U.S. Markets closed

Edited Transcript of IPO-KOJAMO.HE earnings conference call or presentation 23-Aug-19 7:00am GMT

Half Year 2019 Kojamo Oyj Earnings Call

HELSINKI Aug 28, 2019 (Thomson StreetEvents) -- Edited Transcript of Kojamo Oyj earnings conference call or presentation Friday, August 23, 2019 at 7:00:00am GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Erik Hjelt

Kojamo Oyj - CFO & Deputy CEO

* Jani Nieminen

Kojamo Oyj - CEO

* Maija Hongas

Kojamo Oyj - Manager of IR

================================================================================

Conference Call Participants

================================================================================

* Svante Krokfors

Nordea Markets, Research Division - Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Maija Hongas, Kojamo Oyj - Manager of IR [1]

--------------------------------------------------------------------------------

Good morning, ladies and gentlemen, and welcome to Kojamo's Half Year Financial Report News Conference. My name is Maija Hongas and I'm Manager Investor Relations here at Kojamo. And today's presenters will be CEO, Jani Nieminen; and CFO, Erik Hjelt. After the presentations, there's some time for questions. And first, we are going to take questions here from the conference room, and after that, from the conference call line. You have also an opportunity to ask questions with the web chat function at the webcast.

Well, let's get started. Please, Jani, the stage is yours.

--------------------------------------------------------------------------------

Jani Nieminen, Kojamo Oyj - CEO [2]

--------------------------------------------------------------------------------

Okay. Bring with me all the important papers, cover the right topics. So we will cover what's been going on during the first half year here in Kojamo, and of course, starting point is the operating environment and to wrap up shortly, still positive, no big changes going on.

The first half year has been really consistent with our expectations, so strong operating performance is reflected in our key figures. And of course, at this point of time, time of the year, we see that probably there's a chance to slightly specify the outlook.

And if we start with the general operating environment, as I said, no big changes. Urbanization is still the biggest and most important megatrend, creating a lot of demand for new rental homes. The construction volume here in Finland seems to settle down to a so-called normal level, especially in biggest growth centers. I'll talk about Helsinki region, Jyväskylä, probably Tampere and Turku. It seemed that the estimate of building premises is likely going down, but of course, the population growth is going forward and people are moving towards, especially Helsinki region, which will be the winner in this urbanization game here, going on here in Finland as Helsinki is the most important economic point here in Finland. And of course, Tampere and Turku areas are important as well.

Overall, the operating big picture and the GDP growth here in Finland is still positive and good, but of course, the slowing growth of the world trade would have an impact to Finland as we are a small nation, export-driven economy. But the demand-supply in the rental market is based on urbanization not so much about the GDP growth.

And as the urbanization proceeds, there are no big changes in so-called more operating environment concerning residential production and housing development. The number of start-ups and new building start-ups is going down, but as I said, the level of construction work in my eyes will return to normal in the biggest cities and the biggest growth centers, Helsinki, Tampere and Turku. And of course, the low interest levels are appealing, so the institutional players seems to -- they're quite willing to invest in residential business. But in my eyes, it seemed that the total number of building permits trend in this year might be a bit lower than official estimate at this point of the year, but they're dropping down is outside the biggest growth centers.

And of course, even though the number of building permits trended is going down, there are still a lot of new supply in the market because of the construction work going on. And the supply situation will remain the same throughout the next 12 to 14 months, and then the supply-demand balance will change after the new construction work growth on a bit lower level. But as I said, still it seems that in the biggest cities, it's returning to so-called normal level not dropping really down. But there have been a lot of supply in the market, and in my eyes, it will stay the same throughout the next year. We've been doing okay in that environment.

As I said, this combination was -- creates demand for new rental homes. It's a combination of urbanization and change in household sizes, and more and more householders are 1- or 2-person households. There have been also, as said before, a change in people's attitudes towards ownership. And more people who would be able to buy an apartment or, as a matter of fact, for example, a car are choosing not to buy and not to own, and that creates a bit more demand towards the rental market. Another aspect is that the apartment prices have been increasing. And for some people, they're just too expensive or they don't want to spend the money in order to buy the apartment. They choose to rent.

Third aspect are that there has been slight changes concerning loan terms and the equity needed for individuals in order to buy the apartment in so-called housing corporation or loan discussion has been impacting a bit. So I say that there's a good, good demand for rental homes in the future as well, and as we see on the lower right-hand corner, the number of households living in rental apartments in all the main growth centers is growing all the time. And for example, here in Helsinki, roughly half of the households today are living in rental apartments. It's actually more households living in rental apartments than owning their own apartment.

And as I said, the year has been, as expected, in my eyes, no surprises. And we do have a really strong operating year. And it's reflected in all the key figures. The total revenue has been growing 3.7%. Like-for-like growth this year, 2.8% compared to last year 1.9%. So in my eyes, like-for-like growth this year is really strong. We've been able to improve the net rental income by 7.4%. Of course, the funds from operations, FFO, this year really strong, and it is a combination of improved net rental income and lower paid income taxes.

Profit, excluding changes in value, is an important business -- it's an operating result, and it's 8.9% better than last year. So of course, happy, good numbers, strong numbers. And on the other hand, even though the EUR 52.6 million net gain in fair values this year is a positive and big figure, it's slightly lower figure than last year and that's reflected in the profit before taxes. But all the figures are really strong, and it seemed that we are proceeding as expected and planned.

As the urbanization is going on and is proceeding, it's important to notice that more than 2/3 of our housing portfolio, residential portfolio is located in Helsinki region, and actually, the portion of the value in Helsinki region is slightly growing all the time. But the numbers are so big at this point of time that there are no that big changes, but 67.9% today in Helsinki region. And if we combine Helsinki region with Turku and Tampere regions, so the 3 biggest growth centers here in Finland, it covers 83.5% of our rental home from the value point of view.

We've been able to improve the occupancy rate this year even though we were happy as the last year, after the first half of the year last year, it was 96.5%, and this year, 96.9%. And we have to really keep in mind that there's a like-for-like growth of 2.8% going on. And at the same time, we've been able to improve the occupancy rate. So we've been able to improve the processes. Of course, the digitalization and our webstore is an important vehicle, how we help the people here in Finland to move towards the growth centers.

Same comments concerning Jyväskylä area than last year, last presentation after Q1. So even though the city of Jyväskylä is growing and there's a good growth going on, there has been a lot of going on with the supply side. So there are, for a short period of time, there's a situation that too many new construction projects were started a couple of years ago at the same time. So there's a good supply for the tenants at the moment, but it will level off.

The strategy is still the same. We are a combination of strong operative performance, and the ability and goal to grow. And during this year, we've been able to complete 383 apartments. We have started the construction of 648 apartments. At the moment, we have under construction 1,329 apartments, of which 1,127 here in Helsinki region. So a clear focus all the time in Helsinki region.

We have agreed to sell 478 apartments in 12 different locations here in Finland to Olo Asunnot. Behind Olo is international money, international investor. There's a slight capital gain of EUR 0.4 million. They were noncore assets to us, so it's a natural strategic move. And we've been telling already after Q1 that the aim is that this part of the strategy will be completed during this year, and now the deal is done. We've been following and monitoring the market closely in order to find a suitable portfolio according to all the parameters. In the market, there's lot of interest to work portfolio as we've been seeing quite low yields. We haven't found a portfolio meeting to our parameters yet, but the work is still going on and we have a lot of time this year still. If we will find a suitable investment opportunity, of course, we are ready and able to move really fast.

Digitalization and the customer experience is actually really important for us all the time, and we've been able to improve the customer experience. It starts always from the point of time where people is looking for rental apartment. We have to be able to provide an easy and effortless experience. We're not selecting the customer. The customer is selecting us. We are providing means to rent an apartment from the webstore. Still a promise in 15 minutes, you're able to rent an apartment and move in the next day. We provide a lot of services even before you live in our apartments. And after you are our customer, of course, it's important that the customer experience stays the same. It's easy and effortless. We are providing added value. We launched My Lumo services Q1 this year. Today, a bit more than 22,000 active users. A mobile app, you get all the information concerning your living in our apartments. You get the services available.

We have now the Leanheat system in all the apartments. There's winter coming again in a couple of months, and now we have the system in place as full. Of course, all kinds of different service still a big services that sharing cost system providing opportunity that you really don't need to own a car in order to use a car. It's available for you through My Lumo service.

And as I said, the webstore is important. After the first half of the year, the number was 12,000, this morning, more than 13,000. And the portion of transactions coming in through webstore has been growing all the time. At the moment, half of the rental agreements are coming from the webstore concerning the whole Finland. Here in Helsinki region, at the moment, more than half, roughly 60% of all the transactions are coming through the web portal. And that's something that nobody else is able to provide for the customers.

And at this point of time, I will let our CFO Erik to provide some more detailed information.

--------------------------------------------------------------------------------

Erik Hjelt, Kojamo Oyj - CFO & Deputy CEO [3]

--------------------------------------------------------------------------------

Thank you, Jani, and good morning, everybody, from my side as well. So our figures H1 this year came out strong, and our total revenue increased by 3.7%. And that includes the like-for-like rental growth 2.8% and 2.4% from the rent increases and 0.4% from improved occupancy. The revenue growth, EUR 6.6 million, was driven by completed apartments, EUR 4.6 million. And that, of course, includes the completed apartments H2 2018 as well as the completed apartments H1 this year. Acquisition contributed EUR 1 million. Disposals, negative figure there, of course, the EUR 3.9 million. Rent increases, euro-wise, EUR 4.2 million, and improved occupancy, EUR 0.7 million.

Profit before tax. If you look at the profit, excluding profit on fair value investment properties, the growth was EUR 5.9 million, and main driver in that growth was the net rental income improvement, EUR 8.2 million. SG&A expenses, EUR 0.4 million, so pretty stable situation there. Financial expenses, growth EUR 2 million, mainly because of the bigger loan portfolio what we have.

And then, of course, the profit on fair value on investment properties, EUR 52.6 million. It's positive figure, quite sizeable positive figure, but slightly smaller than in corresponding period. Roughly 60% of the profit came through because of the higher prices in the market, and roughly 40% of that profit came through the ending restrictions.

Net rental income, there, the growth rate, 7.4% is clearly higher than the top line growth rate, and there's 2 main reasons behind that. One is that maintenance expenses grew only 1.6%, EUR 0.8 million. There's 2 items that grew there. One is the property taxes, was EUR 0.5 million, bigger in corresponding period. And the cleaning costs, outside area cleaning costs was higher than in corresponding period.

Repairs was minus EUR 2.3 million compared to corresponding period. There, we had some clear savings, and on top of that, some of the project type or repairs were postponed.

FFO growth, EUR 68.1 million (sic) [68.1%]. It's good to note that in the corresponding period, we booked EUR 13.5 million cash taxes because of the disposals of apartments there. The net rental income grew EUR 8.2 million, so that's on the positive side. And it's good to note that the interpretation on IFRIC 21 property taxes are recognized now as expense in 1st of January this year, so whole year's property taxes, and this year, the property taxes are EUR 10.8 million.

Jani will discuss later our guidance, but couple of notes there already at this stage. So the FFO guidance, the midpoint of the guidance is based on a couple of assumptions. One is that weather is going to be on average level. And already in the midpoint of the FFO guidance, there's a bigger amount for repairs compared to previous years. So if we are able to get some savings there, there's potential for -- to move towards the upside of -- upper part of the range, but that remains to be seen.

And as Jani discussed already, we are agreed to dispose 478 apartments, and that will be -- that deal will be closed the end of this month. And this guidance, it's already included EUR 4.4 million tax, cash taxes because of that disposal.

Occupancy rate improved slightly, we climbed slightly during the Q1 and the Q2 was clearly stronger. So this is the cumulative figure for the whole H1 improvement there. And the tenant turnover seems to be in the market-based rental part of the market, roughly on the 30% level, so no changes there.

Gross investments. Investments now proceeding according to strategy, EUR 96.6 million. There's acquisitions, EUR [71.7] million. We acquired 99 apartments during the first half of this year. The development investments, EUR 98.1 million, both completed apartments and on still ongoing apartments there, and modernization investments, EUR 11.5 million.

Modernization investments and repairs, on the same level as in the corresponding period. As already said, we have achieved some savings there. And the division between repairs and modernization investments have slightly changed.

There's one big modernization project that was postponed next year. And there's other modernization project that was started later than what we had in our budgets. So that means that part of those costs will be booked next year. But these 2 postponed is not going to have an impact for total amount of modernization investment repairs in 2020.

The value of investment properties increased in line with the strategy. In the beginning of this year, the increase was EUR 210 million. IFRS 16 was roughly -- at roughly EUR 61 million impact there. So developments, acquisitions and modernization investments, EUR 96.6 million. And change in fair value, when we do valuation, was positive EUR 52.6 million.

The valuation was made according to old valuation techniques. Biggest portion is valued based on transactions from the market. And we have disclosed that we're going to change the valuation technique at the end of this year to yield-based valuation technique. We don't have any new figures for you guys at this stage, but what we are preparing the change there. And the model, we are building the model and it's going to be 10 years discounted cash flow method that we are going to apply going forward. And there's going to be an external expert giving a statement each quarter going forward as well, and it's going to be a household name. And as soon as we have some figures, we are going to disclose of course those figures.

So far, this year, 570 apartments came out of the restrictions, and the total amount coming out of the restrictions this year is going to be a little more than 1,400, and most of them will come out of restriction during the Q4 this year.

Our land bank, on upper part of this page, our land bank that we already own, so plots means basically pure land, EUR 43 million, roughly 1,100 apartments. So that's the management estimation, so the floor square meters amounted by 0.8, and the average size of apartment 50 square meters, that gives the rough figure of 1,100 plots. And if you see the residential buildings, there the idea is to demolish the existing building and build a new one, 700 apartments roughly. Currently, in that part of the portfolio, we have 300 apartments. And conversions, mainly Metropolia project and Erik's servicing in the heart of the city of Helsinki, all together roughly 1,300 apartments.

The lower part of the page, there is the figures for what we have binding preliminary agreements and reservation for plots. So this EUR 121 million is binding agreements where we agreed to acquire the existing land and there's already construction agreement in place. And then the lower part, this is pure land, so we have an agreement that we are allowed to buy those lands. It's good to note that 99% of the total, what we just discussed, is located in Helsinki region.

Equity ratio and loan to value were in line with our targets. So equity ratio target is to be above 40% 4-0, and loan to value to be below 50%, 5-0. And then we are well in line with those targets.

And EPRA NAV, growth of 6.4%. We are extremely pleased with that growth rate. Versatile capital structure, we made a one new agreement with OP Financial Group, EUR 100 million, 7 years maturity, unsecured at the end of reporting period that was undrawn that supports our growth. And in the beginning with this year, we made the latter part of the loan from European Investment Bank.

We have a well-balanced loan structure, well-balanced distribution of loan maturities. Average interest rate stayed at 1.8% and that's including those of derivatives, hedging ratio 89%. And the average maturity for a loan portfolio, 5.1 and average interest rate fixed period 5.4 years. So very strong financial key figures. And there's no major refinancing needs for next 2 or 3 years. And outstanding commercial papers is included in these figures. We have EUR 300 million committed credit lines in place. And at the end of H1, they were totally unused.

And at this stage, back to Jani.

--------------------------------------------------------------------------------

Jani Nieminen, Kojamo Oyj - CEO [4]

--------------------------------------------------------------------------------

And then we move forward towards the outlook and what's going on in big picture. So of course, we have to keep in mind that our strategy is based on different elements, which provides a complete picture. So there's a strategy that we want to grow, and the target at the moment is that by the end of 2021 we are going to be at EUR 6 billion Company. And so we do have the means, the willingness and the ability to grow.

The second aspect is that we haven't been willing, and the aim is not to grow at any cost. We want to keep the FFO level above 32%. Actually we have been -- the strategy growing in order to be even more profitable.

Third aspect is how we handle the risk. We want to keep the equity ratio above 40% and the LTV below 50%. And of course, the customer experience is important for us. The aim is that the NPS will be 40 by the end of '21.

And we've been proceeding according to our strategy. All the aspects at the moment are well in line with our strategy goals. This year, still no big portfolios. Last year, we were able to buy more than the strategy actually needs. So last year, a bit ahead. Still year -- this year, still looking for a suitable portfolio. We have to keep in mind that the growth strategy actually is being able to provide roughly 1,000 new apartments by building and by buying portfolios of roughly 500 apartments a year. So some year, the portfolio deal might be 1,000 or 2,000. Some year, a couple of hundreds. But the average of 500 apartment from the market, existing apartments will carry out through to be EUR 6 billion Company by the end of 2021.

And as Erik's provided a lot of color behind the numbers and the specified outlook, at this point of the year, we feel that we are able to be a more specified range concerning the total revenue increase, and it will be between 3% and 5%. The previous outlook was from 2% to 7%. And the FFO range will be somewhere between EUR 134 million and EUR 144 million. Excluding one-off items, previously EUR 130 million to EUR 143 million. Still, we see that we are investing this year approximately EUR 300 million. Of course, depending whether we are able to find the portfolio, we're looking all the time. There are some opportunities coming available. Depending on the size of the portfolio, such a deal could take a couple of months or a couple of weeks. But this is the specified outlook. And look, the second aspect, of course, the dividend policy, there are no changes. Still, the dividend policy is the annual dividend payment will be at least 60% of the FFO provided that the group's equity ratio is 40% or more, and of course, taking account of the company's financial position and that's the number where last year EUR 0.29.

And to wrap up the whole, of course, as I said, no surprises. All the things are going according to our expectations and really strong performance. We have to keep in mind that the operating performance is strong and efficient. On the other hand, we are providing good customer experience. The customer is choosing us from the webstore. They are willing to move into our apartments, pay the rents. We're providing new kinds of services. Nobody else have been able to copy them. Webstore, providing more and more new clients. My Lumo services is growing with roughly 2,000 to 3,000 active users a month.

So I guess at this point, we are ready to move towards the questions.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Maija Hongas, Kojamo Oyj - Manager of IR [1]

--------------------------------------------------------------------------------

Thank you, Jani and Erik. So now it's time for question. And first, we take questions here from the conference room in Helsinki.

--------------------------------------------------------------------------------

Unidentified Analyst, [2]

--------------------------------------------------------------------------------

It's [Erkki] from [Indras] . A couple of questions. First, on the Lumo services, the revenue and profitability. Any comment on those would be nice or even better ballpark figures regarding those services?

--------------------------------------------------------------------------------

Jani Nieminen, Kojamo Oyj - CEO [3]

--------------------------------------------------------------------------------

I'll answer like this way that, at the moment, we are not providing any detailed figures. And we have to -- well, keep in mind that it's a combination of different aspects. Some of the services are and will be such that you really feel easy and effortless. Some of the services are providing added value that you feel that you're willing to pay a bit more compared to our competitors. Some of the service in the future will be that you pay as you use. But of course, there's a financial checkup. And we are testing some of the services, collecting data all the time. Some of the services will disappear. Some of the new services will appear. The service development is much quicker. You have defined test, get the customer feedback, compared to the real estate investment where you invest in a property and keep it for the next 40 years.

--------------------------------------------------------------------------------

Unidentified Analyst, [4]

--------------------------------------------------------------------------------

Okay. And then this goes to Erik. How's the new valuation methodology going to impact bookkeeping, i.e. what's the treatment going to be? Is it going to show in the P&L, et cetera?

--------------------------------------------------------------------------------

Erik Hjelt, Kojamo Oyj - CFO & Deputy CEO [5]

--------------------------------------------------------------------------------

If there's going to be a change in the values compared to what we now have in the previous come through P&L.

--------------------------------------------------------------------------------

Jani Nieminen, Kojamo Oyj - CEO [6]

--------------------------------------------------------------------------------

And if I may add. I guess one aspect could be that the customer experience and the service might be helping our like-for-like growth compared to others.

--------------------------------------------------------------------------------

Unidentified Analyst, [7]

--------------------------------------------------------------------------------

It's (inaudible) from SEB. A couple of questions from my side. First of all, like-for-like growth, it's rental growth. Basically, what are the key drivers? We have seen a small pickup in a like-for-like basis. So what are the drivers behind the number?

--------------------------------------------------------------------------------

Jani Nieminen, Kojamo Oyj - CEO [8]

--------------------------------------------------------------------------------

(inaudible) 2.8% like-for-like growth is a combination of 2 aspects: the rental growth, 2.4%; and the improvement with the occupancy rate is 0.4%. So that's the combination. And the rent increase, the urbanization is creating demand, but they're supplying the market more than usual. So as I said, the customers are choosing us. They are willing to pay in order to move into the Lumo apartments.

--------------------------------------------------------------------------------

Unidentified Analyst, [9]

--------------------------------------------------------------------------------

Then my second question. You or ...

--------------------------------------------------------------------------------

Erik Hjelt, Kojamo Oyj - CFO & Deputy CEO [10]

--------------------------------------------------------------------------------

(inaudible) there. One is that there is actually 3 components behind that. One is that, according to our lease agreements, we are allowed to increase rents once a year, and that has a impact, of course, for the like-for-like rental growth. Other aspect is that we compare what is the rent level in new agreements compared to expiring ones, and there, there has been a slight increase in couple of years. And then third aspect is, of course, this vacancy level. And then there's 2 questions here: one is that how fast we get a new tenant when one is leaving, and then we've been able to shorten that time; another thing is, of course, if there's a quite long time vacant apartments, there, there is, of course, other things that we need to do. But these are the main drivers behind the like-for-like growth.

--------------------------------------------------------------------------------

Unidentified Analyst, [11]

--------------------------------------------------------------------------------

Then you already touched upon this, but it's related to the housing supply. If we look at the official data, we have already seen, on Finnish scale, decline in new rental contracts in prices. So in a way, should we expect that this will have some kind of impact for you in the future? Or how should we read the situation? Kind of my question is that how resilient do you see this, let's say, 2.4% rental growth rate that you currently have?

--------------------------------------------------------------------------------

Jani Nieminen, Kojamo Oyj - CEO [12]

--------------------------------------------------------------------------------

I think the latest statistic provided over the last week or a couple of weeks ago showed an increase with the existing rents of 1.5% or something like that. And still, the expectation is that the increase with the rents and actually with the house prices in main growth centers will stay the same, roughly 2% to 2.5%. So we have been able to provide a bit more with the like-for-like growth. So as we provided the color behind the 2.8%, the actual rental increase was 2.4%. And that's I've seen steady. No changes there in my answer.

--------------------------------------------------------------------------------

Svante Krokfors, Nordea Markets, Research Division - Analyst [13]

--------------------------------------------------------------------------------

Svante Krokfors, Nordea. First, a question regarding maintenance and repair costs. Was Q2 representative or was it below what you should model in for the remainder of the year? And how does that compare also to 2020 when you have postponed some projects?

--------------------------------------------------------------------------------

Erik Hjelt, Kojamo Oyj - CFO & Deputy CEO [14]

--------------------------------------------------------------------------------

Yes. We just discussed before this meeting that how predictable this business is, that these repairs and modernization investments is one item that is not that easy to predict. In the mid-part of FFO, we penciled in increase in repairs compared to corresponding over the last year's -- latter half of last year. Typically, the repairs -- the amount of repairs is higher in the second half of the year. There's 2 reason. One is, if you in the beginning of the year start repair project, it will take time before they are up and running. Another thing is that, I don't know why, but for some odd reason, construction companies are sending bills quite late. So the amount of bill coming in is, for some reason, panning up in towards the end of the year. So we expect the repairs in the last part -- the second part of this year to be higher level compared to last year. But there's a couple of these project, as discussed, that were postponed, so that has a impact for what we're anticipating in the beginning of this year. They are not going to have a impact to the total amount next year that we are going to spend for repairs and maintenance. We are, of course, not giving any guidance for concerning 2020, but that's a general comment. This is not going to have an impact for the total amount next year, so slightly above last year's figures.

--------------------------------------------------------------------------------

Svante Krokfors, Nordea Markets, Research Division - Analyst [15]

--------------------------------------------------------------------------------

Then what clearly said that you haven't found targets that matched your parameters. Can you a bit elaborate on which the parameters are? And what's the main reason that the deals haven't gone through? Is it, I guess, in location, it -- you decide whether you want to look at it at all? But is it just the pricing has been -- how much too high has the pricing been to match your parameters?

--------------------------------------------------------------------------------

Jani Nieminen, Kojamo Oyj - CEO [16]

--------------------------------------------------------------------------------

Yes. In order to provide color, truly, it's a combination of different aspects. And related to the previous question where the rents are going, so it starts really from the micro location and our existing locations. Do we feel that this is the right micro location? Does it match the criteria of which -- what kind of apartments are included in that property? Is it studios, 1-bedroom apartment, the average size in general? What's the technical condition? And then we come to the pricing. And we've seen quite low yields, 3.5%, even below that. We are not willing to pay that yield if we don't truly believe it's a unique, good building. We've been able to close our deal with better yields. So we are -- you could say that we are a bit picky, that we choose carefully. It would be easy to grow at any means, but we are choosing not to.

--------------------------------------------------------------------------------

Svante Krokfors, Nordea Markets, Research Division - Analyst [17]

--------------------------------------------------------------------------------

And I guess that 3% to 3.5% yield, is that only on new production or?

--------------------------------------------------------------------------------

Jani Nieminen, Kojamo Oyj - CEO [18]

--------------------------------------------------------------------------------

Mostly newly built. But there has -- seems that there has been quite a lot of appetite towards the Finnish residential market.

--------------------------------------------------------------------------------

Svante Krokfors, Nordea Markets, Research Division - Analyst [19]

--------------------------------------------------------------------------------

And then last question, about the 478 apartments you sold at the 4 -- your EUR 0.4 million gain. Can you give any indication about the yield on that? I know it's noncore to you.

--------------------------------------------------------------------------------

Jani Nieminen, Kojamo Oyj - CEO [20]

--------------------------------------------------------------------------------

Yes. And even though I do understand that question and it would be nice to provide the color concerning the yield, but there hasn't been any yield discussion. It was a noncore portfolio, including noncore locations. Might be some more challenging technical conditions. So it was a portfolio deal done on a chunk-based pricing.

--------------------------------------------------------------------------------

Maija Hongas, Kojamo Oyj - Manager of IR [21]

--------------------------------------------------------------------------------

Okay. One more.

--------------------------------------------------------------------------------

Unidentified Analyst, [22]

--------------------------------------------------------------------------------

Yes. This is from [Jassi Ingrom] from [Indras]. One question concerning your divestments. You still have some noncore assets in your portfolio. Could you really describe your strategy? And how and when are you going to divest these assets?

--------------------------------------------------------------------------------

Jani Nieminen, Kojamo Oyj - CEO [23]

--------------------------------------------------------------------------------

Yes. We've provided the color after Q1 that we had roughly 500 apartments on the disposal process in the strategy. And now we have provided the information of selling 478 apartments, so close to that 500, mean really not that much left. But of course, we are a professional investor. And also, in the future, it will be rational to sell some of the properties each year in order to improve the overall portfolio even though the main focus is to grow. But the big part of the disposals concerning the location strategy is ready.

--------------------------------------------------------------------------------

Maija Hongas, Kojamo Oyj - Manager of IR [24]

--------------------------------------------------------------------------------

Okay. It seems we don't have any more questions from here, so let's go to the conference call line, please.

--------------------------------------------------------------------------------

Operator [25]

--------------------------------------------------------------------------------

(Operator Instructions) Okay. There seems to be no questions from the phones at this time.

--------------------------------------------------------------------------------

Maija Hongas, Kojamo Oyj - Manager of IR [26]

--------------------------------------------------------------------------------

Okay. Thank you. And then we'll have questions from the webcast or the chat function. We have one question from there. And it's regarding that, several executives have left the company this year, so what's behind that?

--------------------------------------------------------------------------------

Jani Nieminen, Kojamo Oyj - CEO [27]

--------------------------------------------------------------------------------

No big surprises. We are a company having more than 300 people. Most of our employees have been around for a really long time, so there comes a time that people feel that they want to have a change. Of course, we have become a more visible company. The Kojamo story is more and more known. And it seems that we've been able to provide actions and solutions nobody else have been able to provide. So more and more, our people are provided offers outside. So now -- and actually, even though we are able to find new people, really high-class new people, but we are living in a new world that the other companies are after our people as well. So it's like a normal situation then. You get some new blood, you lose some blood. No big things going on.

--------------------------------------------------------------------------------

Maija Hongas, Kojamo Oyj - Manager of IR [28]

--------------------------------------------------------------------------------

Okay. Thank you. It seems that was our last question. So thank you, everybody for joining us today, and we will be publishing our Q3 report on 6th of November, so I hope we'll meet there. Thank you very much.

--------------------------------------------------------------------------------

Jani Nieminen, Kojamo Oyj - CEO [29]

--------------------------------------------------------------------------------

Thank you.