Morning. Welcome. This is Kojamo's third quarter result webcast. I'm Niina Saarto from Investor Relations. Today's presenter is our Interim CEO, Erik Hjelt. Erik's 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 just wait for your turn in the queue. Now we can start the presentation. I'll hand over to you, Erik.
Thank you, Niina, and good morning, everybody. I'm excited to discuss about Kojamo's Q3 figures. Page four, we have in a nutshell what happened during the Q3, and our total revenue and net rental income increased both, actually, by 3.1% from the corresponding period. Our financial 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 goes with all bigger cities: Helsinki, Espoo, Vantaa, Turku, and Tampere. Our FFO decreased due 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's corresponding period.
And maintenance expenses increased mainly because of the cold weather, especially during the first four months in this year. There was no significant 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 in repairs and SG&A expenses, as well as investments, are all in line with our plan. And our balance sheet remains strong, and our liquidity situation is good. And the next financing is about to refinance the 2026 maturing loans. If we then look at the operating 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 contracting this year, but turned towards the growth has already begun here in Finland.
Page six. If we look at the supply side, estimates are that 17,000 new apartments will be started this year, and that's the whole country and all unit types. If we then look at more important figures for us, it's non-subsidized apartments. The startup is estimated to be only 2,000. It used to be about 20,000, so this 2,000. This is a very, very low figure. Discussions with the construction companies indicate that in the near future, they are not starting any major new projects. That actually means that once these ongoing developments are completed, there's not going to be any significant new supply into the market in 2025-2026. As we know, it takes roughly 18 months to complete a new development project. It can go as long as 27 before we see any meaningful new supply coming into the market.
On the demand side, of course, these megatrends are still valid, so the development household size declining, unfortunately, in Finland, urbanization is there still, and the fact is that in the bigger cities, more than half of the households are living in rental apartments or owner-occupied homes. Migration is already quite strong here in Finland, so we are already on the level of pre-COVID-19 levels, so the population growth in these growth areas is there already, and 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 to the Helsinki region, so the demand side is strong, estimated to be strong going forward as well.
Then if you look more detailed at our financial figures, so total revenue growth is EUR 10.2 million year to date and EUR 1.7 million during Q3 compared to the comparison period. The biggest contributor for top line growth was completed apartments. So earlier this year and last year, completed apartments, EUR 11.9 million year to date and EUR 3.5 million for Q3. And rents and occupancy was a negative impact, EUR 2.7 million year to date. I'll come to the like-for-like rental growth later. Net rental income grew EUR 6.8 million, EUR 2.6 million during Q3. The growth was mainly because of the cost side. Growth was mainly because of the increased maintenance expenses, EUR 6 million. The growth of the portfolio was impacted, EUR 1.6 million. Heating and water were EUR 4.2 million and as said, especially during the first four months in this year because of the harsh winter.
Property taxes were up by EUR 1.3 million. Net rental income margin remained stable, so 67.4%, same as in the corresponding period. Profit before taxes, if you look without value changes, so it's a negative EUR 20.3 million. Net rental income, as said, on the positive side. Then finance expenses increased by EUR 29.5 million. It increased, but it's good to keep in mind that in the corresponding period, there was EUR 8.7 million profit from repossession of the bonds. But if you're excluding that, so the finance expenses increased nevertheless. And SG&A expenses decreased by EUR 4.1 million. Then a couple of notes regarding the FFO compared to profit before taxes. So FFO side, finance expenses were EUR 28.5 million higher than in the corresponding period. And cash taxes, EUR 3.4 million lower than in the corresponding period.
Financial 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 tailwind yet for improving occupancy, but the improvement has come through because of our own activities. So we've been doing some changes, especially in sales management and resources, better responding for the evening and weekend demand from the customer side, especially. Like-for-like growth. So impact of rent and water charge is positive, 0.9%. Impact of occupancy rate, negative, 0.9%. And then negative 0.4%, other impacts. And that comes through because now we are more flexible when it comes to the pricing regarding to support the improvement of occupancy. So we have done some price reductions in those apartments that have been vacant for a very long time.
And then we have some campaigns, so one-month free period in some of those apartments that have been vacant for quite some time. So in total, like-for-like rental growth was negative 0.4%. As part of the saving program, investment decreased significantly. So gross investments, EUR 21.6 million, almost EUR 140 million down from the corresponding period. We started about one new development program that's based on a previous binding agreement. So back in the days, 119 apartments will be completed in Helsinki in the beginning of 2026, but no other ongoing developments. And for the time being, we don't do any new investment decisions. Modernization investment and repairs, both down according to the saving program, in total EUR 22.7 million, EUR 4.7 million on the repair side, and EUR 18 million on the modernization 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 a limited amount of transactions 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 were a couple of smaller portfolios completed during Q3, and there the pricing is pretty much in line with what we saw during H1. There's still 404 apartments coming out of the restrictions, and there will be an uplift in the value when those restrictions end by the end of this year between EUR 20 million and EUR 40 million. Loan-to-value and equity ratio is strong, in line with the current public rating, Baa2, and we have quite a sizable buffer against the maximum level of loan-to-value to 50%.
Actually, loan-to-value equity ratio is pretty much unchanged from H1 figures. Loan maturities 24 and 25 are already covered. We have quite a strong cash position, roughly EUR 350 million, and the idea of using that cash to pay back the bond maturing first quarter 2025. Then that means actually 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 3%. At the end of H1, it was 3.2%, and the hedging ratio is high, 93%. In autumn, Moody's confirmed our rating, Baa2, with negative outlook, so that's a positive sign as well. EPRA NRV, EUR 18.34 per share. Then our outlook, we kept our outlook unchanged.
We estimate that the top line growth will be between 2% and 4%, and the FFO will be between EUR 142 million-EUR 152 million , so unchanged outlook there. At this point, happy to answer 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. First one on the line is Andres Toome from Green Street. Go ahead, Andres.
Hi, good morning. A few questions from my side. [audio distortion]
It's a combination of price reductions in some apartments that have been vacant for quite a long time and the impact of some campaigns, so rent-free periods to support the renting.
Okay, understood. And then this question is about the changes from the market source. It feels like the new market level of the property has actually picked up about a few basis points.
I guess in your portfolio, it's a smaller one than this quarter, but do you see that trend sort of going into the fourth quarter as well, or how does that look based on what you're seeing?
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 said, during the Q3, our occupancy moved in the right direction, and since then, we've been making quite a nice amount of new lease agreements. And there's still oversupply in the market, but we are moving in the right direction given the actions we've taken inside the company.
And my final question, just looking also at what's on the 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, the construction companies, they still have quite a large amount of unsold apartments, but they are, of course, meant to be sold for individuals. As we speak, yes, there are some ongoing developments, but a big portion of that is actually social housing. And they are chasing the rules for social housing, and that's why all these social housing players try to start as many projects this year as possible. So even the 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.
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 of what is going to be finalized next year. So that indicates that we will be in equilibrium perhaps after the summer next year. And by that, I mean that the vacant apartments in portfolios will be roughly on the same level as what we saw before COVID-19, that level.
Understood. Thank you.
Okay, then the next question comes from Céline Soo-Huynh from Barclays. Go ahead, Céline.
Hi, Erik. 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. We're in November, so is it fair to assume that no disposals are 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 at disposals still. We are not in a position that we have to sell anything, but our aim is to dispose of a 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 are able to complete them. And there are several ongoing discussions, but it's too early to say when something really will 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 there is a headhunter involved in that process, and that's an 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 when the new one is coming in.
Thank you, Erik.
Thank you, Céline. No further questions there, so I have a couple of questions here in the chat. So Erik, 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, the like-for-like assumption is in line with what we've seen here today. Then about market, rental market, can you comment on what type of rental incentives there are used?
So typically, there are rent-free periods 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 offer even a two-month rent-free period, but in our case, typically it's from two weeks to one month. Okay, thanks. Then about financing, what are your plans for 2026 maturities? So our preference is clearly to return to the bond market. In our case, it's always been important that we have access to different sources of financing. Of course, we looked at all options, but our preference is clearly to return to the bond market. The market as such has moved in our direction, so swaps came down and spreads tightening, and the market seems to function very well. Perhaps for us, the sweet spot for timing-wise would be Q1 next year.
But as said, our preference is clearly to return to the bond market. Thanks. And then the final question today. What do you see in the transaction market and foreign investor interest? So the transaction market is really still muted, so the volumes are very, very low. When discussing with brokers, we got the impression that there are still international investors who are scanning the market. But for various reasons, those discussions haven't really led to transactions. During Q3, we saw three smaller portfolio transactions in the rental market here in Finland. The sellers were mainly, actually two out of three were open-ended rental funds, and the buyers were 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 on February 13th, so I hope to see you then.
Now I wish you all a great week. Bye-bye.
Thank you. Bye.