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News Article | November 17, 2016
Site: globenewswire.com

-      Profit from assignments and changes in fair value: EUR 0.3 million (EUR 1.1 million) -      Total dividends distributed in the third quarter: EUR 0.27 per share (EUR 0.30 per share) -      Profit from assignments and changes in fair value: EUR 2.0 million (EUR 5.8 million) -      Total dividends distributed during the period under review: EUR 0.81 per share (EUR 0.90 per share) Adjusted net assets per share of Orava Residential REIT plc amounted to EUR 10.49 on 30 September 2016, while they were EUR 11.63 at the beginning of 2016. The value of the company’s investment properties rose to EUR 210.7 million at the end of the period under review (31 December 2015: EUR 195.9 million). “The Orava Residential REIT's financial result for the third quarter improved year-on-year but was weaker than expected. The slow strengthening of the Finnish housing market continued in the third quarter and the value of the housing fund portfolio turned slightly positive; fair values increased by +0.5% year-on-year. No apartments were acquired during the third quarter as Orava Residential REIT only carried out the acquisitions agreed at the end of June. The new apartment block in Hämeenlinna was also completed during the period.  We decided not to make any acquisitions because with current share valuation levels, achievable wholesale discounts and achievable leverage, increasing shareholders’ equity and acquiring apartments would not have led to higher net assets per share. As a result of the slower rate of apartment acquisitions during the second quarter, economic occupancy rate increased from 90.1 to 92.0 per cent in the third quarter, while the economic occupancy rate of apartments owned for more than six months reached 94.9 per cent.  The proportion of investment property maintenance and repair costs of the portfolio value decreased to 2.4 per cent and, largely as a result of this development, net rental yield increased from 4.0 per cent in the second quarter to 4.2 per cent in the third quarter. The relative decrease in maintenance and repair cost is mainly due to seasonal variations. Apartment sales in the third quarter remained at the record levels that they had reached in the previous quarter (EUR 2.9 million). The debt-free purchase prices of the apartments sold by the middle of November this year totalled EUR 9.6 million. There has been a slight decrease in the number of Orava Residential REIT's shareholders and it now stands at about 8,100. The shareholders represent 28 different nationalities. Trading in the company's share on the Helsinki Stock Exchange has picked up slightly; the average daily turnover in January-September was EUR 235,000. Orava Residential REIT estimates that it is reasonably unlikely to come close to its targeted total return of 10 per cent on shareholders’ equity this year.” Finnish GDP growth is expected to settle between +0.9% and +1.2% both this year and in 2017. The growth of private consumption that is central for the housing market is expected to settle between +1.0% and +1.6% this year, while it is expected to remain between +0.5% and +1.1% next year. Short-term market interest rates in the euro area have still continued to fall, and they are expected to remain at less than one per cent for the next seven to eight years. At the same time, long-term market rates have gone up by a few tenths of a per cent in October and November. The estimate is based on the most recent economic forecasts by 14 parties drawing up forecasts on the Finnish economy, compiled by the Federation of Finnish Financial Services, and the market interest rate expectations calculated on the basis of the euro interest rate curve published by the European Central Bank. We expect the slow strengthening of the housing market to continue. During July–September, households drew down EUR 4.4 billion in new mortgages,10% more than a year before, according to statistics from the Bank of Finland. The euro-denominated mortgage base totalled EUR 93.6 billion at the end of September, and the annual growth in the mortgage base was 2.5%. According to the statistics from the Central Federation of Finnish Real Estate Agencies, the change in the number of transactions in old apartments in January-September was +2% and in new apartments more than +26%, compared to the corresponding period in the previous year. The average marketing period for old apartments in the country overall according to the new calculation method of the Finnish Etuovi.com marketing service increased from 67 days in June to 83 days in October, while it had been 81 days in October in the previous year. There seems to have been a slight increase in the demand for apartments in the third quarter. According to Statistics Finland, building permits for apartment blocks were granted for 3,272 apartments in August, which was 4% less than a year previously. Correspondingly, in January–August, building permits for apartment blocks were granted for a total of 25,662 apartments, or 21% more than a year previously. At the same time, the annual change in the sliding annual sum of building permits granted for apartment blocks was +18%. The three-month change in the housing construction volume index that describes the value of ongoing new construction was +29% in August, and the change year-on-year was +17%. According to the November confidence indicator survey of the Confederation of Finnish Industries, the balance figure for construction production for the past three months was +13 points in the third quarter of the year, while it was +32 points in the previous quarter and +17 points a year before. The balance figure for the three-month production expectation was 0 points, compared to +23 points in the previous quarter and +21 points a year before. The number of unsold residential apartments compared to normal fell from -5 in the second quarter of the year to -33 in the third quarter; a year ago, the balance figure was +20 points. The supply in the housing market has continued to grow during the third quarter; there are, however, some signs of a slowdown. Prices, rents and returns in the housing market In the third quarter of 2016, the rents of non-subsidised apartments increased by 2.4 per cent year-on-year. The change in housing prices in the third quarter according to the housing price index from Statistics Finland was +1.4% year-on-year. The change in housing prices from the previous quarter calculated by Statistics Finland was +0.4%, which we estimate to correspond to an increase of approximately 0.6% when converted seasonally. The ratio of housing prices to rents is slightly below the long-term average; the ratio calculated from the square metre prices of apartment block apartments in the third quarter and the rents of non-subsidised apartments was 15.1. The 42-year average for the ratio of square metre prices to annual rents in Finland is 16.9. We expect that during the next 12 months the growth rate of the housing prices in the whole country will accelerate slightly, and the growth rate in rents for privately financed apartments will remain approximately the same, if the market interest rate expectations and economic forecasts prove true with regard to their essential components affecting the housing market. The economic occupancy rate of rental operations in the third quarter was 92.0%, which is higher than in the previous quarter (90.1%). The economic occupancy rate, adjusted so that acquisitions in the past six months have been eliminated, was 94.9%. The gross rental yield in the third quarter was 6.9%. During the period under review, the economic occupancy rate was 90.7 per cent (2015: 90.6 per cent and gross rental yield was 6.9 per cent (2015: 6.8 per cent). At the end of the period, there were a total of 1,712 residential apartments and business premises (2015: 1,639) and 1,484 leases (2015: 1,294); 129 apartments were on sale. Approximately 98% of the entire lease base for residential apartments is in agreements valid until further notice. A total of 149 agreements were terminated in the second quarter (Q3 2015: 149). No agreements on acquisitions of apartments were made during the third quarter. A construction project in Hämeenlinna, which was started in summer 2015, was completed in July. The property has 52 apartments. In addition, transactions of 23 apartments acquired at the end of June were completed. During the period under review, Orava Residential REIT acquired 72 apartments (2015: 304 apartments) at a debt-free selling price of EUR 16.3 million (2015: EUR 37.8 million). In the third quarter, apartment sales remained at the record level they had reached during the preceding third quarter. During the third quarter, the company sold a total of 21 residential apartments from sixteen different housing companies. The debt-free selling prices of the apartments totalled EUR 2.9 million, and the sales commissions were EUR 90 thousand. During the period under review, Orava Residential REIT sold 63 apartments (2015: 25 apartments and 5 plots) at a debt-free selling price of EUR 7.7 million (2015: EUR 4.8 million). The fair value of investment properties at the end of the period totalled EUR 210.7 million (31 December 2015: EUR 195.9 million). On 30 September 2016, Orava Residential REIT had a total of 1,712 apartments (31 December 2015: 1,702), which had a combined size of about 110,000 m² (31 December 2015:  108,000 m²). The apartments were located at 124 different housing companies, where the company's holding was 100% in 16 of the cases. More detailed information on the investment properties is presented in the tables section. Age and regional distributions of the investment portfolio The values of the apartments owned by the REIT are measured at fair value at least on a monthly basis and are published at least on a quarterly basis, and always when a change in the REIT's economic situation requires it or when changes in the condition of the real estate have a material impact on the value of the holdings of the REIT. A more detailed account of the apartment price measurement model is presented in the 2015 financial statements. The Group's financial result for the third quarter The Group's revenue for the third quarter totalled EUR 3.5 million (Q3 2015: EUR 3.8 million). The revenue was divided into income from rental operations of EUR 3.2 million (Q3 2015: EUR 2.6 million) and capital gains of EUR 0.3 million (Q3 2015: EUR 1.1 million). The returns on rental operations include rental income and compensation for use. Gains consist of the changes in the fair value of the apartments and the profit from sales of apartments less sales commissions for sold apartments. Operating expenses totalled EUR 2.2 million (Q3 2015: EUR 1,1 million), of which maintenance costs and annual repairs amounted to EUR 1,4 million (Q3 2015: EUR 1.3 million) and the performance-based management fee totalled 0.0 million (Q3 2015: EUR 0.0 million). Financial income and expenses totalled EUR 0.8 million (Q3 2015: EUR -0.7 million), and taxes for the period totalled EUR 62,000 (Q3 2015: EUR -24,000). Profit for the third quarter was EUR 0.5 million (Q3 2015: EUR 2.0 million). Comprehensive income items amounted to EUR 3,000 (Q3 2015: EUR 0 thousand), and comprehensive profit for the period totalled EUR 0.5 million (Q3 2015: EUR 2.0 million). Financial expenses (net) totalled EUR 2.3 million during the period 1 January–30 September 2016 (2015: EUR 2.0 million). The interest-bearing loans of Orava Residential REIT and the company loans allocated to the shares in housing companies totalled EUR 113.6 million on 30 September 2016 (31 December 2015: EUR 95.8 million). In addition to the loans, the long-term liabilities in the statement of financial position also include EUR 728,000 in rental deposits paid by tenants (31 December 2015: EUR 660,000). Cash flow from operational activities became positive during the third quarter. Cash flow from operational activities in Q3 2016 was EUR 0.1 million (Q3 2015: EUR 0.2 million). Over the entire period under review cash flow from operational activities was EUR -0.3 million (2015: -1.5 million). Cash flow from operational activities over the entire period under review from 1 January to 30 September 2016 includes, under the item of interest paid, full-year interest of EUR 0.9 million on a bond paid on 1 April 2016.  Costs in cash flow from operational activities over the first half of 2015 are strained by arrangement fees of a bond and credit limit agreement and the discontinuation of derivative hedging, totalling EUR 1.4 million. The company's management is monitoring the development of debt-free sales of investment properties on a monthly basis as part of cash flow from operational activities. Cash flow from operational activities including debt-free sales of investment properties in Q3 2016 was EUR 2.7 million (Q3 2015: EUR 0.9 million). Over the entire period under review cash flow from operational activities was EUR 6.6 million (2015: EUR 0.7 million). The amounts of Cash and cash equivalents have been adequate. Cash and cash equivalents at the Cash and cash equivalents at the One of company’s strategic goals is to maintain the loan-to-value rate at approximately 50 per cent. Therefore it is the purpose to replace company loan shares allocated to sold apartments and other loan repayments by withdrawing a new loan. Drawdowns of and increases of loans 2 261       3 613       24 495     23 613 to sold apartments and other At the end of September, the number of registered shares of the company totalled 9,657,567 and 9,144,844 of this number were outstanding shares. The company has allocated and will allocate shares to itself in charge-free share issues, which it may use to strengthen its capital structure, develop its business and widen its ownership base through both acquisition of investment properties and the issue of convertible bonds. Between 1 July and 30 September 2016, the company concluded eight convertible bond agreements totalling EUR 2.0 million. Convertible bonds worth EUR 2.2 million were converted into 297,913 company shares and recognised in the company's shareholders’ equity. The company's shareholders' equity is EUR 97.2 million (31 December 2015: EUR 94.3 million). At the end of the period under review, the company possessed 512,723 own shares it had directed at itself, which corresponds to 5.3 per cent of the total number of the company's shares and the total number of votes. More detailed information on shareholders' equity and convertible bonds is presented in the tables section, at sections 5.3 and 6.1. The trading codes of the company's shares during the financial year were OREIT and OREITN0116. Between January and September, the average daily turnover of shares was approximately EUR 235,000. The company had over 8,100 shareholders at the end of September 2016. Of the total number of shares, 3.3% were nominee registered. * Company under the control of Board members Tapani Rautiainen and Timo Valjakka ** Company under the control of Board member Timo Valjakka **** Company under the control of Board member Jouni Torasvirta Orava Residential REIT was established on the initiative of Orava Funds plc. Orava Funds is responsible for the organisation, management and development of the operations and administration of the Residential REIT. The Residential REIT has no personnel of its own. As compensation for management services, Orava Residential REIT pays the management company 0.6% of the fair value of the assets of the REIT as an annual fixed management fee and 20% of the annual return on the REIT exceeding the hurdle rate of 7% as a performance-based management fee. The stock exchange price is used in the calculation of the performance-based management fee, if it is lower than net assets per share. The performance-based management fee is only paid if the closing stock exchange price for the financial period is higher than the highest closing stock exchange price for the previous financial periods, adjusted for dividends, issues and splits. The fixed management fee is calculated on a quarterly basis, and the value is considered to be the latest fair value of the assets according to IFRS in the previous quarter. The fixed management fees during the period under review 1 January–30 September 2016 amounted to EUR 944,000 (2015: EUR 694,000). On the basis of the company's net assets per share, share price and dividend distribution realised in 2016, no performance-based management fee has been booked (1 January - 30 September 2015: EUR 0 thousand). The performance-based management fee will be paid after the end of 2016 on the basis of the company's realised net assets per share or the adjusted share price in March 2017. The personnel of Orava Residential REIT are part of the business organisation of the management company. The management company is responsible for the personnel expenses incurred from the operational activities of the Residential REIT. The Board of Directors of Orava Residential REIT is composed of six members: Patrik Hertsberg, Mikko Larvala, Tapani Rautiainen, Veli-Matti Salmenkylä, Jouni Torasvirta and Timo Valjakka. The Chairman of the Board is Jouni Torasvirta and the Vice Chairman is Patrik Hertsberg. The Board of Directors convened a total of 15 times during the period under review. The Board members' rate of attendance at Board meetings was 98%. Orava Residential REIT's auditor is the auditing company PricewaterhouseCoopers Oy, with Tuomas Honkamäki, APA, as the chief auditor. The auditor is paid a fee in accordance with the invoice. Authorisations of the Board of Directors The Annual General Meeting decided on 22 March 2016 to authorise the Board of Directors to decide on share issues and the issue of option and other special rights giving entitlement to shares so that the Board of Directors may decide to issue no more than 6,000,000 shares in the company's possession or new shares which do not give entitlement to dividends in 2016. Under the authorisation, a total 756,728 shares had been issued by 30 September 2016, which means that an additional 5,243,272  shares could still be issued under the authorisation. Pekka Peiponen is the CEO of Orava Residential REIT. The management of Orava Residential REIT is part of the business organisation of the management company Orava Funds plc. The management company is responsible for the costs of personnel and management incurred from the REIT's operational activities. The current rules for real estate investment operations are available on the company's website  www.oravaasuntorahasto.fi and they are included as an appendix. Orava Residential REIT estimates that the key risks and uncertainties for the company in the near future will be related to the acquisition of investment properties, changes in the value of apartments and repair costs. It may be challenging and difficult for the company to acquire investments that meet the company's goals. In addition, it may be difficult for the company to secure debt financing for investments under competitive terms and conditions. Major unexpected repairs and repair costs would have a negative impact on occupancy rate, rental income and profitability. The Board of Directors of Orava Residential REIT plc confirmed the company's updated strategy for 2016 on 11 January 2016. The strategic financial objectives remained unchanged: the targeted total return on the share shall be at least 10% p.a., the targeted dividend return shall be 7–10% p.a. on net assets per share, and the crediting rate shall be approximately 50%. In addition to the financial objectives, the following were confirmed as the main strategic objectives: – increasing equity to at least EUR 110 million in 2016 and maintaining an annual growth of approximately at least EUR 20% over the medium term – diversifying the acquisition of debt financing further – increasing the economic occupancy rate to over 95% – reducing property maintenance costs to 5% and repair costs to 10% below the statistical benchmark – increasing apartment sales to 5-10% of the value of investment properties on the opening statement of financial position. The regional and age distribution objectives for portfolio management were updated. According to the updated regional distribution objective, 53% of the market value of apartments shall be located in the Helsinki region, 22% in major cities and 25% in medium-sized cities with a variation range of plus or minus approximately 10%. The age distribution objective remained unchanged, i.e. the weighting of properties completed in the 1990s and afterwards shall be 51%, and the weighting of properties completed before 1990 shall be 49% plus or minus approximately 10% calculated from the market value of the investment portfolio. The company's Board of Directors and the management company Orava Funds plc agreed on a change in the performance-based management fee on 17 February 2016. The hurdle rate of the performance-based management fee was increased from 6% to 7%. The 200,000 shares that Orava Residential REIT allocated to itself in a charge-free share issue on 17 February 2016 were recorded in the Trade Register on 22 February 2016. The company may use the shares allocated to itself to strengthen its capital structure, develop its business and widen its ownership base through both acquisition of investment properties and the issue of convertible bonds. The ISIN code of the shares directed by the company at itself is FI4000197942 (trading code OREITN0116). The shares do not provide entitlement to dividends paid from the profit for 2015 during 2016, but they will provide entitlement to dividends in 2017 and subsequent years. After the issue, the number of the company's shares totalled 9,206,619. The aforementioned 200,000 shares were listed on the stock exchange list of the Helsinki Stock Exchange, and they were subject to trading as of 23 February 2016. The company concluded a market guarantee agreement with Nordea Finland Plc on 9 March 2016 for Orava Residential REIT's new shares (trading code OREIT0116). Under the agreement, Nordea Bank Finland Plc will provide a purchase and sale offer for a share in Orava Residential REIT so that the largest allowed difference between the purchase and sale offer is 4% of the purchase offer. The offers shall include at least a number of shares the value of which corresponds to EUR 4,000. The transaction according to the agreement was implemented on 10 March 2016. The Annual General Meeting decided to authorise the Board of Directors to decide on the distribution of no more than EUR 1.08 share-specific dividends. It is possible to pay a total of no more than EUR 8.993.772,36 in dividends. The dividend that is payable by quarter is in each instalment no more than EUR 0.27 per share. The dividend payment dates are 4 April 2016, 30 June 2016, 30 September 2016 and 30 December 2016. The Board of Directors was authorised to decide on the amount of dividends and their payment by quarter within the aforementioned restrictions, provided that the company's solvency is not jeopardised as a result of the dividend payments. The Board of Directors was authorised to decide on the record dates of dividend payments. The Annual General Meeting decided on 22 March 2016 that a specification is made in the rules for real estate investment operations concerning the payment of the performance-based management fee so that the hurdle rate is increased from 6 per cent to 7 per cent. The hurdle rate is the return for the return exceeding which a performance-based fee is paid to the management company. According to the decision of the AGM, the rules for real estate investment operations (section 11, third paragraph) were specified with regard to the determination of the performance-based management fee. The amended first sentence of Section 11, third paragraph, reads as follows (amendment in bold): As a performance-related management fee, the REIT pays Orava Funds plc twenty per cent (20%) of the REIT's annual return exceeding the hurdle rate of seven per cent (7%). The performance-based management fee is calculated on the basis of earnings per share for the financial period and the number of shares at the end of the financial period. The Annual General Meeting also decided that a correction be made in Section 14, second paragraph, concerning the amendment of the rules for real estate investment operations due to the amendment to the Real Estate Funds Act, according to which the amendments to the rules enter into force after a month from the time they were communicated to shareholders by publishing the information in the manner required in the case of information falling within the sphere of the REIT's duty of disclosure and the fund in accordance with Section 10. In addition, it was decided that an unnecessary sentence be removed from Section 14, second paragraph, which refers to the time prior to listing. The amended Section 14, second paragraph, reads as follows: Amendments to the rules enter into force after a month from the time they were communicated to shareholders by publishing the information in the manner required in the case of information falling within the sphere of the REIT's duty of disclosure in accordance with Section 10. The Annual General Meeting also decided to authorise the Board of Directors to decide on share issues and the issue of option and special rights giving entitlement to shares so that the Board of Directors may decide to issue no more than 6,000,000 shares in the company's possession or new shares which do not give entitlement to dividends in 2016. The authorisation is valid until the next AGM, and it revokes the previous authorisation given on 19 March 2015. At the meeting held after the actual AGM, the Board of Directors of Orava Residential REIT elected Jouni Torasvirta as the Chairman from among the members and Patrik Hertsberg as the Vice Chairman. According to the authorisation received from the AGM, the Board of Directors decided that the dividends to be paid on the share of Orava Residential REIT (trading code OREIT, ISIN code FI4000068614) shall be EUR 0.27, the dividend detachment date 23 March 2016 and the record date 24 March 2016. The total amount of dividends was EUR 2,248,443.09. On 30 March 2016, Orava Residential REIT acquired 23 residential apartments and concluded a binding transaction on the acquisition of 26 residential apartments on 31 March 2016 at a debt-free purchase price of EUR 9.6 million. Of the value of the apartments acquired, 31% is located in the Helsinki Region, 50% in Jyväskylä and Lahti, and 19% in medium-sized cities. The acquisition included 26 new apartments without tenants at a debt-free purchase price of EUR 7.1 million. On 18 April 2016, the company concluded a loan agreement of EUR 10 million with Collector Bank AB to refinance both acquisitions and old loans The loan is for five years and has been drawn down in its entirety. Collector Bank AB is a Swedish credit institution specialising, for example, in real estate financing. The 200,000 shares that Orava Residential REIT allocated to itself in a charge-free share issue on 20 April 2016 were recorded in the Trade Register on 22 April 2016. The company may use the shares allocated to itself to strengthen its capital structure, develop its business and widen its ownership base through both acquisition of investment properties and the issue of convertible bonds. The ISIN code of the shares directed by the company at itself is FI4000197942 (trading code OREITN0116). The shares do not provide entitlement to dividends paid from the profit for 2015 during 2016, but they will provide entitlement to dividends in 2017 and subsequent years. After the issue, the number of the company's shares totalled 9,406,619. The aforementioned 200,000 shares were listed on the stock exchange list of the Helsinki Stock Exchange, and they were subject to trading as of 26 April 2016. On 27 May 2016, the Financial Supervisory Authority granted the authorisation for an alternative investment fund manager to the management company of Orava Residential REIT plc, Orava Funds plc. The Act on Alternative Investment Fund Managers requires a custodian from alternative investment funds, such as Orava Residential REIT. Svenska Handelsbanken AB (publ.), Finnish branch operations, acts as the custodian of Orava Residential REIT plc. The custodian agreement was signed on 20 May 2016. On 30 June 2016, Orava Residential REIT acquired a total of 23 residential apartments from construction companies through binding agreements at a debt-free purchase price of EUR 6.7 million. Of the value of the apartments acquired, 36% is located in the Helsinki Region, 55% in major cities and the remaining 9% in medium-sized cities. The apartments acquired were new and without tenants. Orava Residential REIT allocated 930,000 new shares to itself in a charge-fee directed issue on 5 July 2016 (ISIN code FI4000197942, trading code OREITN0116). The shares provide equal rights to the company's dividends with the other shares; however, so that the shares do not provide entitlement to dividends distributed in 2016. The Financial Supervisory Authority approved the prospectus for application of the issued shares to be admitted to trading on Nasdaq Helsinki (the Helsinki Stock Exchange). On 5 July 2016, the company's Board of Directors decided to annul 679,052 own shares that the company already owned that provide entitlement to dividends in 2016 (ISIN code FI4000068614, trading code OREIT). When the shares subscribed in the share issue and the annulment of the already owned shares were recorded in the Trade Register, the company's number of shares grew by 250,948 shares from 9,406,619 shares to 9,657,567 shares. The shares subscribed in the share issue and the annulled shares were registered in the Trade Register, and they were issued and recorded in the book-entry system maintained by Euroclear Finland Oy on 8 July 2016. The shares subscribed in the issue were listed on the stock exchange list of the Helsinki Stock Exchange, and they were subject to trading as of 11 July 2016. On 29 May 2015, Orava Residential REIT agreed with Rakennusliike Leimarakentajat Oy on the construction of 52 apartments in Hämeenlinna. The apartments were completed at the beginning of July 2016, and the payment of the final instalment of the acquisition, EUR 1,17 million, was implemented with a directed issue on 19 July 2016. Rakennusliike Leimarakentajat Oy subscribed to a total of 157,681 new shares in the company (OREIT0116). The subscription price of the shares was the weighted average price of the shares during the five days of stock exchange trading preceding the subscription. Events after the financial period Debt-free selling prices of sales of Orava Residential REIT’s apartments after the period under review (between 1 October and 15 November 2016) totalled EUR 2.0 million. Sales of apartments this year have totalled EUR 9.6 million by the middle of November. The Annual General Meeting of 22 March 2016 decided to distribute dividends of no more than EUR 0.27 per share from the profit for 2015 in each quarter of 2016, i.e. in total at most EUR 1.08 per share in 2016. Dividends per share paid during the period under review: Orava Residential REIT estimates that it is reasonable unlikely to come close to its targeted total return of 10 per cent on shareholders’ equity. The change in the value of current apartments in the investment portfolio is expected to turn slightly positive during this year. Gross and net rental yields are expected to increase slightly from the early year’s levels.  No significant property acquisitions are expected during the fourth quarter and the proportion of the maintenance and repair costs of the investment asset value is expected to increase slightly towards the end of the year.


Takalo T.,Bank of Finland | Takalo T.,University of Jyväskylä | Tanayama T.,University of Helsinki | Tanayama T.,The Research Institute of the Finnish economics ETLA
Journal of Technology Transfer | Year: 2010

We study the interaction of private and public funding of innovative projects in the presence of adverse-selection based financing constraints. Government programs allocating direct subsidies are based on ex ante screening of the subsidy applications. This selection scheme may yield valuable information to market-based financiers. We find that under certain conditions, public R&D subsidies can reduce the financing constraints of technology-based entrepreneurial firms. First, the subsidy itself reduces the capital costs related to the innovation projects by reducing the amount of market-based capital required. Second, the observation that an entrepreneur has received a subsidy for an innovation project provides an informative signal to the market-based financiers. We also find that public screening works more efficiently if it is accompanied with subsidy allocation. © Springer Science+Business Media, LLC 2009.


During 2017, the 100th anniversary of Finland’s independence, Marimekko will organise several cooperative projects around design and art. The year will start with a spectacular collaboration with the Lux Helsinki light festival illuminating the city centre from 5 to 9 January. Marimekko and print designer Maija Louekari will take part in the creation of an artwork combining animation, lights and print design. The artwork, to be displayed on the wall of the Bank of Finland on Kirkkokatu street, is based on a new Marimekko pattern designed in celebration of Finland’s centenary. Marimekko has for decades travelled in the borderland between art and design, bringing colours and patterns as well as functional products to people’s everyday lives. To celebrate the 100-year-old Finland, the company will launch a pattern entitled Veljekset (brothers) created by Maija Louekari, one of Marimekko’s younger-generation print designers. The design was inspired by Finnish folk tales and it depicts animals that live in the forests of Finland. At Lux Helsinki, the Veljekset pattern will come to life in Maija Louekari’s artwork, through which Marimekko wants to offer the residents of the city a story-like experience and inspire them to dream colourful dreams in the middle of the darkest winter – and also remind them of how fascinating their northern country is. “The Veljekset animation and light artwork will bring our wild and exotic north to the wintry city centre, reminding us city dwellers of our forests that are still inhabited by strong, expressive animals. I designed the Veljekset pattern inspired by the main characters in Finnish folk tales, the so-called totem animals, for Marimekko in celebration of the 100-year-old Finland. With its lights, the Lux Helsinki festival will bring to life what on printed fabric stands still,” says print designer Maija Louekari. “We will create bold patterns for Finland during the centenary year. We want to contribute to building a successful future for our home country by doing things together open-mindedly. Throughout the year, we will encourage participation in and establish opportunities for bold actions and innovation, even in some unexpected ways. We are excited about the light artwork collaboration with our print designer Maija Louekari and Lux Helsinki, which will kick off the anniversary celebrations. Through this artwork, we can together provide a bright and inspiring breathing space in the midst of the winter darkness for local residents as well as visitors to Helsinki,” says Tiina Alahuhta-Kasko, President and CEO of Marimekko. All Lux Helsinki’s light artworks, including Veljekset by Maija Louekari, will be on view in the city centre from 5 to 9 January 2017 between 5pm and 10pm. More information about the festival can be found at www.luxhelsinki.fi. Further details about Marimekko’s other projects and events related to the centenary will be available, inter alia, at www.marimekko.com. Photos of the artwork for media use: http://mediabank.marimekko.fi/l/bxpJ5BbTQjXW Marimekko is a Finnish design company renowned for its original prints and colours. The company’s product portfolio includes high-quality clothing, bags and accessories as well as home décor items ranging from textiles to tableware. When Marimekko was founded in 1951, its unparalleled printed fabrics gave it a strong and unique identity. Marimekko products are sold in about 40 countries. In 2015, brand sales of the products worldwide amounted to EUR 186 million and the company's net sales were approximately EUR 96 million. More than 150 Marimekko stores serve customers around the globe. The key markets are Northern Europe, North America and the Asia-Pacific region. The Group employs about 400 people. The company’s share is quoted on Nasdaq Helsinki Ltd. www.marimekko.com


Financial statements bulletin 1 March 2017 at 8:00 a.m. -      Profit from assignments and changes in fair value: EUR –0.7 million (EUR 1.8 million) -      Total dividends distributed during the period under review: EUR 0.27 per share (EUR 0.30 per share) -      Profit from assignments and changes in fair value: EUR 1.4 million (EUR 7.4 million) -      Total dividends distributed in 2016: EUR 1.08 per share (EUR 1.20 per share) Adjusted net assets per share of Orava Residential REIT plc amounted to EUR 10.11 on 31/12/2016, while they were EUR 11.63 at the beginning of 2016. The value of the company’s investment properties rose to EUR 210.9 million at the end of the period under review (31 December 2015: EUR 195.9 million). The debt-free prices of apartments sold by Orava Residential REIT’s after the period under review (between 1 January and 20 February 2017) totals EUR 2.4 million. The Board of Directors’ proposal to the General Meeting concerning dividends to be paid in 2017 is EUR 0,03 per share for each quarter, i.e., a total of EUR 0,12 per share. “The financial results of Orava Residential REIT for the fourth quarter and for the whole of 2016 were poor. As in previous years, the housing prices developed very little, in addition to which the slow growth of the fund meant that the impact of acquisitions on the result was decidedly smaller than in the earlier years following the listing of the company’s shares. The slow recovery of the Finnish housing market continued during 2016, albeit that the prices again took a downward turn during the fourth quarter. The change in the fair value of the apartments acquired for the housing fund portfolio was –0.2 percent from the third quarter, while the change for the year was +0.2 percent. The value of housing units acquired during the fourth quarter was EUR 3.8 million, while total acqui­sitions for the year were just over EUR 20 million. The economic occupancy rate continued to improve during the fourth quarter and rose from 92.0 to 93.2 percent. The economic occupancy rate for the whole year was 91.3 percent. As expected, the proportion of investment property mainte­nance and repair costs of the value of the portfolio increased again towards the end of the year and was 3.1 percent for the last quarter, while the figure for the whole year was 2.7 percent. Correspond­ingly, net rental yield decreased to 3.7 percent during the fourth quarter and was 3.8 percent for the whole year. Divestments of apartments continued to increase during the fourth quarter and amounted to a record-breaking figure of EUR 3.9 million; the sum total of debt-free sales prices of apartments for the year was EUR 11.6 million. At the turn of the year, Orava Residential REIT had 7,500 shareholders. Trading volume of the company's share on the Helsinki Stock Exchange has remained almost unchanged: the average daily turnover in January–December was slightly over EUR 240,000. The company estimates that its result for 2017 would be positive and in the range of EUR 2–5 million.” The growth of Finland's GDP in 2016 is estimated to be between +0.9 and +1.5 percent, and it is expected to remain in that bracket in 2017. The growth of private consumption, very important for the housing market, is estimated to be between +1.4 and +2.1 percent in 2016, while it is expected to be between +0.8% and +1.3% this year. The market interest rates in the euro area are still exceptionally low, and short-term market rates are also expected to remain below one percent for the next four to five years. The estimate is based on the most recent economic forecasts by 15 parties drawing up forecasts on the Finnish economy, compiled by the Federation of Finnish Financial Services, and the market interest rate expectations calculated on the basis of the euro interest rate curve published by the European Central Bank. We expect the slow strengthening of the housing market to continue. According to statistics from the Bank of Finland, during October–December, households drew down EUR 4.4 billion in new mortgages, or 3 percent more than the year before. The euro-denominated mortgage base totalled EUR 94.1 billion at the end of December, and the annual growth in the mortgage base was 2.4%. According to the January statistics from the Central Federation of Finnish Real Estate Agencies, the number of transactions in old apartments was over 8 percent higher than in the corresponding period in the previous year. The average marketing period for old apartments in the country as a whole, according to the Finnish marketing service Etuovi. com, increased from 83 days in October to 104 days in January, while it had been 94 days in January in the previous year. The demand for apartments seems to have continued to strengthen moderately during the last quarter. According to Statistics Finland, building permits for apartment blocks were granted for 2,000 apart­ments in November, 35 percent more than last year. Correspondingly, building permits for apartment blocks were granted in January–November for a total of 26,102 apartments, or 26 percent more than last year. The annual change in the sliding annual total of building permits granted for apartment also increased to +26 percent. The three-month change in the housing con­struction volume index that describes the value of on-going new construction was –1 percent in November, and the change year-on-year was +13 percent. According to the February confidence indicator survey of the Confederation of Finnish Industries, the balance figure for construction production for the past three months was +8 points in the fourth quarter, while it was +13 points in the previous quarter and +2 points a year before. The balance figure for the three-month production expectation was +9 points, compared to 0 points in the previous quarter and –2 points a year before. The number of unsold residential apartments, compared to the normal situation, fell from –33 in the third quarter to –22 in the fourth quarter; a year ago, the balance figure was +10 points. The increase of supply in the housing market seems to have slowed down slightly during the fourth quarter. Prices, rents and returns in the housing market In the fourth quarter of 2016, the rents of non-sub­sidised apartments increased by 2.4% year-on-year. According to the housing price index from Statistics Finland, the housing prices increased during the fourth quarter by 1.2 percent year-on-year. The change in housing prices from the previous quarter calculated by Statistics Finland was –0.4%, which we estimate to correspond to an increase of approximately 0.5% when converted seasonally. The ratio of housing prices to rents is slightly below the long-term average; the ratio calculated from the square metre prices of apartment block apartments in the fourth quarter and the rents of non-subsidised apartments was 15.0. The 43-year average for the ratio of square metre prices to annual rents in Finland is 16.9. We expect housing prices in the country as a whole to increase by 1 to 3 percent during the next 12 months, and the growth rate in rents for non-subsidised apartments to remain approximately the same if the market’s interest rate expectations and economic forecasts are correct with regard to their essential components affecting the housing market. The parent company’s distributable funds were EUR 1,281,802.44 on 31 December 2016. The Board of Directors proposes to the Annual General Meeting that a total of EUR 0.12 per share be distributed from the result for 2016 in dividends total EUR 1,151,869.20 and that the Board of Directors be authorised to decide on the amounts of dividends to be paid in each quarter. Orava Residential REIT estimates that its result for 2017 would be positive and in the range of EUR 2–5 million. The change in the value of current apartments in the investment portfolio is expected to be slightly positive during this year. The gross and net rental yield is expected to remain approximately at its present level, and the volume of acquisitions is expected to remain at the last year’s level or to increase slightly. The ratio of maintenance and repair costs to the value of investment properties is expected to slightly decrease from the previous year. The Financial Statements Bulletin 2016 and the current rules for real estate investment operations are available on the company's website at www.oravaasuntorahasto.fi, and they are included as an appendix. The audited Financial Statements and Board of Directors’ Report will be published on the company’s website on 1 March 2017.


Takalo T.,Bank of Finland | Takalo T.,Catholic University of Leuven | Tanayama T.,National Audit Office of Finland | Toivanen O.,Catholic University of Leuven
International Journal of Industrial Organization | Year: 2013

We extend the theoretical basis of the empirical literature on the effects of R&D subsidies by providing an estimable model of strategic interaction among subsidy applicants, and public and private sector R&D financiers. Our model incorporates fixed R&D cost and a cost of external finance. We derive the optimal support rule. At the intensive (extensive) margin the costs of external funding reduce (increase) the optimal subsidy rate. We also establish necessary and sufficient conditions for the existence of additionality. It turns out that additionality at the intensive margin is less likely with higher spillovers. Our results suggest that the relationship between additionality and welfare may not be straightforward. © 2013 Elsevier B.V.


Verona F.,Bank of Finland | Verona F.,University of Porto | Wolters M.H.,Kiel Institute for The World Economy
Computational Economics | Year: 2014

Macroeconomic models with sticky information include an infinite number of lagged expectations. Several authors have developed specialized solutions algorithms to solve these models under rational expectations. We demonstrate that it is also possible to implement this class of models in Dynare-a widely used software package for solving dynamic stochastic general equilibrium (DSGE) models. Using the Dynare macro language one can easily construct and change the required large number of lagged expectation terms. We assess the accuracy of simulations run with different truncation points for the lagged expectations terms and find that the solution is reasonably precise even for moderate truncation points. © 2013 Springer Science+Business Media New York.


Itkonen J.V.A.,Bank of Finland
Climatic Change | Year: 2015

Recent research focusing on social factors affecting risk perceptions has suggested that social networks might help to explain why differences of opinion about climate change persist across segments of the lay public despite the scientific consensus. Even though concern for global warming in itself might seem irrelevant for most social ties, we show that it is significant enough to be reflected in the structure of social networks. To do this, we programmed a Facebook application that collected survey data on concerns and network data on friendships. We found that respondents tend to have friends with similar concerns as their own, the unconcerned respondents have fewer friends, and any two respondents who disagreed about the seriousness of global warming were less than half as likely to be friends. The results indicate that the structure of the social network may hinder changes in opinions, explaining why opinions persist despite the scientific consensus. The results suggest that the communication of climate science could be improved by strategies that aim to overcome these network effects. © 2015 Springer Science+Business Media Dordrecht

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