Kojamo Oyj

OMXH:KOJAMO

Earnings Call Transcript 2022-Q1

[Niina Saarto, executive]

Good morning, ladies and gentlemen, and warm welcome to Kojamo's First Quarter Results News Conference. My name is Niina Saarto, and I'm Group Treasurer and Head of Investor Relations. Today, CEO, Jani Nieminen; and CFO, Erik Hjelt, will tell you about Q1 events. And after their presentation, we will have time for questions. We will first take questions from live audience here, then from the phone line and finally, from the chat.

But let's get started and let's welcome Jani.

[Jani Nieminen, executive]

Thank you, Niina. Nice to be here and providing color on what's been going on here in Kojamo during Q1 this year. To start providing some color and wrap up in the big picture, I would say, of course, rental market has been affected by tighter COVID-19 restrictions introduced late last year. Restrictions were lifted in March, and this will be having a positive impact towards rental apartment markets and urbanization here in Finland. Russian attack to Ukraine has had no direct impact to Kojamo operations. All the development projects, ongoing projects have been proceeding in a normal manner as planned.

Of course, we have seen in the market cost increases concerning construction business, some availability problems concerning materials, but they have not been impacting our business. Our figures Q1 is solid performance. Operations have been -- remained stable. Financial position is really strong. So I would say we've been able to proceed according to our strategy. We've been able to actually increase our top line rents, increase in total revenues, net rental incomes and FFO. Now we see the rental apartment market improving as COVID-19 restrictions have been lifted, as I said, and towards the year-end, things are going to get even better.

Moving to the operational environment on Page 4. The reopening of the economy and recovering demand of services will support the private consumption, creating growth and urbanization. Of course, the war in Ukraine and related sanctions are estimated to slow down a bit Finland's economic growth and prices are expected to increase due to inflation, but activities among consumers, individuals have been witnessed. Here in Helsinki streets, people are moving a lot using restaurants, meeting, having fun. Residential start-up numbers seems to be increasing towards the year-end last year. Now it's clear that estimates have been brought a bit down. So the number of new residential start-up is declining.

I would actually say that our estimates are lower in the market than the official estimates. Construction companies have been having problems with increasing construction costs. On the other hand, we see increasing interest levels, increasing uncertainty among homebuyers and that may create an impact that actually more build-to-sell projects will be either postponed or canceled in the market. Not enough information concerning construction cost increases this year. Of course, it's easy to say that some material costs, we have witnessed a rapid increases, severe increases.

On the other hand, we have to keep in mind 2 things. All Kojamo construction projects, new development projects are based on fixed prices. They are turnkey projects, so don't impact our ongoing projects. On the other hand, according to construction companies and statistics, it's good to keep in mind that actually of apartment prices roughly 30% on material costs. And of that 30% of material cost, some 20% are materials like rebars, steels, windows and wood structures. So at the end of the day, the cost increase is concerning this certain materials will have a limited impact to the overall construction cost increases.

Moving to Page 5, the operational environment. We firmly believe that all the long-term trends, drivers for demand of new rental apartments in the bigger cities are still valid. Urbanization will continue. As economy is improving and societies opening, we have witnessed already the increasing number of work opportunities. Students are moving back to university cities and urbanization will pick up speed. Actually, estimate, for example, here in capital region is that 40,000 people increase will be happening this year here in Helsinki region.

On the other hand, what we see in the market is that if we combine uncertainty related to the war in Ukraine, inflation, interest levels, construction costs, that may have an impact for homebuyers. They will start postponing the decision making buying homes. And as I said, that might have a severe impact in build-to-sell projects with construction companies, bringing volumes in the total market down and actually create a situation where the relative attractiveness of rental apartments will increase compared to owner-occupied homes. We do see a lot of interest still from international players towards Finnish residential market. Actually, a couple of quite big transactions have been completed. Buyers have been international players.

And coming back to what I said and society opening rental apartment market improving. Yes, during Q1, the occupancy level was not as good as we would hope. On the other hand, our focus has been quite systematic approach concerning pricing, still improving our net rental income and top line growth, increasing the rents in a normal manner. Now what we have seen after restriction has been lifted, April, if we compare the amount of new tenant agreements with the last year April, the improvement has been 17%. Now during May, during the first 11 days, the actual growth compared to comparison period is about 20%. So a number of new tenant agreements is actually increasing quite rapidly.

The old thing still valid. As the urbanization continues, the number of households living in rental apartments in all the big cities will be increasing in the future as well, Helsinki, Turku, Tampere. Today, half of the households live in rental apartments, actually more households living in rental apartments than in owner-occupied homes. And has been previously said, the number of small households is still increasing here in Finland, where we see no impact because of COVID-19.

A lot of color already provided concerning Slide 6. As I said, construction cost increases have been present, some challenges with raw materials. On the other hand, a limited impact and things like rebars, wood. At the end of the day, they are bulk. Construction companies will be able to find new solutions with logistics. Our estimate is that this kind of cost increase impact will be temporary. On the other hand, of course, inflation and cost increases concerning, for example, energy will have an impact in construction costs. Population growth will start picking up speed here in capital region again, as I said. And what we will follow closely is that if construction volumes and when they start coming down a bit, projects typically will be first postponed, then construction companies will start figuring whether to cancel those project, and that situation may open possibilities for companies like Kojamo with a really strong financial position.

Moving forward to Page 7 and our key figures. They are really solid. We've been able to actually increase the total revenue by 2.4% increase, basically based on units completed last year after Q1 and this year, providing growth. Net rental income increased 2.8%, very strong result there. Of course, some details to be provided by CFO, Erik Hjelt, things like electricity costs increasing slightly, real estate taxes increased slightly, some cost savings concerning, for example, renovations. Funds from operations, FFO, improving 3.6%, strong figure.

Today, the fair value of investment properties, EUR 8.4 billion increase there basically based on our investments. We are still growing according to our strategy. Gross investments close to EUR 49 million, basically new development projects. Still happy to say that operationally, we are really strong. Profit, excluding changes in fair value improved by 4.1%. And then at the end of the day, profit before taxes, EUR 63 million. There is good to keep in mind that actually changes in fair value last year, EUR 143.5 million, this year now a strong figure, EUR 28 million, but still less amount than comparison a year.

For us as a company, it's all the time being important that we are able to grow using multiple sources. At the moment, it's been about how to optimize new development projects. We've been able to actually increase the amount and keep it in a good level. Now 2,566 apartments under construction, mainly all the projects located here in Helsinki region, one project in Tampere, one project in Turku. But we still keep in mind that Kojamo is able to convert buildings into apartments. We have started the first project concerning so called Metropolia case. We will be scanning portfolios available if and when we find something appealing enough to buy. We are buying portfolio still.

But this strong project pipeline is now providing good growth, strong growth. As I said, all the construction projects are based on fixed prices, turnkey projects, projects under construction, providing the net initial yield around 4% or above 4% actually means that development gains are really strong, north of 30%. And as we are completing this year close to 1,300 apartments, next year, 1,700 apartments, we are achieving those development gains after completion of the projects. We still have binding agreements with construction companies providing additional 600 apartments. And then the Metropolia case is proceeding and the last zoning part will be completed by the end of this year. So the growth path is really strong still.

Lumo is providing easily best living. And actually, it means that it's not only floors, walls and ceilings but providing additional value for our customers. How to make things easy and effortless, combining apartments, communal spaces, services, both digital and physical, additional services like you are able to get a dishwasher. That's been appreciated a lot. We are still on a path to create new services. Now the latest services introduced to our residents being related to sustainability. Our clients today are able to make a carbon footprint test digitally using My Lumo. We launched a service to our customer to join climate actions. They are able to buy carbon-free district heating.

All the time it's been a question that the ESG is a part of our company DNA, a part of all our operations. Now with -- for the first time, we will provide a Green Deal demolition. The old shopping center in Puotila will be demolished and replaced with the apartments and business premises. We will start a project providing geothermal heating for 7 of our properties. And in the big picture, today, close to 100 properties already use renewable energy and heating.

Now if Erik would continue providing more detailed color, please.

[Erik Hjelt, executive]

Thank you, Jani, and good morning, everybody, from my side as well. So Page 13, our total revenue growth was EUR 2.3 million from the corresponding period. And the like-for-like growth was flattish, negative 0.2%. There's actually 2 different part of that story. So the increases in rents and wood charges was a positive figure 2.2%. So we've been increasing the rents pretty much in normal manner, if you like. And the decline in occupancy rate was a negative impact, 2.6%, at a positive 0.1%. So the total revenue growth was mainly driven by the bigger property portfolio.

So Q1, we completed 270 apartments. And of course, for revenue growth contributes as well. Those apartments that we have completed Q2, Q3 and Q4 last year, more than 1,200 apartments. Net rental income growth was EUR 1.5 million. Maintenance expenses, up EUR 1.3 million. Electricity, up by EUR 0.7 million. Property taxes, EUR 0.3 million. And cleaning and water together, EUR 0.3 million. All other items were pretty much in line with the corresponding period. Repairs decreased EUR 0.5 million.

Page 14. If we first look the profit on fair value investment properties, so there was a main contributor, there was the end restrictions covering roughly 40% of the positive impact in fair values and development gains, 60% of the positive effects in fair value. We kept yield requirements unchanged during Q1. And the development gain, as Jani mentioned, was north of 30%, 30%. FFO growth there was EUR 1 million. Of course, net rental income contributed EUR 1.5 million. SGA expenses up by EUR 0.3 million and financial expenses in FFO calculations, EUR 0.3 million. And cash tax is a negative figure there. So it's a positive thing, of course, so down by EUR 0.4 million.

As Jani mentioned, our financial occupancy rate was impacted by the restriction regarding COVID. And now after all these restrictions has been removed, we expect to see a positive trend in occupancy rate. Of course, the occupancy -- the change quarter-to-quarter was a negative, but not 2% as can be calculated here given the fact that 2021 figure is the whole year figure. And of course, 2022 figure in this slide is only 1 quarter's figure.

Page 16, I think we already covered that like-for-like rental income. And for us, it's important to increase the rents and water charges in a normal manner. And this is something we've been doing this year as well. Page 17, investments. So gross investments mainly covered by development projects, EUR 46 million. Modernization investments, EUR 1.6 million and capitalized borrowing costs, EUR 1.2 million. Modernization investment and repairs flattish, so repairs down by EUR 0.5 million and monetization investments EUR 0.2 million.

The value of investment properties EUR 8.4 billion, and we still have 1,854 apartments where we have restrictions regarding the valuation and the uplift in -- they will be somewhere around EUR 120 million to EUR 130 million when these restrictions ends, and they will end gradually by 2024. And more than half of that uplift will come 2024.

Page 19, euro-wise, our ongoing developments and land bank. So on the column on left-hand side, apartments under construction, EUR 388 million already invested and EUR 257 million to invest in order to complete this ongoing developments, providing 2,566 apartments. Binding agreements, we have apartments for EUR 636 million -- number of apartments and EUR 123 million to be invested in order to finalize this. Metropolia developments, 1,000 apartments. 77 of these apartments already included those figures that Jani showed that what is the estimated completion of ongoing developments and in this case, of course, conversion. But otherwise, Metropolia is not included in those figures.

And the actual land bank providing us 1,500 apartments. In those -- in that land bank, we have both pure land and those land where we have existing building and the idea there is to demolish existing building and build a new one. And there is roughly 250 apartments on those land. Almost all of these apartments or the construction of binding apartments are located in Helsinki region. We have one project ongoing in Tampere and one in Turku. We took slightly down our estimate of investments in development this year.

Now we estimated that it will amount to EUR 280 million to EUR 330 million. And the reason this slight change there is that there were a couple of projects where the zoning and building permission project takes slightly more time than originally estimated. So it's a pretty much a timing issue. And then it's good to note that already during Q2, we have started 2 new projects, Luotsikatu and Niittykatu, so in Espoo. And all these apartments under construction and under these binding agreements, we have the net initially 4-ish-percent and the development gain north of 30%.

Page 20, our equity ratio and loan to value. So we have a target equity ratio of about 40% and loan to value below 50%. And we have quite sizable buffer against these levels. When you look our equity ratio, it's good to note that 31st of March, we made the new bond. And so the bond and the cash is included in our balance sheet. And of course, that is visible in equity ratio, but loan-to-value, you can see that the change was quite limited there. So very, very strong figures there.

Page 21, EPRA NRV flattish there as well, EUR 21.9. And if you look what's happened during Q1, so of course, the dividend decision was made already during Q1, and that has a negative impact for EUR 93.9 million. Profit for the period, positive figure there, EUR 50.4 million. And then the fair value reserve also meaning that the derivatives because of the increased interest rates were up by EUR 28 million. So if you put all this together, that kept our EPRA NRV flattish.

In this type of interested environment, it's important to have a strong financial position, I think, and that's exactly what we have. So at the end of Q1, we had cash and cash equivalents, EUR 478 million. We had financial assets, EUR 104 million. So in total, EUR 582 million. On top of that, we had EUR 300 million committed credit lines unused and we don't have any major maturing refinancing needs in next 2 years to come. And our average cost of financing, including cost of derivatives, 1.8%, and the fixed interest rate period 4 years. And our hedging ratio is actually very, very high, so 93%. So in our case, we have a strong balance sheet. We are really cash rich, and we have very, very high hedging ratio. So our financing position is very, very strong.

Page 23, a couple of notes regarding strategic targets. So FFO against total revenue, 29.1%. That is good to know that because of IFRIC 21,the property taxes for whole year is booked in Q1. The amount is EUR 11.7 million. So that means that the part of property taxes allocated to Q2, Q3 and Q4 is EUR 8.8 million on the -- if you calculate that in, so that means that the FFO total revenue was 9% higher than what we've shown here. So pretty much in line. Actually, we are about this target level.

Other note here is that the Net Promoter Score, 38. We changed how we calculate the Net Promoter Score because previously, we showed different Net Promoter Score as such and the digital Net Promoter Score. And now we have combined these 2. So in this new calculation, we have the Net Promoter Score for incoming customers, for existing customers and leaving customers and in each part included the digital part of our operations. If we calculated this in a low old way, if you like, so there was no major changes during the Q1.

Outlook for this year unchanged. So we estimate that total revenue will increase by 3% to 6% year-on-year and that FFO will amount between EUR 153 million to EUR 165 million. And if you look at the higher end of the top line growth, outlook 6%. So there is 2 parts before -- behind that, one is that half of that growth will come through the like-for-like rent and water charges increases between 2.1% and 2.5%, and some improvement in occupancy and half of that growth will come through the completed apartments. And as Jani mentioned, all our ongoing development project are proceeding as planned. And this FFO range reflects the top line range. In FFO, we have estimated that the whether it's going to be normal remaining part of this year, some impact on inflation and some impact of cost savings that we are able to achieve.

Page 26, our dividend policy, nothing changed there. So 60% FFO annually paid as a dividend.

And now back to Jani.

[Jani Nieminen, executive]

I guess before Q&A, it's good to, in a way, summarize. And as I said, all the key figures, solid. The financial position at the moment, really strong. We already able, willing to move forward according to our strategy. In spite of a challenging environment. All the ongoing projects have been proceeding as planned. Good to keep in mind there that we do have fixed prices, turnkey projects for all the ongoing projects as well those binding agreements, providing additional 600 apartments. So looking forward, we do believe that we are getting those strong development gains. Cost increases are not impacting those projects.

As restrictions have been lifted in March, we have witnessed a lot of positive signs. As I said, we have seen an increasing number of new tenant agreements. And yes, we did read this morning that KPI provided information concerning rental apartment markets and supplying the market. There it's good to keep in mind that this data is based on a survey made in March. Those providing information then looked backwards, what's been happening in January, February, beginning of March. Now we are already in May. Actually supply from the market in April in the commercial portal, for example, in Helsinki, dropped down more than 10%. So it seems that a lot of activities in rental market at the moment.

Urbanization will continue. Students are moving back to universities, cities. Probably summer will be quite hectic providing a growing number of tenant agreements.

Thank you. Now if we move to Q&A.

[Niina Saarto, executive]

Yes. Thank you, Jani and Erik. We could take first questions from the audience. Go ahead.

[Svante Krokfors, analyst]

Svante Krokfors from Nordea. A couple of questions actually. First, regarding the consumer confidence is quite more currently. And inflation is high and wage increase is quite limited. So given the squeeze on the consumers, how do you view the possibilities to raise rents in the 2% to 2.5% range that you target? And yes, that's the first one.

[Jani Nieminen, executive]

Yes. I think that is good to keep in mind that total market is about people finding homes. And this uncertainty, an increase of living expenses, so maintenance cost is as well impacting owner-occupied homes directly and increasing interest rate levels will be impacting homebuyers. And typically, if we look backwards what's been going on in history, uncertainty in consumer confidence will impact homebuyers and actually increase the relative attractiveness of rental apartments. So yes, we do believe that we are able to increase the rents as we have been planning.

[Svante Krokfors, analyst]

And could you remind us about the rent increase terms that you have? How much is indexed? And how much can you raise rents above the index level?

[Jani Nieminen, executive]

Yes. So in all our rental agreement, we apply close that we are able to increase the rents once a year with index plus maximum 5%. It actually means that we are pricing all the apartments one by one and all the customers are receiving an individual letter.

[Svante Krokfors, analyst]

And given the inflation, I mean, it has many impacts. But what kind of impact does it have on your operations and maintenance and repair?

[Erik Hjelt, executive]

What we've seen so far is that the cost of electricity has gone up. And that, of course, plays a role if you look maintenance cost. Then heating is -- including the rents also, heating cost will have a impact. Those prices gone up slightly as well, but more important in our figures is what is the better -- sorry, impact of the better. And taking snow from one place to another, it seems to be quite expensive. So weather factor is more important for us than the price factor that comes to heating. Otherwise, price, yes, there -- we have seen inflation, prices gone up slightly, but we've been able to offset part of those increases by being a big buyer in the market. And that's -- so the impact, as already discussed in our figures has been quite limited so far.

[Svante Krokfors, analyst]

Okay. And then regarding the occupancy rate, which is at unprecedently low levels. What do you really believe is the impact from COVID-19? And how much is the impact from increased supply in the market?

[Jani Nieminen, executive]

The biggest driver by far is COVID-19 impacting urbanization. As a net result, actually Helsinki has been shrinkening during COVID-19. So people moving away from Helsinki. And at the same time, so we've been providing information all the time. We did know that new supply was coming to the market. And without COVID-19, it wouldn't have been a problem. On the other hand, we have said all the time that the impact is temporary. Urbanization will continue. And then, of course, depending on what kind of player you are, what's your strategy puts the ball game to a certain level.

Our focus has been that we are able to increase the rents all the time. Systematically, we've been able to do this. And as we now provided information, actually, as we've been providing all the time information that we firmly believe that as soon as COVID-19 is passing by, restrictions are removed, activities will start again. Job opportunities will be available. People move, using services creates demand for services. So people start moving back to big cities. Universities now asking students to come back. That will start happening. So demand side will be coming back. So it's -- our focus is a long-term game, not short-term temporary impacts.

[Svante Krokfors, analyst]

Excellent. Very clear. You haven't communicated anything about your review of the noncore portfolio of 3,600, I guess you will not comment it here either. But what I've heard there's been a number of portfolios quite large in the market. And at least I haven't heard of any of those having closed. So what's the investor demand? How has that developed?

[Jani Nieminen, executive]

Yes, it's still an ongoing process. So we are not providing color. As I said, a couple of transactions have been completed. A portfolio consisting roughly 2,000 apartments disposal project was completed by a foreign investor. So it seems that there is still a lot of demand in the market.

[Svante Krokfors, analyst]

And the last one, Erik, you mentioned that the higher end of the top line -- sorry, our growth guidance assumes a somewhat higher occupancy rate. Can you be more specific on that?

[Erik Hjelt, executive]

So if you calculate the 6%, so if half of that is coming through according to our estimate because of completed apartments and half, so 3% of like-for-like growth in total. And if we estimate that increases in rents and water charges will provide the growth for like-for-like 2.1% to 2.5%, so the slight increase is occupancy will cover the difference between 3 and this 2.1%, 2.5%.

[Niina Saarto, executive]

Okay. Do we have -- no more questions from here. So next, we can take questions from the phone line. Operator, we are ready.

[Operator]

[Operator Instructions] We have a question from John Vuong from Kempen.

[John Vuong, analyst]

Perhaps on the -- what you called the demand coming back to Helsinki from the restrictions being lifted at the beginning of March. We're now well into May. What are you seeing in your overall inquiry numbers?

[Jani Nieminen, executive]

Yes. Thank you for the question. As I provided color, we have been following the market and our operations on daily basis as typically. April against last year April, the increase of new tenant agreements was 17%. Now during the first 11 days of May against a comparison period of time, the increase is about 20%. So it seems that the market is picking up speed. And what we have seen is that in commercial portals during April, for example, in Helsinki, the supply decreased more than 10%.

[John Vuong, analyst]

Okay. Those numbers are a bit more comforting given that it's quite significant. Any changes in terms of the average rent levels you're asking for these same apartments?

[Jani Nieminen, executive]

So we still been able to increase the rents in a normal manner provided in a like-for-like figure. So top line growth has been 2.2%.

[John Vuong, analyst]

Okay. That's clear. And perhaps on the delay in zoning, you mentioned that EUR 30 million of CapEx is being delayed now. It feels like the delay in zoning is a bit of a recurring theme. Is this you being too optimistic on timing? Or would you say that there's more unforeseen case specific issues here?

[Erik Hjelt, executive]

Actually, the situation hasn't changed if you look today and compared to a couple of years ago. So the question is that when we make our estimates, so we pencil in this project in the schedule. This is the time that we estimate that we are able to start each project. And there, of course, we take into account that zoning might take this and that long or getting a building permission will take 1 or 2 months or 3 months. And if those are postponed somewhat. So that, of course, has an impact for investments made this year because we are now estimate the investments for 2022. So if we originally estimate this as 1, a project is started in May, and now it looks like it will be postponed 6 or 7 months. So that means that the amount of investments this year for that project is going to be very, very limited.

And this is actually what is so. So it's -- yes, the zoning is unfortunately taking longer than we would like to see, but it's a question of each project that we put them on the calendar when we think that the 1 project can be started. And if that is postponed for that point for a couple of months, then it might tend to be started next year or can be started this year, but the investment for that project this year is going down. So this is -- as you mentioned, so this is a ongoing thing. And lucky enough, some projects are started or completed earlier than anticipated in our estimate.

[John Vuong, analyst]

Okay. That's very clear. And then just one last question on the development starts that are coming down across the market. How does the Helsinki region compared to the other regions you're looking at?

[Jani Nieminen, executive]

I think that the impact goes throughout all the cities. It's related to a couple of things. I think at the end of the day, now construction companies are facing difficulties in pricing the product and facing the situation that homebuyers are a bit more careful with the decision-making. And this construction cost impact goes throughout the country.

[John Vuong, analyst]

Okay. So not that Helsinki region is seeing more -- or actually less development starts than initially planned relative to, for example…

[Jani Nieminen, executive]

I think all the players still find Helsinki region attractive as a market. But now they are facing challenges in how to estimate the cost side and do the pricing concerning the projects. The visibility has been a bit limited because of Russian attack to Ukraine.

[Operator]

Your next question comes from Jonathan Kownator from Goldman Sachs.

[Jonathan Kownator, analyst]

I appreciate it's been talked about quite a bit already this morning. I just wanted to come back to the occupancy and perhaps understand a bit better. I guess, in longer term, not in the next month, but obviously, the drop from peak from 97.2% in 2019, obviously very significant. So do you think half of that has become structural, i.e., you're highlighting that there's been more supply recently and appreciate if the environment is obviously changing. But when I'm trying to think about long term, are we thinking that the levels of 97% are achievable again in the short term given the recovery that you're seeing? Are you seeing any concentrated vacancy in some specific area, which have changed in terms of attractiveness or anything around that? I mean, obviously, we think happened. So just trying to get a bit of color on that gap and whether that occupancy shortfall across your portfolio, what they communicated.

[Jani Nieminen, executive]

Yes. Thank you for the question. Of course, the tricky part is what do we mean with a short period of time. I would say that as we've been commenting the market all the time, yes, one could argue that there's a lot of supply in the market. But as I have been saying, due to COVID-19 and lack of urbanization, there's actually been a lack of demand in the market. And now as restrictions have been lifted, the demand is picking up speed. At the end of the day, the total amount of available rental apartments in the marketing capital region is limited. It's not a question of tens of thousands of apartments, but a handful of thousand apartments.

So as people are moving back to Helsinki region in order to start working or starting to study in the universities or other places, that supply will be observed by the market. And sooner or later, here in Helsinki region, the occupancy levels will be reaching 97 again. In our eyes, we've been commenting and I have been providing information all the time. Occupancy plays an important role. But at the end of the day, it would be too easy to buy occupancy. You just start lowering the rents and stop making money. It's about being consistent with your strategy and providing additional value and finding epicenters in your processes. And once the market normalizes as it now seems to be happening, you are actually in a better shape than ever.

[Operator]

[Operator Instructions] There are no further questions at this time. Dear speakers, back to you.

[Niina Saarto, executive]

Thank you. We have some questions in the chat. The first question is about the occupancy rate. Have you thought about giving upfront increases in order to improve occupancy rate if it keeps going downward?

[Jani Nieminen, executive]

I think we've been providing quite sufficient color on that topic, and we will keep on being systematic with our strategy. Now we do believe that -- as estimated, things are getting better as restrictions have been lifted and market will be normalizing. So we will continue with our strategy.

[Niina Saarto, executive]

Okay. Then there's a question concerning your comments. You highlighted that the growth in new rental agreements has been quite rapid during Q2 compared to last year. Is it possible to comment how has the financial occupancy rate developed during Q2?

[Jani Nieminen, executive]

Typically, we only comment on the standing quarter report. We're not providing exact information on ongoing quarters. But as we've been saying that there are positive signs. And it's typical that once you start creating, increasing number with new tenant agreements -- there's a slight delay, once they step into force providing improvement with the occupancy.

[Niina Saarto, executive]

Good. And one more question. Did the negative occupancy rate development in Helsinki region focused on some specific location or age group? Or was it more general development?

[Jani Nieminen, executive]

I would say it'd be more general development.

[Niina Saarto, executive]

Okay. Thanks. It seems we don't have more questions. So thank you all for joining us today. It's been a pleasure to host this event. Kojamo's half year financial report will be published on 18th of August. Hope to see you then. Thank you, and have a great summer.