Strengths

Toivo's strengths

Unique project development and ownership business model

Toivo's business is divided into real estate development and property ownership. Integral parts of this are project development, design, construction, and owning and renting of properties, as well as additional services.

Toivo’s aim in real estate development is to have a low cost price, and according to Toivo’s management this will be achieved more easily with Toivo’s unique business model than a traditional real estate business model where properties are acquired as built and not developed by the company itself. In addition, with its own real estate development activities, Toivo can influence the properties they own, both to respond to market trends and acquire the optimal properties for long-term ownership.

In owning real estate, Toivo’s goal is to achieve a high utilisation rate and optimised management costs. According to Toivo’s management the capital received from renting properties thanks to the real estate portfolio development and ownership and possible future value increases are efficiently returned to real estate development.

Value generating real estate development process

Toivo develops and builds real estate in a comprehensive manner, taking into account each party of the development project and their objectives throughout the project. The real estate objects to be developed are selected carefully, and the project design phase focuses on designing optimal solutions both for Toivo and the future tenants of the properties it owns. In addition, during the construction phase, Toivo uses tailor-made contract models to ensure rapid and efficient construction.

Toivo has an experienced team who according to Toivo’s management has a strong track record in the real estate business. Toivo’s team members have been involved in the development of over 12,000 apartments and have an average experience of ten years in the real estate sector. Toivo’s average development margin for its completed residential properties is 28%1),2)

1)=The development margin is calculated by dividing the development profit with construction costs. The development profit is calculated for an unfinished project by subtracting the estimated construction costs from the fair value of the finished property based on the appraisal document, and for a finished project by subtracting the actual construction costs from the fair value of the property based on the appraisal document.

2)=Historical average development margin in completed residential properties owned by the company on 31 March 2021, calculated as a ratio between actualised development profit and construction costs.

An efficient and modern dwelling portfolio

Toivo has made a strategic choice to focus on attractive micro-locations in growth centres, and 98% of its dwellings are located in the Helsinki, Tampere and Turku regions. According to Toivo's management, Toivo’s dwelling portfolio is efficient and modern and consists of attractive and modern dwellings with an average age of less than one year. In addition, ecology and environmental aspects are important elements in Toivo’s properties, and a majority of the properties are in energy class A. A brand is created for each of Toivo’s property already in the design stage and the brand has a role throughout the real estate development. In several of its properties, Toivo offers residents tailored additional services that fit the brand of the property.

According to Toivo's management the company can maintain efficient real estate management compared to typical real estate industry players thanks to its business model and modern real estate portfolio. Typically, management costs1) are on average some EUR 4.5 per dwelling square meter for a conventional operator2), while Toivo’s management costs3) were EUR 2.14) on average per square meter in 2020. The company has some 2,000 apartments under construction and/or in the contract phase5), which corresponds to more than 80,000 square meters5) and a fair value of approximately EUR 430 million6).

1)=Includes plot rents the share of which is EUR 0.09/m2/month.

2)=Source: Statistics Finland, Management costs of housing companies increased in 2019, June 2020.

3)=Does not include plot rents.

4)=Square area-weighted monthly maintenance cost per square meter in 2020.

5)=Dwellings under construction/in the contract phase.

6)=Dwellings under construction or the contract for the project has been signed, as well as the plots in the contracts.

Focus on a healthy housing market

In Finland, the population is increasingly concentrating on the Helsinki metropolitan area and other growth centres, and it is estimated that by 2040 the population in these regions will increase by 245,000 people (Statistics Finland's population projection 2019). In addition, demand for small dwellings will increase and already 77% of Finnish households are 1-2 person households (Statistics Finland 2019). Toivo's management believes that its business model enables Toivo to respond to these market trends in a comprehensive manner, and thus the strategic priorities of Toivo are new, small, efficient, and affordable housing in the Helsinki, Tampere and Turku regions. 98% of the company's properties are located in these areas.

Business model

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Strategy

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