Lumo Kodit Oyj (LUMO) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to Kojamo's first ever Investors' Day. My name is Maija Hongas, and I'm Manager of Investor Relations here at Kojamo, and I'm very happy to host you today even though, unfortunately, we have to be on a virtual format instead of a live one. The purpose of today is to give you more color on how Kojamo implements its strategy. And if we take a look on today's agenda, we have 3 main themes that we are discussing today. The first presenter -- the first speaker will be our CEO, Jani Nieminen, who will be giving the opening words. After that, we will discuss our digital road map, which is a road map defining how we use digitalization in implementing our strategy. And this will be presented by our Chief Digital Officer, Katri Harra-Salonen. Today, we have also launched our sustainability program. Sustainability has always been very important for Kojamo and in the company's DNA. But now the program gives a framework and targets how we are going to implement this going forward. And this program will be presented by Hannamari Koivula, our Sustainability Manager. And the last presentation will be about our project development, which is a very important part of our growth strategy. And this presentation will be given by Ville Raitio, our Chief Investment Officer. After each of the main presentations, we have 10 minutes for questions and answers. And we will be first taking questions from the conference call line and after that from the chat. And if there are more questions and we have time, don't worry, we have reserved time for a general Q&A at the end of the event where we can take those as well. But enjoy the day let's get started. Please, Jani, let's start.

Good afternoon, everybody, and welcome to Kojamo's Investor Day. We have been proceeding well in line with our strategy. And today, as Maija mentioned, our purpose is to increase understanding on Kojamo as an investment. So there are no changes in our strategy or our KPIs, and our topics will provide color on our activities as we will continue creating better urban living. I will talk about mega trends and our strategic focal topics and points. We have identified 5 mega trends supporting our business. And of course, a current theme at the moment is whether there will be an impact on mega trends because of COVID-19 or not. To start with, it's good to keep in mind that Finland is a country with a population of 5.5 million people. Actually, it means 2.7 million households, on average 2 persons per household. Of that, more than 1.2 million households are with only 1 person. And 2-person households, the number is roughly 900,000 people in those households. So yes, we do have here in Finland an aging population, an increasing number of smaller households, and that will continue creating actually demand for new homes as the number of 1-person households seems still to be increasing. Of course, urbanization creates a lot of demand, and it seems that still Finland is lacking behind the rest of the Europe concerning urbanization rate. And even throughout this year, urbanization has been proceeding even, of course, with a bit of smaller -- slower pace at the moment. But to my understanding, all the new jobs and services in the future will be created in the bigger cities and especially here in Helsinki region, and people probably will be moving towards Helsinki more rapidly next year already. And all the estimates still are valid, providing the information that more than 10% of the total population will be moving towards the biggest cities here in Finland during the next 20 years. Actually, to provide a description of the amount of people moving towards Helsinki region, the same number of people living in Tampere today will be moving towards Helsinki during the next 20 years. The number of people living in Lahti today will be moving towards Helsinki during next 10 years. So that actually creates a lot of demand for new homes. New technologies and digitalization, a big topic today, I guess, during this year. And the impact of COVID-19 has been that digitalization seems to be going with a more rapid speed than it used to. We are moving towards online services, we are using online meetings. We are meeting our friends with digitalized ways. And so actually, I think a lot of things will happen faster than we anticipated before. Individuality and sense of community. Of course, it has been a bit different year. And I guess most of the same features still will remain the same. But on the other hand, of course, things like remote working, working from homes, are issues we have to consider. And to my understanding, what we have to think about is that what kind of common areas we will build and what kind of services should our buildings include for our customers because it still seems that they prefer the same kinds of apartments, same kind of micro locations, but the facilities in the properties will be changing in the future. Environment and sustainable development. Sustainability has been an important topic already. And the importance seems to be increasing on an annual basis. So in a big picture, I don't see that COVID-19 will have an impact towards our operations or the mega trends supporting our business. Strategy is always a big question. For Kojamo, what it actually means is that we have to know the right things to do it right and efficiently. The strategy is in place. And just to keep in mind, the most important KPIs in our strategy: we aim to increase the total turnover annually between 4% and 5%; we are investing on an annual basis between EUR 200 million and EUR 400 million; we keep our FFO against total turnover about 36%, that actually means that we are growing and we are growing in order to be even more profitable; we are keeping our LTV above 50% and -- loan-to-value above 50% and equity ratio above 40%, so actually, the LTV below 50%, and that's how we handle the risk position; and of course, we never ever forget the customer and strategic KPI that is the Net Promoter Score of 40. The strategic focal points are related to each other. And of course, they create a wholeness together, and they are supporting the total strategy of profitable growth. Delivering the best customer experience is really important. And for us there, an important factor is how to create easy and effortless living and provide added value for our customers. Strong growth. Of course, for us, it's important that we are able to grow using multiple sources. We have developed -- making new development projects. Typically, half of the projects are based on our own land bank, half of the project we buy from construction companies. Then we have the capability to convert buildings which are now used for different purposes into apartments like the Metropolia case. And then, of course, we are able to move fast and make acquisitions when we find portfolios suitable to our parameters. And of course, an important part of strong growth is our capability to use optimized financing from multiple sources. Operational excellence. That's the heart of doing right things right and efficiently. That creates scalability for our operations, competitiveness. So there, we are creating operation -- operating models using technology. We do have all the most value-adding processes as in-house operations. So we are using our own people when we are renting, doing the property management, supervising the construction sites and things like that when we are meeting the customers. And that's why there is a focal point of most competent personnel and dynamic place to work. We want to ensure our future through competence development and employee experience. Responsibility and sustainable development is an important aspect. Sustainability and responsibility has always been a part of our company DNA and our daily operations. We already achieved many great things in our daily operations. Today, we are launching our sustainability program. And then, of course, the sixth area is renewal through digital solutions where we are adding value for our customers and improving our business. And as I said, these things are all linked together and provide us the capability to move forward with our strategy. Today, we will be focusing on providing more deeper color on these 3 topics. Ville providing color on strong growth and the development processes, then Katri providing the digital road map and then Hannamari providing the color on the sustainability program. With these words, I still want to welcome you all to our Investor Day, and looking forward to have a good day with a lot of value-adding questions. Thank you.

Thank you, Jani. Then we can move forward and start our first theme presentation of the day. So I welcome you to the stage, Katri.

Good afternoon, ladies and gentlemen. It's a real pleasure to be here today to talk you through the digital road map and our thoughts and plans around digitalization here at Kojamo. I wanted to start with a little bit of hindsight with what we have already been doing. We have a great platform for digital already today. It's a strong foundation for us going forward. I just wanted to highlight some milestones from the past 5 years with 2015, where we launched the very first web shop, industry-leading, first mover in that field. 2018, we came out with an artificial intelligence-powered temperature measurement and operation. 2019, we launched the service for our current residents called My Lumo. And this year, 2020, we have launched a new concept for the web shop launched 5 years ago. Of course, there has been happening a lot of other advancements also. But I wanted to bring out this and give that as a foundation for what we will talk about today. This leaves us in a very good position indeed. If you look at the numbers, we can see that our current service called Lumo.fi, already attracts approximately 200,000 visitors every month. When we look at the platform for residents called My Lumo, we can take out a key performance indicator for us called DAU, daily average users. And that has been around 1,300 lately. So those figures give us a little bit of background of where we start 2020 and where we started to -- when we started to think about what the road map should look like going forward. So let's have a little bit of a look at the road map then. The key point here is, of course, that digital is not only about the future. It is very much present in our everyday operations today. So what we are doing in 2020, as we speak, and during the coming year that we have planned, 2021, it will be very much focusing on the actions here in the slide. So we have the digital services, and we will, for sure, scale them up. We are going to focus on the service business. We have been doing a lot of activity in that area already in 2019, and we have a great foundation to build on this year and going forward. We will increase the use of artificial intelligence when it comes to our processes, and it will change some ways of working in the organization. We are going to focus on the experience elements that Jani mentioned in his presentation. So around our core product, we are going to build services and other elements that we will provide value with for our clients. And of course, we also need to remember that there are some competencies that we are adding to the organization as we speak. So if we want to look at what the areas really are for the road map and what we have chosen to focus on in this field, there are 5 areas. Three of our areas are value-creation areas. We have a big area in the customer experience and in servitization. This is the interface towards our customers. Here, we are already strong, but we are adding on the experience element and we are really focusing on the customer experience in the digital. We are proud about that figure that you can see on the slides, the NPS, the Net Promoter Score, for our joint digital services. It has been around 70 and even above this year. Of course, we will track that very closely in the future and even better understand what elements, what functionalities provide value for our clients online. The second area, the value creation element, is around scalability. It is about also, at the same time, about employee experience. So we are looking to different kind of productivity solutions across our operations at Kojamo. One example comes later on, but I can already mention here that there are a lot of mobile services, for example, that will help our field personnel in their daily tasks. The third area is a really exciting one. It is about our core product and the digitalization of homes and properties. So in these areas, we already had one example earlier on, 2018, with the AI-powered temperature control. But here, we are working on very, very actively at the moment. Also, a new category of possible products around the intelligent home is a very intriguing one. And there, we are analyzing, looking into and learning about our customer behaviors. This is an area we are going to pilot on this year and the coming year. To power really these 3 value-creation areas, we need to do activities in 2 enablers, if you like. So first, I will mention the data and artificial intelligence that we already talked about. This is an area where we really have stated ourselves the goal to be best among our peers in database leadership. So data is not just about information. It's very important that we, as an organization, are also capable of utilizing the data that we have. Of course, in the foundation, in the back end, we have a lot of work ahead. So we are going to move most of our systems into an in-cloud architecture. And also, we are learning and experimenting a lot around the virtual techniques. So that will be kind of the foundation that we all need in order to be able to provide the value that we're planning to do in the future. So what is the philosophy behind? And what are really the key kind of takeaways? We believe a lot in the digital user experience. We really want to be able to make our customers happy with a very easy experience online. We want to bring in relevancy into the digital services that we provide. And of course, we measure every day, each hour, what is going on and understand more and more about the customer behavior in our services. So here, you can also see that we put another KPI on the slide. This is about the employee experience. So through the new services that we are bringing to our employees, be it in the office or out in the field, we really want to lift the employee experience and make the life and the day -- the working day a lot easier and better data powered for all of our employees. There is a measurement that we have done also in the past, we are targeting at 3.7 in employee experience. On the other side, of course, the utilization of the data is really important for all of our thinking. We get a lot of data at Kojamo, and we are utilizing it already today in very many areas. In the middle of this picture, you can see even a heart which we have there to explain and state about the importance of linking technology and people. It's a philosophy that we think is very important for companies today to be able to really reap the benefits of digitalization and build an organization that is very competitive in the future. So let me come to the really exciting part of the presentation today. We wanted to give you some highlights and examples of the cases that we are currently working on or that we have planned to work on. So there is an example around how we work with My Lumo at the moment; we're going to tell a little bit about Lumo One, our tower in Kalasatama; something very exciting called mVasu, which is a mobility solution for our sales organization; and of course, also a small example of how AI will really power our organization and already now teaches us a lot about what is really going on with our customers. So I hope that through these 4 examples, you will get a good picture of the variety of actions and the depth of the actions and also, of course, the impact on the business that we are working on, on the digital side. So let's get started with the examples. So My Lumo, already today, it is in the pocket, if you like. It's a very mobile service, and it has been designed mobile first. It already is in the pockets of approximately 75% of our customers -- of our current residents. And I mentioned the figure, 1,300 of them are there every day. We have digitalized our processes through this service to a great extent already. There's a lot a customer can already do through this service. It is a self-service tool. At the same time, it is one of the -- actually the most liked communication tool by our customers today. And right now, what we're looking at, we're looking at bringing our new services on top of this platform for our customers to consume. So it has a variety of functions and is very central in our digital strategy in the future. Of course, here also, when our customers move from one platform, if you like, or digital service to another, we need to work on a very coherent user experience. So we can call it a seamless way of working or way of using these services. There is a couple of screenshots that you can see on the slide. And those are from a change that we're making in one of the parts of the My Lumo. So we want to really welcome our customers when they have chosen to take a Lumo home, when they are planning what they are going to do in there, we are going to give them a warm welcome and make it very easy to tailor their experience also with the coming services. And especially when they are moving, we have a package of services to help them out. About Kalasatama and Lumo One tower, which I think that we are all very excited about, it is an example of a product that we will enhance with services. We have learned from the studies and from the customers that the service elements will be very important in order to get the full experience of living in the Kalasatama harbor in a unique tower. And what we're going to focus on here is very much -- was very much already pointed out in Jani's introduction with especially the common spaces that are going to be quite unique in this building with the terrace, with the common areas and, of course, also with the lobby area downstairs. So we're putting a great deal of effort in designing those areas so that they will be providing a great experience and also some monetization elements for Kojamo. On top of the common spaces, of course, then come partner services. So we're looking into different areas where our customers in this specific building will be getting value from us helping them to find good services. And last, but not least, this is, of course, a target where we will enhance and bring to our customers some of the intelligent home elements. And this is a piloting area at the moment for us. So quite exciting indeed, and we still have a little bit of time ahead of us but going live then in 2022 with the building. The third example is about the mobility services, if you like, or the services that we are bringing to our staff who is working in the field but also in the office. So this example that we took out right now is very, very fresh, and it is something that we're working on at the moment. It will help our salespeople and sales personnel out in the field to give the customer the best possible customer experience. They will have all the data and all the information that we have in our CRM available to them in their mobile, and they will be able to keep the customer very happy in that moment when they physically meet the customer. It is a design that we have made ourselves. And this is a great strength also of the team that we have at hand here. We are quite fast, and we have our own system development for that part of our system architecture. Very proud about that one. If we go forward, we also wanted to bring out another maybe a newer example of how we can utilize artificial intelligence today. So we have been building a great data infrastructure with our EDV and with the availability of the data from different sources of the company. This example that I have here on the slide is about understanding the customer and about understanding the customer sentiments. We have a lot of information in a structured manner that we have asked our customers, and it is a great strength to us. But on top of that, we get a lot of kind of free data, free text, free comments from our customers. And this specific tool called IVA is helping us in order to interpret that data, that kind of massive data that is very unstructured, to see where there are patterns, where there may be new needs or where there are some challenges for us in the customer experience. It gives the voice to the people, and it makes us understand the uniqueness in the answers that we get. It has been very exciting to look at kind of the results from this one. But we've just started, and we see that there's a lot of opportunity when we bring it also to the other sources where we get this kind of data from the customers. We have done other pilots as well. Here on the slide, we are mentioning the churn modeling, which is also quite interesting. Of course, it's really important for us to understand where, why and who would be kind of at risk to churn amongst our residents. When we understand it better, when we understand the reasons behind it better, we are also going to be better at working with those reasons before somebody decides to leave us. So here, artificial intelligence has brought us a lot new knowledge about who it is and why, what are the reasons. So with that tool, we can go into the nuances of an individual or a group making decisions. Very important for us as well. So these are the kind of prepared cases or examples of different parts of our operations of how we work with the digital and with the digital road map. Then what to expect really going forward with '21? We will continue, like I said, working on all these 5 key areas. What that really means is that we see, as Jani stated, there is an increased activity online and on the digital. So we will see the customers more and more active increasingly online. What we want to do is, of course, we want them to stay with our digital services also in the -- when they become customers and take My Lumo into use, et cetera. So throughout the customer journey that our customers have with Lumo, we want to be their support, help and be very, very easy to approach. The service offering that we mentioned earlier is something that will be in our focus for '21. So this year, we have really carved out kind of a package of services that we wanted to monetize. Last year, we launched a lot of interesting new services. And this year, we are going to continue the work with the carved-out package and, of course, scale that up. But also innovate new possible services. There is a figure, after the 6 months of turning kind of the servicing model into a monetized model that we have every -- 1 per 10 customer is actually buying some service from us currently. So that's a very encouraging number for us, and we are going to continue scaling it up. The productivity goals that we have, digital is going to be very important in reaching those. And mentioning these field solutions and, of course, then also in the office, how can we make the office life and the remote work a lot easier still. The core product, the product line, will benefit from the new digital services, the experience elements. And of course, also in the future, we hope to launch some of the intelligent home services in a couple of years. Data investments we will turn them into competitive advantage more and more. Of course, there is a big element of better foresight. And of course, also then the speed and decision -- speed of the decision-making and, of course, also the quality of the decision-making across Kojamo. The innovativity factor. That is, of course, something that we will keep alive and focus on also in the future. So listening a lot at what our customers say, like you heard through the IVA example, and then, of course, also utilizing both design and data capabilities in the future. So in this field, we have added on some people also to the organization and hope to be maybe talking about that later on. I think that this is what I wanted to talk to you about. And of course, at this stage, very, very welcome for any questions around the digital.

Thank you very much, Katri, for your presentations. And now we're ready for the questions. So please operator, we are ready for the conference call line questions.

[Operator Instructions] Our first question comes from Anssi Kiviniemi from SEB.

It's Anssi from SEB. So I have 2 of them. I will take them one by one, if that's okay. Firstly, on My Lumo and add-on services that you provide through the platform, how much of the sales they currently account? And do you have any ambitions for the service part in the future, some kind of figures in terms of top line perhaps in some years ahead? Or how should we look at the scalability of the service offering and the potential of the service offering? That's the first one.

I think that the best way to look at it at the moment is that if you look at the kind of the product portfolio that we launched last year, 2019, it had a different kind of a setup for the products and services there. This year, like mentioned, we have carved out some services where we have started out to monetize those. We can mention some examples about the moving services. And for example, the key career, everything that is important to you when you start to move to your new home at Lumo. We are in the process, of course, of looking into what specific targets we will set. But at the moment, we haven't yet gotten any figures to announce around that. The fact that we have, at the moment, every 10th customer, a new customer taking one or the other of the services gives a little bit of confidence for us that we can scale this business up.

Okay. So then second question is on the competitive edges, perhaps digital capabilities, data and data utilization that perhaps your local competitors in Finland do not have. So how would you describe the competitive edges that you have?

Well, I think that, first of all, of course, throughout the digital services that we have today and the fact that most of our customers visit them quite regularly, we're going to bring that number up as well in the coming years. So the data that we get about the customer behavior and the way we can understand our customers also throughout, of course, when they are looking for their potential home is quite in a good shape. So through the digital services, the data that we have is deeper than what our customers have. Of course, it is also for us to really kind of keep on building our capabilities and utilizing that data and bringing it into all relevant areas. We are currently using kind of a daily and real-time data to steer, for example, the online services, the web shop, if you like. And on the other side, we have a lot of really important functions that already today are AI-powered. And if you look at, for example, some pricing decisions, I think that we are very able to do good decisions in that field because of the technological background and the AI that we use. So indeed, in very important areas of the business, we have been so far able to bring in kind of focused technological solutions, and we will increase that then in the future. So data -- it's very important to get the data not just into the company but also flow -- data flows throughout the company and then, of course, the utilization. So I would say that our operations already today are very data-keen and very eager to get more and analyze more. So I think that we're in a good spot from that perspective.

Okay. The next question, please?

There appears to be no further questions at this point, so I will hand back to the speakers.

Okay. Thank you very much. We have had some questions from the chat, first being, very interesting with data collection and services connected to that. What kind of future services are you thinking about offering going forward?

So when we looked at the kind of portfolio of services that we have launched last year, of course, we were looking for the most relevant ones for the customer to really kind of -- or the value creation for the customers. But we also started from a point in the customer journey that is quite significant to us and when we get the new customers into Lumo. We are going to look into services that are important and interesting for our current residents, especially. And that's quite an exciting field of exploring what could be something that we haven't yet offered. And of course, there's plenty of, how to say, inspiration also on the market of what the clients value.

Okay. The next one, in digital services to tenants, how are you positioned versus competition in Finland and peers outside Finland? This, we a bit touched already.

Yes. It's -- well, of course, I mean, we see that we have been quite a first mover in this field. And of course, it's also always difficult to kind of compare with the services that are for the residents in the other companies. But from what we know, I think that, for example, the fact that our customers in and through My Lumo can pay the rents today without friction, I think that, that is quite a unique functionality in these services. And of course, not just the functionalities but then the fact that our customers, when we have asked them, they really value the communication opportunity that this service provides. So we see that we are quite in the front line. And of course, it's our intention to keep it that way.

And then how much of your churn is unwanted or high-risk tenants? And do you believe you can lower churn through, for example, AI?

So we wouldn't be doing kind of this churn analysis and utilizing AI if we wouldn't believe that we can get a better understanding about this question through that technology. So that, we have been piloting this year, and I think that we will continue. Of course, this is an area where -- which goes fast forward all the time, and we will need to kind of stay on track and ahead of the track. But we think that we can work with that to lower it, yes.

And then can you please provide some more concrete examples of the new services you want to monetize? How much do you expect services to generate in revenues in 2 years?

This question came earlier also, and I could kind of go repeat that one. But definitely, like if you're looking at the services for the current residents, I think that we will find, especially when we look at the kind of the new pilots and the innovation areas going into the intelligent home, we hope to really find a good value-creation element in there. But at the same time, we have some very interesting discussions with some partners also within the fields where we have been active before but not monetized those services. So that's an area that we're looking at and turning kind of the business model with those services around. So there are several alternatives. And of course, in this innovation pipeline, you need to be able to make the decisions about the right ones for our customers. And there, they help a lot. So we're going to have quite some activities together also with the customers during '21 to really understand what their needs are, how they see the services that we are developing and whether or not we can provide value through those.

What are the most liked and used services?

Well, at the moment, when we look at the services, kind of this moving portfolio has seen quite some traction. But also interestingly, a service that we launched for our customers, for them to be able to compare the electricity providers, so that has been very, very liked and used during these first 6 months of operations. So it seems that the customers really value kind of the information that they get and that they can work with their electricity options.

Okay. Maybe we will take the final question. So have you seen a better rate retention of your tenants after the deployment of your digital strategy?

That's a very difficult question. I mean, at this time, we are, and we have been kind of fulfilling the digital strategy for quite some years already. And of course, now we are in the middle of kind of working across with the road map that we have. So I think for the results, we will have to wait a little bit and then go through those.

Okay. Thank you very much, Katri.

Thank you.

And next, it's time for our next presentation, which will be our sustainability program. So I welcome on the stage, Hannamari Koivula.

Good afternoon, ladies and gentlemen. It's my pleasure to be here today to present to you our today published sustainability program. The agenda I have for today is that I will first go through the link between our strategy and our sustainability. Then I will go through a little bit of our history with sustainability, the long-term foundation that we have many years doing the sustainability work, and then going forward to today to present you the sustainability program with its focus areas and objectives and the foundation of the sustainability program. And lastly, I will talk you through to what are the plans to go forward from here. First of all, about our strategy. As Jani mentioned in the beginning, sustainability is one of our strategic focal points for the current period, '20 to '23. And it means that the responsibility in sustainable development is part of our DNA. It's part of our everyday work. It's part of everyone's work at Kojamo. And now we are even strengthening this link between our strategy and sustainability further with our sustainability program. And we already -- sustainability is not something that we have already done for -- that we have just implemented today. It's something that we have already been working for, for several years. We have a very strong long-term foundation of our sustainability. Already, since 2002, we have been part of the voluntary energy efficiency agreement in Finland which is an agreement between the state and between the real estate sector. And now we are today ongoing our third agreement period lasting until '25. And here, we have a target to reduce our energy consumption, 7.5% before '25, and with already very good results and achieved 73% of the target already. So energy efficiency is something that we have been working on already for a very, very long time, and it's been in the core of our business. Also since 2002, our head office has been certified according to the WWF Green Office certification. And now moving on for today, since 2019, all our offices have been certified to the Green Office certification. We have a very strong growth and new developments, an important part of our sustainability as well, as sustainability has been integrated into our new development projects already since 2016 when we established the nearly 0 energy building principles for all our new developments. And at this moment, 80% of all our completed construction projects are already done according to these principles. And when we look at the ongoing development projects we have at the moment, 90% of the projects are according to the nearly 0 energy buildings. So we pay a lot of focus for sustainability also with -- and goes in line with our growth. Taking a look at the social side of sustainability. Since 2017, we have been awarded as the Finland's Most Inspiring Place to Work. And this recognition, we already have had for the third consecutive year. And we have good -- very good result of personnel satisfaction. We pay a lot of attention to employee well-being, for example, and the satisfaction index has been on a high level, 75%. And this is something we measure also on an annual basis. Since 2019, our portfolio has been carbon neutral in terms of electricity. And when we look at the whole energy renewable selection, the renewable part of the energy consumption of the whole portfolio, we already are at the 28% at the moment. And artificial intelligence solution that's controlling the indoor temperature of our portfolio, that covers already 80% of the portfolio. So definitely, sustainability is something that we have been working for a very long time already. And now when we go forward for today, we have this year, 2020, done our first corporate responsibility materiality analysis. And with this analysis, we have combined the long-term work and the foundation we have for sustainability with our stakeholder input. We did a questioner and deep interviews with our key stakeholders, including investors, analysts, our own employees, our customers. And with the views of our key stakeholders, we incorporated the sustainability focus areas and objectives that concluded our sustainability program where we are launching today. And now finally, presenting you the program. So this is the framework for our sustainability from today onwards. We have our strategy, a responsible and sustainable development at the very core, at the very top of our sustainability work. And the main focus of our sustainability program is to create better urban housing. Our mission is at the core of our sustainability. We have 4 cornerstones, we have 4 focus areas, cornerstones, of our sustainability program: sustainable cities, the best customer experience, a responsible corporate citizen and most competent personnel and dynamic workplace. And within these focus areas, we have identified and created targets for longer term and for the years to come and also a more detailed KPIs. And today, I will go through some of the most important objectives of all of these focus areas and we will publish the more detailed KPIs as part of our annual reporting. And also as the foundation, the cornerstones of our sustainability program, we have, at the bottom of the visualization, ensuring long-term profitability and business growth, sustainable and responsible operations and transparent communication and reporting. So these are the factors that enable our sustainability program to progress. Before presenting you a more -- in more detail the content of each of the sustainability focus areas, I'm going to present you the key sustainable commitments that we are committing to with our sustainability program. With our program, we are committed to United Nations Sustainable Development Goals and the Net Zero Carbon Buildings 2030 commitment. With our program, we commit to those 8 of the United Nations' Sustainable Development Goals that have the greatest impact on our business. And those goals are: good health and well-being, gender equality, clean energy, decent work and economic growth, innovation, infrastructure, sustainable cities, responsible consumption and climate action. And these are the key United Nations Sustainability Goals that our sustainability program will support. And we have identified those focus areas of our sustainability that are relevant for each of these United Nations goals. And also, very importantly, we have established ourselves an ambitious goal. We will be owning only assets that are net zero carbon in operation by 2030. And why we chose this commitment and this ambitious goal for 2030 is that when we look at the whole carbon footprint of our portfolio, up to 70% is from the energy usage of our properties. So we wanted to concentrate on the issue where we have the most impact on to decrease the carbon footprint. And with this commitment, the Net Zero Carbon Buildings 2030, we are committing to the World Green Building Council commitment as well. On the basis of our sustainability program linked to our strategy, we -- the sustainability program is supporting the execution of our strategy. Ensuring long-term profitability and business growth is on the foundation of our sustainability and is in line with our strategic targets for this current strategic period. Sustainable, responsible operations, how we manage our own operations and also how we manage sustainability in our supply chain. Our -- we have just launched our Supplier Code of Conduct, and that is incorporated into all our new partnership agreements. Also transparent communication and reporting on sustainability plays a highly important role in our sustainability program. And we engage in the very transparent multichannel communication on our sustainability. We have selected the frameworks we are reporting on. We are reporting on the GRESB, Global Real Estate Sustainability Benchmark; the GRI standards; and EPRA frameworks. And I will go -- I will get back to this a little bit later in my presentation. Now moving forward, going through the focus areas -- the different focus areas of our sustainability program. Sustainable cities, with this focus area, we are committed to decreasing the carbon footprint of our portfolio and to increasing energy efficiency of our portfolio. So those are the 2 main priorities in these sustainable cities. We are committed to only owning assets that are net zero carbon in operation by 2030, and we continue to be committed to improving energy efficiency by 7.5% by '25. This is the voluntary energy efficiency agreement that we have been a part of already since 2002, and we continue to implement the actions as part of this agreement. Very importantly, we invest in the growth centers and sustainability has, as said, very strong link with our growth. And we invest in locations with good accessibility and services, with good transportation links. And that's also one of our key sustainability factors. We have also divided these long-term targets into annual targets and into smaller parts, and we are reducing energy consumption of 3% annually, measuring that in our energy intensity. And on the development project level, we are targeting to have energy efficiency level 80 or below in our new construction projects starting from next year. And when we look at the major renovation projects, we have a target to improve energy efficiency 30% of our major renovation projects. We also have a water consumption target reduction of 5% by 2030; and circular economy, an important sustainability aspect for us as well. There, we have a target to reduce our portfolio waste recycling rate, to improve it up to 55%; and related to new development and major renovation, to improve it to 70% by the end of '23. Moving on to best customer experience, another focus area of our sustainability program. We work to promote better and more sustainable urban housing. The Lumo brand provides and delivers residents the best customer experience in housing, and that's also in the core of our sustainability program. We have 2 main targets or main objectives: satisfied residents and increasing our Net Promoter Score. Here, we continue our program that is ongoing, the Customer's Viewpoint program. And we have a target, a more concrete target, for this program. 90% of our households is the target that is using Lumo application by the end of '23. At least 80% of Lumo homes, we have a target to have waste sorting solutions supporting waste fractions by '25. And this is in line with the target that we have to increase the waste recycling rates to 55% by the end of '25. Also, we have a target to increase the high energy efficiency rates in our home appliances and also to expand the coverage of shared cars and shared bikes that our residents are using, so expand the geographical coverage of the service. So in this best customer experience focus area, we focus on those sustainability factors that are the most relevant for our Lumo residents and the neighborhood environments of our Lumo buildings. Employees is a highly important part of our sustainability. The most competent personnel and dynamic place to work is the third area of our sustainability program. We want to be, and we are known, for a dynamic and productive corporate culture and sustainability. As said, it's already now part of our DNA. We ensure competitiveness through competence development, provide employee experience that attracts the best talent. We have divided this focus area into 3 main areas: good management, invest in employee well-being and promoting equality and nondiscrimination. Here, we have several concrete targets. We have 0 accident targets related to accidents at work. And then we have a 0 tolerance policy for harassment and inappropriate conduct. We want to be the most attractive and highly valued employer in our industry, and that's one goal we have in this focus area. And importantly, we promote the equality and well-being amongst our personnel throughout the employment relationship starting from the recruitment. We have a very development-driven approach to management, and we encourage our personnel to emphasize renewal and learning in their own competence areas. So these are issues that we continue to work on with our employees, and they are also a very important part of our sustainability program. A responsible corporate citizen. We operate sustainably and in a transparent manner while developing our shareholder value in accordance with our strategy. That's the key of this focus area. We have a code of conduct, and we have just recently updated our code of conduct with more specific sustainability factors, and we have a new Supplier Code of Conduct that will be incorporated in all new partnership agreements starting from next year. We have a 0 tolerance policy for gray economy and also 0 tolerance policy for data protection violations. We are reporting taxes very transparently, and this is -- these are the factors as well included in this focus area. And also, our Lumo sponsorship program and grant program are important part of this focus area, and we annually support top Finnish athletes and individuals and team sports for young people. So the core of this focus area is anti-gray economic work, privacy and data protection, corporate governance, paying taxes transparently and compliance. So these are kind of foundation base of the sustainability program. And here, I'm putting together the sustainability frameworks and recognitions that are supporting our sustainability work. The key commitments that we have for sustainability is advancing net zero. We are targeting a 2030 zero-emission energy usage. We also committed to United Nations Sustainable Development Goals. We are ongoing with our -- we are continuing and ongoing with our voluntary energy efficiency agreement. All our offices are Green Office certified. And then we have a recognition also for being a responsible employer and also being a responsible summer job provider. So these are the commitments -- our key sustainability commitments that we have. And regarding our sustainability recognitions, we are very happy of our first GRESB result. We have done our first Global Real Estate Sustainability Benchmark reporting this year. And we got 3 stars, 70 point -- 70 out of 100 points and a Green Star recognition, which we are very happy and a very good result for a first year reporter. And also, our Annual Report 2019, we did in accordance with the EPRA sustainability best practice reporting principles for the first time, and we got silver award from that and also Most Improved award, very happy about that. And these are the frameworks and recognitions that we hope to continue. We are also reporting and applying the GRI standards with our annual reporting, and that brings the framework for our sustainability annual reports. Our sustainability memberships that we have that are supporting our sustainability work in Finland is that we are a member of the Finnish Business and Society. We are a member of the Climate Leadership Coalition, and we are Helsinki's Ilmastokumppanit, which is Helsinki climate partner. So these are the key frameworks and recognitions for our sustainability work from going toward -- from today onwards. And finally, putting it all together, where we are the way forward from today is that from now on, we are dividing our sustainability according to this, our sustainability program. We have 4 focus areas: sustainable cities, the best customer experience, responsible corporate citizens, and most competent personnel and dynamic workplace. And we have objectives for all these and then more detailed KPIs. And the work that we are -- the sustainability work that we are doing is, from now on, based on this, our program. And the foundation, ensuring long-term profitability, business growth; sustainable, responsible operations; and transparent communications and reporting, and continuation in that are a very important part in enabling the rest of the sustainability work to go on. We create better urban housing. That's our mission, and that will be also in the core of our sustainability work. Thank you very much.

Thank you very much, Hannamari, for the presentation. Let's get the Q&A started. So please, operator. We are ready for questions.

[Operator Instructions] Our first question comes from Anssi Kiviniemi from SEB.

It's Anssi again from SEB. Yes, a couple of questions from my side. First of all, you had target to achieve zero carbon level in energy by 2030. Kind of what should we read on that in terms of investments? Does it mean that your renovation and modernization spending will increase in the coming years? And in concrete terms, does it also mean that we will be focusing more on thermal energy and those kind of solutions of keeping the apartments heated up? So that's the first question.

Thank you very much. A very good question. And the road map that we have for the zero carbon 2030 is consisting of improving energy efficiency and own renewable energy production as well as buying renewable energy. And we have already now been part of the voluntary energy efficiency agreement, and we have already now been implementing the energy efficiency actions, and we continue to do that. And within this framework, we are also -- a big part of this framework is our new developments, which are built very energy efficiency -- on a good energy efficiency level. So that is one important part, and also the renovations that we have done. And actually, we have already been implementing the energy efficiency as part of our renovations. And we -- these -- we are continuing on the same investment principles as we have already done.

Okay. So we should not expect any increases in renovation and modernization spendings, right?

Right. Yes.

Okay. And the thermal energy part -- or where do you get the energy for heating? Could you touch a little bit on that part? Is there a change in view how you drive the business?

No, there is no change. These are the kind of decisions that we make on a "property on property based" level and on investment base. We are continuing with our long-term maintenance goal and maintenance plans that we have for the coming years. And if there is, we will always evaluate in case of every property the possibilities for own energy production, but we will make the decisions based on the same investment decisions that we have done before as well.

Our next question comes from Svante from Nordea.

Yes. Svante Krokfors from Nordea. I have one question, and that's regarding -- what's your customers' or tenants' focus on sustainability, energy efficiency and so on when choosing apartment? And do you think that you could eventually price differentiate based on apartment sustainability features?

That might be. At this moment, we have done -- as part of our materiality analysis this year, we conducted a larger way, including also our customers. And we got almost 300 -- 3,000 answers of our Lumo residents regarding sustainability and what factors they find important. And there, the views were that the waste recycling, for example, the energy efficiency, the carbon footprint-related issues, and issues related to safety, comfortability of the housing, those were all very important, and they are now incorporated into our sustainability program. So on the basis of that questionnaire, there was -- that was the tenants -- it was obvious that they find it increasingly important, the sustainability issues, and we will continue to focus on questionnaires like this on a -- not -- annual or biannual basis.

That appears to be the last question in the queue. So I'll hand it back to you for [indiscernible]

Okay. Then we have some questions from the chat, the first being, what do you think about wooden buildings from the ESG perspective? Do they have lower carbon footprint?

That's a very good question. Yes, they have a bit -- they might have a bit lower carbon footprint. And we have just now very recently -- we are actually -- we have our first wooden developments ongoing at the moment as well. And we are waiting the results for the carbon footprint production. But many research that refer to the fact that wooden buildings have a lower carbon footprint, and that's also one thing that we are analyzing in the next -- in the future.

Can you elaborate a little bit about the definition of the nearly zero energy emission buildings? Is the whole construction process defined as zero emission or just the finished building? Are you compensating the emission that are generated during the construction phase?

The nearly zero energy building, the definition is that the building is using renewable energy. Totally -- the energy that the building is using comes from totally renewable sources, and that's the definition. The definition doesn't include the construction phase, not the materials. It's concentrated on the energy usage and how -- and what is included in the definition is the energy efficiency and then the production of the -- how the energy is produced in the building.

Can tenants choose freely their electricity provider? Or do they have to buy electricity for sustainability-generated sources?

They can use the source freely. But at the moment, the electricity that we have for the property common areas, that is from renewable sources. So that's 100% renewable electricity that we have.

Could you elaborate on your possibilities to utilize the apartment or property-specific water or energy consumption data to nudge or incentivize the tenants to save natural resources in line with your goals?

That's a good question. Yes, that's something that we might be looking at the years to come. And also -- but I think that the very important part of this is that we increase the communication with the tenants about this, how to save energy and how to save water. And so this -- I think the communication is an important part of this achievement and also incorporating tenants into paying attention to their water usage and their -- and energy usage. And also, what we do -- what we do as our normal maintenance planning and maintenance work, we are always changing or paying attention to the water equipment that we have in the buildings to make them as water-efficient as possible. So these are maybe the main ways to concentrate at the moment on the water consumption.

How do you audit your suppliers and the suppliers of your suppliers?

Well, as said in the presentation, we are at the -- we have just very recently now launched our supplier code of conduct. And how we plan to incorporate it -- this into action is that we are incorporating the supplier code of conduct into all of our agreements with our suppliers. And also, we take sustainability as part of our cooperation in the corporate meetings and all cooperation that we have with the supplier. And we do internal auditing as well with our own resources for our suppliers, and sustainability responsibility factors are part of that as well.

Yes. Then we talk about what are our main means to receiving -- or reaching the net zero emissions, but could you review the main actions when transiting the -- our current assets into net zero?

Regarding our current assets, I think the main way of moving towards zero is, first of all, the major renovations and old renovations that we do and how to implement energy efficiency in that sense and also the consideration of buying district heating products that are from renewable sources.

Okay. Thank you very much.

Thank you.

And then it's time for our final but not the least presentation. So Ville Raitio, welcome to the stage.

Good afternoon, everyone. If this was a rock concert, this would be a very special slot, and that's why -- because we're moving into the sunset slot of the day. Those listening in on the presentation in Helsinki can testify to that. But let's spend the next 20 minutes or so looking at our investment strategy. I want to do a couple of things: first, try to understand how we are generating growth. As you know, we are aiming for EUR 200 million to EUR 400 million of annual growth. So I'll open up a little bit the avenues, the ways that we generate that. Secondly, we have a special collection of projects, the Metropolia schools that we acquired a couple of years ago. Let's spend a brief moment on those projects and see where we are with them. And then finally, what I will do is run you through -- run through a specific investment case really from start to finish. So how do we go about identifying investment opportunities, what is the exact process that we then go through, and finally, what does it look like now that the investment is completed. So the starting point really is, again, investing that EUR 200 million to EUR 400 million on an annual basis. What is it that we're looking for? First of all, the question is about the city. So which cities do we invest in? As you know, our focus is on the 7 largest cities in Finland, and more specifically, with the growth investments, we are targeting the top 3, if you like, so the metropolitan region, the Helsinki region as well as Turku and Tampere. These regions all benefit from strong population growth. So Tampere and the Helsinki region, they're all forecasted to grow at double-digit numbers for the coming decade, Turku almost the same at 8.5%. So strong, robust population growth and urbanization, which sets a really good starting point for our investment strategy. Secondly, we want to understand what kind of neighborhoods we're investing in. So we're building homes for people. So what are good locations for homes? We want to see good transport connections, both road connections but also public transport. We want to see parks and other recreation facilities. We want to see shops and services, where people live, where they shop. And as we've heard today already quite a bit about sustainability, those features are really important for us as well. In terms of implementing that strategy, we have 3 main alternatives: direct acquisitions; our in-house project development and land bank; and then finally, project acquisitions directly from construction companies. We remain open for direct acquisition opportunities. We have a track record of implementing large transactions. We are, all the time, looking at different opportunities that fit our strategy and are ready to move when the opportunities present themselves. In terms of the in-house development, and as you can see, the 2 final boxes, they really represent ways of growing through development projects. So the in-house development is really focused on our land bank. So we own approximately 180,000 square meters of land. Roughly half of that is already zoned. So that gives us a good path to grow. The other half is still something that we're working on through the zoning process. The land bank itself, together with the Metropolia properties, they provide us some growth opportunities for approximately 3,000 new homes, so quite substantial avenue for growth. And then finally, the project acquisitions, so buying projects directly off construction companies. The main difference here is really that as we work on our own developments, that's where we take a very active role in the design of the buildings as well, whereas with the project acquisitions, typically, the design responsibility and the planning responsibility lies with the construction company. Of course, we review the plans in our due diligence, like I'll show you in a minute, but typically, they come as sort of readily planned. This is something that you'll probably recognize from our quarterly reviews in terms of our development pipeline. So 2 important points that I want to make here. First, as it comes to the actual map, you will see quite a number of dots, and you will see that the dots are linked and closely related to either the metro connection or the railroad, which is shown in the darker blue color, so again coming back to that point in terms of the micro location and where we want to see the assets located with the good transport connections. Also, you'll notice that this is not a complete map of Finland, but right now, this is where our development focus is. So all of the projects that we're right now working on are in the Helsinki region. The second point to make here is about the numbers in the table. So you'll notice that we have around 500 apartment completions for 2020. But perhaps, right now, as we are already in December, more important to look into '21 and '22. So we have around 1,400 and 1,600 apartments on an annual basis due for completion in those 2 years, setting us on a very good path in terms of delivering that growth target of EUR 200 million to EUR 400 million of annual investments. '23 is something where we don't have such high numbers yet, but that's really, if you think about the construction period, typically 16 to 18 months. So everything that we've been working on so far has naturally flown into the '21 or '22 buckets. Increasingly, the opportunities that we're working on right now will gradually start to be apparent in the '22 and '23 numbers. But let's zoom in to Helsinki, and like I promised, let's take a quick look at what's happening with the Metropolia properties. This is a portfolio of 6 schools used by the Metropolia school. They centralized their operations on one campus and, therefore, did not need the schools any longer. And therefore, the city of Helsinki sold these properties. We were very fortunate to be able to acquire them a few years back and since then have been working on the zoning for those properties. So of course, there have been in public use, and now we're working on zoning them, of course, predominantly into a residential use. The photos show that they are quite unique, quite special buildings. We are aiming to develop up to 1,000 apartments, 1,000 homes into these locations. And the little table there on the top right-hand corner shows you our best estimate as we stand here today in terms of when we are through the zoning process. So the first 2 assets, A and B, we're really moving towards the final stages of the approval now in December. And then the remaining 4 assets, we hope to complete the zoning of those, for most part, during the first half of next year; and then, for the final asset, second half of next year. I've also shown a simple graph in terms of how the zoning process works. And the little blue eggs in the bottom of the screen, if you like, that shows the interaction. So there's always -- it's a public process. The public has an opportunity to voice their opinions, voice their concerns of these processes. And therefore, with this element, it's always difficult to assume and give us precise timing as to when exactly the plans are going to be complete because of the potential to opinion or the potential to appeal on the final zoning. But I think the graph there should give a very good understanding of what we're aiming towards. So at the same time, as we're already quite far with the zoning process on most of these assets, we've started to look at the detailed planning and looking at the projects and their completion. If all goes well, we should see the first projects started already towards the end of next year in terms of the construction start. Let's go back to our development map. And here now you can see that I've highlighted Case Kirkkojärventie. Why this specific asset? It's -- as I'll show you in a minute, it's been included in one of our reverse tender offers -- processes, and it's also something that's recently completed. So it's now gone through the whole cycle. So it's quite interesting to look at it right now. Secondly, of course, I mean you must love the name, Kirkkojärventie, so easy to pronounce. So this is for all our foreign audience. Sorry. Bear with me. I'll just refer to it as the asset. So if you look at the process, it's really 4 steps. And by the way, this is the picture of the asset. This is how it looks like in Espoo about 200 days a year, so beautiful. But we start with the reverse tendering process. I'll talk about that in a little while. I'll also show you how we've approached the actual investment underwriting, what are the things that we are looking at, what are the things that we're paying attention to; the actual construction, quite importantly what are the risks there on us as the investor versus then the construction company who is actually delivering the process; and finally, as the building is now just complete, a little quick look at the lease-up on how we have performed there. So in terms of the reverse tendering process, about 18 months ago, a bit more even, spring of last year, we approached construction companies that we knew are active in the Finnish market and asked them to propose us development portfolios in the tune of EUR 100 million each with the following shopping list, if you like. So we wanted the assets to be located in those top 3 regions, so Helsinki, Turku or Tampere. We also follow our own design principles in terms of our own development. So we wanted those to be as closely matched as possible with those projects that would be offered to us equally. We were also looking at the net zero energy building standard. So we wanted to reach that level of energy efficiency as one of our key sustainability goals. And then finally, we were looking at an average apartment size of 45 square meters. We went through the offers, and the process really culminated in August of last year with us signing 2 cooperation agreements with SRV and with Hausia, covering a bit more than 900 homes altogether. The asset that we're going to talk about now is included in the agreement that we signed with Hausia. And again, that was nearly 400 homes in Espoo. So getting a little bit closer with the actual underwriting. There's quite a bit of material here, but this is something that we look at as we evaluate the investment. So I'll make a few points there. We want to understand the area profile, how we score the location, how we score the public connection, the transports. We look at the amenities. We look at the sustainability features. From the map, like you can see, there are both recreational opportunities, very close by schools, shopping opportunities and a train connection to the city of Helsinki in less than 0.5 hour, so ticks a lot of boxes in our interest. The bottom shows the Lumo services, and I'm sorry to say cats are not included in the rent, but you're, of course, welcome to bring your own pets. A little bit closer look at what is it that we then mean by those different dots and how do we look at the amenities, for example. So these heat maps really are looking at all of the data that we have on the area and really showing it in a graphical way and scoring it in terms of how we look at it on these 3 key aspects of amenities, transport connection, and then nature and recreational areas. Let's then look at the actual development process. So with this specific asset, the developer was developing the whole block. So they got a little bit of a head start in terms of the development of the asset. The construction started in October '19, and it's now finished at the end of October and that the clients moved in beginning of November. In terms of the roles and responsibilities, and this is a key point in a sense that if you consider the pipeline that we're working on and to understand a bit more closely the risks that are involved with that, very simply, the design responsibility, the timetable responsibility, the budget responsibility, that's all with the developer. Our main responsibility comes with the project oversight. So we have our own staff who are looking after the project. So we understand what's going on in a very detailed way. And then of course, we are funding the project as the -- as per the completion rate of the building. So that's our main responsibility. So most of the financial responsibility, therefore, in terms of the actual project, in terms of the construction risk, that is with the construction company. What's our competence in this? We have the internal project management team. Our development team is 20 people strong. And for each of our projects, we have both the project manager who's looking at the project, the overall time line and then, of course, following up on the completion rate. And then we also have a technical oversight. So this goes a lot more into detail in terms of the technical implementation and really, at the end of the day, making 100% sure that we get what we are paying for. Let's then move into the fourth and the final phase of the building as it comes to the development, and that is the lease-up. We start leasing the buildings 6 months ahead of completion. We benefit quite a lot from our web store in terms of the lease-up efforts, but we also use our direct sales team. So you can see here how the occupancy has evolved, how the sales have evolved. We were pretty much at sold-out position already in October. And when the building was then taken over by us in the beginning of November, we were at 100% occupancy rate, so all of the apartments sold, so quite a good result. You can also see that roughly half of the apartments were sold through our web store. So this is quite typical if you look at our new construction. Also perhaps interesting to think that, okay, this is, of course, a project that's been quite successful in terms of the lease-up. We are typically underwriting the new investments to a 97% occupancy. And we -- that's something that we'll look at completing within the first 3 months of the acquisition or the completion, and that's something that we've been also consistently able to achieve throughout this year. Finally, in terms of the customer profile, just a few observations there, and I'll start with the donut on the left side. If you look at where are the people coming from, where are they moving from, most of them are actually not moving from that far at all. So more than half are coming from somewhere else in Espoo, and that's quite typical because what you tend to see is that once people get accustomed to a certain area, they tend to move within the area rather than moving outside of the area. Of course, if there are big changes in the personal situation in terms of work, et cetera, then it's a different story. But by and large, this is quite typical. I guess the one area where this differs from a number of other properties is that if we look at the longer-term trend specifically for Espoo, we see that from the start of 2018, more than 20% of people have come from outside of the Uusimaa region, so from the rest of Finland. And like you see here, it's less than 10%, interesting consideration. Maybe there's something to do with the COVID situation right now. So people don't necessarily move that much from one location to another. So that could be a possible explanation. In terms of the household side, like you can see, a little bit more than half, 1-person household; and then 1/3 of 2-person household; with the remaining being in the larger household. So if you look at -- again, contrast this specific investment to the broader market, I think we've overemphasized the 1-person households a little bit here. The market number is probably closer to 45% equally with the 2-person household. Not a big change there or not a big difference there, whereas, of course, in the market, then the larger households are a bit -- or see a little bit higher numbers where we've emphasized the smaller households in this specific example. So hopefully, this has given you a good overview of how we go about implementing the investment strategy through those 3 pillars in terms of the acquisitions; our own in-house development; and then finally, buying projects directly from the construction companies; also a little bit of an update on where we are with the Metropolia properties; and then finally, with the walk-through of our development process from identifying the investment to completing and then finally lease-up and including it into our portfolio. Thank you.

Thank you very much, Ville. Before we start the Q&A, I would like to remind you that we have first 10 minutes with Ville here. And after that, we will have all our speakers on the stage so you can still have questions with them if you would like to. But let's start the Q&A with Ville. So please, operator, we are ready.

[Operator Instructions] Our first question comes from Svante Krokfors from Nordea.

Yes. Svante Krokfors from Nordea. Thank you, Ville, for the presentation. Very, very, very good to look at how you look at your growth. But as you haven't been acquiring anything -- and I guess that is mainly because of the price level in the market currently. But could you elaborate a bit why you said that Helsinki, Turku and Tampere are the focus areas but you currently build 0 apartments in Turku and Tampere?

Yes. Absolutely. I think we are -- within that strategy and within that scope, we are quite opportunity-driven. So this is really the function of where we've seen the best investment opportunities and why we have been so focused on the Helsinki region for the time being.

Okay. That's clear. And then perhaps on the different ways that you can grow. Obviously, when you buy a portfolio, you get the yield that you pay. But could you elaborate a bit on what you expect in development gains when you compare in-house development versus project acquisitions or reverse tendering and also conversion of, for example, the Metropolia to apartments?

Sure. I'll start with the 2 different types in terms of our own in-house development versus then the project acquisitions directly from construction companies. I don't think that there is, just by the different format, necessarily a fundamental difference in terms of the profitability of those projects. I think it's quite location-driven and, therefore, also revenue driven in terms of where you would see potentially the most profitable investment. So it's not necessarily whether we do it in-house or we buy from a construction company that's driving the difference. As we look at our development cost, we take into account all of our own cost in terms of managing the process. So that's a cost that's put on top of the construction cost. We also, of course, take into account the time value of money that's involved with the construction period. So those are taken into account. Once you take that into consideration, we're typically shooting for at least a 4% yield with those investments. So that's -- just to give you a very rough idea, that's kind of the yardstick. In terms of the development opportunities, as it comes to the conversion, that's probably not far off if you take the numbers that I just talked about as a base for the Metropolia opportunities. Like I was explaining, we're still a little bit off in terms of finalizing the zoning. So that's a question mark, and that's why I wouldn't want to sort of state any specific numbers at this point. Also, like I said, they are unique properties, but at the same time, they are old school buildings. So in terms of the efficiency, you would have, for example, really, really wide corridors that you wouldn't necessarily have if you were building the apartment buildings from scratch. And I mentioned that because that has a bit of an impact on the efficiency. So while we have very, very unique assets, very, very unique locations and hopefully are, therefore, in a position to drive the rents as well, of course, the construction itself needs to be taken into account.

Okay. That's very helpful. And then a final question regarding the fact that you haven't acquired anything in a while. Is it mainly owing to that you haven't found the right locations or that the prices are just too high on the ones that you find suitable?

So we've turned an awful lot of stones, and like you said, we've not really completed too many direct acquisitions this year. Pretty much the same applies for 2019 as well. Way I look at it is that we remain diligent in our process, and right now, at this present time, we've seen more value in the development opportunities compared to the direct acquisitions. But like I said, we remain open for business on that front as well.

And will you remain open also for divesting apartments if there is an opportunity for that?

That's probably a smaller focus going forward. As you know, we've sold quite a lot of apartments in the previous years. Last year, we sold roughly 500 apartments, and there were certain nonstrategic locations that we divested at that point in time. So that really completed our divestment program for the present time.

Our next question comes from Oliver Carruthers from Goldman Sachs.

I just wondered if you could comment a little bit about the new supply environment particularly in Helsinki where your land bank is. And then on top of that, any comments regarding further projects that you're looking to acquire and how you really see the scale of your land bank on a 2-, 3-year view? Do you intend to continue to grow it as you have been doing? Or will it be more of a case of it kind of coming off as you complete projects?

Sure. So if we look at -- just to provide a few numbers on what's going on with the new construction, I think a few points to make. If you look at the estimate for the country in total and all of new housing, I think the number is around 28,000. But if you then take off the regulated part of the market and if you focus purely on the nonregulated part on the flat, so that's where we are active in, so be it for owner occupancy or be it for investor like ourselves, I think the latest projection is 16,000 units for this year going down to 11,000 for next year. So there is quite a decline in terms of the production volumes. And I think that will also be beneficial for us in terms of our acquisition opportunities as there will be less competition and less development coming online. So that's one thing. In terms of our focus, we remain focused on those 3 areas. So we continue to evaluate opportunities in the Helsinki region as well as Turku and Tampere. Finally, I think you asked about the land bank. So that's also quite opportunity-driven. I think we have -- like I mentioned, we now, through the land bank, have a path to at -- around 300 -- 3,000 homes to our portfolio. I think that's a very good level. I'd love to see some of that unzoned land then go through the zoning process and eventually turning to cash flow positive from our viewpoint, so probably not any aggressive additions to the land bank at present time.

Our next question comes from Anssi from SEB.

Yes. It's Anssi from SEB. A couple of follow-ups. First of all, the fact that you haven't done any larger portfolio acquisitions, do you think that you need to lower your thresholds in terms of asset location, et cetera, and also in terms of pricing to get the deals done? Or are you unwilling to do this?

I think our main benefit is really to make the most out of the fact that we're able to grow through acquisitions through the land bank and through the development projects. And I think we've been able to generate quite robust growth through those 3 strategies even if the acquisition part has been weaker for this year. So I would be a little bit reluctant to start compromising on the investment criteria.

Okay. That's clear. Then on the Metropolia project, I know it's early stage, but you have highlighted that you aim to have 20% development gain in your own production and own units that you build. Is this a fair assumption for the Metropolia? Or how should we read the situation currently?

I think that's a good basis to start. I'd love to aim a little bit higher than that. But starting with the same base as for the rest of the portfolio, I think it's a good place to start.

Great. And the last question is on project management team and the organization capabilities and perhaps scalability. Can you increase the development volumes, meaning units under construction with this team? Or do you need to hire more staff or do something else in order to facilitate, let's say, faster growth if there are more opportunities in the future?

Right now, we're not looking to expand the team any further. I think short term, if there are changes in the portfolio so that we need more simply manpower to manage the process, we, of course, always have the flexibility in terms of outsourcing some of it, which is an important option for us. But long term, I think we are, right now, at the level where we need to be, and that's already accounting for the growth that we are aiming at.

Okay. Then the last question, it's on the units under construction and we aren't close to record level, so at a record level currently, what you are doing. Is this a new normal? Is this a peak? Or should we expect higher numbers going forward? What's your view, how you aim to drive the own development business?

I think we've -- as you know, from the numbers, we've been ramping up the development activity really from last year and have seen quite an increase. Of course, the nature of the beast is that those production, that also finishes and sort of gets removed and becomes part of the portfolio as it should. But with the targeted growth, I think we will continue to see a high number of homes under construction. So this is probably something that we'll get used to.

Thank you. And now we take a short break, and we will invite all our presenters to the stage and continue the Q&A then. [Break]

So thank you for your presentations today. We will now continue the Q&A session, and we'll continue to take questions from the conference call line. So please, operator.

[Operator Instructions] Our first question comes from Anssi from SEB.

Yes. It's Anssi from SEB. One question on the short-term trends that you are seeing. You have been a little bit more positive on new rental contracts when we have kind of ended, let's say, recovery phase from the COVID -- first COVID peak, but now we are seeing more infections in Finland on that side. So has this impacted the new rental contracts? And kind of what's the outlook in the short term like-for-like?

Yes. Jani, please.

Yes. Thank you, Anssi, for your question. I think it's quite early to predict the impact on rent with the latest COVID-19 news. What we learned from the first wave of COVID-19 was that the impact was temporary. And as we've been providing information already in July, we received a high number of new tenant agreement, actually a record high number of tenant agreements. So as soon as things got better, people started moving. And my estimate is that if things would get worse, there might be a short-term impact towards moving. Of course, if there would be a lockup, that would have an impact. But on the other hand, globally, people are waiting for vaccinations to start. So if something would happen, it would be a short-term impact, so probably not major impacts towards like-for-like growth in mid- to long term.

Our next question comes from Svante from Nordea.

Yes. Svante from Nordea. I hope you can hear me.

Yes, we can.

I have a -- yes. Good. I have a question to Jani regarding the transaction activity in the market, which slowed down in the spring. Have you seen any more activity on that side? And you also mentioned 2 deals that you -- or 2 portfolios that you looked at but that you walked away from. So could you comment a bit on the market activity currently?

Yes. We've been -- thank you for the question. As we've been providing color, we attended a bidding contest during the springtime, ended up walking away. And just a month ago, there was another one going on, which we participated and decided to walk away. That deal hasn't been closed yet. So we actually don't know the final buyer or the pricing. There has been indications that there's a lot of interest towards our markets from international players, and some of those acquisitions could come available but nothing significant going on at the moment as it seems. But as Ville was providing information, he and his organization has been turning a lot of stones in order to find good possibilities. So we will keep on working every day.

[Operator Instructions] Okay. There appears to be no further audio questions. So I will hand back to the speakers.

Thank you very much. We have some questions in the chat. Actually, they are related to the last presentation. So let's continue with those. So could you comment demand-supply balance for your new apartments coming to the market in '21 and '22?

Yes. That kind of relates back to what we were talking about already in the previous Q&A in terms of the production volumes and the growth prospects of the city. So that seems to be balanced and also taking into account that there's, at least right now, an expectation of some type of a slowdown, actually even quite dramatic in terms of the number of apartments started. So I think that all bodes well for the completion of our apartments and the lease-up. Even if it has been an exceptional year, we have progressed quite well in terms of our letting targets, just like I was showing with this one specific example as the illustration. So I think we're looking at 2021 and the lease-up in a very positive way.

And then any comments on smaller markets outside Helsinki, for example, Lahti, Jyväskylä or Kuopio? Do you plan to exit, keep the current footprint or grow in those markets?"

Yes. We don't have any -- like I was mentioning in terms of the divestments, I think we're happy with where our portfolio is right now at the present moment. The markets that you were mentioning, some of the smaller cities, if you look at our occupancies there, it's quite clear that we have room for improvement. You can also see the impact that we've seen also over time in some of the smaller cities that even small increases in supply can be a little bit of a short-term shock to the market. And I think we see a little bit of that going on as well as some of the more COVID-19-related impacts of universities closing down, students not having to show up then for the classes. So that's also important for the smaller universities. So there's a little bit of one-off impact and a little bit of short-term increase in supply in that regard.

And then on the slide on the customer origin, it seems not to be supporting urbanization. Most are local or regional. A few moved in from rest of Finland. Are this short term or COVID deviation? Or is it another effect in the data?

That's a good question and something I was also sort of contrasting. And maybe just to repeat that difference so that if you recall the numbers, we saw, I think, 9% of people from outside of the Uusimaa, so the closest region, so very little, in that sense, people moving in from the rest of Finland. And that -- there is a difference in terms of -- if you also look at it vis-à-vis what's been the historic rate. So we were closer to actually 20%. I think time will tell if that's a one-off for this specific asset, because again it's just one building, or if there was more of a COVID impact in terms of less movement sort of from the rest of Finland.

And then do you see wooden buildings as an investment? Are they viable investments for Kojamo? And do you have any strategy to invest or not to invest in those?

We don't have a strategy to not invest. So like Hannamari was mentioning, we have one project under construction right now that started in December -- sorry, September. We're quite keen on understanding and learning more. I think there are positives primarily with the carbon footprint. There's still a number of things that we need to understand better, especially in terms of the cost of managing those buildings long term. But like I said, we're also evaluating those opportunities.

2 And then if the economics are the same for in-house developments or buying from a developer, doesn't it make much more sense to do the latter where you have less direct development risk, for example, on cost [ overheads ]?

Important to understand what the risk difference is because, like I mentioned, when we buy the projects off the construction company, we really apply it with the design, with the plan, and most of the construction risk then lies with the construction company. If we look at what happens within our own development -- so we hire the designers, we hire the architects, so we control the process. But then we go out and tender the actual construction works with the construction companies, and those are fixed-price contracts. So the risk profile is no different from -- compared to if we were to buy it from a construction company, start to finish. It's just that we have more of a say and more of an impact in the design phase of the project.

Maybe you have touched with this, but did you have to give any initial rent discounts when leasing up the Espoo project? What is the running rental income on the project compared to which you're underwriting?

So we're pretty much hitting our numbers. The rent, if you look at that, that's just slightly in excess of EUR 20 per square meter. So overall, I think we're very happy with sort of meeting our underwriting numbers both in terms of the rent levels, but then also in terms of the occupancy curve that I was showing in the presentation. So that's very, very positive, I would say. And there was a second part to the question as well or...

What is the running rental income on the project compared with your underwriting?

But -- sorry, can you repeat the start? Maybe I just...

Yes. Maybe you have touched with this, but did you have to give any initial rent discounts when leasing up?

Yes, exactly. So yes, no wonder I forgot that. Always hard to think about money moving away from us. But no -- so we have these campaigns. So right now, with the Black Week, there was a campaign, but that's for specific apartments and specific assets. Here, we did not use any incentives. We're actually working on the second phase right now, and the sales are progressing quite well in that one as well.

How have you analyzed the market for Lumo One tower? How large is the market for this kind of high-end and high-priced apartments? And how do you see the demand?

So we -- the building will be completed in August '22. And of course, Katri was showing some of the ideas in a sense of what sort of service concepts and innovations we're thinking about bringing in with Lumo One. In terms of the market opportunity and in terms of the volume, I don't have any specific numbers to share at this point in time. But there's been quite a bit of initial interest. So we've already started to, if you like, building the book and really trying to get those already interested in the asset of the building to be in our client list, and that initial process has been quite promising.

And what is the amount of investments still required to the Metropolia assets?

That depends quite a bit in terms of where we get with the final zoning. Again, one of the open questions partly is the amount of new construction. And that's, of course, driving a lot in terms of the investment volume, so a little bit too early to say.

Okay. It seems that we don't have any more questions at this point. So I warmly thank you all and our presenters today for participating and giving us nice and very, very insightful presentations, and thank you all for participating. These presentations are currently available at our website, and the recording of the webcast will be there afterwards as well. So thank you once again, and have a good evening.