Good morning all, and welcome. This is Kojamo, and this is our Q1 Result Webcast. I am Niina Saarto 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. 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, Niina, and good morning, everybody. I'm really excited to discuss our latest result. Operationally, we had a very strong quarter. The improvement of our occupancy rate accelerated in the first quarter of this year. Total revenue and net rental income grew in the first quarter of this year. 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. Net rental income grew EUR 2.2 million, but on the FFO side, the financial expenses grew EUR 3.6 million. Our occupancy rate has improved since last autumn, and the increase accelerated during the first quarter. At the end of, or during March, actually, the occupancy was already 93.5%. Our balance sheet remains strong, and the liquidity situation is very good.
Following the successful issuance of EUR 500 million in March, now we can say that already 2026 material loss are covered. Geopolitical tension grew significantly in the beginning of this year, and that has, of course, an impact for general environment, economical environment. Since Kojamo is operating only in Finland and we do not have any export or import, the direct impact of this geopolitical tension is not visible in our operations. For us, it is more important what is happening in the rental resume market here in Finland. I will come to that later as well. Operating environment as said, 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, a little more than 1%.
Given, in that sense, a good background for our operations. Operating environment, if you look first at the supply side, already three years in a row, the resident startups in Finland have been at a 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. Startups in 2023, 2024, each year it was well below 4,000, and estimates for this year non-subsidized apartment startup is 7,500. That estimate is given on Confederation of Finnish Construction Industry. If you look at releases from listed construction companies, this 7,500 may be a quite optimistic figure. Nevertheless, there are estimates that in Finland we need 35,000 new apartments annually to cover the needs of the organization. These startup figures are way, way below that requirement.
As we know that it takes roughly 18 months once a started project is completed, so it is pretty clear that the second half of this year, 2026 and 2027, no major amount of new supply coming into the market. Moving to the next page, the demand side, the organization is already on the same level as it was before COVID-19, and actually the city of Helsinki, for example, and the population growth there is even stronger than before COVID-19. At the same time, the immigration, according to Finnish standards, has been quite strong. Statistics Finland estimate 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 the Helsinki region.
If you combine, we are not giving any guidance here, but if you combine these two figures, the volume of startups, resident startups, and the population growth in these growth centers, we might be in a balanced situation by the end of this year. When I say balanced situation, I mean that available apartments in the public portals are on the same level as it was before COVID-19. Moving to page nine, total revenue grew EUR 1 million, improving occupancy contributed EUR 0.5 million, and then completed apartments another EUR 0.5 million. Net rental income grew 2.2%, repairs was EUR 0.2 million, lower than in the corresponding period, and maintenance was EUR 1 million below corresponding period.
Heating was EUR 1.4 million down from corresponding period due to the mild winter here in Finland, and electricity was EUR 0.5 million below last year's figures during the Q1 as well. On the growing side, there was water and cleaning together roughly EUR 1 million up. Moving to page ten, profit before taxes excluding change in values, so net rental income contributed EUR 2.2 million, SG expenses same level as in the corresponding period, and finance expenses on the P&L side up by EUR 4.7 million. On the FFO side, finance expenses up by EUR 3.6 million. Page eleven, our occupancy has improved since last autumn. If we compare Q1 occupancy to Q4 last year, the occupancy rate improved 1.2 percentage points, quite strong improvement there. If we take only the occupancy rate for March, it was already 93.5%.
During April, we have made a good number of new lease agreements as well. Tenant turnover decreased from last year, so corresponding period is down by 0.6%. All this happened regardless of the fact that there is still oversupply in the market and there is typical seasonality in the market. What we have been actually doing, the renting has been quite strong. There are several reasons behind that positive improvement there. We are still increasing the rents for existing customers more than 1%, but that is a much more moderate level compared to the beginning of last year. We are more flexible when it comes to the rents, and we have made some additional repairs to support the renting. 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 things that are contributing for improving occupancy is that we have been able to enhance our customer satisfaction. Now we have been developing our operations of the Lumo service center, and we have improved our cooperation with property management partners. Now the end situation is that we are offering faster and more effortless service for our customers, and this is already visible on our figures. Net Promoter Score 57, all-time high figure there. Page twelve, 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.
If you look, the impact of rents and water charges, as I said, we are still increasing the rents for existing customers, contributing 0.8 percentage point for like-for-like calculations. These lowering rents and incentives, we are in some cases offering at a negative impact of 0.4%. This impact of occupancy rate, the - 1.7%, as I said, this is a backward looking figure, and we are more concentrating on improving our occupancy looking forward. 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.
If you look at 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 thirteen, our investments remain at the low level, so for the time being, we are not making any new investment decisions. We have one ongoing development project, 119 apartments, so-called Sentnerikuja project in Lassila in Helsinki, 119 apartments to be completed during the first quarter 2026. Gross investments during the first quarter this year was quite a low figure, EUR 4 million. Modernization investments, EUR 2.9 million, and repairs, EUR 5.8 million.
We estimate that the repairs for the whole year will be broadly in line with last year's figure, and the modernization investments this year are going to be somewhere around EUR 30 million, given the fact that we have started a couple of bigger modernization investment projects. Fair value investment properties slightly down 0.5%. There was a limited amount of transactions in the market, actually only one small portfolio transaction, and that was broadly in line with the previous transactions, so there's no evidence that the yield requirement has moved during the first quarter. It is clear that the decrease in interest rates reduced 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, EUR 37.4 million, there are several items included, these items including the impact of net rental income and aging of the buildings. Page fifteen, equity ratio and loan to value at a strong level. We have communicated that our aim is to do some moderate amount of disposals between EUR 100 million and EUR 300 million, and because of the IFRS requirement, we have now booked EUR 280 million worth of assets as held for sale because of the IFRS requirement. There are several ongoing discussions, but nothing more to say at this point. If we are able to finalize several of these discussions, then of course we'll release the outcome in due course. 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 sixteen, we have been active on the financing side as well. We issued this EUR 500 million bond in March, and together with that, we made the tender offer for the 2026 maturing bond, and we were able to repurchase EUR 165 million worth of those bonds. There is still outstanding EUR 135 million in that 2026 maturing bond. This new one is carrying a coupon of 3.875%. Our net debt went down to EUR 3,470 million. If you combine all these factors, we can now say that 2025 and 2026 maturing loans are covered. At the end of the quarter, we had EUR 317 million cash and financial assets and EUR 375 million 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 there 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 EUR 400 million. And then the 2026 maturing bond, we made the repurchase that was carrying a lower coupon compared to the new one. These factors lead to the increase in average interest rates, 3.3%. That is 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 modernization investments on the balance sheet, and only part of them are booked in P&L. Now we introduced 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 expenses is 2.7%. Page seventeen, our key figures here, equity ratio, equity per share, and EPRA NRV remained pretty much unchanged compared to the ending of last year. Page nineteen, our outlook for this year, we kept that unchanged. We estimate that top-line growth is going to be between 1%-4%, and FFO is going to be between EUR 135 million-EUR 145 million. 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 with what come to rents. We have not penciled in any support from the market, improving market in this guidance.
If you look at the FFO guidance, the range there reflects the top-line growth rate and then average the midpoint of the FFO guidance, including assuming average weather, remaining part of this year, and SG expenses and repairs in line with what we had in 2024. Strategy targets, a couple of notes there. 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 EUR 15 million. The other thing is this Net Promoter Score. Very, very strong improvement there in the 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, 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 Q1. Fair value and investment properties are pretty much on the same level as year-end, and our financial situation has remained strong. Now I'm happy to answer any questions you may have.
Do we have any online questions we can take? If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Anssi Raussi from SEB. Please go ahead.
Yes, hi all, and thank you for the presentation. I have a few questions, and I'll go one by one. First, about your average rent per square meter, which decreased a bit year- over- year. Could you explain a bit what impacted this figure?
Do your campaigns impact this number? Thanks.
Yes, in some cases, we've been lowering the rent, the asking rent, I mean. In a situation where the apartment has been vacant for a 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 than what we have. In those cases, we have even lowered the rents. The impact of these campaigns, 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 EUR 37 million. 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?
There are several items including the impact in that figure. The impact of changing net rental income, aging of the building, and some other items as well.
Okay, these apartments held for sale did not have, or these were not the main explanation here?
At this stage, we are not able to comment on that because they are booked because of the IFRS requirement.
If we are able to finalize those discussions, then of course we are going to dispose of the impact of those transactions as well. It is too early to comment at this stage.
Okay, thank you. Maybe one more. Did you mention your buffering fair values before you would hit the 50% LTV?
It is EUR 800 million, so around 60 basis points if only yield requirement changes. Of course, now the cash flows are improving, but if you only look at the change in yield requirement, it is around 60 basis points. Quite sizable buffer against that 50% level.
Great, thank you. I will jump back to.
The next question comes from John Vuong from Van Lanschot 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?
It looks that the lowering of the rents is not there anymore in big scale. In that sense, we haven't seen in the market changes yet, but our approach is now more moderate when it comes to the lowering of the rents.
Would you say that your apartment rents are now at market rents? Everything in your portfolio is at a similar rent to apartments in the neighborhood, comparable?
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.
If we compare our pricing to the general market, we are still getting a premium to what we see in the market. We do not want to get rid of that, of course, but in some cases, it has been justified to be more flexible when it comes to the renting. If you combine what we have done on the rent side and what we have achieved on improving occupancy, improving occupancy is more than offsetting the impact of, in some cases, lowering the rents.
Okay, clear. Just on your comments on the investment market, I think you said it was still a bit slow. You have not really seen any transactions. At the same time, you booked a couple of assets as held for sale. Does this imply that you are seeing that the market is opening up?
We have communicated that our aim is to dispose of some assets, non-core assets, EUR 100 million-EUR 300 million, and that's still our aim. There are several discussions ongoing. We know that there are especially international investors who are looking at the Finnish property market. Why we booked these assets 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.
Morning, everyone. I have a quick question on your Moody's rating. How comfortable are you in defending the current rating at Moody's? The reason I ask is because Moody's was expecting the EBITDA ICR to land at 2.4 times as of earlier 2024, whereas the number came out at much lower as 2.17 times. Just trying to get some thoughts around that.
When we discussed with Moody's and actually what they said in their latest report, 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-grade rating. There are three KPIs that they are especially looking. 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. The other thing is liquidity coverage, and we are ticking that box as well. Now, on the back of this latest bond issue, our position there is even stronger. They are looking net at EBITDA as well.
They have not set a target there, but they concluded that thanks to all these actions taken by the company, net at EBITDA is slightly coming down going forward. Of course, we have this fixed cost coverage ratio, ICR, as Moody's called it, fixed cost coverage ratio. In their latest report, they say that in our case, they will tolerate 2.5 times. Based on their calculations, we might go below that, but thanks to all these actions taken by the company, they expect that to recover and go to the growth path. 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 turns to the growth path again. We have set a management meeting with Moody's in August, and nowadays they take each company once a year in their rating committee. 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. This is the situation regarding the KPIs and how Moody's approaches our figures and situation.
Thank you. Just a linked question to that. Moody's is also assuming EUR 140 million assets to be disbursed 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 their report, they say that they penciled in their calculations EUR 140 million disposals this year.
Yeah, thank you.
The next question comes from Anssi Raussi from SEB. Please go ahead.
Thanks. A couple of follow-ups from me, if you may. I think you mentioned that the rental activity has remained at a solid level or maybe even improved in April. How should we think about the typical seasonality this year because the market conditions are quite exceptional right now?
The seasonality is still there in the market, and it was actually very, very strong if you look at what happened in the market. We've been able to move into other directions thanks to all the actions taken by the company. In our case, the seasonality is not visible in our figures, but yes, you do see the seasonality in the market.
Typically, during the summer, the amount of new lease agreements is higher compared to other months, and we do not anticipate any changes there if we look at the market.
Understand. Maybe lastly, just to double-check something here. Did you mention that you have increased rents above 1% in your existing agreements?
Little more than 1%, yes.
Got it. Thank you. That is 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, and we already touched the assets held for sale and also the fair value changes and these items which are included in those calculations. 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 and funds that they are more or less closed right now, so they are not paying out for the investors. That is why we do not anticipate to see any forced sellers or highly motivated sellers regarding that. Other than these open and rescue funds, there has not been any distressed or highly motivated sellers in the market.
About this like-for-like growth. You made progress in occupancy improvement, but the like-for-like bridge shows occupancy effect was - 1.7%. Can you explain the difference? Because it was thought that it was Q1 2024 versus Q1 2025, and then Q1 2024 occupancy was lower than in Q1 2025.
In this like-for-like calculation, you compare figures for the past 12 months against the previous 12 months.
It's not quarter to quarter, it's a year to a year or 12 months to 12 months. That's why in these calculations, there's still those figures where you compare Q2 last year against Q2 2023, and same goes with Q3 and Q4 as well. In those quarters, the like-for-like when it comes to the occupancy was quite strongly negative. You are right that Q1 against Q1, it's just positive because of these 12-month calculations. You have the burden of these poor quarters in Q4, second and third quarters. Now what comes to the calculations going forward, in Q2, we are going to enjoy the positive trend in our occupancy, and in those calculations, we will drop out the poor quarter, I mean Q2 2024 against Q2 2023. That's why in like-for-like figures, you still have quite strong negative impact on the occupancy.
In real life, our occupancy has been improving. That is why I say that this like-for-like calculation is backward-looking, and we are concentrating on what is happening in the future and what we have achieved, especially during Q1 this year. This is a tricky one in this type of situation when things are changing very fast.
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, which accelerated this speed. If you look at SATO's Q1 occupancy and compare it to their Q4 occupancy, it is down by 50 basis points. In that sense, we are moving in another 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 with the outcome of what we have achieved when it comes to the improving occupancy in our case.
How is this improvement in occupancy rate? How is it in line with your FFO guidance?
The top-line guidance, 1%-4% in the midpoint, is the improved occupancy. That, of course, has an impact for FFO as well. If you compare the midpoint of the top-line growth guidance and the midpoint of the FFO, they are in line. 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 on both top-line and FFO.
Can you comment on where we are standing at the end of the year in 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?
The thing is that this year, we do not need to do any additional refinancing because the investment volumes are low. It is all about refinancing, not taking new money in. It looks that interest rates came down already. I would say in the last month or so, the spread has been quite slightly wider compared to the time we made our last bond. There is 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 2
026 as well. Okay.
Now, final question, and it's related to the Lumo website and web store. Do you show all the available rental apartments there? Is it up to date? 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 apartments become vacant, it takes a little time before it's taken into the web store. Some of our apartments, of course, are under repairs, and they are not available in the portals. You can't get the exact spot figure. In the fallback, 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. Next time we will meet in August, August 21. We will publish then our half-year result.
Thank you for joining us today. I wish you all a very good and warm summer. Thank you. Bye-bye.
Thank you very much.