SATO Corporation’s Financial Statements Release 2024: The housing market gradually returning to normal, favourable development across all areas

SATO Corporation, Financial Statements Release 2024, 7 February 2025 at 09:00 am

Highlights January–December 2024 (January–December 2023)

• The economic occupancy rate increased and was 95.5% (94.9).
• Net sales stood at EUR 304.1 million (288.4).
• Net rental income increased and was EUR 214.4 million (198.7).
• Profit before taxes increased and was EUR 105.4 million (-185.8).
• The unrealised change in the fair value of investment properties included in the result was EUR 12.0 million (-249.3).
• Housing investments amounted to EUR 48.6 million (150.0).
• Invested capital was EUR 4,582.1 million (4,610.4).
• Return on invested capital was 4.0% (-2.5).
• Earnings per share were EUR 1.04 (-2.72).
• The Board of Directors proposes to the Annual General Meeting that no dividends be paid for the 2024 financial year (EUR 0.00/share for 2023).

Highlights October–December 2024 (October–December 2023)

• The economic occupancy rate was 95.7% (94.8).
• Net sales were EUR 77.1 million (73.5).
• Profit before taxes was EUR 21.9 million (-91.6).
• The unrealised change in the fair value of investment properties included in the result was EUR 1.1 million (-109.3).
• Investments in rental apartments amounted to EUR 16.9 million (57.3).
• Earnings per share were EUR 0.20 (-1.30).

CEO Antti Aarnio:

The 2024 reporting year was challenging, just like its predecessor. The oversupply of rental apartments, consumers’ weak confidence, the high interest rate level and general economic uncertainty proved challenging to apartment rental operators. Although residential construction was at a historically low level, the number of previously completed new properties on the market still exceeded expectations, and competition for good tenants continued to be tight. Despite a challenging market situation, SATO’s economic occupancy rate and customer satisfaction improved compared to a year earlier.

Enhancing the efficiency of our operations and the implemented savings measures improved our net rental income. Our organisation has now been adapted to reflect the current operating environment and our fixed costs will decrease by around one million euros. The majority of the savings will realise in 2025. The positive development of our net rental income was also impacted during the reporting year by moderate rent reviews and an increase in the occupancy rate.

The company’s equity ratio and balance sheet improved. The share issue begun in late 2023 ended in February and we raised some EUR 200 million in gross proceeds from the issue. During 2024, altogether EUR 800 million in new long-term financing was withdrawn, and as a result, our financing needs for 2025 are now covered. In November, the credit rating agency S&P Global Ratings confirmed SATO’s BBB credit rating with a stable outlook.

During the reporting year, the economic uncertainty continued even though the high inflation finally began to fall. The European Central Bank began to cut its key interest rate in June and continued with an interest rate cut policy during the second half of the year, which will have a positive impact on SATO’s financing costs. In 2025, the economy is expected to begin growing moderately. If employment and consumer confidence improve, we expect this to have a positive impact on the development of the rental apartment market. The outlook is overshadowed, however, by uncertainties connected to geopolitics and the development of the labour markets.

In recent years, competition between rental housing providers has been tight with the abundant offering of apartments exceeding demand. New construction continues, and at the end of the year, there were still approximately 6,000 rental apartments under construction in the Helsinki Metropolitan Area. As a result of oversupply, rent increases have fallen behind real costs. The rising maintenance costs may result in higher rents when the housing supply falls.

During the reporting year, 349 new and 56 renovated rental apartments were completed for SATO. Peijinkuja 10, which was completed in December 2024 in Espoo, will be, for now, our last newbuild as, in accordance with the decision made in October 2022, SATO will continue to refrain from starting any new construction projects.

During the year, we continued to develop our digital services and our residents’ service portal, OmaSATO, was updated. At the same time as we move services online, we have invested in the competence of our house experts and service managers who work on our properties, and on their ability to interact with our residents in everyday life and in difficult situations. We wish to ensure that customers receive a uniform, consistent service experience in all of their encounters with SATO’s employees.

The customer feedback we have received has been largely excellent and the Net Promote Score (NPS) measuring customer satisfaction during living improved to 27. The NPS for various transactional situations was 57. The NPS results were the best in SATO’s history. Despite the tight competition, we also succeeded in improving our economic occupancy rate. It was 95.5% (94.9) for the entire year.

During the reporting year, we continued along the path defined by our sustainability programme. We enable sustainable housing for our residents and encourage them to make daily choices that reduce consumption and promote circular economy. In the autumn we arranged biodiversity training for close to 70 SATO employees working in customer-facing roles and leadership positions across the company’s various operations. Our goal is to do our part to slow down biodiversity loss and enhance biodiversity in both our construction projects and the neighbourhoods of our existing properties.

The carbon roadmap we released during the reporting year steers our operations towards carbon-neutral in-use energy consumption. We increased the use of geothermal heat at our properties in line with our plan and we completed the installation of solar power plants in 23 residential buildings. The calculated solar power output generated locally at our properties in 2024 corresponds to the annual electricity consumption of roughly 400 apartments.

The Global Real Estate Sustainability Benchmark (GRESB), which assesses sustainability in the property sector, awarded SATO’s sustainability work a rating of three stars and the Green Star recognition. During the reporting year, we were particularly successful in the social responsibility assessment.

SATO has been certified as a Great Place to Work® company for the third time and achieved an impressive sixth place in the Best Workplaces in Finland ranking. I am extremely proud and grateful for this recognition, which highlights our long-term success in developing SATOs culture and employee experience. Our employees take pride in their work and find it meaningful. In a survey conducted at the end of 2024, 90% of staff reported considering SATO an excellent workplace overall. Additionally, our eNPS (Employee Net Promoter Score), measured for the first time, was exceptionally high at 61.4.

SATO is the most well-known brand in our sector. According to year-end statistics, one-fifth of respondents named SATO as the first rental housing provider that came to mind. Additionally, over 40% mentioned SATO spontaneously, and more than 80% recognised the company from a list of alternatives. This provides a solid foundation for continuing to build our brand awareness.

This year, our company proudly celebrates its 85^th anniversary. We have played a vital role in the post-war reconstruction of Finland and in establishing the foundations for rental housing. Today, in an increasingly urbanised Finland, we are committed to providing our 44,000 residents with a safe, comfortable, and responsible way of living.

2024 was a challenging year for us in multiple ways. However, I am immensely pleased with how we managed to stay focussed and ensure strong results across all our metrics. I extend my warmest thanks to SATO employees, our partners, and the residents living in SATOhomes for their excellent collaboration.

Report of the Board of Directors 1 Jan–31 Dec 2024 

Operating environment

During 2024, SATO’s operating environment remained challenging. The housing sector continued to be influenced by the abundant supply of rental homes and ongoing economic uncertainty. Uncertainty was further heightened by industrial action at the beginning of the year, negative economic growth, a weakened employment situation, and the European Central Bank’s strict interest rate policy. Also geopolitical challenges like the war in Ukraine, global tensions, and trade policy decisions and sanctions impacted our operating environment.

Headline inflation in the eurozone slowed clearly during the review period and was at approximately 2% in late 2024. The rise in services prices has kept core inflation above the target set by the European Central Bank. Finland’s inflation has been the lowest in the eurozone. Due to the fall in inflation, the European Central Bank began its interest rate cuts in June and continued with an interest rate cut policy throughout the second half of the year. The markets expect the key interest rate to fall further during 2025.

Economic confidence indicators have remained low, even though inflation slowed significantly. Consumers’ low confidence was reflected in cautious consumption and selection of rental apartments. Also changes made in housing allowance policies may steer consumers to find less expensive apartments, which showed during the review period as an increase in demand for smaller apartments.

The construction of new apartments is at an all-time low. Largely due to an increase in the volume of interest-subsidised housing construction, there has, however, been a slight upturn in projects started. The number of apartments completed has contracted clearly this year, but the newbuild construction volume of previous years, which exceeds the long-term housing demand, is, however, maintaining an oversupply of rental homes in growth centres. The oversupply has been shrinking slower than anticipated earlier and competition for good tenants continues. The transformation taking place in construction may in future turn the apartment oversupply to a housing shortage in growth centres.

Finland’s economy is shifting to a slow growth phase. Pay raises, slowing inflation and the gradual fall in interest rates improve consumers’ purchasing power. Employment is also expected to improve as economic growth accelerates. In 2025, the GDP is expected to grow by about 1%. The outlook is overshadowed by uncertainties connected to geopolitics and the development of the labour markets.

The number of households living in rental apartments exceeded the one million mark in 2023. At the end of 2023, 1.02 million households lived in rental apartments, which is 36% of all households. The amount rose by 2.2% year on year and by 6% from 2010. Living in rental homes has become more common as household sizes have decreased. In 2023, approximately 63% of households living in one- or two-room apartments were renting their homes.

Urbanisation continues and dense urban living is becoming increasingly popular in Finland. There is a demand for rental apartments in growth centres near good public transport connections and services. Of the major growth centres, the Helsinki metropolitan area, Tampere and Turku continue to enjoy robust growth. The Helsinki metropolitan area’s net positive migration rate in 2023 was the highest in the 2000s: 23,500 people. In 2024, internal migration continued to be strong and the net positive migration of the Helsinki metropolitan area was some 16,000 people at the end of September. The Helsinki metropolitan area is expected to grow by over 200,000 new residents by 2040.

Close to 80% of the area’s residents already live in one- to two-person households, and the number of small households continues to rise. The proportion of immigrants living in the capital area is expected to grow from the current 17% to 25% by 2030. Ageing populations typically move closer to growth centres and the services they offer, and they increasingly expect housing-related services. The change in the population structure and development in the prices of owner-occupied apartments create a stable foundation for demand for rental housing especially in the capital area and in Tampere and Turku.

Competition for good tenants remained tight during the reporting year, and rent increases remained moderate as housing providers have not been able to pass the actual cost rises on to rents. The rising costs of maintenance and financing will manifest as rising rental costs while the offering of rental apartments falls.

The income development of wage and salary earners, pent-up housing demand of households and the decrease in new housing production are expected to increase rental apartment demand going forward. Also economic uncertainty may have a positive impact on the demand for rental apartments as the attractiveness of rental living is predicted to grow among those previously looking for owner-occupied apartments.

Strategy

SATO is a housing investment company that owns 25,849 rental homes in the Helsinki metropolitan area, Tampere and Turku. Our company’s strategy is focussed on the continuous improvement of the customer experience, sustainability and sustainable housing, and SATO employees.

We want to be present in our customers’ daily lives so that we can offer them a successful customer experience. We build sustainable homes and take care of them in accordance with the life-cycle principles. Long-term profitable business enables our sustainable operations.

SATO employees are our most important resource. Well-being at work, an inspiring employee experience and a coaching management style encourage SATO employees to develop themselves and the company and build the SATO of the future.

We measure our success using strategic indicators. We strive to improve our residents’ net promoter score (NPS), maintain our Investment Grade credit rating and achieve a return on equity in line with the set target (8%).

Net sales and profit

In 2024, consolidated net sales were EUR 304.1 million (288.4). Operating profit was EUR 185.6 million (-113.6). The operating profit without the fair value change of investment properties was EUR 173.6 million (135.7). The change in fair value was EUR 12.0 million (-249.3).

Net financing costs totalled EUR -80.1 million (-72.2). Profit before taxes was EUR 105.4 million (-185.8). Cash flow from operations (free cash flow after taxes excluding changes in fair value) amounted to EUR 88.2 million (32.9). Earnings per share were EUR 1.04 (-2.72).

Financial position and financing

The consolidated balance sheet totalled EUR 5,059.6 million (5,085.0) at the end of December. Equity was EUR 2,599.8 million (2,435.0). Equity per share was EUR 30.63 (43.01).

The Group’s equity ratio was 51.4% (47.9) at the end of the year. EUR 800.0 million in new long-term financing was withdrawn (255.0) and the solvency ratio was 38.6% (42.4) at the end of December. The Group’s return on equity was 3.3% (-6.3). Return on invested capital was 4.0% (-2.5).

Cash and cash equivalents at the end of December totalled EUR 31.3 million (7.0). Interest-bearing liabilities at the end of December totalled EUR 1,970.1 million (2,159.2), of which loans subject to market terms accounted for EUR 1,865.7 million (2,044.0). The loan itemisation is in note 25 of the financial statements. At the end of the reporting year, the average loan interest rate was 3.7% (3.4). Net financing costs totalled EUR -80.1 million (-72.2). The average maturity of loans was 3.8 years (2.8).

The calculated impact of changes in the market value of interest hedging on equity was EUR -6.2 million (-13.4). The proportion of unsecured loans to all loans was 69.5%. At the end of the year, the proportion of unencumbered assets was 73.0% of the balance sheet.

Issue of shares

The share issue begun in late 2023 ended in February and we raised some EUR 200 million in gross proceeds from the issue. The number of company shares rose by 28,279,377 due to the share issue, from 56,783,067 shares to 85,062,444 shares.

Group structure

SATO Corporation is the parent company of SATO Group. At the end of the reporting year, the parent company had a total of 11 (13) subsidiaries engaged in business operations. Mergers took place during the year in order to clarify the Group structure.

SATO Corporation’s majority shareholder is Balder Finska Otas AB, whose parent company is Fastighets AB Balder, which is quoted on the Stockholm Stock Exchange.

Housing business

Our housing business focuses on rental activities, customer service, life-cycle management and maintenance. Our goal is to guarantee fast and efficient renting for home-seekers and a steady cash flow for the Group. Our focus is on building a first-class customer experience at all contact points, both physical and digital.

High-quality property maintenance and regular preventive maintenance ensure the comfort of residents and that the apartments stay in good condition and retain their value.

At the end of the year under review, SATO had approximately 44,000 customers. The economic occupancy rate improved compared to the previous year and was 95.5% (94.9) during the reporting year. Plenty of new rental apartments were completed for the market, which gave customers more options. Apartment rental activities slowed and competition among housing providers remained tight in all our operating areas.

In 2024, we have focussed especially on improving the effectiveness of service processes, strengthening the consistency of operations, and developing new operating models and practices and their comprehensive adoption. Developing measurement and reporting has been a key aspect of our operations and we have also developed new tools to improve the predictability of our operations.

We want to be closely present in our customers’ daily lives and offer them first-class customer service. We serve our customers through various channels in as many as 20 different languages. In addition to personal service, our customers can reach us via the chat service at sato.fi, where also the SATObot is on duty 24/7. We actively develop our digital services together with customers and our personnel.

During the reporting year, we actively developed SATO’s house expert model. At the end of the year, 67 house experts and 6 team leaders worked in our house expert organisation. Their primary task is to ensure, together with the maintenance company, that our buildings are comfortable and well-maintained. The house expert model is in use in all of the properties wholly owned by SATO in the Helsinki metropolitan area, Tampere and Turku.

Our residents’ customer experience is made up of multiple factors, such as how well the resident’s home meets their needs, home removal situations and digital and face-to-face interaction with SATO employees. We have invested in building a first-class customer experience by developing our service processes. With their help, we can ensure a consistent and seamless customer experience at all of our contact points, regardless of the channel.

We continued to develop the Concept of good encounters that was launched in 2023. The concept describes the way we interact with one another, our customers, partners and other stakeholders.

We have significantly developed customer experience measurement and reporting. In 2024, we continued to use the Net Promoter Score (NPS) index. Our NPS during living was 27 (23) and the NPS for various transactional situations was 57 (53). The second figure is based on our customers’ estimates at different contact points, such as customer service calls, maintenance visits by house experts, apartment offers made by our sales team and apartment viewings.

Our economic occupancy rate was 95.5% (94.9) at the end of the year. The external tenant turnover rate for rental apartments was 28.7% (26.8). Rental income increased by 5.4% to EUR 304.1 million (288.4). The average monthly rent of SATO’s rental apartments at the end of the reporting year was EUR 18.40 per m² (18.08). Net rental income from apartments stood at EUR 214.4 million (198.7).

Investment properties

On 31 December 2024, SATO owned a total of 25,849 apartments (25,468). During the reporting year 349 rental apartments (978) were completed for SATO, and at the end of the year, no rental apartments were under construction (349). The number of divested apartments was 1 (530).

EUR 40.4 million (99.1) was spent on repairing and upgrading apartments. During the reporting year, renovation was completed for 56 apartments (545) and renovation was underway in 0 apartments (56).

Fair value

The core purpose of our business operations is to increase the value of our rental apartments. The housing stock is focussed on areas and apartment sizes that are expected to grow in demand in the long term. The allocation of building repairs is based on life-cycle plans and repair need specifications.

The fair value of our investment properties on 31 December 2024 totalled EUR 4,971.4 million (4,885.7). The change in the value of investment properties, including investments and divestments in the financial year, was EUR 85.7 million (-158.5).

The fair value of properties funded by ARAVA and interest-subsidised loans using the income value method would be some EUR 250 million higher than the current value.

The external expert JLL Finland Oy (JLL) issues a biannual statement on the valuation methods applied by SATO, the appropriateness of sources of information used and the quality and credibility of the valuation for investment properties.

JLL’s latest statement was issued on the valuation carried out on 31 December 2024. The criteria for the determination of the fair value are presented in the notes to the consolidated financial statements.

At the end of the year, the Helsinki metropolitan area’s commuting area accounted for some 86.3%, Tampere for some 7.9% and Turku for 5.8% of the value of apartments.

Investments, divestments and property development

Investment activities are used to manage the housing portfolio and prepare the ground for growth. In the 2000s, SATO has invested a total of more than EUR 3.9 billion in non-subsidised rental apartments. SATO acquires and builds entire rental buildings and single rental apartments. Property development allows for new investments in rental apartments. The rental potential and value of current rental apartments are developed through repair activities, which also help increase comfort and improve energy efficiency.

In response to continued strong urbanisation, SATO invests, in addition to Helsinki, Espoo and Vantaa, also in their surrounding municipalities and in Tampere, Turku and their surrounding municipalities. Investments in rental apartments were EUR 48.6 million (150.0) in 2024. Investments in the Helsinki metropolitan area represented 90.2% and investments in new apartments represented 39.4%. In addition, SATO’s binding purchase agreements on 31 December 2024 totalled EUR 1.3 million (16.2). During the reporting year, 1 rental apartment (530) was divested. Its value was EUR 0.1 million (52.6).

The book value of plot reserves totalled EUR 66.6 million (44.3) at the end of the reporting year. The value of new plots acquired by SATO by the end of December 2024 totalled EUR 26.5 million (0.8).

SATO has permitted building volume for approximately 1,650 apartments on the plots in the company’s housing portfolio. The long-term aim is to utilise the existing infrastructure, create a denser urban structure and bring more residents close to services and good public transport connections.

We engage in urban development together with cities and other operators in the sector. Developing urban districts benefits not only the future residents of new apartments, but also the existing residents, as services improve and the urban environment develops. As a long-term property owner, housing investor and housing provider, SATO has the will to build pleasant, safe and diverse neighbourhoods. We offer our residents sustainable way of living and encourage them to make sustainable choices in their daily lives. We build and maintain homes in a financially viable manner and minimise our operations’ environmental impacts.

During the reporting year, we continued the development of, among other areas, Itäkeskus in Helsinki and Sarfvik area in Kirkkonummi. In Helsinki, we are contributing to the development of a new centre for East Helsinki around the Puotila metro station and the Puhos and Stoa areas. In Kirkkonummi, we are initiating the partial master planning of the northern section of the Sarfvik area, originally developed by SATO, in collaboration with the municipality of Kirkkonummi and other key landowners in the area. Over the coming decades, the aim is to build a new modern, comfortable, and ecological urban area along the Espoonlahti shoreline. SATO is also engaged in several other development projects in Espoo, Helsinki, Järvenpää, Kirkkonummi, Tampere, Turku, and Vantaa.

During the year, we strengthened our land reserves by acquiring two larger plots in Viikki and Myllypuro, Helsinki, enabling the future construction of approximately 500–550 new homes.
Plots in areas developed by SATO were sold to construction companies and other partners. This enables the construction of approximately 400 owner-occupied and rental apartments, thus promoting the diverse development of the residential areas.

During the reporting year, 349 (978) new rental apartments were completed for SATO. Apartments were completed in Hyrylä in Tuusula and Finnoo in Espoo. In addition, during the review period, 33 completed and under-construction homes were acquired (0).
We renovate the rental homes and properties we own according to the life-cycle principle. Renovations on a total of 56 rental apartments were completed in Kallio, Helsinki.

Housing starts have been at an all-time low in the entire sector. The supply of new rental apartments will heavily decrease over the next few years. In autumn 2022, we decided not to initiate any new investments for the time being. Behind the decision were higher financing costs and the rise in construction and maintenance costs driven by dramatically increased inflation.

We are committed to improving the energy efficiency of our properties and we are increasing local production of renewable energy at our properties.

Sustainability

During the reporting year, our sustainability work was governed by SATO’s strategy and our sustainability programme for 2023–2026. The themes of the programme are sustainable housing (environmental sustainability), communities’ well-being (social sustainability) and profitably sustainable business (good governance and economic sustainability). Our programme’s policies are linked to the UN Sustainable Development Goals (SDG). During the year, we advanced our sustainability work in line with the targets in all areas. The realisation of the sustainability programme’s annual measures is part of every SATO employee’s remuneration.

In environmental responsibility, we continued the energy-efficiency measures based on our carbon roadmap and invested in renewable, locally produced energy: solar power plants and geothermal heat. Energy produced locally on our properties helps us reduce purchased energy. During the reporting year, we installed solar power plants on 20 of our existing properties, which include altogether 1,268 rental homes, and in three new construction projects, with 349 homes. At the end of 2024, 53 properties housing 4,616 rental homes had a solar power plant. Locally produced solar power is used as building electricity for, among other things, lighting and ventilation in communal spaces.

At the end of the reporting year, among the properties fully owned by SATO, geothermal heat was the main form of heating in 1,820 rental homes and hybrid heating with district heat and heat pumps was the main form in 70 rental homes. During the year under review, we made an investment decision to switch over to geothermal heat during the next year in 13 properties located in the Helsinki metropolitan area, Tampere and Turku. In addition to our own measures, we continuously collaborate with energy suppliers in order to save energy and increase carbon neutral energy solutions, among other things.

Our goal is to also reduce our water consumption. During the reporting year, we installed apartment-specific water meters in some 4,000 current rental homes. According to Motiva’s assessment, water meters reduce water consumption by around 8% on average. In 2024, building electricity did not produce any emissions because it was produced 100% by wind power. SATO’s goal is to be carbon neutral by the end of 2030 when it comes to in-use energy consumption.

During the reporting year, we initiated our biodiversity work in line with the biodiversity roadmap 2024–2026 that we released last year. Our goal is to slow down biodiversity loss and improve biodiversity in housing construction and in the areas where our existing buildings are located. In 2024, we began to update the guidelines steering newbuild construction and building repair planning, and the maintenance guidelines with regard to biodiversity. Furthermore, we began creating introduced species guidelines. At the end of the year, we organised biodiversity training, attended by close to 70 SATO employees. We also started up an in-house discussion on planning measures linked to the theme at our existing properties.

We participated for the tenth time in the Global Real Estate Sustainability Benchmark (GRESB) assessment. We retained our three stars on a scale of one to five. SATO’s score in the Standing Investments Benchmark (existing properties) remained at 76 as in the previous year, and in the Development Benchmark (construction projects), SATO’s score rose to 83 points from 79 points in the previous year. In its peer group, SATO’s result represents the average of northern European housing investors.

SATO’s strengths in the GRESB assessment were, for example, sustainability management, risk management, diverse stakeholder co-operation, a comprehensive health and well-being programme and measures for personnel, and issues related to tenants’ health and safety. SATO received full points for sustainability management. SATO received the weakest scores in buildings’ environmental certifications that are not used by the company.

In the area of social responsibility, we focussed during the reporting year especially on supporting our employees’ well-being at work and competence development. In addition, we continued to strengthen our occupational safety culture and ways of working. Our goal is to reduce mental health-related sick leave days and absences resulting from work accidents. We succeeded in reducing our sick leave days resulting from mental health issues by 36% compared to the previous year and work accidents leading to absences by 92%.

We carried on the diversity, equity and inclusion work (DEI) that began last year. During the reporting year, we continued to increase understanding on the topic through in-house discussions, and we arranged coaching on neurodiversity in the work community for everyone at SATO. We reviewed our personnel practices and adopted a positive special treatment principle in our recruitment process, which, when there are two equally matched applicants, allows us to use as a selection criterion an attribute that is in the minority in the work community.

We continued to improve customer encounters during the reporting year in line with the Concept of good encounters that was launched in 2023. The objective of the concept is to ensure that our customers can enjoy a consistent service experience regardless of the situation and the SATO employee, and to improve the customer experience. The good encounter concept is a tool used by all SATO employees and steers our daily activities.

During the reporting year, SATO joined the HIMA project, which supports youth living on their own through means of family cooperation and participation. The project is run by the Finnish Youth Housing Association NAL, Vamos Helsinki and Pääkaupunkiseudun Nuorisoasunnot ry. In the collaboration, SATO recommends the project to young adults that it has encountered through housing advisement.

We also continued collaboration with the non-profit organisation No Fixed Abode and the Rehabilitation Foundation in their project to help participants in the project to find two of life’s essentials – a home and a job. By the end of 2024, seven people who had participated in the project were living in a SATOhome.

In the area of governance and financial responsibility, we continued to develop consistent and transparent ways of working and the description of our core processes during the reporting year. At the start of the year, we also carried out a Compliance risk assessment. During the year, we updated our guidelines on combatting money laundering and terrorism and the anti-corruption and anti-bribery guidelines. We trained our personnel in the Code of Ethics, which was updated at the end of the previous year, and launched related online training, completed by 95% of SATO employees during the year.

During the year, we also began preparations for reporting in accordance with the EU’s Corporate Sustainability Reporting Directive (CSRD). SATO will report in compliance with CSRD starting in 2025. During the reporting year, we implemented a double materiality assessment and a gap analysis of reporting readiness. The material topics identified for SATO in the double materiality assesment are: Climate change (E1), Water and marine resources (E3), Biodiversity and ecosystems (E4), Resource use and circular economy (E5), Own workforce (S1), Workers in the value chain (S2), Affected communities (S3) and Business conduct (G1).

SATO has a First Whistle channel in place, through which SATO employees and external stakeholders can confidentially report detected or suspected misconduct or other inappropriate conduct.

We report on our sustainability work annually in reference with the Global Reporting Initiative’s (GRI) reporting guidelines, and the environmental sustainability and procurement figures presented in the report are verified by an independent third party, i.e. Deloitte Oy.

In 2020, we committed to reporting in accordance with the Task Force on Climate-Related Financial Disclosures (TCFD) framework. In the framework, the risks are divided into four main categories: transition risks, acute and chronic physical risks and social risks. During the reporting year, risks caused by climate change were part of SATO’s general risk assessment that is conducted internally each year. Climate-related risks and opportunities and their impact on the company’s operations were addressed in the Corporate Management Group and reported to the Board of Directors twice during the reporting year.

Impacts on the environment and society

According to the Ministry of the Environment, construction and buildings cause approximately one third of Finland’s greenhouse gas emissions. In addition to the climate, the built environment also has a significant impact on nature, and the construction supply chains also have identified nature impacts.

Our most significant climate impacts arise from energy consumption during living and the construction and repair of our homes. Mitigating climate change and responding to it are at the core of our sustainability work. We aim to reduce the emissions caused by our operations and our goal is to reach carbon neutrality for in-use energy consumption by the end of 2030.

Our objective is to systematically reduce the negative impacts of our operations on the environment and nature. We reduce the load on the environment by regularly and proactively maintaining and repairing homes and properties according to the life-cycle principle, and by building properties primarily in existing urban environments and near good public transport connections.

The planning of SATO’s new rental apartments always takes into account energy efficiency and solutions that will last for decades. In new properties, SATO’s goal is energy class A (energy performance indicator 75 or below), which is significantly better than that required by the building code (energy performance indicator 90). All of the buildings that were completed during the reporting year were energy class A. In 2024, we did not start any new construction projects.

During the reporting year, we continued to invest in energy efficiency improvements in SATOhomes in connection with renovations. In renovations, our goal is to improve energy efficiency by at least 30% compared to earlier. A total of 56 homes were renovated in 2024.

We are committed to the Energy Efficiency Agreement targets for the property sector, aiming for a reduction in the total consumption of electricity and heat of 10.5% from the 2015 baseline by 2025. The use of renewable energy in heating significantly reduces the in-use emissions of homes. Our goal is for 80% of our energy consumption to be renewable or carbon neutral by the end of 2026. We increase local energy production and always look into the possibility of using geothermal heat and other locally produced energy and heat recovery. We implement these wherever it is possible and also financially viable.

During the reporting year, specific energy consumption rose 2.7%, specific electricity consumption rose 2.7% and specific water consumption rose 0.3% compared to 2023. Specific emissions from SATO’s apartments rose by 0.4% compared to 2023 and were 23.2 carbon dioxide equivalent kilograms per square metre (23.1). Emissions are calculated according to the absolute consumption of district heating. Total energy costs grew due to the freezing temperatures in early 2024 and higher heating energy costs.

Our business is long-term, transparent and sustainable. We regularly assess and predict the social, economic and environmental risks related to our operations. We strive to systematically reduce the identified negative impacts, for example by following our Code of Ethics, by combating the grey economy, by approving only companies registered with the Reliable Partner service as our co-operation partners, by providing guidelines for our partners, through internal control, and by continuously developing our operations.

We generate a steady financial benefit for our stakeholders, including shareholders, employees, goods suppliers and service providers and their employees as well as customers, municipalities and the state. We support growth opportunities in business and industry by offering rental apartments in Finland’s largest growth centres, in the Helsinki metropolitan area, Tampere and Turku.

We enable sustainable way of living for our residents and encourage them to make sustainable choices in their daily lives. We are a long-term and responsible housing provider for our residents.

Development activities

Our operating model is based on the idea that any needs for improvement and change in the organisation are best identified by the employees whose daily work involves the matters in question. One of the spearheads of SATO’s strategy is SATO employees, and our intent is for each SATO employee to develop and build the SATO of the future.

SATO has in place a continuous improvement model for business. We develop our operations as smaller components rather than large units, which speeds up development work and allows processes to be improved effectively. In connection with development work, we identify, prioritise and carry out strategically important actions.

SATO’s development activities in 2024 focussed on projects improving operating models and business operations. We invested in developing digital services, the customer experience and in building a harmonised service experience.

During 2024, SATO revamped its digital service for residents, OmaSATO. In the platform, residents can manage their housing-related matters digitally. The goal of the development work was to make it easier to use the service, enabling residents to take care of as many matters as possible directly in OmaSATO. Due to the revamp, OmaSATO offers residents an improved user experience and more extensive information on their own housing matters. The service will be developed further based on residents’ wishes and the available data. The fact that more than 30,000 SATO residents use the service proves its importance.

During the reporting year, we planned and carried out a new system for long-term maintenance planning. At the same time, we will also review the operating model for the entire life-cycle management. The maintenance planning system was created as part of the property data system KoTi, which allows us to manage the key areas of property management centrally and in a uniform manner. As the operating models develop, we will continuously invest in the development of the KoTi system to ensure that it corresponds as closely as possible to our customers’ needs.

In 2024, we looked into the opportunities offered by AI and expanded our personnel’s AI competence. We organised training for the entire personnel and discussed the topic at the annual SATO Day in September. We carried out many business-oriented tests and pilots from the perspective of utilising AI and we extensively tested tools utilising AI. At the end of the year, we started up the AI ambassador programme with which we are looking into increasing and accumulating AI competence and embedding best practices in our operations.

A total of EUR 2.2 million (2.3) was spent on development in year 2024, corresponding to approximately 0.7% of net sales.

Events after the review period

No significant events after the end of the reporting period.

Risk management

Risk management is used to ensure that risks impacting the company’s business are identified, managed and monitored. The main risks of SATO’s business are risks related to the business environment and financial risks. SATO’s key risks are:

The weak development of Finland’s economy
The weak development of Finland’s economy, deteriorating employment situation, and uncertainty surrounding the economic outlook are impacting consumers’ purchasing power. A weaker-than-expected economic situation in Finland may influence the housing market through decreased market demand, reduced customer solvency, increased credit losses, lower market rents, and consequently, a decline in the value of SATO’s housing assets.

The growing repair backlog
If SATO’s housing assets are not maintained systematically and in a timely and controlled manner, this may lead to negative impacts on residents’ comfort and health, SATO’s reputation, the rentability and pricing of the apartments, and, therefore, the value development of the assets.

Geopolitical risks
Security policy tensions that have grown due to the war in Ukraine and other military conflicts and any tariffs possibly set by different countries may have a significant impact on SATO’s business environment.

Cyber risks
Cybercrime has increased risks related to business continuity and the loss of critical data. It can target, for example, systems critical to the continuity of the business or personal data. The consequences of a cyberattack can be the interruption of operations, the weakening of the company’s reputation or fines imposed by authorities.

Risks related to climate change
A delay in measures aimed at mitigating climate change and increasing extreme weather phenomena can impact the condition of apartments and maintenance costs, increase repair needs and reduce apartments’ rental potential. This can have a negative impact on the fair value of investment properties.

Risks related to renting apartments
The most significant risks in the renting of apartments are related to economic cycles and fluctuations in demand and supply. High new housing construction activity can increase the supply of rental housing to a point that it exceeds demand. This leads to rental housing vacancies and pressure to even out or lower the rent level especially for the old housing portfolio.

A clear weakening in the housing market could have a negative impact on the market value of SATO’s housing portfolio. In accordance with its strategy, SATO focusses its investments on growth centres and on renovating and repairing its existing housing portfolio. This ensures apartments’ rental capacity and value development.

Official regulations
Changes in official regulations and legislation, as well as the uncertainty stemming from them, may have a significant impact on the reliability of the investment environment and thus on SATO’s business. SATO monitors and anticipates these changes and also calls attention to what it considers to be negative impacts of regulation.

Financial risks
The management of financial risks is steered by the Group’s treasury policy, which has been approved by SATO’s Board of Directors. Our financial risk management principles are defined in the treasury policy. Our most significant financial risks relate to liquidity, refinancing and interest rates. We manage our liquidity and refinancing risks by diversifying the financing sources and maturity of our loan portfolio, and by holding sufficient liquidity reserves in the form of committed credit facilities and other long-term financing commitments. The company has a valid EUR 2.0 billion Euro Medium Term Note (EMTN) programme.

The means for managing the liquidity risk at SATO include cash assets, a bank account limit, committed credit facilities of EUR 600 million and a commercial paper programme of EUR 400 million. We increase the amount of reserves as the financing requirements grow. Our objective is to keep the liquidity requirements of the next 12 months covered by committed agreements.

Floating rate loans form an interest rate risk which we manage by balancing the share of fixed and floating rate loans either by issuing fixed rate loans or by interest rate hedges. According to our treasury policy, our objective is to keep the ratio of fixed rate loans at over 60% of the debt portfolio after interest hedging. At the end of the review period, the fixed rate portion of the loan portfolio after hedging was 63.0% (excluding current loans).

Pending legal actions

SATO has no official procedures, legal actions or arbitration proceedings pending that would have a significant impact on the company’s financial standing or profitability, and SATO is not aware of any threat of such proceedings.

Shares

On 31 December 2024, the share capital of SATO Corporation was EUR 4,442,192.00 and there were 85,062,444 shares. The company has one series of shares. The shares are included in the book-entry system maintained by Euroclear Finland Oy.

SATO Corporation holds 166,000 treasury shares. This represents 0.2% of all shares and the votes they confer.

On 21 March 2024, the General Meeting authorised the Board of Directors to decide on a share issue. The number of shares issued based on the authorisation cannot exceed 8,517,460 shares. The maximum number of shares corresponds to some 10% of the number of the company’s registered shares after the share issue executed at the start of the year. At the time, altogether 28,279,377 of the company’s new shares were subscribed for in the share issue, which corresponds to some 99.90% of all of the 28,308,533 new shares in the company offered in the share issue.

On 31 December 2024, the Board members or the CEO of SATO Corporation did not directly hold any shares in the company. A more detailed description of the shareholdings of the members of the Board is given in the Corporate Governance Statement 2024.

Personnel

At the end of December 2024, the Group employed 300 people (323), of whom 277 (295) had a permanent employment contract. The average number of personnel was 315 people (333) during the reporting year. The Group’s salaries and remunerations in 2024 totalled 21.4 million (22.1).

Shareholders’ Nomination Committee

The Shareholders’ Nomination Committee consists of representatives of SATO’s four largest shareholders registered in the book-entry system on 1 October. If a shareholder chooses not to exercise their nomination right, the right will pass on to the next largest shareholder. The State Pension Fund, the company’s fourth largest shareholder on 1 October 2024, did not exercise its nomination right, and the right was passed to Erkka Valkila, the fifth largest shareholder. The Committee consisted of representatives of the following shareholders: Balder Finska Otas AB (Erik Selin), Stichting Depositary APG Strategic Real Estate Pool (Ming Eng), Elo Mutual Pension Insurance Company (Niko Syrjänen) and Erkka Valkila.

Board of Directors, CEO and auditors

SATO’s Annual General Meeting held on 21 March 2024 confirmed that the Board of Directors consists of six members. Re-elected to the Board of Directors were chair Erik Selin and ordinary members Esa Lager, Tarja Pääkkönen, Sharam Rahi, and Timo Stenius. Ming Eng was elected as a new board member, replacing Johannus (Hans) Spikker.

The Board of Directors convened 11 times in 2024. The Board’s work is supported by the HR and Remuneration Committee.

In 2024, Antti Aarnio, M.Sc. (Tech.), was SATO’s President and CEO.

As the company’s auditor, the Annual General Meeting selected the audit firm Deloitte Oy, which appointed APA Aleksi Martamo as the auditor in charge. The auditor’s term in office is the financial year, and the auditor’s duties end at the closing of the next Annual General Meeting.

Members of the Corporate Management Group

During the reporting period 2024, the Corporate Management Group consisted of Antti Aarnio, CEO, Arto Aalto, EVP, Investments, Markku Honkasalo, CFO, Laura Laamanen, CCO and Elina Vaurasalo, EVP, Housing Business.

Related party transactions

During the financial year, SATO had no significant related party transactions. For more details, see note 32 of the consolidated financial statements and note 19 of the parent company’s financial statements.

Outlook

In the operating environment, SATO’s business activities are mainly affected by consumer confidence and purchasing power, rent and price development for apartments, maintenance costs, the general competitive situation and interest rates.

Weak economic growth and falling employment have depressed consumer confidence. Going forward, the falling interest rate level, declining inflation and pay raises will improve consumers’ purchasing power and employment rates, and the economy is expected to take a moderate growth trajectory in 2025. The outlook is overshadowed by uncertainties connected to geopolitics and the development of the labour markets.

The construction of new apartments is at an all-time low. Largely due to an increase in the volume of interest-subsidised housing construction, there has, however, been a slight upturn in projects started. At the end of the year, there were still around six thousand apartments for rental use under construction in the Helsinki metropolitan area. The number of apartments completed has contracted clearly in 2024, but the newbuild construction volume of previous years, which exceeds the long-term housing demand, is, however, maintaining an oversupply of rental homes in the growth centres. The shrinking of the oversupply has been slower than anticipated and competition for good tenants continues.

Dense urban living is becoming increasingly popular in Finland and there is demand for rental apartments near good public transport connections and services. The change in the population structure, together with price development, creates a stable foundation for demand for rental housing especially in the capital area and in Tampere and Turku. Internal migration to the major growth centres has continued and the Helsinki metropolitan area’s net positive migration rate in 2023 was the highest in the 2000s: 23,500 people. In 2024, internal migration has continued to be strong and the net positive migration of the Helsinki metropolitan area was some 16,000 people at the end of September. The powerful migration is reflected in the strong increase in demand for rental apartments in growth centres.

Urbanisation, the income development of wage and salary earners, pent-up housing demand of households, falling interest rates and the decrease in new housing production will increase housing demand going forward. Changes made in housing support policies may, however, steer consumers to find less expensive apartments. Some people looking for owner-occupied apartments may consider living in a rental apartment as an option.

Decreasing new housing production and population growth in growth centres will reduce supply and increase demand for rental apartments, which will likely translate into higher rents in the future.

As tenants have a wider array of choices, a successful customer experience is more important than ever. SATO is investing strongly in increasing its customer presence and developing digital services.

In line with its majority shareholder’s operating model, SATO Corporation will not publish guidance on its 2025 earnings. The parent company of Balder Finska Otas AB is Fastighets AB Balder, which is quoted on the Stockholm Stock Exchange.

Proposal of the Board of Directors for the distribution of profit

On 31 December 2024, the parent company’s distributable equity was EUR 729,448,510.73, of which profit for the period was EUR 37,384,372.90. The company had 84,896,444 outstanding shares entitling to dividends for 2024.

The Board of Directors proposes to the Annual General Meeting that no dividends be paid for the 2024 financial year (EUR 0.00/share for 2023), and that EUR 37,384,372.90 be transferred to retained earnings.

No material changes have taken place in the company’s financial position since the end of the financial year.

Distribution of shares
Largest shareholders on 31 December 2024

On 31 December 2024, the Group had 129 shareholders entered in the book-entry system. The turnover of SATO Corporation’s shares was 0.0% during the reporting year.

Annual General Meeting 2025
The Annual General Meeting of SATO Corporation will be held in Helsinki on Thursday, 20 March.

Financial publications in 2025
Publication dates for interim reports and the half-year financial report:

8 May 2025                   Interim report 1–3/2025
15 July 2025                 Half-year financial report 1–6/2025
28 October 2025        Interim report 1–9/2025

For further information, please contact:
President and CEO Antti Aarnio, tel. +358 20 134 4200, [email protected]
CFO Markku Honkasalo, tel. +358 20 134 4226, [email protected]

Attachments:
Annual Report 2024
Financial Statements presentation 2024
Financial Statements as an XHTML file

Distribution: Euronext Dublin, main media, www.sato.fi/en.

SATO Corporation is an expert in sustainable rental housing and one of Finland’s largest rental housing providers. SATO owns around 26,000 rental homes in the Helsinki Metropolitan Area, Tampere and Turku.

SATO aims to provide an excellent customer experience and a comprehensive range of urban rental housing alternatives with good access to public transport and services. We promote sustainable development and work in open interaction with our stakeholders.

SATO invests profitably, sustainably and with a long-term view. We increase the value of our assets through investments, divestments and repairs. www.sato.fi/en

Attachments

• SATO_Annual Report_2024
• SATO_Financial_Statements_presentation_2024
• 7437009ELUGUOA45V564-2024-12-31-0-en