Good morning, ladies and gentlemen, and welcome to Kojamo's full-year results news conference here at Helsinki, Kojamo's headquarters. My name is Maija Hongas, and I'm Manager Investor Relations here at Kojamo. We had quite a successful year, and you will hear more about that soon, presented by our CEO, Jani Nieminen, and our CFO, Erik Hjelt. After the presentation, we have some time for questions, and you can ask questions here from the Helsinki audience, from the conference call line, or there is also a chat function at our webcast. Without no further delay, please, Jani, the stage is yours.
Thank you. So welcome all, and I see you, and it's always a positive opportunity to provide positive information concerning Kojamo. I hope my voice will carry out. I'm having a bit of a flu-like some of the things at the moment. The weather has been nice. We will go through what happened last year, the summary, and then take a look at 2019, the outlook, and financial targets, and the dividend policy. Without further delay, I will jump straight forward to what's been happening last year. As Maija already said, we are really happy and proud that we did have a good year. It started, of course, with an operative environment, which has been good and positive. The GDP growth was positive, and it's based and well-balanced between export, private consumption, and investments.
The unemployment rate has been going down, so it seems that people are having more and more work, and there is an estimate that the household income growth will continue during 2019. Even having a really strong and positive operating environment, there are signs that during 2019, the GDP growth would soften a bit. Some estimate that it will come from declining export growth, and on the other hand, signs that the willingness to invest will slightly go down, so the investments would go down. We do not see any big impacts to Kojamo with any changes in operating environment. Within our industry, of course, a big thing is the urbanization, which has been proceeding strongly as estimated, and that, of course, creates a lot of demand for new homes, new housing in the biggest cities.
There are signs that the number of new residential startups is slightly declining, but that does not have an impact for completed apartments during 2019. We do believe that during 2019, we still do have a lot of new supply in the market, and any changes in the supply will happen during 2020 and 2021. Even though there are signs that the startups will slightly go down, we believe that the total volume of the new construction work will stay on a fairly high level, especially in the biggest cities, and especially here in the metropolitan area, the volumes will stay in higher levels. Of course, as urbanization proceeds, differences between different locations in Finland will continue to grow.
We will see an increase with apartment prices and rents here in the capital region steadily somewhere between 2-3%, even though the whole country seems a bit flat. We see areas here in Finland where both people are moving out of the area, and apartment prices have been decreasing for several years already. As the urbanization is proceeding, especially in the biggest cities, what's happening is that there's a strong trend that more and more people, more and more households are choosing rental apartments. There has been a big increase in all the biggest city areas of the amount of households living in rental apartments. The estimate is that by the year 2040, 624,000 people are moving inside Finland towards the 40 main growth areas.
That creates a lot of demand for new homes, and most of them will end up renting an apartment. We have to keep in mind that from that 624,000 people, 599,000 people are moving towards the seven biggest growth centers where Kojamo operates. We believe that even though there's a slight estimate and signs that the residential startup is a bit going down, the market seems solid, and we will see a steady increase with our rents and for light growth. Oh, I'm moving. That's why I got started to wonder what's happening. I was pushing it the wrong way. Excuse me. To wrap up last year, I'm really happy and proud to tell you that we did have a really, really successful year with all the key metrics. We were able to proceed with our strategy as planned.
We were able to find during Q1 an attractive portfolio deal with OP Financial Group, 1,000 apartments roughly. We were able to sell 1,600 apartments from our point of view, non-core locations to Morgan Stanley operated funds. We were able to get Eurobond financing with really attractive terms, and we really did a successful IPO. As our numbers show, we have been providing the story that our aim is to create profitable growth. That is what has been happening. The total revenue growth was 6.5%. The net rental income grew by 8%, and the FFO grew by 8%. We were able to increase the occupancy rate. The cost control, on the other hand, the processes how we rent the apartments out, we were able to fine-tune our processes and to proceed with the strategy. All the numbers are really strong and positive.
As we keep on investing most of the new construction projects to the capital region, so Helsinki region, today more than two-thirds of the housing assets are located here in Helsinki region. If we combine Helsinki region with Tampere and Turku regions, which are the second and third biggest growth regions, our assets there are more than 83% at the moment. As we have been providing our strategy for the last five years already, that we are concentrating and focusing to the main seven growth areas here in Finland, we at the moment have only 1.7% of the housing assets outside of our core areas. That being said, it means roughly 500 apartments still under disposal process. As these pillars on slide 9 show, the LUMA business segment has been growing all the time as the strategy plan has been.
On the other hand, the VBO business segment has been going down. The growth in total is that some of the VBO apartments always, when the restrictions end, have been moved to LUMA business segment. On the other hand, the LUMA business segment has been growing with us investing EUR 2 billion during the last five years. For example, last year, we acquired 1,049 apartments. We completed 1,258 apartments. That creates a growth in the LUMA business segment. As the numbers show, last year, VBO business segment was so small that we will stop reporting that during 2019.
If we go through some numbers with our financial development, of course, the total revenue growth of 6.5% is based on our ability to increase the rents on annual level, the growth of completing more than 1,200 new apartments, the portfolio deal with OP Financial Group, so an acquisition of 1,000 new apartments. That creates the growth part. On the other hand, the profit before taxes is better than last year, even though the change in the fair value of investment properties is more or less on the same level as 2017. The part of so-called other items, which for me means business, not other things, but the real business has really been doing better 2018 than 2017. If we compare the business part against the total revenue, it's slightly even better than it was 2017.
We have to keep in mind that even in 2017, we were happy with our business result. The FFO part, we ended with EUR 116.4 million. Of course, this is a figure which we have been providing outlook for last year. The outlook was based on all the knowledge we had at that point of time, and the estimate was that it would be a maximum of EUR 150 million, excluding the one-off items with the IPO. What really happened during Q4 was a combination with really warm weather. We were able to improve the occupancy rate more than we expected, and some of the renovations got postponed. The combination of these three things is what created a slightly better FFO result for the whole year. We have to keep in mind that it is a combination of all these aspects.
None of these aspects alone would have made the difference with the forecast with our outlook. Still, we have to keep in mind that the FFO growth of 8% is a number we are happy with. On the other hand, as Lumo has been the vital part of our strategy, and the growth has been visible there all the time throughout the years, the growth in Lumo business segment last year with total revenue was 13.1%. Half of that comes from the apartments moved from VBO business segment to Lumo business segment as the restrictions end. Half of the growth was coming from rent increases, completed new apartments, and portfolio acquisition. On the other hand, as we've been providing the story that we are aiming for profitable growth, we have been able throughout the years to provide more and more net rental income.
The growth with Lumo business segment net rental income last year was 13%. If we take a look at what has been happening with our investments and sales of investments, we have been proceeding in line with our strategy, disposing more than 1,300 apartments during the last five years, investing on average more than EUR 300 million a year, EUR 2 billion within the last five years. Last year, we invested more than EUR 360 million. On the other hand, we made this selling of 1,600 non-core apartment portfolio. The modernization investment part and repairs, we have to keep in mind that our housing stock, the average age there is 31 years. It needs some repairs and some modernization investments, even though it is on average nine years younger than the housing stock in the same cities where we operate.
Last year, we stayed on the same level as the previous year, so roughly EUR 60 million, the renovations and modernization investments together. We've been providing the information that we expect that the volume of renovations and modernization investments together could be somewhere between EUR 70-80 million. What's making the difference on annual level, jumping from EUR 60 million to, for example, EUR 70 million, we have to keep in mind that one really big renovation project may be EUR 10 million a year. It's about timing. Sometimes it's EUR 60 million, sometimes it might be EUR 70 or 80 million. The rough estimate is that on annual level, we will stay between EUR 70-80 million.
As we have been investing and focusing in the growth centers, the fair value of the investment properties has been increasing and growing as planned, and we are well on the way towards our strategic goal of being a EUR 6 billion company by the year of 2021. On the right-hand side, there is the information providing the number of apartments in different valuation methods. Most of our apartments today are measured at the market value, but we still do have some properties and some apartments where the valuation technique is based on either the acquisition method or the yield value method. As the restrictions end, these apartments will provide a potential uplift with our values.
As we see, there is roughly, was it 1,400 apartments last year where the restrictions end, and this year we see that the restrictions will end on roughly 100 apartments more than last year. The financial occupancy rate, even though there has been more supply in the market than throughout the previous years, we have been able to increase the occupancy rate without lowering the rents, without spending more money on renovations, just by fine-tuning our processes. Of course, we have to keep in mind that one thing that is really helping us is the one and only web store. More than half of all the new contracts here in the Helsinki region are coming through the web store. That is helping us really. We were able to increase the occupancy rate, and we are happy with the level of 97.
A slight increase with the tenant turnover, but I expect that this is the new truth level where we have to live because the millennials, the younger people, are moving more often. We just have to find solutions and effective processes how to handle it. It shows that even though there was a slight increase with the turnover, we were able to increase the occupancy rate. It really did not hurt us. If I would pass the presentation to our CFO at this moment.
Please, Erik. Oh, thank you, Jani Nieminen. Good morning, everybody, from my side as well. On page 17 shows our equity ratio that improved last year. At the end of 2018, the equity ratio was 43%.
It is good to know that we made a primary during the IPO and EUR 150 million, and that contributed 1.6 percentage points for the equity ratio. We are clearly above our target for equity ratio, and that is 40%. We have set a target for loan-to-value as well. The target is to be below 50%, and we are clearly below that target as well. Our equity per share improved last year by 7.4%. We think that it is more important to look at the equity per share, to look at the EPRA NAV per share, and that ended EUR 11.69 at the end of last year. This EPRA NAV represents better the situation for the company that is ongoing. The percentage growth there is different compared to these two figures. The main reason, of course, is that the base figure is different.
The percentage calculation gives a different outlook. It is good to know that there is a dilution given the fact that we made this primary. The number of shares is different, and the impact for EPRA NAV is different than for equity per share. We have versatile capital structure. Our target is to have access for different sources of financing. Going forward, we want to have a bigger portion of the financing coming from the bond market. Bank financing is going to be an important source of financing even going forward. The portion of bond financing is going to go up, and the portion of bank financing is going to decrease. Even the bank financing can grow in euro terms, given the fact that the whole company is growing. At the end of last year, more than half of the financing was from the bond market.
When we entered the bond market and when we got the public rating from Moody's, P882 with stable outlook, we set a target that more than 60% of we need to have more than 60% of unincorporated assets. The path was to get there in three years' time. Now, with the second foray to the euro bond market early part of the last year, we are already above that level. We are healthy in those frames setting in process getting this public rating and what we communicated for bond finance providers. We have very strong financial key figures, average maturity 5.5 years. We are quite conservative what come to HETSEL. HETSEL ratio was 94% at the end of last year. The average interest rate period was 5.8. The average cost of debt was 1.8%, and that's including the cost of derivatives.
This gives a very solid situation for the company going forward. At the end of last year, we had outstanding commercial papers only EUR 50 million. We have a EUR 250 million commercial paper program, but still we are quite cash-rich company. That is why the amount of outstanding commercial papers was quite limited. We are heading towards our strategic goals for 2021. We have the growth there. Our aim is to be a EUR 6 billion company measured by fair value investment properties by the end of 2021. At the end of last year, we were a EUR 5.1 billion company. It requires EUR 300 million investments every year. The plan is to have those investments, EUR 200 million on average through our own development activities and EUR 100 million through acquisitions. We are well on track for that growth target.
We have the risk management angle there, if you like. The equity ratio to be above 40% and the loan-to-value below 50%. We are there nicely in line with these targets. It is good to know that our current public rating is pretty much anchored into this 40% equity ratio targets, and we are well in those lines. The profitability is there. We measured by FFO as a percentage of total revenue. This 32 is not the minimum, is not the target. The message here is that we want to be above that level. There is actually two angles in this target. One is that we do not want to grow at any cost. We want to maintain the profitability of the company despite the growth. Or put it other way, is actually that we want to grow to be able to increase the profitability of the company.
Of course, the most important part in this target is the customer interface. We have set a target for net promoter score. The target is 40 by the end of 2021. We are moving nicely towards that target. At the end of 2018, that promoter score was 35. There was almost 4 percentage point improvement in that last year. Key actions last year towards these strategic goals. Growth. We acquired investment properties worth almost EUR 340 million. We divested at the same time properties worth EUR 100 million. We made modernization investments almost EUR 24 million. The gain from valuation also was EUR 127 million. What comes to number of apartments? We acquired the portfolio from OP Financial Group almost with 1,000 apartments, almost 1,300 apartments completed last year. At the end of last year, more than 1,000 apartments were under construction.
Equity ratio, most important actions, of course, were this primarily made during IPO. The strong results of the company contributed for the equity ratio and loan-to-value figures, of course. Actions what comes to FFO target, there's no one or two actions actually contributing there. It's a combination on several things. That underlines the company and the fact that Kojamo is a unique combination of the growth and yield. Net promoter score, main action service offering was developed and customer experience was developed during last year. Moving to our outlook for 2019, we estimate that top line growth will be between 2% and 7%. We estimate that the FFO will be between EUR 126 million and EUR 141 million. The acquisition or investments in new development acquisitions will exceed EUR 300 million.
There are again same topics that we discussed last year regarding the FFO guidance. This guidance is based on average weather conditions, average business environment, and a bigger amount of repairments compared to 2018. These EUR 300 million investments require a minimum EUR 100 million acquisition to be able to reach that target. Dividend policy and the board's proposal. The policy is to pay 60% of FFO provided that the equity ratio is above 40%. The board proposes the dividend of EUR 0.29 per share. That represents 62% of FFO. Now we are ready to move to the Q&A part of this meeting. I am happy to take any questions you may have.
Yes, thank you, Harri Paakkola from Nordea. First of all, congratulations on the good quarter and a solid start as a listed company.
Could you give a little bit color on the development pipeline? When are the apartments going to be ready? What is the distribution for the year 2019?
As Erik said, we have more than 1,000 apartments under construction at the moment. As most of the construction projects is, the development time or construction period of time is somewhere between 12-18 months. Close to 1,000 units will be completed 2019. On annual level, it varies somewhere roughly on 1,000 units. Like last year, 1,200. This year, I'm not really sure whether it's 1,000 or just below 1,000. Roughly 1,000 new apartments will be completed.
When are they coming online already? Is there any variation in the distribution? For the whole year. Okay. Any color on the divestments currently? I think you have around 500 non-core apartments. How are the divestments looking like?
Of course, the market seems good. It's not a bad moment to sell those apartments. Probably we will do the disposal during this year or the next year. About the postponement of renovations, could you give some indication of the magnitude, how much has been kind of transferred from 2018 to 2019? How much will it increase? The total amount of modernization investment and repairs last year was around EUR 60 million. We estimate that going forward, these two lines put together are going to be between EUR 17 million-EUR 18 million. If you take only repairs, that contributes as an impact for FFO, that's of course only part of that. That gives at least an idea of what amount we are talking about.
On the other hand, you can think it that way that we had been providing the outlook for it.
We only ended up EUR 2 million above that. If there was a project postponed with EUR 10 million, it would have had a bigger impact on figures.
These EUR 60 million in total last year and 2017, there were no major one modernization investments included. If we start one bigger one, it can be almost EUR 10 million, one project. That is going to have an impact for the whole year figures if that type of project is going to be started.
On how many apartments did restrictions end in 2018? That is easy math from that chart, but less than 1,400.
Yeah. I would say 1,370 something. That something is 2. So 1,372. Okay. Thanks. Rough estimate.
This one to go for Nordea. Do you have any comments on construction cost development and renovation? Yeah.
Construction cost has been increasing throughout the last two, three years all the time. Even though, as I said after Q3 last year, the statistics show that the construction cost was growing with 2.5%. We saw some offers that were above that. We saw construction cost growing more than 2.5% in some cases. As it now seems that as the number of new building permits is slightly going down, the pressure with the construction cost increase is going down as well. We do not expect the cost increase to continue that heavily.
Okay. Thank you.
Next, we will be taking the questions from the conference call line.
Thank you. Ladies and gentlemen, if you do wish to ask a question, please press 01 on your telephone keypad.
If you wish to withdraw your question, you may do so by pressing 02 to cancel. There will just be a brief pause while any questions are being registered. Just as a reminder, if you do wish to ask a question, please press 01 on your telephone keypad now. As there are no questions, I'll hand back to the speakers.
It seems we have one question asked in the webcast currently. Here comes a couple of questions from Matias Rautelma from OP. The first question is, how do you see like-for-like rents developing in 2019? We don't see any big difference compared to last year. The like-for-like growth will remain on roughly the same level, so between 2-3%. How does the indexation look like? Do you see that the market gives the possibilities to exceed inflation?
We are increasing the rents based on our contracts, which allow us to increase the rents with index plus maximum 5%. The inflation rate at the moment is fairly low. When we provide the information that we are estimating a like-for-like growth of somewhere between 2-3%, we are able to increase the rents above the inflation.
Your revenue guidance has quite a large range. Can you open the logic here? Does it include major divestments?
In that guidance, it is included that at least part of the 500 apartments still to be disposed will be disposed during this year. The range is, I think, pretty typical. That range includes the like-for-like growth, as Jani mentioned. It includes the development activities or new apartments completed estimated to be completed during this year, and some acquisitions as well.
The final question, how much was the value uplift from apartments freed from restrictions in Q4? Actually, we already covered that. Not actually the value, but the number of the restrictions.
Roughly half of the total value change came through the ending restrictions.
Okay. Excellent. Thank you, everybody, for participating in our event. Our Q1 results will be published in May, 9th of May. Thank you, and hopefully we see you then.
Thank you.