Good morning, ladies and gentlemen, and welcome to Kojamo's full year results news conference. My name is Niina Saarto, and I'm Group Treasurer and Head of Investor Relations. Today, the presentation will be given by CEO Jani Nieminen and CFO Erik Hjelt. After the presentation, we have time for some questions. We'll take first questions from the phone lines and then from the chat. Let's begin. Jani, welcome.
Good morning, everybody. It's nice to be here and provide some color on what's been going on in Kojamo last year. Providing color as a summary of last year, it's easy to say that we have made steady progress in implementing our strategy, and we've been able to create profitable growth in spite of the challenging circumstances. Our numbers are solid, and we had a strong growth in the fair value of investment properties due to our investments and lower yield requirements in the market. Going forward and providing some color concerning the operating environment on page four, the Finnish economy is expected to grow driven by domestic demand, and the overall view of the economy is stable despite of the COVID-19. The pandemic has had an impact concerning urbanization. I would call it a temporary impact, especially here in Helsinki region.
If we look at the numbers concerning residential starts, it seems that towards the year end, there was an increase concerning the estimates. As it now seems, the estimate is that 44,000 apartments were started, mostly because of the fact that construction companies feel that there's a lack of supply for home buyers, and they have a limited number of unsold apartments. More and more construction companies are focusing towards build-to-sell projects for home buyers. Construction increases were, according to statistics, 3.5%. We do feel that they've been increasing a bit more than 3.5%. It's good to keep in mind that actually these construction increases have no impact for our ongoing new development projects, as all our projects do have fixed prices. GDP growth was positive. 3.4% is quite a strong figure.
The vaccination level here in Finland is really strong. Of course, we have had this phenomenon of COVID-19 and Omicron variant providing a lot of new cases and restrictions and creating uncertainty. Moving forward, it's good to keep in mind that even though there's been a temporary impact towards urbanization, long-term drivers for demand for rental apartments in the biggest cities are still valid. Finland is still lagging behind the rest of Europe concerning urbanization. According to all the estimates, urbanization will continue after COVID-19, and especially the uncertainty related to possible restrictions coming in or out will be removed. We feel that then traveling will pick up speed. People will start moving towards the biggest cities again, as new work opportunities are available, and that will create, again, a lot of demand for new homes.
It's still a fact that we have an increasing number of small households, meaning one- and two-person households here in Finland, and there's been a shift in people's values towards ownership. Especially, for example, cities like Helsinki, Turku, and Tampere, actually more households today live in rental apartments than in owner-occupied homes. Moving forward, as we've been saying, we feel that it's a temporary impact created by COVID-19 towards urbanization. On the left-hand upper corner, it's clear to see that the population growth here in Capital Region has been low. Some have been talking about whether there's oversupply situation in the market. I wouldn't call it oversupply situation in the market. I would call it a temporary under demand situation in the market, which will pass by once people start moving towards Helsinki region again.
I would say the construction increases have made it a bit more challenging for us to find suitable new development projects according to our parameters. Actually, that means that we just have to work a bit harder and scan more projects in order to find suitable ones for us. Construction companies providing increasing volumes for home buyers, I do believe that it's based on the fact that they do have a limited number of unsold apartments, but as well that they do believe that they are able to transfer the increase in construction cost to home buyers as all the estimates indicate that home prices are still increasing and will increase this year.
On the other hand, if they are not able to transfer the cost increases for home buyers, they do have quite a lot of projects to be started, and they may end up in a situation again which actually opens up a window for Kojamo in order to buy more projects. Moving forward to key figures, as I said, our numbers were solid according to our estimates. No surprises there. We were able to actually increase the total revenue. The increase there against the corresponding year was 2%. Of course, it's always a combination that we've been investing a lot and completing new homes, both 2021 and 2020. As well, we will be completing this year. And then there's a like-for-like growth aspect as well. We were able, as well, to increase both the net rental income and funds from the operations.
There is a combination, as we've been providing information already last year that last year the winter was cold, provided a lot of snow. There was an impact because of the pandemic. People spent more time at home, consumed more water. On the other hand, we were able to achieve some savings, for example, in SG&A expenses, and we were able to optimize some renovations. The fair value of investment properties today, EUR 8.3 billion, included a strong positive impact. At the end of the day, our strategy has been all the time to grow and invest in new homes. The strong development gains is a combination. Of course, there's a lot of interest towards the Finnish resi business. We have seen quite aggressive yield down in the market, and that provided an impact towards valuation yields.
On the other hand, we've been saying all the time that we do get strong development gains as we are completing new homes. We did have an improving net rental income, and at the end of the day, we still have apartments where restrictions are ending, and we are changing the valuation methodology that provides uplifts. Gross investments, roughly EUR 357 million, basically new development projects. We did not buy anything last year because we didn't find suitable portfolios for us. A strong number in profit excluding changes in value, EUR 173 million. Improvement, there's 4.7% against the corresponding year. As we combine the changes in fair values with the profit excluding changes, we did have a really strong number with profit before taxes, close to EUR 1.3 billion last year.
For Kojamo, it's all the time important that we are able to grow by using multiple sources. Last year, the focus has been new development projects. We did start the construction of a bit more than 1,300 apartments, and we do have a record high number of new development projects under construction, providing 2,675 apartments. Most of the projects here in Helsinki region, one project now located in Tampere region, that will provide us the future growth. We still are able to convert premises into apartments. There's a big potential in so-called Metropolia properties, providing additional 1,000 apartments in Helsinki region. Of course, we are scanning the market all the time in order to find suitable portfolios for us. We are ready, willing, and able to move fast if we find something appealing enough.
As I said, all the projects, except one new development project in Tampere, are located here in Helsinki region, those projects having an excellent micro-location along with public transportation. The net initial yield in all the new development projects is 4% or above 4%, actually meaning that we are gaining strong development gains once those projects will be completed. All the projects at the moment are proceeding in a normal manner. This year, we will be completing roughly 1,300 apartments. 2023, we are completing 1,800 apartments. Today, we are working on the numbers providing completed homes 2024 and onwards. Metropolia case is proceeding. The last parts of the zoning will be completed. The first projects, the conversion will be started during this spring. As I said, it's good to keep in mind that these ongoing projects do have fixed pricing.
They are turnkey projects. We have binding agreements with construction companies providing roughly 600 apartments. In those projects, basically, most of them do have fixed pricing. They are turnkey projects, so these cost increases have no impact toward our net initial yields. We've been fine-tuning the Lumo brand as well. For us, it's important that we are able to create exceptionally good customer experience, providing added value for our customers, meaning easy, effortless living. It's a combination of apartments, communal spaces. We do typically own the whole building, provide different premises, providing services for incoming tenants, existing tenants, both digital and physical services. We are happy to say that, for example, the digital Net Promoter Score was 64 last year. 70% of our tenants today use My Lumo application.
To pick up one example of the services, we have a bit more than 700 cars available for our customers in the sharing car system. Moving to page 11, providing some color on sustainability work. For us, it's a part of our company DNA. We've been working on ESG issues on daily basis all the time. We aim to be a company using carbon-neutral energy by 2030. We do have a roadmap in place. We are proceeding as planned. We have a clear vision, and we've been succeeding in improving our GRESB figures. We will be providing more color on ESG in our annual report, which be soon published, and we will keep on working on daily basis in order to achieve our targets concerning ESG issues. At this point, I would move to Erik, and Erik will provide more detailed color.
Thank you, Jani, and good morning, everybody, from my side as well. Page 13, our total revenue growth was 2%, and that's EUR 7.8 million. During Q4 last year, the growth was EUR 2.5 million, and the total revenue landed in Q4, EUR 99.6 million. Like-for-like rental growth was a negative 0.3%, and the growth was mainly driven by the growing portfolio, meaning the completed apartments, 2020 and 2021. Net rental income growth was whole year EUR 4.7 million. Growth was EUR 1.7 million during Q4, landed at EUR 65.5 million.
The whole year figure, the growth in maintenance cost was EUR 6.4 million, mainly driven by the harsh winter that we had here in Finland, especially during Q1 and Q4. Impact for whole year maintenance cost during Q1 was EUR 2.8 million and EUR 1.6 million during Q4. The repairs was negative figure there, so some savings there, EUR 3.4 million. Page 14, the profit on fair value and investment properties, whole year figure, EUR 1.1 billion, EUR 621 million during Q4. If you look at the Q4 value change, so the yield compression accounted 68% of the total value change. Development gains, 7%.
Net rental income increases provided 24% of that growth. Easing restrictions played a minor role in Q4. Our development gain has been north of 30%, 30% . Yield requirements came down by 24 basis points from Q3 to Q4 on whole portfolio level. FFO growth there was EUR 1.7 million. Of course, net rental income growth contributed there, EUR 4.7 million. SG&A expenses, we achieved there some savings, EUR 1.1 million. Finance expenses up by EUR 3.9 million, given the fact that underlying loan portfolio was much bigger than in corresponding year.
Cash taxes up by EUR 0.5 million. Page 15, the financial occupancy rate pretty much flat compared to Q3. The drivers there and reasons behind that, they're pretty much the same as after Q3. The Omicron variant and the restrictions based on that still plays a role, especially here in Helsinki region, and hopefully now we are moving towards removing those existing restrictions. Page 16, like-for-like rental income total figure -0.3%, but good to note that the impact of rents and water charges was a positive figure, 2.2%. We've been increasing the rents pretty much in a normal manner, and the negative figure, 2.5, was the impact of occupancy rate.
Page 17, investments, mostly development investments, EUR 339.5 million, monetization investments EUR 11.9 million, and capitalized borrowing cost EUR 5.4 million. Monetization investments and repairs down by EUR 3.4 million, as already said, and monetization investments, 15.2 million euros less than in corresponding period. There the reason is decrease in monetization investments related to timing of projects, so no bigger monetization investment projects started 2020. Page 18, fair value investment properties. The profit on fair value investment properties EUR 1.1 million, and investments EUR 356.9 million.
We still have 2,039 apartments where there are restrictions regarding the valuation and the uplift in the valuation, and these restrictions gradually end by 2024, will be somewhere between EUR 130 million and EUR 150 million, and that is back weighted, so half of that most likely is coming through 2024. Page 19, our ongoing developments and binding agreements and land plots, euro-wise, so almost EUR 400 million already invested in these ongoing developments, EUR 267 million to be invested in order to complete these 2,675 apartments. We still have under binding agreements apartments 636, and to complete those, we will invest EUR 123 million.
Metropolia case, providing additional 1,000, roughly, on 1,000 apartments, EUR 8 million in our balance sheet, and then the real land bank, if you like, so pure land and land where we have existing building, and idea is to demolish existing buildings, building to provide a net 300 additional apartments, so worth of EUR 51 million. We estimate that investments in developments this year, 2022, will be somewhere between EUR 310 million and EUR 360 million. Page 20, our loan-to-value and equity ratio figures actually very strong. We have set the target for equity ratio to be above 40% and loan-to-value to be below 50%, and we have quite sizable buffer against these levels.
EPRA NRV per share, 22.04, driven by the value change, and the FFO, of course, for growth from Q3 was EUR 2.72 per share. Actually, I have noticed that, in most of the times in 2020 and 2021, Kojamo shares has traded above premium on this EPRA NRV. Page 22, our key financial figures, strong figures, no major changes there actually. Cost of debt on average 1.8% including the cost of derivatives, and we are quite conservative when it comes to interest rate hedging, so hedging ratio was 92%. Average loan maturity and average fixed interest rate period above four years. We have EUR 300 million credit lines in place, committed, unused, EUR 250 million.
Commercial paper program, EUR 50 million, outstanding commercial papers. We are quite cash rich, so more than EUR 300 million in cash and cash equivalents, as well as in financial assets. Page 23, couple notes for the strategic KPIs. Growth 2%. Our long-term target is to be somewhere between 4%-5% annual investments. The target there is to invest between EUR 200 million and EUR 400 million per year. We were on the upper end of that range. Profitability side of the KPIs, so FFO against total revenue, our target is to be above 36%, more than we were above 39%, so very strong figures there as well. The risk management angle, if you like, so loan-to-value, equity ratio, quite sizable buffer against these target levels. Net Promoter Score target is 40.
We were at 20, so it's good to note that digital NPS was 64, and this NPS net promoter score figures seem to have gone down during the COVID-19 and that's quite universal phenomenon. It goes on different industries as well. Our interpretation there is that people are still simply sick and tired of COVID-19, and that's why they are unsatisfied. Because in our surveys all these customer satisfaction KPIs has been improving even during 2021. Our outlook, we estimate that the top line growth will be between 3% and 6% year-on-year. We estimate that the FFO 2022 will be somewhere between EUR 153 million and EUR 165 million.
This outlook doesn't take into account the impact of potential acquisitions or disposals. If you look at what assumptions we have behind this outlook, the top line first. If you look at the upper end of that range, 6%, that's actually divided into two parts. First of all, half of that to achieve this 6% will come through the like-for-like rental and water charges increases and improving occupancy, and half of that will come through completed developments. Of course, those developments completed 2021, and those that will be completed in 2022 will have a positive impact for top line. This FFO guidance actually reflects the top-line guidance. On top of that, of course, it requires to have so-called normal weather.
Last year, the weather was very tough and we had to spend more money because of that. In this guidance, we expect the winter to be a normal level. We expect some cost inflations there, but we estimate that we should be able to save some costs as well. Dividend policy, no changes there. The board proposal for AGM, EUR 0.38 per share. Now I hand it over Jani.
Thank you, Erik. In order to a bit summarize, say that 2021 was in line with our estimates and expectations. As I said, our numbers were solid. Both the total revenue and net rental income increased. Our balance sheet figures are really strong at the moment. We've been progressing in line with our strategy. We are growing in line with our expectations. The new development project pipeline is really strong, and we see that the impact in urbanization because of COVID-19 is a temporary issue. Urbanization will continue. For example, a piece of good news is that even though market conditions here in Helsinki have been quite challenging, we started renting out Lumo One in January. First people will be moving in in July. We have already rented out half of the apartments. Basically half year before the completion, half of the apartments are already sold.
We do believe that there's a lot of appetite for the concept Lumo provides for the customers. Thank you. Now we would move to Q&A. Please, Niina.
Thank you, Jani. Thank you, Erik. As said, we can now move on to Q&A part, and we could have first questions coming from the conference call line. Operator, we are ready.
Thank you. If you wish to ask a question, please dial zero one on your telephone keypads now to enter the queue. Once your name has been announced, you can ask your question. If you find it's answered before it's your turn to speak, you can dial zero two to cancel. Our first question comes from the line of Santtu Klockars of Nordea. Please go ahead, your line is open.
Thank you. Thank you, Jani and Erik, for the presentation. I have a couple of questions here. First one to your value uplift, which was quite massive noting that Helsinki region declined from 3.5% to 3.25% quarter-over-quarter. Could you give some flavor about what kind of reference deals impact that? Is it mainly new apartments, or has there also been some old apartments sold?
As we've been providing color already, last year, there have been several transactions, acquisitions in the market. Of course, we are relying on the expert view provided by JLL, which follows the market all the time, gathers all the information from the market. I would say it's a fact that there's been a yield compression in the market. We have seen quite aggressive yields in acquisitions, 3% and a low figure, even if not a flat 3% here in Helsinki region. On the other hand, it's good to keep in mind that the positive impact in valuation was not only because of the yield compression. We did receive strong development gains as well, for example.
Thank you. A follow-up question on your latest line. So you implied that the development gain is now north of 30%. Does that mean that you are already at 3% or even below 3% in the valuation of new apartments?
We are still above three in new ones.
Your yield on cost is at least with some margin above 4%.
Yield on cost is still around 4% or above 4% as discussed earlier. Given the fact that ongoing developments and those ones that will be completed this year, those agreement has been made two or three years ago. Most of those we have fixed price. As indicated earlier, the yield on cost there has been around 4% or above 4%. Nothing changed there.
Follow-up on that also. Your investments for 2022 are perhaps a bit on the low side. I know that obviously a lot of that is decisions that have been made a long time ago. Does the increased cost level of construction impact your investment willingness?
As I said, we have seen that we need to work a bit harder in order to find new projects. I would say last year the slight impacts were because of timing issues, so planning, building permits, things like that, not because of that we wouldn't been able to find new projects. We do have existing binding agreements with construction companies providing additional 600 apartments. Mostly it was-
Thank you.
A timing issue last year.
Thank you. Then, on the one you earlier or at the end of last year announced the possible disposal of up to 3,600 non-core assets. Any progress in that?
We will provide information in a timely manner once the decisions are made. No new information there yet. We are evaluating the issue.
Thank you. Then, regarding the guidance, Erik, you gave some color on that. Basically if I read it correctly, should we assume that you are closer to 3% revenue growth if the occupancy rates stay at current level? If they would move up, let's say some point to where it has used to be, then it should be closer to the higher end.
As said, half of the 6% upper part of the range is coming through if we are able to increase the rents and water charges and improving occupancy. That means actually that even if the occupancy would remain flat, the like-for-like growth is going to be there because our target is to increase the rents in pretty much a normal manner.
Okay. Thank you. That's all from me.
Thank you. Our next question comes from the line of Andreas Toome of Green Street Advisors. Please go ahead. Your line is open.
Hi. Good morning. I was just wondering if you could help us understand the occupational recovery potential in Helsinki. It seems to be a moving target, and I can appreciate that the government restrictions obviously have made it quite difficult to predict when the demand side recovers. Looking at the supply picture in Helsinki, it seems elevated. Just looking at the construction completions, and that's really a structural feature, right? On the back of that, what are you assuming in terms of rent growth potential for the next few years in your underwriting?
Yeah. Thank you for the question. As we've been providing color, we did see an increasing number of work opportunities already last summer here in Helsinki region. There was, because of COVID-19, uncertainty, and people were hesitating in order to move towards Helsinki region. Then COVID-19 kicked in with Omicron variant, creating restrictions and more uncertainty. As soon as restrictions will be removed, and there's a relief concerning the uncertainty, so people believe that no restrictions will be entering again, we do believe that they start moving towards Helsinki region. Even though the supply numbers are higher at the moment, we do see that as a temporary thing.
As urbanization will continue, that supply will be absorbed from the market. Mid- to long-term, we do still believe that we are creating like-for-like growth between 2.1% to 2.4% or 5% a year.
Understood. Thanks. Maybe also on the disposals, I guess, you can't reveal much in terms of the process, but if you were to go ahead with the disposal, where do you kind of think to invest those proceeds? Is it to your pipeline, buying new projects, or you're looking to buy maybe other stabilized assets around Helsinki?
I think that part of the question remains to be answered after decisions will be made whether we are selling something or not. Of course, there are different options to invest all the money, invest some of the money and provide extra dividends. Those combinations are all possible, but no decisions yet made.
Thanks very much.
Thank you. Once again, if there are any further questions from the phones, please dial zero one on your telephone keypads now. Okay, we've had one further question come from the phones. That's from the line of John Vuong of Kempen & Co. Please go ahead. Your line is open.
Hi. Yes, good morning. Thank you for taking my questions. Perhaps also on the leverage number. It's a number that has already been decreasing for the past, I think, two years or so with strong valuations. Is this a number you're comfortable with, given that it continues to get lower each year, essentially?
Hi, John. Thanks for the question. Yes, our strategic KPIs, they are unchanged and we are quite nicely in line with those figures. That's of course the starting point. That buffer case gave us room to maneuver, if you like, so we are able to grab the opportunities in the market. Yes, the buffer is quite sizable at the moment. As I said, we are in line with our strategic KPIs.
Okay, thanks. I suppose that does not necessarily mean that you're willing to adjust your return requirements for any acquisitions you are making?
We haven't really changed our acquisition criteria. As Jani Nieminen earlier said, it's important for us that we have access to different sources of growth. Through our own developments and through acquisitions. Different times, the weight in these sources, of course, varies, and that's important for us. We are able to grow according to our strategy even without acquiring something. Yes, we are looking to the market, and if we find something suitable at first, then we look at all criteria, not only the yield requirements, but the quality of the property or the portfolio and the location and so on and so forth. It's a combination, but so far we haven't changed our investment criteria.
Okay. That's helpful. Thank you.
Thank you. We've had one further question come through on the phone. It's a follow-up from Santtu Klockars of Nordea. Please go ahead. Your line is open.
Yes. Hi again. One more question regarding construction cost increases. Official number 3.5%, but you, Jani, said that you feel that it's higher. Could you quantify that and perhaps also give some color on where you especially see increases in costs?
Yeah. As I said, it seems that these type of indicators seem to be a bit low because they follow a longer period of time. I would say here in Helsinki region, they are most likely between 3.5%-5%.
Okay. That's helpful. Thank you.
Thank you. As there are no further questions from the phones at this time, I'll hand the floor back to our speakers.
Okay. Thank you. We have also some questions in the chat. I believe that we have already discussed part of those. First question is, how much do housing allowances account for turnover?
Yeah. Housing allowances seems to be a topic which pops up once in a while. We've been providing all the time information that it's not a piece of information that we follow. Housing allowance is a system here in Finland which provides subsidies for people in need for a certain period of time. Those allowances are typically paid for the individual, which then decides whether to spend it on rents or something else, like, for example, grocery. We don't follow that issue or that topic. We don't gather that information. I would say it's good to keep in mind that look at the offering we provide for people. We provide solutions mainly for working people in excellent micro location with public transportation, providing additional services. It's not something we follow.
Okay, question on yield compression. Have you seen any U-turns in yield compression trend? I guess there has been some transactions already at under 3% yield requirement in Helsinki, but have you seen any changes during Q1?
It seems that there's still a lot of appetite towards the Finnish rental resi market from international players. Construction company SRV sold one tower in Kalasatama to an international investor. It seems that they were willing to pay quite an aggressive yield. It seems that there are some ongoing portfolios in the market and a lot of appetite. Remains to be seen what kind of yields will be paid by the lot of appetite towards the market.
Very good. Another question on occupancy ratio that was low, especially in Helsinki region. How do you expect or model this to develop in 2022, and have you seen already some signs of better or worse in Q1?
The visibility has been a bit limited during COVID-19, so it's not easy to model occupancy development. As we've been providing information, things have been better already last year in other parts of Finland and cities like Turku and Tampere are coming back to basically normal in the rental market. Here in Helsinki region, it's been more the question concerning the uncertainty and possible restrictions and when COVID-19 goes away. Restrictions now being lightened, hopefully no restrictions are coming again and uncertainty will be removed. That will have a positive impact towards urbanization. People will start traveling, start taking the work opportunities here in capital region. At the end of the day, Helsinki region is the economic heart of Finland. It will be the winner in urbanization game, so it will start growing, but the visibility is limited at the moment.
Okay. It seems that the other questions have been discussed more or less already. As we don't have any further questions, it's time to thank you all for joining us today. Kojamo's Q1 interim report will be published on May 12th. Hope to see you all then. Thank you very much and goodbye.