that's much more a moderate level compared to beginning of last year. We are more flexible what comes to the rents, and we have made some additional repairs to support the renting. And we have improved our own operations. Actually, we have developed our sales management, and we have enhanced our online processes, and then we have established a sales support function in our service center. Tenant turnover is coming down as well, so other thing that is contributing for improving occupancy is that we have been able to enhance our customer satisfaction. So now we have been developing our operations of LUMO Service Center and we have improved our cooperation with property management partners. And now the end situation is that we are offering faster and more effortless service for our customers, and this is already visible in our figures. So Net Promoter scored 57, so an all-time high figure there. Page 12, our like-for-like rental income. It's good to keep in mind that like-for-like calculation is backward looking. So it's past 12 months compared to previous 12 months. So if you look at the impact of rents and water charges, as said, we are still increasing the rents for existing customers contributing point. 8% is 0.4 like follow-up calculations. And these lowering rents and incentives we are in some cases offering had a negative impact of 0.4%. But this impact of occupancy rate, the negative 1.7% has said this is backward looking. figure and we are more concentrating to improving our occupancy looking forward. And this like-for-like calculation, we actually carry on the situation Q2 and Q3 last year, and that has a strong negative impact on this like-for-like calculation as shown in this figure. But if you look how we have been able to improve our occupancy year to date and the good amount of new lease agreements in August, That impact, the negative impact, is about to change when we look at the future calculations later this year. Page 13. Our investments remained at the low level, so for the time being we are not making new investment decisions. We have one ongoing development process, 119 apartments. so-called Centering Kuja project in Lassila in Helsinki, 119 apartments to be completed during the first quarter of 2026. Gross investments during the first quarter this year was quite low, figure €4 million. Modernization investments €2.9 million and repairs €5.8 million. We estimate that repairs for the whole year will be broadly in line with last year's figure. And the modernization investments this year is going to be somewhere around 30 million euros, given the fact that we have started a couple of bigger modernization investment projects. Fair value investment properties slightly down 0.5%. There was limited amount of transactions in the market, actually only one small portfolio transactions, and that was brought in line with the previous transactions, so there was evidence that the yield requirement has moved during the first quarter. And it's clear that decreasing in interest rates reduce the pressure to increase the yield requirements. Because of the limited amount of transactions in the market, we kept our valuation parameters unchanged. In the negative outcome, 37.4 million euros, there are several items included. These items include the impact of net rental income and aging of the buildings. At 15, equity rates and loan-to-value at a strong level. So we have communicated that our aim is to do some moderate amount of disposals between 100 and 300 million euros. And because of the IFRS requirement, we have now booked 280 million euros worth of assets as held for sale because of the IFRS requirement. So there are several ongoing discussions, but nothing more to say at this point. So if we are able to finalize several of these discussions, then of course we'll release the outcome in due course. So in our loan-to-value, 44% is now including the assets held for sale, so basically no changes there compared to the end of last year. Page 16. So we have been active on the financing side as well. So we issued this 500 million euro bond in March. And together with that, we made a tender offer for 2026 maturing bond. And we were able to re-purchase 165 million euros worth of all those bonds. They're still outstanding 135 million euros. in that 2026 maturing bond. This new one is carrying a coupon of 3.875. And our net debt went down to 3.470 million euros. And if you combine all these factors, we can now say that 2025 and 2026 maturing laws are covered. At the end of the quarter, we had 317 billion euros cash and financial assets, and 375 million euros unused committed credit lines. They are really unused. Hedging ratio is still quite high, 91%. Average interest rate went up to 3.3. There were several reasons behind that. One is that the bond issue was very, very successful, but nevertheless, the coupon rate is higher compared to what we have on average in our portfolio. During Q1, we paid back the remaining part of 2025 maturing bond, a little more than 400 million euros. And then the bond, 2026 maturing bond, we made the repurchase, so that was getting a lower coupon compared to the new one. So these factors lead to the increase in average interest rates, 3.3, that's including the cost of derivatives. There has been some discussions regarding the comparability of our figures, because it looks that some of our peers are booking part of the repairs and monetization investments on the balance sheet, and only part of them are booked in P&L. So now we introduce a new KPI, so coverage ratio excluding repair expenses, to make our figures more comparable. The coverage ratio including repairs is 2.5 and excluding repair expense is 2.7. Page 17, our key figures here, equity rates, equity per share, and APRA NRV remained pretty much unchanged compared to the big ending of last year. So page 19, our outlook for this year, we kept that unchanged. So we estimate that top line growth is going to be between 1 and 4%, and FFO is going to be between 135 to 145 million euros. In the midpoint of the top line guidance, we assume that the rent increase is going to be moderate. The improvement on the occupancy is penciled in there as well, and the fact that we are flexible what comes to rents. We haven't penciled in any support from the market, improving market in this guidance. And then if you look the FFO guidance, so the range there reflects the top line growth rate range, and then average, the midpoint of the FFO guidance, including the assuming average weather remaining part of this year and SG expenses and repairs in line what we had in 2024. Strategy targets, couple notes there. So FFO against total revenue, it's good to keep in mind that because of the booking requirements, the whole year's property taxes are booked in first quarter, almost 15 million euros. And then other thing is this net promoter score. Very, very strong improvement there in latest year, and as I said, Q1 this year, the all-time high figure there. I'm extremely pleased with that improvement in Net Promoter Score. To summarize, our Q1 saw total revenue and net rental income increased, FFO decreased due to the increased finance expenses. Our occupancy rate has improved since last autumn, and the increase accelerated during the Q1, and fair value investment properties are pretty much in the same level as year-end, and our financial situation has remained strong. So now, I'm happy to answer any questions you may have.

So, do we have any online questions we can take?

If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Ansi Rousey from SEB. Please go ahead.

Yes, hi all, and thank you for the presentation. I have a few questions and I go one by one. So first about your average rent per square meter, which decreased a bit year over year. So could you explain a bit what impacted this figure, like do your campaigns impact this number?

Yes, so in some cases we've been lowering the rents, the asking rent, I mean, and in a situation where the apartment has been vacant very long time and we know that there's nothing wrong with the product and we have tried to find a customer there and we see that around our building, our competitors have available apartments, they are clearly lower rent, what we have in those cases, we have even lowered the rents, and then the impact of these campaigns. So in some cases we have offered two, three or four weeks vacant period in the beginning of the lease period. That has been the case in the market for several years, and there are much stronger incentives available by our competitors. We do that in a small scale, but yes, that has an impact on the average rent as well.

Got it. Thank you. And then about your booked fair value losses, which were, I think those were 37 million euros. which was the main driver here, and maybe linked to these 2,200 apartments, which are now booked as held for sale, or is it so?

So there are several items, including an impact in that figure. So the impact of net rental, changing net rental income, aging of the building, and some other items as well.

Okay, so these apartments held for sale didn't have or these were not the main explanation here.

So at this stage, we are not able to comment that, because they are, as I said, booked because of the IFRS requirement. If we are able to finalize those discussions, then, of course, we are going to dispose the impact of those transactions as well. But it's too early to comment that at this stage.

Okay. Thank you. Thank you and maybe one more. Did you mention your buffer in fair values before you would hit the 50% LTV?

800 million euros, so around 60 basis points, if only yield requirement changes. Of course, now the gas flows are improving, but if you only look at the change in yield requirements, it's around 60 basis points. So, quite a sizable buffer against that 50 percent level. Great, thank you.

I jump back to

The next question comes from John Vong from Van Lanshot Kempen. Please go ahead.

Hi, good morning. Just a follow up on the question before on rents in your market. Are you seeing any change in this lower rents and discounting that your competitors are giving over the past, say, month or two?

So it looks that the lowering the rents is not there anymore in big scale. So in that sense we haven't seen in the market changes yet, but our approach is now more moderate what comes to the lowering the rents.

And would you say that your apartment rents are now at market rents? So everything in your portfolio is at a similar rent to apartments in the neighborhood, comparable?

So at the moment, I think we are at the market. Of course, in a big portfolio, there might be one or two apartments that you need to look at what the right rent level is there. And then if we compare our pricing to the general market, so we are still getting premium to what we see in the market. We don't want to get rid of that, of course, but in some cases, it has been justified to be more flexible what comes to the renting. And of course, if you combine what we have done on the rent side and what we have achieved on improving occupancy, so improving occupancy is more than offsetting the impact of, in some cases, lowering the rents.

Okay, Claire, and then just on your comments on the investment market, I think you said it was still a bit slow. You haven't really seen any transactions. At the same time, you booked a couple of assets as held for sale. Does this imply that you're seeing that the market is opening up?

So we have communicated that our aim is to dispose some assets, non-core assets, 100 to 300 million euros, and that's still our aim. There's several discussions ongoing. We know that there are especially international investors who are looking at the Finnish property market, but why we booked this as held for sale, it's more related to the requirement on IFRS.

Okay, that's clear. Thank you.

The next question comes from Neeraj Kumar from Barclays. Please go ahead.

Good morning, everyone. I have a quick question on your Moody's rating. So how comfortable are you in defending the current rating at Moody's? The reason I ask is because Moody's was expecting the EBITDA ECR to land at 2.4 times as a full year 2024, whereas the number came out at much lower as 2.17 times. So just trying to get some thoughts on that.

So, when we discussed with Moody's and actually what they said in their latest report, so they think that the market is improving, they seem to like the company, they really appreciate all these actions taken by the company to support the balance sheet and to remain investment-creating. And there are three KPIs that they are especially looking at. One is loan-to-value, and as I said, We have a quite sizable buffer against the 50% level, which seems to be the threshold for BAA2 rating. Other thing is liquidity coverage, and we are taking that box as well. And now, on back of this latest bond issue, our position there is even stronger. They are looking net debt EBITDA as well. They haven't set a target there, They concluded that, thanks to all these actions taken by the company, net debt debita is slightly coming down going forward. And then, of course, we have this fixed-charge coverage ratio, ICRS. Moody's call it fixed-charge. coverage ratio and in the latest report they say that they they in our case they will tolerate 2.5 times and based on their calculations we might go below that but thanks to all these actions taken by the company they expect that to to recover and go to the gross path and and the reason why they kept the negative outlook, it has been there quite a long time, is that actually they want to give the company time to show that this is really crystallizing, I mean, all these actions, and even if the fixed cost coverage ratio goes below 2.5 times, it turned to the growth path again. And we have set a management meeting with Moody's in August, and Nowadays, they take each company once a year in the rating committee, and on the back of this meeting that has been set, they, of course, will take us to the committee, and then we hear what the outcome is. But this is the situation regarding the KPIs and how Moody's approach our figures and situation.

Thank you. Just a linked question to that. So Moody's is also assuming 140 million assets to be disposed by you this year, which means, should we assume you'll be able to sell half of the assets held for sale, which you have classified?

In the report, they say that they penciled in in the calculation 140 million disposals this year. Yeah, thank you.

The next question comes from Ansi Rousey from SEB. Please go ahead.

Thanks. A couple of follow-ups from me, if you may. So I think you mentioned that the rental activity has remained at the solid level or maybe even improved in April. So how should we think about the typical seasonality this year because the market conditions are quite exceptional right now?

Well, the seasonality is still there in the market, and it was actually very, very strong if you look what happened in the market, and we've been able to to move into other direction, thanks to all the actions taken by the company. So in our case, the seasonality is not visible in our figures, but yes, you do see the seasonality in the market. And typically, during the summer, the amount of new lease agreements is higher compared to other months, and we don't anticipate any changes there if we look at the market.

I understand. And maybe lastly, just to double check something here. So did you mention that you have increased rents above 1% in your existing agreements? Little more than 1%, yes. Got it. Thank you. That's all from me.

There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Thank you. I think we have some questions from the chat. We already touched assets held for sale and also the fair value changes and these items which are included in those calculations. But then a quick question on the transaction market. Do you see any potential motivated or forced sellers, for example, funds,

That used to be the case six months ago or so, but now, because these funds, most of these, they are open-end funds, but they are more or less closed right now, so they are not paying out for the investors, so that's why we don't anticipate to see any forced sellers or highly motivated sellers regarding that. Other than these open and resi funds, there hasn't been any distressed or highly motivated sellers in the market.

Then about this like-for-like growth. You made progress in occupancy improvement, but like-for-like bridge shows occupancy effect was negative 1.7%. Can you explain the difference? Because it was thought that it was Q1 24 versus Q1 25, and then Q1 24 occupancy was lower than in Q1 25.

So in this like-for-like calculation, you compare figures for the past 12 months against the previous 12 months. So it's not quarter to quarter, it's a year to a year, or 12 months to 12 months. So that's why in these calculations, there are still those figures where you compare Q2 last year against Q2 2023, and same goes with Q3 and Q4 as well. And in those quarters, the like for like what comes to the occupancy was quite strongly negative. So you are right that Q1 against Q1 is just positive, because of these 12 months calculations, you have the burden of these poor quarters in Q4, second and third quarters. And now what comes to the calculations going forward, so and in Q2, we are going to enjoy the positive trend in our occupancy, and we will, in those calculations, we will drop out the pure quarter, I mean Q, Q2 2024 against Q2 2023. So that's why in like-for-like figures, you still have quite strong negative impact on the occupancy. But in real life, our occupancy has been improving. And that's why I say that this like-for-like calculation is backward looking. and we are concentrating what's happening in the future, and what we have achieved, especially during Q1 this year. So, this is a tricky one in this type of situation, when things are changing very fast.

Then a question on Peer Sato. They have reported increasing rents for Q1 and higher occupancy rate. Is there anything you can comment or explain?

Yeah, the occupancy is higher than ours. We are moving in the right direction, we accelerated the speed, and if you look, SATUR's Q1 occupancy and compare it to the Q4 occupancy, it's down by 50 basis points. So in that sense, we are moving in other direction. Yes, the fact is that the occupancy is still higher than ours, but now we are moving in different directions and I'm extremely pleased of the outcome, what we have achieved, what comes to the improving occupancy in our case.

So how is this improvement in occupancy rate? How is it in line with your FFO guidance?

So, the top-line guidance, 1-4% in the midpoint is the improved occupancy, and that of course has an impact for FFO as well. But if you compare the midpoint of the top-line growth guidance and the midpoint of FFO, they are in line. So if we are able to improve the occupancy, the aim is of course to improve it, then of course that is going to have a positive impact, both top line and FFO.

Can you comment where we are standing at the end of the year, regards to the occupancy?

We are not giving guidance regarding our occupancy.

How about the cost of debt? Do you expect it to remain stable?

So, the thing is that this year we don't need to do any additional refinancing, because the investments volumes are low. So, it's all about refinancing, not taking new money in. And it looks that interest rates came down already. And again, I would say in last month or so, and the spread has been quite slightly wider compared to the time we made our last bond. So, there's not that much to be happening during this year, given the fact that we now have taken care of all refinancing needs for this year and 2026 as well.

Okay and now final question and it's related to the LUMO website and web store. Do you show all the available rental apartments there? So is it up to date and is it possible to calculate the spot occupancy rate from there?

It's an indication, but you can't really calculate the exact figures, because when an apartment becomes vacant, it takes a little time before it's taken into the web store. And some of our apartments, of course, they are under repairs, and they are not available in the portals. So you can't get exact spot figure, but in a ballpark, of course, you can follow what's happening, just looking at those figures.

Yes, you can see the trend. Thank you for the questions, and thank you for the very good questions. So... Next time we will meet in August, August 21st. We will publish then our half year result. So thank you for joining us today. And now I wish you all a very good and warm summer. Thank you. Bye bye.

Thank you very much.