Kojamo has either completely or at least partially stopped requesting security deposits. And in any case, it must be remembered that we are talking about the tenant’s own assets.
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It isn’t actually. The correct level as of Q2 would be 4% (prime Helsinki yield requirement). You could roughly add 100 basis points to that and we would be closer to reality (both for the Helsinki Metropolitan Area and the rest of Finland).
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Based on this Kauppalehti article (behind a paywall), I believe Kojamo’s management has exactly the right approach to the current situation and they have a very good handle on things. That is, market conditions are acknowledged with even stark realism, and proactive measures are taken accordingly. To quote CEO Jani Nieminen: ”We want to ensure through proactive measures that we stay in good shape. The world is now full of examples of companies that are forced to act when others command them to.”
Most of my own investments have been in direct real estate investments since 2010, and I view Kojamo’s business and stock pricing specifically through this lens. By buying Kojamo shares at the current price, I can acquire apartments at an exceptionally large discount relative to their value. Kojamo’s apartments are in good condition and in the right locations, so I believe tenants will be found for them in the future as well. In the long term, this is what determines the company’s success. Another long-term decisive factor is that the company’s business can withstand tough times. In my opinion, management’s actions in the current market situation show that A) risk management was already in order and B) changes in the operating environment are reacted to actively and in advance.
Considering the points above, I think the stock’s pricing is now so attractive that it’s hard to stay away. I first bought the stock at 11 euros, and yesterday I doubled my position at 8 euros. Predicting stock prices in the short term is likely an impossible task, but I see that with this stock pricing, the margin of safety is so large that the decision will prove to be a good one over a few-year horizon.
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For this adventure, investors pay with their dividends, employees through redundancy talks, and the CEO who drove the motorhome off a cliff gets a pay raise. Nice, hehehe.
Aki Pyysing has written about Kojamo this time.
I would say that Kojamo is cheap if interest rates drop significantly in the coming years. You can gain access to a residential portfolio more cheaply, with more diversification, and with less effort through Kojamo than by buying apartments directly.
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There may be pressure to maintain key figures, but what about demand? If there isn’t enough demand, then Kojamo will rent at current levels and will have to revalue its properties.
Of course, the marketing person is mentally preparing customers to accept the increases, but if there’s an oversupply in the open market, then by switching, a tenant can get more for the same money.
This is a simplification, of course, but by the same logic, those rents did rise more than purchasing power or inflation. The same can, of course, be observed from Kojamo’s stock chart too.
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I suppose the future of the demand side is a logical consequence of what is currently happening in the residential investment market:
- investing in apartments is currently very poorly profitable → those who can exit the business are doing so and putting their money elsewhere (e.g., into interest-bearing assets), and those who must continue are at least not acquiring new properties (excluding existing commitments, which will already hit rock bottom next year)
- the number of properties will increase for a moment, but at the same time, they are being removed due to the above, and next year the trend will already be negative
- owner-occupied apartments are not being bought and decisions are being deferred while interest rates are high and no one dares to commit → the relative share of renters is increasing, which strengthens the multi-year trend of growth in rental housing
I suppose that’s the answer to what will happen to demand: the supply/demand situation looks mediocre for Kojamo for the coming months, and excellent as early as next year.
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Here is a Salkunrakentaja article about Kojamo, which can be read in a few minutes.
The cost of secured bank financing is clearly more affordable than bond financing. Additionally, Kojamo has plenty of headroom in financial ratios related to loan collateralization, which allows for the use of collateral in future financing arrangements.
Subheadings:
- The company must win back the market’s trust
- Credit rating is everything
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Here is Juha Varis’s tweet thread about Kojamo. 
https://twitter.com/JuhaVaris/status/1715337077934461316
https://twitter.com/JuhaVaris/status/1715337079914168823
https://twitter.com/JuhaVaris/status/1715337082074198339
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I’ve been following Lumo’s operations from up close lately, as we’re still living in one of their apartments for this month before moving into our own place. I already explained the reasons for the move in another thread, but it was mainly the constantly rising rent that made us move out.
We gave notice on this apartment over a month ago, and a Lumo representative still hasn’t come to do the final inspection or take photos of the apartment. First, it didn’t fit their schedule, and after that, I just haven’t heard anything. I checked out of curiosity and saw that there are 5 other apartments for rent in our building (which is entirely owned by Lumo). We are, however, in the best location in Tampere, at least in the opinion of young adults/students.
As a Kojamo shareholder, it puzzles me that there doesn’t seem to be much effort put into renting out the apartment, at least in our case, and from what I’ve heard from several people this year, the situation is similar. Our apartment is listed for rent, though without photos. No one has actually come for any viewings.
At the same time, I saw that there are 2,132 vacant or soon-to-be-vacant apartments in the whole of Finland. This can’t be very good for the company’s earnings and balance sheet if this continues for, say, half a year. Not to mention an even longer period of time.
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It certainly doesn’t give the best impression of the quality of the rental operations. I’m not sure if these are isolated incidents or if they reflect the big picture.
Over 2,000 apartments is a significant number, after all. In the spring, the figure was approaching the 3,000-apartment mark, since which about 1,000 units have been completed for Kojamo. Thus, occupancy rates have improved somewhat, despite the fact that a large number of apartments are still being completed.
I predict that occupancy rates will improve significantly over the next 12 months, as there won’t be much new supply coming onto the rental market anymore.
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Indeed, and it could well be that we are an isolated case and only the negative experiences reach our ears, as is typical 
From an owner’s perspective, there is just a fear that apartments are allowed to sit vacant with minimal effort because it’s such a large player and the quality of the listings can’t be monitored very closely. As an owner, I would also demand some cleverness in rental pricing and contracts to minimize vacant months. Now, the apartment will likely sit empty for over a month, and about €1000/month will be lost. Expenses keep running. I also feel that it doesn’t increase the desirability of the apartment if it hasn’t been lived in for several months (have the drains been flushed, appliances been turned on, etc.).
I haven’t personally tracked the number of their vacant apartments before, but it’s good to know that things have moved in a so-called better direction in this regard.
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Well, that is good if only 2,000 of Kojamo’s 40,000 rental boxes are temporarily vacant. It means the occupancy rate is 95% for all of Kojamo’s cubbies.
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Yes, the number feels large, but relative to the total housing stock, it is still quite small in percentage terms. Of these over 2,000 apartments, well over two hundred are ones that will be completed on December 1st or later.
I would estimate that during Q3, Kojamo’s occupancy rate has increased by one to two percentage points, based on the development in the number of apartments offered.
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Kojamo released this announcement today.
Inside information: Kojamo has signed a new EUR 425 million loan agreement
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Why doesn’t Kojamo disclose the interest rate of the loan? Can anyone think of sensible justifications for this?
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In these bank financings, it seems to be quite standard to use wording that does not disclose the loan’s interest rate. Below are a few examples that were easy to find during the review.
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This response is purely speculative.
With lower interest rates, it is possible to use lower yield requirements in the valuation of assets. When property yield requirements are low, the values of the assets are, in turn, higher. With high interest rates, I believe it is impossible to justify these yield requirements Kojamo uses for its properties (which start with a three). Could there be, for example, significant prior interest rate hedges in the background? Who knows 
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In general, interest rate levels certainly affect yield requirements, but information on interest rates is public and available to the appraiser. In an external appraiser’s valuation, on the other hand, the specific interest rate at which the asset(s) being valued are financed is not taken into account. For this reason, I don’t believe that the motive behind withholding Kojamo’s loan interest rate is specifically intended to influence the valuation of their own properties. I would guess it’s more likely because if the deal is favorable, they don’t want competitors to know about it, or alternatively, if the margin is on the high side, they don’t want to signal this to investors and reveal that their negotiating position with banks might not be as strong as expected.