Good morning, all, and welcome to Lumo Homes' half-year result webcast. I'm Niina Saarto.

I'm Treasury and Investor Relations Director. Soon we will hear the Q2 result.

Our CEO, Reima Rytsölä starts, giving also an update of the market as well as on the acquired portfolio's leasing and how the integration to our platform has started. Then interim CFO, Antti Syvänen continues with financial development and outlook.

Q&A follows the presentation, and there we welcome both live questions and chat questions. Now we can start with the presentation.

Very good morning on behalf of myself as well, and welcome to this Lumo Q2 earnings release webcast. We had a we had a actually strong quarter behind us, and and all the total revenue, net rental income, and FFO grew strongly in second quarter.

All in all, the the kind of market conditions seem seem to improve, and I I come back on on later stage a little bit more detailed on the on the market conditions. Our occupancy rate grew from from last year's comparison point, even though the the we acquired on 1st of April the portfolio of 4,761 apartments, which which occupancy was much lower, 83 on the on the date of 1st of April.

Already during Q2, we managed to raise the occupancy from 83 to 89 on this acquired portfolio, and and and it was truly a success. The the development has continued in very favorable terms since since the end of June also.

We also refinanced €300 million of our acquisition financing with the bond issue in May, and and all in all, our financial position remained stable. In June, we also signed €500 million backstop facility agreement, which which is very favorable in cost-effective-wise to us, and and enables us to kind of refinance the the maturing bond not not earlier than than than next spring.

If I then start with the operating environment, all in all, I think the the first half of the year for Finnish economy has been very very very good, and and it's glad to see that finally Finnish economy is is leading the pack also in European context on on growth terms in in in first half. The the both the first quarter and the the second quarter preliminary GDP figures are 0.9% growth in each quarter, which is which is strong in in compared to what what it has been in previous previous muted years.

Of course, the the kind of geopolitical tensions and and somewhat rising interest rates are are are giving some kind of clouds for for the development, but so far so good on on on Finnish economy-wise. Also the the kind of supply-demand balance seem seem to finally finally start to to to to balancing out, especially if we look at the the supply supplied rental apartments, which especially in Helsinki area in in in Helsinki, the the amounts of offered apartments have have declined meaningfully close to close to 20% from from last last year's comparison point, or or last 12 months' time.

Year to date, the the the decline of supplied apartments have been even even higher, but but then we need to bear in mind that we always have a kind of seasonal effect from from year-end year start beginning of the year when we coming to summertime, which is the which is the kind of seasonally best time for landlords. Also, as I said, that for example, Helsinki, it's it's roughly 20% decline in in in in apartments that are that are offered for for rental.

It's it's it's a meaning meaningful in in that sense. Also, the the construction has been has been very muted this year, and even though some of the forecasts seem to be that that also the next year for for residential construction will be will be even lower than this year.

At the moment, the the latest forecast is 15,000 apartments. Still the the especially the the growth triangle, to say, Helsinki area, Tampere, Turku area is is is growing on on population terms and even even the household terms, even though the the households haven't haven't grown as number of households haven't grown as fast as as as population.

That has been probably the one thing that that has has kind of postponed the recovery of of rental market. Now it seems to be started that that it has started from from Helsinki area, and and it's of course the most important area for us, especially Helsinki as a city, but Helsinki area overall.

Three 76% of our portfolio value is in in in Helsinki area, and in that growth triangle, close to 90% of our our apartments are are located in the in the growth triangle. I would say that our our portfolio is is in in good good shape to kind of face the the recovery that has started from the from the capital area.

Then the as as we already announced in February, and and the deal was closing in 1st of April, so we acquired 4,761 apartments. The the I think the only weak spot of the portfolio was that it has it has very low occupancy at the time of of of acquisition or closing, and it was roughly 80% 83%.

Already during, as I said already earlier, already during the Q Q2, we were able to raise the the occupancy from 83 to 89, and and and the development has has been very favorable since that either. It it it looks good, and and when we when when on the last Q1 earnings release, I said that we expect to reach with this portfolio the the stabilized occupancy rate, which we mean that roughly the same occupancy rate than than we we have in in our legacy portfolio.

We expect to reach that probably not this year, but but latest on during next year. I have to revise that due to favorable developments so that we already expect to reach that stabilized level already in Q3, by the end of September, if the if if this kind of favorable development carries on like like we do believe at the moment.

All in all, I would say that that we had a we had a kind of strong and solid quarter. We we still have we still have plenty of to It's it's very very kind of promising that that market seemed to finally start recovering.

Of course, there's a still still if we if you think about the the kind of pricing power of of a landlord, so it often comes a bit delayed since the since the since the supply-demand balance process. We we expect that we will we will see in latest in next year so so kind of growing pricing power for landlords as well.

For financial targets compared to our strategy, so it's it's of course early days early days, we have a first six months to go, but all in line, but definitely some some work to do still, which is which is natural. Good time to remind that that we in in last spring on on on AGM, we we revised our dividend policy where we said that we we will distribute at least 20% of FFO to our shareholders, and and it was optional, either dividend or or share buyback.

With the with the current trading of of of a share, it's probably more more likely to to to to the distribution via via buybacks than than with the dividend. That's a bit of early days to say, but that's the thinking at the moment.

Okay. Then I would like to hand over the the word for for Antti, who will carry on the financial development and outlook.

Yes. Hello, everybody, also from my side.

My name is Antti Syvänen. I'm the interim CFO of Lumo, and I will be giving you the insights into the financials for over the next two quarters until Tommi Valento, who has been appointed as CFO, will start next January.

Let's go through the figures starting from the top line. The revenue and net rental income both increased.

Total revenue up €5.9 million or 2.6%, it is. As Reima mentioned, we have acquired a portfolio that gave us revenue increase of €14 million compared to last year.

We have made some disposals in '25 and '26, which has had an effect to the net revenue roughly €12 million. In addition, we have had a higher occupancy rate compared to last year, which increased the revenue by €2.8 million.

Net rental income up €6.0 million, 4.1%. The main explanations are it's done in revenue.

In addition, we had a bit higher maintenance expenses, €0.8 million compared to last year. Repair expenses were €0.9 million less compared to last year.

On slide 14, profit before taxes and FFO both increased. Profit before taxes came up from negative €24 million last year into positive €62.7 million.

If we exclude the changes in value, the increase was €9.6 million, and of course, it was positively affected by the increase in total revenue, as I explained. In addition, we had a bit higher admin expenses compared to last year, €2.5 million.

The increased salaries and fees were €1.3 million higher compared to last year. Total amount of financial expenses, they were €2.3 million higher compared to last year.

FFO up €2.8 million, 4.5% compared to last year, and the same explanations than in profit, excluding changes in value. Next slide, occupancy rate.

It has steadily increased actually from quarter 3 '24. It now stood at 95%.

It was up 1.4% compared to last year, and it was also slightly up 0.2% compared to the year-end, even though we acquired the portfolio, which had a relatively low occupancy rate compared to our so to say legacy portfolio. Tenant turnover ratio has increased slightly, but it's still on a normal level, 14.5.

Nothing special there. Next slide, we have had positive development in like-for-like rental income.

It was up 2.7% compared to last year. Main driver was the impact of occupancy effect was 3.7%.

We have slightly minus from the impacts of rents, especially rents, and then water charges in total. Just as a reminder, when we calculate this like-for-like rental income, we are comparing past 12 months' figures into previous 12-month figures, and it doesn't include the properties that we have acquired or disposed or completed within two years, doesn't include the acquired portfolio as such.

Next, slide 17. We have had strong progress in investments.

That was mainly due to the acquisition of portfolio, which was made in April. That had an effect of roughly €900 million.

We have sold 218 apartments. That had an effect of €21.5 million.

Gross investments were totally up by roughly €870 million. Maybe one comment here regarding to the accounting treatment of this portfolio acquisition: At the time when we acquired the portfolio, it was recognized as a cost according to the ruling of IFRS, so that's why the figure is slightly below €900 million due to the fact of this booking of the premium of this deal.

Later on, this premium that Varma paid, it was subsequently recognized as a profit on fair value of investment properties, roughly €51 million. Modernization investments and repairs were up 6.3% or €1.5 million.

Slide number 18, fair value of investment properties, they were €8.5 million up 7.5%. There once again, the main reason was the acquisition of this Jupiter portfolio that had an effect of €900 million.

On a negative side, we had the disposal last year of residential properties, which had an effect of roughly €240 million. We didn't change any parameters regarding the valuation.

They were unchanged. In the second quarter, the change in the fair value of investment properties were €34.1 million.

Next slide, equity ratio and loan to value, they have both remained really strong. Equity ratio of 41 45%.

Loan to value was a bit above our internal target, which is 45. Now it was 45.1, but we see already in the near future that it will go down below 45%.

Maybe one comment here that we still have a quite sizable headroom to all the financial agreement covenants. For instance, the Moody's leverage is 50 and European Investment Bank's LTV limit is 60, there's a sizable buffer into the limits.

Our financial position has remained strong. In May, we issued a €300 million unsecured bond, and the proceeds were used to refinance the so-called bridge loan that was drawn in April, and we still have a plan to refinance this rest of the €300 million with long-term debt.

In June, we signed €500 million backstop facility agreement, which can be used if needed to refinance this €500 million bond, which is maturing in spring '27. Of course, our intention is to refinance it in the debt capital markets.

After the review period, we signed €100 million loan agreement with OP. The liquidity situation is very strong.

We have unused committed credit facilities of €275 million, and then this unused backstop facility of €500 million. The distribution of group's loan maturities very well-balanced.

Then key figures per share, they both slightly came down, but didn't change significantly, slightly down. Equity per share now €14.53.

EPRA net tangible assets slightly below €18 per share, and the reason was the dilution of shares. Finally to the outlook.

We have specified our outlook both for the revenue and for the FFO. In revenue, we have narrowed the guidance by raising the lower end by €4 million and lowering the upper end by €4 million.

The guidance now is €488 to €493 million. Still the midpoint of this revenue is unchanged, is €490.5 million, based on our latest estimates.

In FFO, we have kept the low guidance limit unchanged, and we have lowered the upper guidance limit by €5 million. The main reason for this is that the finance expenses has been a bit higher than we anticipated in our previous outlook.

That's all from me, and now I welcome you here, and we have now the Q&A session.

Thank you. We can now start the Q&A, and let's first take the online questions.

Thank you very much for the presentation. I just had two questions, and I'll go one at a time.

You noted that occupancy in the Varma portfolio moved from 83 to 89% in second quarter and will be stabilized in the coming year, and I was just wondering what kind of occupancy level you're targeting by year-end and also how rents are tracking relative to the rest of the portfolio.

The line was very bad in the very beginning, can you repeat the question? Apologies for that, I didn't get it.

Of course. You noted that occupancy in the Varma portfolio moved from 83 to 89%, and it's looking like it will be stabilized in the coming year, and I was just wondering what kind of occupancy level you're targeting by year-end.

Thanks. As I said that we talked about stabilized level for acquired portfolio, and then we talk about kind of our own stabilized level.

I have earlier said that with the market conditions like this, it's probably somewhere between 90-70 96 to 97 the kind of stabilized level. Round about that, we're not giving any guidance as such for our occupancy.

Perfect, thanks. Then you also flagged improvements in renting activity in the quarter, and I was just wondering if you could bit more color on what you're seeing in terms of general performance and then also just whether that's translating into pricing power.

I think it has, as I said already earlier, it's of course we do have a seasonal effect as well on summertime is always more active on renting activities. Definitely this year has been encouraging in a way that the activity has been probably even higher so far.

Of course, we had a kind of extra vacant apartments in our portfolio as well due to fact that we acquired significant portfolio with relatively low occupancy. Like we said already when we released the deal, we said that we are confident that actually our leasing operations are capable of renting these apartments, and it appears to be so.

Then your question of pricing power, so as I said earlier, we haven't seen that much yet of pricing power. It definitely hasn't gone worse, but no significant improvement yet.

It's natural that first comes the supply and demand balance, and then you will see the pricing power. We expect that pricing power will improve either end of this year or beginning of next year.

Then

just on the regional performance, could you just elaborate a bit more on what you're seeing kind of on the ground?

Regional-wise, Helsinki has definitely leading the pack at the moment, and I think it's natural that the majority of the new jobs are creating in Helsinki and in Helsinki area. In Helsinki, inside the Helsinki area, Espoo is kind of following the Helsinki trend.

Vantaa is more on a stable, the situation hasn't improved as much as in Helsinki and Espoo. That's, I think, mainly due to fact that there have been quite a lot of foreign construction workers living in Vantaa traditionally, and construction market hasn't improved that much.

At least not in Helsinki area, there are some data center projects, but they are more of outside of capital area. Amount of construction workers hasn't grown up so far, so that's why I think Vantaa is lacking Helsinki and Espoo.

The main volumes are obviously in Helsinki.

Perfect. Thanks.

Yes, hi, all. It's Anssi Raussi from SEB.

Thank you for the presentation. A couple of questions left from me.

First about your campaigns, could you talk about the impact of these campaigns on your reported financial occupancy rate and also average monthly rents, did your campaigns affect these lines? That's the first one.

I would say that, of course, that there have been some boost for campaigns in Q2 figures as well. Far, I think especially the acquired portfolio, we haven't had to kind of boost them with the campaigns.

In that respect, campaigns have played some kind of a role, but I would say that not that meaningful.

Okay. If I continue on your reported financial occupancy, do you have some apartments which are not listed on your website, or is there something else which explains maybe a slight difference compared to the reported financial occupancy and the absolute occupancy?

We do have apartments that are not listed, they are under kind of a major renovation, for example, they are not listed there.

Okay. That's clear.

Finally on your refinancing, you mentioned, and of course, you have this backstop financing in place, which is kind of an optionality right now. You said that you still aim to use or tap the bond market at some point, but was it so that your timetable is early next year, or are you already planning to use bond financing this year?

The backstop facility was basically taken to kind of secure the refinancing of a bond that is maturing next spring. According to kind of Moody's rules or how Moody's assess companies, we should have refinanced that bond already this year.

Now that we took the backstop facility, we actually able to carry until the next spring, and still it's a long-term finance. That's why I said that and given the fact that actually the coupon is less than 2%, the combination of cost of a backstop facility and the bond that is maturing on next spring, the combined cost is cost-effective in these market conditions.

Got it. That's helpful.

Thank you.

Hi, good morning. Thanks for taking my questions.

Just following up on the Varma portfolio, it sounds like you're ahead of underwriting in terms of occupancy gains, but could you provide a bit more color on the incentives that you're providing and to what extent these net effects are in line with your underwriting?

I think they are very much in line in underwriting. That's why I think we are well in line with the business case on pricing terms and then well ahead with the occupancy as such.

All in all, I would say that the integration of Varma portfolio has gone really well, even better than our own expectations.

That's clear. Just on your LTV, you mentioned that is a bit ahead of your target.

How do you see the trajectory towards a lower leverage from here?

We don't give that much of details in the future, but it was on a slightly up of our internal target, we expect that to come lower, but we don't give too detailed numbers as such.

You can't provide on how you see that this 45.1 goes towards, say, mid-40s or around that level, basically?

As Antti said that we're not willing to give a kind of detailed path for that, but we expect it to come underneath that 45. That's why kind of we are relatively confident for that.

Also

as I mentioned, it's our internal target to have it below 45, we have a sizable buffer to all the leverage from Moody's and also from European Investment Bank.

Okay. Is there a follow-up on the campaigns?

Just to confirm, are these campaigns, the incentives that you're providing, are these reflected in your ERVs in financial occupancy, or are parts of it in other lines like costs?

Sorry, John, the line was very bad in the beginning of your question. Can you repeat that again?

Oh, yeah, sorry. Just following up on the campaigns or incentives, are these reflected in the ERVs in your financial occupancy, or are there also parts of it reflected in other lines like costs?

They don't affect to our occupancy as such, but they of course affect the revenue that we present.

It's netted in your gross rental income.

Yeah.

Thank you.

Thank you, Reima, Antti, and Niina for the presentation. A couple of questions left from me.

Could you elaborate a bit on rental increases in existing contracts? I think you earlier have mentioned that in the capital region, you basically don't try to push for higher rents on existing portfolios, whereas, for example, in Tampere, you could increase rents by 2%.

Has there been any change to that?

Kind of in general in our portfolio, I think averaging round about 1.3 to 1.5% of rental increases for existing customers. That we have keep on doing that, and but as you said, Svante, we need to be mindful for what's kind of a micro market for particular apartments or real estate or area.

That's why it differs quite a lot. As I said that also in a capital area, the market seems to improve now.

Thank you. Then coming back to the Varma portfolio, could you give some color on what the reason has been that the occupancy rate was so low on that?

Have you lowered rents significantly on vacant apartments in the Varma portfolio?

It's difficult to say that why it was so low. We have somewhat decreased the rents of vacant apartments as we planned already in our underwriting, of course, they are meaningful, but not kind of outstanding declines of rent.

I would say that the biggest contribution has been the kind of very active rental operation and kind of leasing operation that we have. It differs a lot from a kind of third-party model that Varma used to have in their renting operations.

Thank you. Then coming back to Antti's question about apartments taken off the market, could you give some color on what kind of numbers we talk?

I think you have earlier mentioned that it could be something like 40, 50 apartments max normally, but what numbers are we talking about this time?

Actually, I don't have that, and neither seem to have until the exact figure. We can come back to that on what is the kind of probably not the exact figure, but the round about figure that we have currently.

Thank you. Last question.

You sold 218 apartments in Q2. Could you give some details on what that was Were there any from the acquired portfolio, or was it some non-core assets that you have in your legacy portfolio?

It was not from acquired portfolio, but it was more of related to kind of heavy CapEx spend, and the trade-off between the CapEx and CapEx usage or divestment. We come to conclusion that it's more profitable for us to dispose those assets.

Thank you. That is all from me.

Okay. Seems that we have some questions here in the chat.

Let me see. There are some questions about the guidance and the acquisition progressed ahead of expectations, but why did you narrow the revenue guidance instead of upgrading it?

It's a good question, and it links to the more of a pricing power that we have already discussed, that even though the kind of market seems to improve, and especially when talking about acquired portfolio, the occupancy has performed and leasing operations have performed really well. Given the fact that overall the pricing power in the market hasn't improved that much, so that's why we kept that guidance as a midpoint unchanged.

It's good to bear in mind that it's still roughly 12% of our portfolio, the acquired portfolio. There's a lot of apartments in revenue creators as such outside of the acquired portfolio.

Then there's another question. Could you please elaborate more on the €2 million higher other operating income?

The other operating income actually come from one disposal. That was a company which we had less than 50% ownership, it came from that disposal.

Coming back to the guidance, and now FFO guidance that was cut by €5 million. What is the reason offsetting the stronger operational run rate?

Can you comment?

I think the FFO guidance, I think the main reason that we brought down the upper band of guidance was the higher financial costs that are involved since the last February then we were given the guidance.

Okay. Then about rent increases.

Average rent per square meter increased both quarter on quarter and year on year. Is there any split between what was the effect from the new apartments versus like-for-like if we compare to, let's say, Q1?

We probably don't have a exact split, but it's fair to say that the average rent for acquired portfolio given the location of those assets that we acquired is higher, and it raised the kind of average rent in our portfolio. Like in Antti's presentation, there was a like-for-like, rents and water charges was in like-for-like calculations was minus 1%.

We discussed already existing agreement and their rent increases, but how about new lease agreements? There are some Statistics Finland data, for example, in Helsinki area, the figures seem to be quite flat, and then again, in some smaller cities, quite a lot positive.

What is our kind of comment? Is it the same as our rent increases for new agreements?

It definitely differs by rents. We do have some new leases or some new tenants that we need to still kind of decline the rent.

It's growing amount that we can raise the rent as well. All in all, it has been so far year to date slightly negative.

As I said already a couple of times, we expect that this pricing power, especially in Helsinki and capital area, will come back for landlords in some undefined timetable.

Then as the acquired portfolio occupancy has been moving up very nicely, has it been affecting negatively the legacy portfolio somehow?

This is a question that we have discussed a lot internally as well, and there's a kind of a common understanding that it hasn't affected negatively. All in all, it's fair to say that the kind of major component or contribution of increased occupancy has come from acquired portfolio.

Of course, there was a plenty of room. As we have said since the February of releasing the deal that we see that actually the asset quality in acquired portfolio is really good, and there was a plenty of vacant apartments.

It's kind of natural as well that in very good quality portfolio and relatively high vacancy, it's easier to raise the occupancy in those assets.

Okay. Continuing with the acquisition, what annualized net operating income contribution do you expect once stabilized versus your original acquisition underwriting?

Antti, do you have

No. I don't have any numbers to present here, but it should be maybe a bit higher than our legacy portfolio since the locations are a bit better in that portfolio compared to our whole legacy portfolio.

Okay. Then different type of question.

What is more important: to maximize asset book value or cash flows?

I think it's more of a cash flow. All in all, I think as you look at our financial targets as well, we aim to have a growth in FFO per share, kind of contributing and creating cash flow is in top of our list.

Okay. This may be the last question, it's about guidance again and refinancing the bond next year.

What refinancing cost or timing is included in guidance, and how should investors assess if the bond coupon will be between 3.7 to 4.0%? What

was the question about the bond that is maturing next spring? Yeah.

Yes, or it's what kind of refinancing expectations are in the guidance.

Shall I take it? I think that, first of all, I think as we said that we have kind of more or less locked in the cost of a bond maturing next spring, and we have said that we still have a €300 million to take on acquisition financing on the capital markets transaction.

It's round about the market level of refinancing of refinancing the acquisition finance. Then, of course, it depends on that what kind of instruments do you use.

All in all, I would say that given the fact that it's the time of this year, the financing cost as such doesn't have anymore at this stage of a year as big significance for the guidance as it would have in beginning of the year.

Okay. That concludes the Q&A.

Thank you very much for the questions. Lumo's Q3 report will be published on 5th of November.

Thank you, all, for joining us today. Let's meet in November.

Thank you very much.

Thanks.