Ceos review

2017 was an excellent year for SATO in many ways. We implemented our strategic customer-driven programmes successfully and this was reflected in improved customer feedback and in increased occupancy rate, net sales and net rental income. We responded to urbanisation challenges, in particular, by launching complementary construction projects, of which our StudioHome project in Vantaa created considerable public interest. In total, we invested EUR 156 million in Finnish housing. Our decreased solvency ratio and the higher proportion of unencumbered assets strengthened our investment capabilities and supported our goal of reaching a stronger credit rating. It was also rewarding to see that the job satisfaction of our increasing personnel improved throughout, even during a very busy year.

Housing market changing actively

The pace of housing construction remained at a record-high level in Finland. The results of active housing production are reflected in the market, for example, through increased competition and slower increases in rents. In a functional market the consumer is offered housing solutions that vary in size, quality and price and every apartment completed will as a result release one inexpensive apartment to the market.

We need to be able to maintain this pace in housing production, as increasing the number of apartments in growth centres is a core requirement for affordable living and successful urban development.

Housing policy plays a more important role in the ongoing social change than it has in a long time. Most new companies, ideas and jobs are created in cities with a high enough population density. From the point of view of Finnish society and Finland's international success, it is vital to succeed in urbanisation. We also need to find functional solutions for people to move out of locations with fewer jobs. It is important to understand that in these rapid changes, where digitalisation can revolutionise both the labour market and transport solutions, housing policy can no longer be implemented by testing older methodologies and ideologies. We need to find solutions for modern needs by working extensively together, starting with a clean slate. In this, we need to listen to consumers. After all, solutions must be based on their wishes and opportunities. The housing market does not serve consumers by using regulations prescribed from above.

Consumers demand a predictable long-term housing policy. This is why changing the conditions of subsidised production retroactively is damaging and should be discontinued. This is how we commented on the Government proposal for developing the interest subsidy system for housing construction in November.

New housing in collaboration with cities

During the reporting year, our investments were directed at the most rapidly growing urban areas. Number of our apartments increased by roughly 450 apartments. We completed 856 new apartments. This includes apartments built in new areas and complementary construction aimed to densify the existing urban structure.

We consider partnership planning and complementary construction to be effective and functional ways to control increases in housing costs. During the reporting year, the Wise Mobility Block project in Oulunkylä, Helsinki, was a good example of both of these. Its planning solution was sought through an architectural competition, held together with the City of Helsinki.

As a result of our extensive plan development in Martinlaakso, together with the City of Vantaa, we started the construction of 288 apartments in Raiviosuonmäki and completed 110 apartments on Kukinkuja and 68 StudioHomes on Raikukuja.

In Espoo, plans of development projects made good progress in 2017 regarding Finnoo, Soukka and Niittykallio in Saunalahti. In Turku and Tampere, we are negotiating with the cities over complementary planning projects to be launched during spring 2018.

We pushed the planning of complementary construction, which effectively makes use of the existing infrastructure, forward for roughly 1,100 new apartments.

In the Helsinki High-rise architectural competition, held to develop central Pasila, the proposal of SATO, Skanska and ALA Architects made it to the second round in the autumn of the reporting year. The aim of the competition is to find a designer and developer for a high-rise area in central Pasila.

New housing solutions arise from the needs of consumers

The changing values and living preferences of people, combined with their needs for more affordable housing, drove us to develop diverse housing solutions. StudioHome, a pilot building for social living completed during the reporting year, is a good example of new kinds of solutions. It is a building in which a home expands from small two bedroom apartments into shared living rooms. More than 700 customers applied for StudioHome apartments, of whom 70 moved in to the building at the beginning of December 2017. SATO’s community manager moved in to one of the 68 StudioHome apartments to create opportunities for social living. The StudioHome building is home to people of 19–69 years and seven different nationalities, ranging from students to pensioners and from workers to managers. In 2018, we will obtain valuable experiences in social living, allowing for the implementing of it in our other buildings as well.

During 2017, we also designed the IdealHome concept aimed at standardised production. In cooperation with partners, we seek to identify production solutions that enable us to offer more affordable homes, especially in areas suitable for complementary construction.

We are constantly developing new kinds of housing solutions and are intently listening to consumers.

Bringing a new type of service culture TO life

During the reporting year, we did what we promised in our strategy and succeeded in building a new type of service culture for our customers. This is connected to the implementation of our mission. We are revolutionising the housing sector – we are offering more than just walls.

Our Customer First programme brought our daily customer service close to our customers. We created a new customer service model during the development programme to ensure an unbroken service chain for our customers in accordance with the one contact principle.

Our building-specific service managers know our customers and their home buildings, and are available in their buildings every month and offer a more personal service. The service managers continue to fulfil their of previously outsourced building management tasks but their job descriptions are more extensive and service-driven. When selecting maintenance companies, we make sure that they also follow our Customer First programme and our instructions.

In 2017, we also launched FindHome, a service for finding a new home and the first phase of our development programme for digital services. Now, finding a new ideal home is an easier experience for our customers.

Our success in these strategic programmes resulted in a constantly improving economic occupancy rate, an increase in net sales and a decrease in external tenant turnover.

Working hard to strengthen our financial position

Funding is important to us, both in terms of cost efficiency and opportunities for growth. We took giant leaps forward in changing our financing structure and lowering our solvency ratio as a result of our hard work during the reporting year. Our aim is to shift towards a financing structure mainly free of real securities. At the end of the year, 66.3 per cent of our assets were unencumbered. Our solvency ratio decreased to 52.1 per cent.

To improve the availability of funding and ensure the competitiveness of financing costs, we set a stronger investment grade rating (currently Moody's Baa3) as our strategic goal at the beginning of the reporting year.

Inspired and more satisfied employees

Our customer-driven strategy has challenged and inspired our increasing personnel – we now have some 40 more employees than a year ago. The motivation to lead the more customer-driven organisational culture forward was made visible in the form of increased employee satisfaction. I am happy about the thoroughness of the coaching for new SATO employees regarding their tasks and our operating culture, and in particular about how new ideas were adopted and implemented.

Responsibility was again part of everything we do. We have on regular basis revised and changed the guidelines and principles followed in our operations, such as the new Code of Conduct introduced on 1 January 2017.

Keeping our strategy going, also in 2018

In 2018, we will carry our Customer First programme forward, particularly with our partnership network. We will create new business models and develop our existing ones. We will focus on creating diverse housing solutions for our customers, listening to them and learning from them. What is more, we will invest in our digital service development and launch the MySATO service. It will make our customers' lives easier, and we have already received good ideas for it from our active customers. We will continue to strengthen our financing structure and develop interaction and cooperation with cities and our other partners in order to build more functional urban environments in Finland.

During the reporting year, we made good progress in terms of our key strategic programmes and goals. I would like to thank our customers, financiers, shareholders and partners, and everyone here at SATO, for our great success. Let us keep up the good work in 2018.

CEO reflecting on the year 2017

Saku Sipola reflects on the year 2017

"For many reasons last year was excellent for SATO"

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