Release Date: August 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Total revenue increased by 3.9% to EUR225.6 million, driven by completed apartments.
- Net rental income rose by 3% to EUR142.7 million.
- The saving program is progressing as planned, with no surprises.
- Balance sheet remains strong, with all maturing loans for 2024 and 2025 already covered.
- Commitment to sustainability, with significant progress towards carbon neutrality by 2030.
Negative Points
- Financial occupancy rate decreased due to market oversupply and seasonality.
- Funds from operations (FFO) decreased due to higher finance and maintenance expenses.
- Harsh winter conditions led to increased heating and water costs, impacting maintenance expenses.
- Fair value of investment properties decreased by EUR138.5 million due to changes in yield requirements.
- Intense market competition and oversupply have kept rent increases minimal.
Q & A Highlights
Q: If the market situation does not improve in the latter half of the year, are you willing to sacrifice occupancy to maintain rent levels?
A: Jani Nieminen, CEO: We have been disciplined with our rents and increased them earlier in the year. Our aim is to improve occupancy without letting go of rental increases entirely. We will follow market pricing closely and adjust dynamically based on micro-locations and market conditions.
Q: You took down the fair values of your properties. Are you done with this adjustment, or do you foresee more changes?
A: Jani Nieminen, CEO: We have included all market transactions in our current valuation. While we can't predict future buyer behavior, we see decreasing pressure on yield requirements due to falling interest rates. We don't anticipate further significant adjustments.
Q: Can you continue with a zero dividend if necessary?
A: Jani Nieminen, CEO: Yes, we are committed to defending our investment-grade rating and are prepared to take all necessary measures, including maintaining a zero dividend if required.
Q: Can you provide more color on your rental performance in July and August?
A: Jani Nieminen, CEO: Our new tenant agreements in July and August are roughly on the same level as last year, which aligns with our guidance. We expect a slight improvement in occupancy in the second half of the year.
Q: Are there still highly motivated transactions in the market?
A: Jani Nieminen, CEO: There is still potential for highly motivated sales processes, especially among open-ended funds. We understand that ongoing processes are matching previous pricing levels, indicating no significant changes.
Q: What is your target occupancy rate for the next two to three years?
A: Jani Nieminen, CEO: We aim to achieve occupancy rates between 96% and 97% over the next two to three years.
Q: Do you need to provide incentives to attract new tenants?
A: Jani Nieminen, CEO: Currently, we face intense competition and some competitors offer generous campaigns. However, looking forward, we expect a different operational environment with lower supply, reducing the need for incentives.
Q: Do you expect to do any refinancing in H2 that could impact the FFO guidance?
A: Erik Hjelt, CFO: We do not anticipate needing to refinance during H2. Our cash position, FFO, and savings program cover the 2024 and 2025 maturing loans.
Q: Can you elaborate on the EUR34.3 million gain in the valuation of investment properties?
A: Erik Hjelt, CFO: The gain primarily came from apartments that came out of restrictions, allowing us to apply our standard valuation techniques. We still have 404 apartments with restrictions that will end by the end of this year, potentially adding EUR20 million to EUR40 million in value.
Q: How do you handle property valuations?
A: Erik Hjelt, CFO: We conduct internal valuations every quarter, supplemented by external expert reviews.
Q: What is your hedging strategy for financing?
A: Erik Hjelt, CFO: Our strategy is to hedge between 50% and 100% of our financing. Historically, we have been conservative, and we are ready to adjust based on market conditions and interest rate expectations.
Q: Do you see any impact from changes in housing allowance legislation?
A: Jani Nieminen, CEO: We do not base our business on subsidies. While some tenants may receive subsidies, changes in legislation affect the entire market, not just us. We will monitor the situation, but we do not foresee significant impacts at this time.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
