Lumo Kodit Oyj (LUMO) Earnings Call Transcript & Summary

Good morning, and welcome to Kojamo's Half Year Results News Conference. My name is Niina Saarto. I'm Group Treasurer and Head of Investor Relations. Today's presenters are: our CEO, Jani Nieminen; and CFO, Erik Hjelt, who will tell you about the first 6 months [ figures ] and events. After the presentation, we take the questions first from this room, then from the conference call line and finally from the chat. But now I would like to hand over to Jani. Please go ahead.

Thank you. Good morning, everybody. Nice to be here providing color on what's been going on here in Kojamo and in the Finland's residential market during H1 this year. But first, I would -- just want to mention that the building on the left-hand side in the picture is Luma One tower. First, tenants actually moved last month. And today, even prior to completion, the occupancy is actually already above 90%. So it's been a huge success story. But moving forward to close to our half year figures. In the big picture, I would say, our H1 key figures are solid. We've been able to create profitable growth. We acquired almost 1,000 apartments, and our financial position is really strong. In the market, as COVID-19 restrictions were lifted in March, since that we have seen the rental market improving towards the summer. That's kind of the big picture. Then, moving closer to the operating environment. Of course, the continuation of Russia's attack towards Ukraine has had an impact, creating inflation, interest levels increasing, construction cost increases. Now what seems to be happening in the market is that a substantial decrease concerning new start-ups, especially non-subsidized block of flats. The estimated decrease is 29%. In my eyes, it may be even bigger one. The total amount of start-up estimated officially 39,000 in this thinking includes only the decrease of non-subsidized block of flats. But I would assume that in the total market, as well other parts of the construction business like social housing or one family homes, new start-ups will decrease. So, housing volume start-ups in Finland will decrease. On the other hand, we have seen a significant construction cost increase in the industry at the moment in a way. What the construction companies provide information, it seems that this cost increase is slowly leveling off. Rent levels are increasing back again in the whole market. Home prices still increasing this year. Now, of course, the latest information seems to be that home buyers are getting a lot more careful, and that may have an impact in our owner-occupied market, actually creating more demand towards the rental market. Then, inflation has been a big topic, and most probably will -- a topic towards the rest of this year. The inflation level estimate here in Finland, 5.8%. Actually, there -- in my eyes, it's good to know that for us in Kojamo, the inflation impact, the cost increase, if you think about maintenance cost, H1 this year, the increase was 1.9%, if you calculate it euros per square meter per month. So, not the whole inflation impact is coming to our figures. We are able to optimize our doings, and on the other hand, buildings use energy and in cleaning and maintenance repairs, but they don't need -- They don't buy [ grocery ]. In the upmarket, otherwise, actually, a couple of large portfolio deals being made during the summer, both around 2,000 apartments. So it seems that there's a lot of interest towards the Finnish resi market still. The yields seem to be in a normal level. No impact there because of the market situation. Of course, we have seen a couple of portfolio deals postponed or taken away from the market. On the other hand, we know that a couple of new portfolios are entering the market. We released information prior to that, we are considering a possible disposal decisions being yet made. Other than that, we decided to postpone this project because of the uncertainty related to Ukrainian situation, NATO discussion, raising interest levels. So in that sense, we saw the market -- must be a bit cloudy. And at the end of the day, as we've been saying, we don't have to sell that portfolio. We are happy to enjoy the net rental income. Moving a bit forward. An important aspect is that, we do still believe that all the mega trends creating long-term need for new rental apartments are still valid. So, urbanization will continue. The number of small households in Finland seems to be still growing. Values towards ownership have been changing. People seem to be choosing easy, and therefore, prefer living in rental apartments, not that anxious anymore to take the housing loans. And as the table on right-hand side, the bottom corner source, actually, in all the big cities, the number of households living in rental apartments is still increasing on an annual basis. Towards the summer, as I said, we have seen the improvement of the rental market. Actually, one factor is that, we see that there was uncertainty related to COVID-19 and restrictions, as they were level -- taken away in March, whether new restrictions would be entering. We have seen an increasing number of new job opportunities in Helsinki region, people being a bit careful in order to move towards Helsinki. Actually Q2 this year, net migration in Helsinki was again positive. Students are active in moving into university cities, now an age group between 25-35 people. An increasing number of new tenant agreements actually mean that people are coming to capital region in order to start working. Our renting, even though it's in a way, not the H1 figure, I have to say that actually, we did make a new record concerning new tenant agreements this July, and August seems quite strong, providing a lot of new tenant agreements. And of course, that way, it will have a positive impact toward the occupancy as towards the end of H1, tenant turnover has been decreasing. In the operational environment, of course, as I said, we estimate that there is a substantial decrease concerning new start-ups. Aspects behind that are increase in construction costs. Home buyers' intentions to buy apartments are decreasing, and, of course, housing loan interest levels are increasing. That's creating a bit of the challenged situation for construction companies to provide build-to-sell projects. At the same time, it's good to keep in mind that all Kojamo projects are turnkey projects, fixed price projects. So, our projects are proceeding in a normal manner. Remains to be seen what's the situation later this year as construction companies build saying that the [ consult ] increases seems to be leveling off. And so, mainly the impact of Ukrainian situation. Peaking into the half year figures. As I said, strong figures, solid performance, providing profitable growth. Total revenue increased 3.1%. We've been quite consistent with our strategy, increasing the rents in a normal manner, as we have seen the COVID-19 situation is a temporary thing. Of course, there's been an impact in occupancy, providing a moderate like-for-like growth. So, basically, the total revenue growth has been coming in by a high level of investments. So, buildings completed last year and during this year. A strong performance in net rental income improvement compared to last year, 4%. Of course, if we look inside the maintenance, there was an increase of EUR 2.7 million. Biggest couple of aspects there: increase in electricity, EUR 0.9 million; increase in property taxes, EUR 0.7 million, mainly because we just own more buildings, and then some savings concerning repairs. FFO growing strong, 2.7% increase there against the comparison year. So of course, a positive thing there is the net rental income improvement. On the other hand, there is impact because of financing, and the actual green bond will launch at the end of Q1. So, as we have more debt, that had an impact. On the other hand, I would say that was a good thing to do during Q1. We were cash rich. And actually, the interest levels are in a good level in Kojamo. Fair value of investment properties at the moment, EUR 8.7 million. We are investing a lot. There's been a positive development concerning fair values. And as I said, investing a lot across the investments during H1, EUR 338 million. I would say in the big ballpark, around EUR 130 million new development projects, close to 200 million acquisitions, and then roughly EUR 10 million modernisation investments. Profit, excluding changes in the fair value, improved by 2.7%, being EUR 82.7 million. So, a good solid performance there. And then, profit before tax is EUR 157.8 million there. It's good to keep in mind that this year, the impact of changes in fair value of investment properties, there was a positive impact, EUR 75 million, mainly because of the strong development gain we are receiving, as we are completing apartments. But there on the other hand, we have to keep in mind that a year ago, the corresponding number was EUR 446 million, and there was -- yields were going a bit down. But in a big picture, solid figures, good performance. As we've been saying, for us, it's important that we are able to grow by using multiple sources. We've been quite careful what to buy concerning existing portfolios. We were able to find a portfolio matching our parameters, good micro locations, quality new apartments. We bought a portfolio of 942 apartments in June. There has been some questions concerning the transaction price. In a big picture, I would say that well below EUR 200 million. We don't have any revenues in H1 figures. We did do the acquisition during H1, but actually, revenues are generated from the beginning of July, and it seems that occupancy wise, we've been having quite a good start. And towards looking at the future, the stabilized yield is 3 point 8-ish. Being able to use multiple sources in order to grow is a way to optimize the growth. So now, we were able to buy close to 1,000 units. On the other hand, we still have more than 2,200 apartments under construction, mainly in Helsinki region. This year has been quite active in order with the completions. So close to 1,800 apartments were completed. We are helping people to move towards the big cities, providing new homes. We've been consistent with our strategy. All our projects have a high-quality micro location, close to public transportation services. All the projects are turnkey projects with a fixed pricing, actually meaning that the development gains are around 30%, so providing good impact to our fair values looking forward. In a market, Luma operates in a way that we really want to provide easily best living. So, it's a combination of providing apartments, communal spaces and services. So, strategy is to provide added value for a customer. Some of the services are included in the monthly rent. Some of the services tenants pay as they use them. So, we don't aim to be the cheapest player in the market, only the best player in the market. Looking to the services. For example, the installation of dishwashers has been appreciated by the customers. There seems to be an increase in number of customers there. A couple of new services. Carbon footprint test is available in My Lumo, as well our tenants are able to buy carbon-free district heating using My Lum application, so actually able to join the movement. Now, if Erik, you would go a bit deeper to figures, please.

Thank you, Jani, and good morning, everybody, from my side as well. So, Page 13. Our total revenue growth was EUR 6 million, plus 3.1%, and the like-for-like growth was negative 0.4%. We've been increasing the rents and water charges in a normal manner, so that contributed positive 2.2% figure -- 2.2% occupancy rate, negative figure there, 2.7%, and others, 0.1%. So, the growth was mainly generated by the growth of the property portfolio. So, during H1 this year, we completed 784 apartments and H2 last year, 841 apartments. So of course, that generates a growth for top line. As Jani mentioned, the portfolio acquisition didn't contribute any cash flows during H1. It's starting to contribute for the top line growth 1st of July. So, net rental income growth was EUR 7 million -- sorry, EUR 5 million, plus 4%. Maintenance expenses, up by EUR 2.7 million, electricity biggest factor there, so up by EUR 0.9 million. Property taxes EUR 0.7 million. Heating EUR 0.2 million. And all other items were pretty much in line with the corresponding period. So, when it comes to the heating, it's -- of course, heating expenses as such has been increasing, but given the fact that weather -- so the milder winter this year offsets the increases in prices. Repairs and -- repairs decreased by EUR 1.6 million. So FFO. if you first look at profit before taxes, so excluding change in values, there was an increase there. If you look at the change in value part of the equation, so yield requirements were kept unchanged. And we increased our assumptions related to inflation, rent increases and expenses increases, 30 basis points, to somehow reflect the change in inflation environment. Of course, this is based on 10 year -- this valuation is based on 10 years' cash flow calculation. So it's inflation for 10 years and not the inflation figures today. And during Q2, and -- we had one property where the restrictions ended, contributed roughly 4% of the change in fair value. So almost all positive change in fair value of investment properties was due to the completed developments or development gains. And then, all these developments on average, the development gain has been north of 30%. FFO increased by EUR 1.9 million. So net rental income contributed EUR 5 million, as mentioned. SGA expenses, up by EUR 0.7 million. No big changes there. Finance expenses up by EUR 2.2 million because of the [indiscernible] portfolio, what we currently have. Cash tax is flat, so EUR 9.1 million as in –- during the corresponding period. So COVID-19 have had impact for our occupancy rate. The rate came down 0.4%. Of course, it's not on a satisfactory level. But nevertheless, we think that the impact is temporary and related to COVID-19. Now we have seen actually several positive signs. One is that restrictions regarding COVID-19 has been removed in Finland March this year, and we have seen since people starting to move towards Helsinki region, especially. So, the total population Helsinki region now is increasing according to statistics. We've seen students starting to be active and some tourists are here as well. So all these are, of course, positive signs. And according to our estimates, that how we are going to come out of these restrictions. One is that students will be the first movers, then the people start to move towards the Helsinki region where there are lot of working opportunities, and then tourists will return to Finland. That part we have already seen. Other positive sign is there that our tenant turnover came down by 1.3 percentage points, and most of that or almost all of that positive change there was during the Q2, so back of ending restrictions. And then tenancy agreements completed in July and August, so also a clear improvement compared to the previous year. So there are clearly positive signs now in this occupancy rate thing. I think we covered already this like-for-like rental growth. So, investments, EUR 338.4 million. As Jani mentioned, the acquisition of this sizable portfolio included in these figures and it started to generate cash flows for us in the 1st of July. And then other part of these investments, of course, were developments, both completed and ongoing developments. Modernisation investments, EUR 7 million. On other side, investments slightly up, EUR 2.1 million, and repairs decreased EUR 1.6 million. Investment properties, EUR 8.7 billion, and of course, biggest contributors, acquisition, ongoing developments as well as positive change in fair value of investment properties. You still have a little more than 1,800 apartments where we have restrictions regarding valuation, and those restrictions will graduate by 2024, and we are going to get uplift of EUR 110 million to EUR 130 million when these restrictions ends and we start to just apply different valuation techniques. So, we are not aiming to dispose those maybe just start to apply a different valuation method there. And the uplift in values is somewhat back [indiscernible]. Then if you look euro-wise, our ongoing developments as the land bank. So this 2,230 apartments under construction. EUR 331 million already invested, and EUR 232 million to be invested in order to complete these ongoing developments. And binding agreements a little more than EUR 100 million to be invested. Fixed price there as well as in these ongoing developments. And this -- under these binding agreements, we have apartments -- 363 apartments. We estimate that the development investments this year is going to be between EUR 280 million and EUR 330 million. 94% all this in Helsinki regions. So actually, we have one project in Turku and one project in Tampere ongoing, and all others are located here in Helsinki region. We have fixed prices, as mentioned in these binding agreements as well as these apartments under construction. Net initially 4-ish percent still, and we estimate that the development gain is going to be north of 30%. Equity ratio, loan-to-value, we have strong figures there. So the target is to have equity ratio above 40% and loan-to-value below 50%, and we have quite sizable buffer against these levels. The increase in loan-to-value after Q1, nothing exactly there. So actually, we made this euro bond during Q1 and net debt to that was included in net debt calculation. And this portfolio acquisition was paid as cash. So that plays a role in net debt calculation. So nothing [ excited ] there. EPRA NRV, EUR 22.29, growth from corresponding period 16.9%. Our financial key figures are very strong. And here, it's good to note, when you compare our figures to many other players in Europe, especially in Sweden, so we have a strong balance sheet figures. We have high hedging ratio of 91%. Actually, our average cost of financing decreased during Q2, down to 1.7%. We still have quite sizable cash position. So cash and cash equivalents and financial assets totaled EUR 240 million. We have credit lines, EUR 300 million. Committed, unused and commercial paper program, EUR 250 million. Outstanding commercial papers, EUR 65 million. And our average maturity in our loan portfolio and as well as fixed interest period, close to 4 years, and no major maturities in the next 12 months or so. Our strategic targets. Top line growth, 3.1%. H1 investments, EUR 338 million. So, growth is there. FFO against total revenue, EUR 35.7 million. There is good to keep in mind that because of IFRIC 21, the whole year's property tax is already included in our figures during Q1. And if we adjust the FFO against total revenue by the H1 portion of our property taxes, so EUR 5.8 million -- EUR 5 million. So that means roughly 3 percentage point improvement in FFO. So that means that FFO against total revenue will be improving going forward this year. Loan-to-value equity ratio already discussed, and Net Promoter Score 43. And there, now we include the digital NPS as well. Our outlook this year is specified. So now we estimate that total revenue increase will be between 4% and 6%. And we estimate that the FFO is going to be between EUR 155 million and EUR 165 million. If you look what might take us towards the higher end of this top line growth range, so that requires that we are increasing the rents in a normal manner between 2.1% to 2.5%. That's what we've been doing so far, and that's our aim to achieve second half of this year as well, and some improvement in occupancy. Then of course, completed apartments, [ those ones ] that's completed. Especially Q2 and Q3 will be contributed for the top line growth. And then this portfolio acquisition that already we discussed. And what assumptions we have for FFO guidance. So if we take the midpoint of the guidance, so that reflects our specified top line outlook. And we have a couple of assumptions there. One is that normal weather during H2, because the weather plays a role for maintenance cost, and current inflation figures included in our assumptions as well in the midpoint of FFO guidance. Dividend policy, no changes there. So 60% of AFFO are providing that the equity ratio above 40%, and that is clearly the case today. So, at this stage, back to Jani.

Thank you, Erik. Before Q&A in a way, a bit summarize is, I still say that, we've been proceeding very systematically according to our strategy, as usually able to provide profitable growth. And mega trends creating long-term demand for new rental apartments in the big cities are still valid. And now looking short-term, the rental market seems to be improving. As Erik described, our financial position is really strong. We are able to create growth using multiple sources. Actually during H1 investments, EUR 338 million were a strong figure providing future growth. And now if we would move to Q&A by Niina.

So, thank you very much, Jani and Erik. Let's start with questions from here. Do we have anyone Okay. It seems that there are no questions here. Let's take the conference call line then. Operator, we are ready.

Our first question comes from Anssi of SEB.

I have actually a couple of questions and I go one by one, if I may. The first one is about capital allocation. And like, if we think about your asset yields and the cost of debt, like, how do you see the situation in terms of effective capital allocation? ,I mean what should happen in spreads between bond and asset yields that you would actually start to divest assets and repurchase your bonds? And also, how do you see share buybacks instead of acquired properties as you're service trading below EPRA NRV value? That's the first one.

As described, our financial figures are very stable, given the high hedging ratio. And our average cost of financing declined actually during Q2, and we still have quite strong cash position. So we are able to invest there. So if we get 4-ish percent of our net initial yield in new developments with the average cost of financing EUR 1.7 million, so that makes a lot of sense to invest according to our strategy. Of course, if you look then the price of new financing, that has been really a roller coaster. If we compare what the price for us was starting on this year, then towards the summer and today, and the changes has been substantial, and it's very difficult to predict what is the cost the additional financing going to be when we finally need it. And the good thing is that we don't need to make any new finance agreements in the next 12 months or so. So that, of course, gives us a very, very strong position again compared to many, many other players, especially in other Nordic countries. So we haven't seen any need for change in our approach towards the capital allocation regarding new developments or acquisitions or disposals. It's unclear right now where the yields are heading. As Jani described, there has been portfolio transactions, quite actually aggressive pricing. There are a couple of portfolios coming into market according to our understanding. And at the same time, several portfolios, they were in the market, but those transactions postponed. That's remain to be seen where the prices is in the market, what comes to portfolio transaction -- is heading going forward. Finland still seems to be attractive target market for international investors. What we estimate that is going to be that construction companies will come to a situation that they might start calling us again and offer us attractive projects since the demand for owner-occupied homes is declining clearly in Finland. So that's something that we are looking at going forward as well.

And actually, my second one is a bit related to the first one, and it's about development gains. Like what kind of development gains you are currently seeing? And like, are you taking into account how markets are valuing your share? What I mean is that, if we look at Kojamo share price, for example, or market cap, we've assumed that markets are not valuing Kojamo with same yield which is used in official EPRA NRV calculation. So how do you see the situation regarding development gains at the moment?

So, of course, we are not commenting share prices of EPRA NRV or how markets sees that. But the thing is that, in all our ongoing developments as well as our binding agreements, we have fixed prices. And we estimate that the development gain is north of 30%. Nothing changed there in our portfolio.

And the final one from me is just the overall question regarding market demand. Like how do you see the demand actually at the moment? And I mean, your occupancy ratio still came down a bit in Q2, but we know already that the students should be coming back to the cities now. But also, could you remind us how much you expect to see impact from students moving back?

Yes. As I tried to provide color, since the restrictions were lifted in March, we have seen an increasing number of job opportunities here in Helsinki region. It seems that there was some uncertainty by individuals in order to move towards Helsinki. Moving towards the summer, we have seen activities increasing in the rental market. In the summer students has been active. We did make a new monthly record concerning new tenant agreements in July. August will be strong. We already know that. So, in that sense, the market is now coming back to normal. And looking backwards, what's been going on in Q2, Q2 was the first time net migration was positive in Helsinki. Espoo started already during Q1. Vantaa still balancing on close to 0 level. So now it seems that these indicators are moving towards a positive sign. And we've been estimating all the time that students will start moving towards university cities during the summer. It seems that there was a bit of delay before working people started moving towards Helsinki region, related to the uncertainty whether new restrictions would be entering. The supply in the market has been coming down now on a monthly basis in Helsinki. You might not be surprise that, of course, the cheapest apartments are observed first from the market. But as I said, we did make a record high number of new tenant agreements in July. So at the moment, we are doing okay.

And actually one quick one from me still about asset yields in Q3. What kind of development have you seen, like transactions still going with the same kind of yields as seen in Q2? Or how is it?

As Erik provided color, and as usual, we don't provide any outlook concerning yield developments. Our valuation is based on analysis concerning concluded deals. We have seen a couple of sizable deals in the summer. Pricing was still aggressive. So those actions -- transactions what we have seen in the market, provide no data that the change -- there would be a change in yields.

And our next question comes from the line of Andres Toome of Green Street.

Just wondering regarding your occupancy rate, which has obviously come down again. Just trying to understand why is Kojamo's occupancy still going down whilst your peers are actually able to increase occupancy already for 2 quarters in a row? Is it just a function that you are protecting rental rate growth at the expense of occupancy and the peers are doing sort of the opposite? Or is it something else that is creating this divergence in relative performance?

It's a good one. And of course, different players seem to have a different strategy, and that's good for the market. We've been quite systematic in our strategy, seeing that the impact provided by COVID-19 is a temporary thing. We've been increasing the rents in a normal manner. I've been saying this prior, one of the easiest things in this business is to improve occupancy. You just start lowering the rent enough or start spending money in repairs and personnel. And it's good to keep in mind that when you compare companies, you should use multiple figures and compare the key figures as well. But, as I said, it seems that as the market has been improving, it's not a surprise that, for example, students observed from the market first the cheapest apartments. And the most price-sensitive customers are looking for the cheapest apartments now, but in the future as well.

And second question then sort of follow-up. And in regards to the comments you made about quite strong leasing volumes coming in, in July, and August looking quite good as well. Just wondering if you're looking into sort of year-end, are we in for a big spike in occupancy rate? Or is it going to improve materially now? And I think -- not even asking for a forecast really, but what are you seeing today in so far as -- if you were to close the books again today, would you be reporting a higher occupancy than in June?

It's tricky question. Yes, we do not provide any forecast or outlook concerning occupancy. But, as I said, we did have a record high number of new tenant agreements in July. There was a decrease concerning tenant turnover towards the end of H1. August, if we look at the number of new tenant agreements, is strong. These are all positive indicators. I did say that it will have a positive impact in occupancy. Of course, there's a slight delay always when you make a tenant agreement until you move to the apartment. Sometimes it's 24 hours, sometimes it's a couple of weeks, sometimes it's 1 month. But yes, we do have a positive thinking towards the future.

And my last question is regarding your disposal portfolio that you were sort of putting on the market and you've taken it out. I'm just wondering, did you get any [ stakes ] on that? And how much were they below your asking price I guess then, because you have taken it off the market?

We haven't said at any point that we will sell the portfolio. We have been saying that we are evaluating the strategy, and whether we would be willing to sell the portfolio. As things started happening -- bad things in Ukraine, we felt that, that theory is not the best possible one. Because if you don't have to sell something, you really need to get an attractive pricing if you would be willing to sell it. So, we didn't feel that the market was clear enough to start that kind of an operation.

So there were no bids really, and that sort of assessment was more on the back of broker indications, I guess, in terms of where you could expect reasonably to sell?

Of course, we've been doing kind of market sounding, but we didn't feel like moving forward, like really move forward.

Our next question comes from the line of Svante Krokfors of Nordea.

Couple of questions left from me. The first one regarding rent increases. You have been quite consistent with the 2.1% to 2.5% rent increases. How are you now reasoning regarding that given the inflationary environment and increasing costs?

Well, of course, for the short-term, we are consistent with our strategy. So, as we've been saying -- providing the color that our aim is to create like-for-like growth between 2.1% to 2.45% without the positive impact of occupancy. But then looking forward in the market, I see that -- now I talk about the whole market, not about Kojamo, there's increase in maintenance in all residential buildings in Finland. That will provide pressure for individuals owning rental apartments. They've been having quite low yields, and now the cost side is increasing significantly. They are not able to use big volumes like we do. That will provide pressure for the market. At the same time, we see that the supply in the market is decreasing. And typically, when that happens, that will provide an impact on rent increases. And we are following the market on actually daily basis. And our aim is to get the market price we feel is right at all times.

And you have kept the rent increases perhaps a bit at the cost of higher vacancy rate because of the temporary situation from the pandemic. But what kind of threat do you see from the, I guess, still higher supply in the market than pre-pandemic levels on your occupancy rate long term?

As I said, it seems that the market is coming back to normal. The supply in the market seems to be coming down. Number of new start-ups is decreasing substantially. So looking forward, there is less new supply coming to the market. On the other hand, what we see in the market is that home buying intentions are low level, and if people stop buying homes, that will create pressure towards the rental market, and either way supply from the market. So, in that sense, there is the long-term demand for new rental apartments, and our capability to increase the rents in the long-term.

And then the last question regarding the transaction in June. I think you said that the stabilized yield, 3.8%, sounds quite attractive. And I guess the square meter price less than EUR 6,000. Was it an off-market deal? Or was there intense competition for the target?

I would not provide indeed any color on that. We made a good offer and we are happy with our deal.

That sounds like a good deal.

Our next question comes from the line of Erik Granstrom at Carnegie.

Almost all my questions have already been answered, but I have one follow-up and that's regarding the outlook. Could you just specify a little bit the reasoning behind sort of narrowing the range here in Q2? Was it due to things you've seen in the rental market? You mentioned increased activity both because of the transactions that you made in the summer? Or could you just specify that just to make sure?

Yes, sure. So, typically, we narrow the guidance at this point of the year because now – then -- at this point, we know H1 figures and then we have some more -- it's more visible what is going to happen second half of this year. Now we have this transaction completed. We know what is the rent level, what is the amount of new agreements, July, August. So the view is clear. That is one reason why we want to specify -- we want to narrow the guidance range at this stage. So this is a normal timing for narrowing rates. Of course, one may argue that because the market is a little cloudy or focus or -- so one might want to keep the guidance unchanged. But since we think that we have enough visibility for the H2, and that's why we did the narrowing in a normal manner. So nothing out of the ordinary there.

But the acquisition that you did make in June is included.

Now the EUR 4 million top line that the acquired portfolio will provide second half of this year, is included in the guidance.