CEO’s review

According to Financial Statements Release 1 January–31 December 2023

We achieved a good result last year in a very challenging market. Total revenue, net rental income and FFO increased, and our financial position has remained strong.

Although there was still a lot of supply in the rental market, we managed to improve our occupancy rate from previous year. Urbanisation continued stronger, which boosted demand. Population growth accelerated last year in the so-called growth triangle, meaning the capital region, Tampere and Turku. According to the latest forecasts, urbanisation will continue to be strong. In addition, the increased immigration in recent years will advance urbanisation. There has been oversupply in the rental market due to the high level of construction in recent years. While this still affected the recovery of the occupancy rate, the market situation is expected to become more balanced as new supply decreases significantly. The number of new housing start-ups plummeted to a record low last year, and for the moment, there are no signs suggesting that the number of new housing start-ups will begin to increase. The slowdown of construction and the simultaneous acceleration of population growth will likely be reflected in improved occupancy rates as well as higher rent increases.

The fair value of our investment properties decreased by 1.9 per cent in the year-end valuation. Last year, there were no significant comparable transactions in the transaction market, so the increase in yield requirements was based on an overall evaluation. The valuation was positively impacted by increased cash flows and the growth assumptions of future rents and expenses.

We launched a saving programme in the early autumn because we want to maintain investment grade credit rating and to ensure the company’s strong financial position. The saving programme has progressed as planned, and we have not started new investments. In relation to the personnel costs, we renewed organization in the autumn to make our operations more efficient. The lay-offs are being implemented in stages after the end of the change negotiations, and most of the personnel cost savings as well as other cost impacts and the dividend decision will be visible in 2024. In December, Moody’s affirmed our Baa2 credit rating.

We successfully made significant financing arrangements despite the uncertainty in the financial market. During the year, we signed loan agreements totalling EUR 925 million with Nordic banks. These arrangements enabled us to refinance the loans that matured during last year, and they also cover our loans maturing in 2024. This is proof of the strength of our banking relationships as well as the significance of the saving measures we have taken. Our company has taken a long-term approach in terms of financing, and it has always been important to us to maintain access to diverse sources of funding. For several years now, we have also hedged most of our loans to fixed-rate loans. The high hedging ratio reduced the impact of the increased interest rates last year, and our financial key figures have remained strong. The next financing arrangements will target loans maturing in 2025. Thus, after the review period, in January, we issued EUR 200 million bond as a private placement. Our liquidity position is good.

Our investments last year amounted to EUR 190.7 million with the continuation of the development projects started in the previous years. Last year, we completed a total of 1,450 apartments, one of which was our conversion project on Bulevardi. We built 77 premium rental apartments in the previous chemistry laboratory and teaching facilities of the historical Helsinki University of Technology. Our housing portfolio grew to 40,619 apartments. We had 354 apartments under construction at the turn of the year, and these last ongoing projects will be completed in early 2024.

The customer experience has always been a key part of our strategy. At the end of the year, the net promoter score (NPS) of our customers was 50, representing a five-point improvement compared to the previous year. During the year, we developed the My Lumo service on the basis of our residents’ wishes. The changes were based on a resident survey and usability testing, and their aim was to improve customer satisfaction and retention, as well as to reduce the number of customer service contacts.

Last year was highly exceptional in terms of the operating environment. We again demonstrated our strength and capacity for both anticipation and renewal in the face of the changes around us. With that in mind, I want to take this opportunity to thank everyone at Kojamo for their excellent work. I also wish to thank all of our customers, partners and shareholders for their trust in the company.

Jani Nieminen

Page updated 15 February 2024