The Pandox Spirit

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					Report on Pandox business operations 2009

  The Pandox Spirit

                                            o n e o f t h e l e a d i n g h o t e l P r o P e r t y c o m Pa n i e s
Pandox is one of europe’s leading hotel property companies. the portfolio is of the highest quality, embracing 46 hotels
with a total of 11,100 rooms as well as nine operating companies. the business model is that through active and
committed ownership, work with four operational strategies, situation adapted for each hotel.
the hotels are located in international hotel markets such as london, Berlin, stockholm, copenhagen, Brussels and
montreal, as well as stable cities with a high proportion of domestic demand such as Bremen, antwerp, gothenburg and
swedish regional and university cities. all hotels have strong natural positions with an average size of 240 rooms, which
limits risks and provides prerequisites for efficient operations.
Pandox has a unique network within the hotel market and works together with many of the major brand names, including
hilton, intercontinental, hyatt, scandic, crowne Plaza, radisson BlU, holiday inn, clarion, Quality, elite, first, or through
independent distribution channels.


The Company                                                                                                                         The hotel properties
Business model  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 2                 List of properties .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 32
Success factors  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 4                Hotel properties  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 34
History/Development  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 6
Business philosophy/Knowledge  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .8                                       Finances
Strategic orientation  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .12                   Financial overview  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 40
      Business processes/Pandox Model  .  .  .  .  .  .  .  .  .  .  .  .  .  . 14                                                  Sensitivity analysis  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 42
      Types of agreement  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 16                        Valuation and fiscal situation  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 44
The Pandox Model in practice  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 18                                      Definitions .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 45
      Södertälje  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 18           Ten-year overview .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 46
      Berlin  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 20   Quarterly data 2008–2009  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 48
      Brussels  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 22
      Montreal  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 24
Market communication .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 26
Surrounding world  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .28
                                            2009 was yet another successful year for Pandox. despite global anxiety,
                                            cash flow increased whereas revenues and profits declined. the driving force
                                            behind the good developments is a combination of the company’s business
                                            model, the high quality of the property portfolio and lower interest costs.
                                            read more in the message from the ceo on page 74.

Financial statements 2009                                                                                               Other information
Report of the Board of Directors  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 50                            Work of the Board of Directors  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 68
Income statement and comments  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 52                                  Board of Directors and auditors  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 68
Balance sheet and comments  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 54                            Senior executives and hotel managers  .  .  .  .  .  .  .  .  .  .  .  .  .  . 70
Changes in equity  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 56       Pandox’ management team  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 72
Cash flow statement and comments  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 57                                     CEO summary of the year 2009  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 74
Accounting principles  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 58
Notes to the accounts .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 60
Proposed disposition of earnings  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 66
Auditors’ report .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 67
2 | Pa nd o x 2009
                       The business model
                     is based on methodical work, defined structures and individually skilful and creative employees.

                                                                                                          success factors

                                                    & individual capital

                            consistent strategy
                                                    Knowledge, network
Pandox has had rapid business development since its start in
1995. the success factors are a combination of the company’s
expertise and experience, as well as a strategy that implies
active ownership and committed industrial owners.                       4
                                                                 Read more on page

Pandox has achieved constant progress in size, cash flow and
value-growth – and consequently a strong market position.
the portfolio value has increased from seK 800 million to
approximately seK 13 billion, while cash flow has increased
40 times since the start 1995.                                          6
                                                                 Read more on page

one of Pandox’ most important cornerstones is to constantly
develop its areas of competence and expertise. in order to
inspire our employees, an informal leadership style has been
developed to give each individual considerable freedom and
development opportunities. the corporate culture includes an
interactive discussion with an extensive network, which
provides valuable input in both large and small issues.
                                                                 Read more on page

Pandox has a well-defined strategy that is thoroughly embodied
with the Board of directors, senior executives and banks – a
strategy that has been consistently followed since the com-
pany was formed nearly 15 years ago. starting point is to
acquire under-performing large hotels in strong locations,
where the company’s specialist expertise can be used to
develop the assets. this in turn creates good conditions for
long-term value development and a strong company.                Read more on page

                                                                              Pan dox 2009   |3
                                              Pandox’ business model

                     Successindividually important – together invaluable

                        1                 short and rapid decision-making paths
                                          Pandox’ shareholders and Board of directors possess industrial expertise in hotel opera-
                                          tions, properties and business development. their experience creates confidence, and is
                                          utilised by being organised and taking rapid decisions within, for example, different
                                          acquisition questions. this is a competitive advantage in a significantly slower surround-
                                          ing world.

     2               flexible business model
                     depending on the local conditions, Pandox can choose between four operational strategies; through leases with
                     professional operators where Pandox remains as a strategic partner; management agreements where a partner
                     runs the daily operations on behalf of Pandox; by managing one’s own operations within the framework of a
                     franchise agreement with a well-known brand; or through independent distribution channels. the business model
                     provides excellent opportunities to create a situation-adapted strategy of “asset by asset”.

                              3                     expertise and network
                                                    Pandox’ management team has extensive experience of hotel and capital
                                                    markets. the company’s specialist expertise embraces hotel markets,

                                                    hotel operations, properties, finance and business development.

                                 Well-defined and consistent strategy
                                 Pandox has a well-defined strategy within geography, types of hotel and yield requirements that have
                                 been consistently observed since the company was formed.

4 | Pa nd o x 2009

5   Portfolio of the highest quality
    the hotels are located in international hotel markets such as london, Brussels, Berlin, stockholm, copenhagen
    and montreal, as well as cities with a high proportion of domestic demand, which in turn creates a balance in
    revenues. all hotels have strong natural positions with an average size of 240 rooms, which limits risks and
    provides strong conditions for efficient operations. the hotels are large, thus providing a critical volume, and
    they are marketed by the sector’s most well-known brand names. the agreements structure, with a combina-

    tion of leases, management agreements and own operations, provides good potential with a limited risk.

                                              acquisition strategy

                                              Pandox primarily acquires hotels with a potential that can be brought out
                                              through active measures and where the company’s areas of expertise
                                              can be utilised.

    corporate culture
    Pandox has established an informal leadership style where a high level of expertise is combined

    with low bureaucracy and effective monitoring methods. Keywords are inspiration, simplicity,
    rapidity, expertise and visible leadership.

                                                                  choice of countries
                                                                  and locations

                                                                  Pandox is established in major hotel markets that
                                                                  have good potential and stable demand.

    strategic alliances
    Pandox seeks strategic alliances with brand names that are interested
    in forming a partnership that creates benefits for both parties.

                                                                                                               Pan dox 2009   |5
                                                              Pandox’ business model

                       from financial crisis to a successful hotel property company


Background and history                                                             Expansion to North America
Pandox has it’s origin in the swedish financial and property crisis in the early   in 2007, Pandox continued its international expansion with its first acquisition
1990s. the company was founded in 1995 by skanska and securum. its                 in north america. the acquisition of the intercontinental in montreal, with its
task was to structure the owners’ hotel portfolio and prepare it for sale, which   357 rooms, laid the foundation for selective expansion in north america. in
was a fact when the company was listed on the stock exchange two years             2008, the 605-room hyatt regency montreal was acquired. thereby Pandox
later. all in all, some 100 assets from the swedish and international hotel and    had within a year acquired 1,000 rooms in montreal.
tourist industry were sorted, systematised and structured. this was the start
of Pandox.                                                                         Strong growth and stable profitability
                                                                                   the Pandox cash flow has increased 40 times since the company started in
The original hotel property portfolio                                              1995. this has been achieved by an active ownership of existing hotels and
initially, Pandox consisted of 18 properties and three small operations. all the   profitable acquisitions. the company’s hotel property portofolio is now worth
hotels were situated in sweden, most of them were small and located in             around seK 13 billion, seeing a thirteen-fold increase in its value since the
secondary locations, which reduced the profitability of the company.               start 1995.

Listing on the stock exchange                                                      Expertise provides ability to rapidly adapt
When Pandox was listed on the stockholm stock exchange in 1997, it was             Pandox’ market expertise, business culture and network enable the com-
the first time a company offering this business concept had ever been listed       pany to rapidly adapt and adjust – where 2009 is an excellent example.
in europe. the company’s portfolio was valued at seK 1.3 billion, with a mar-      in a demanding global economic climate with dramatically falling demand,
ket value of seK 520 million, and it had 4,000 new shareholders. after being       Pandox’ hotel property portfolio has managed considerably better than
listed, Pandox underwent massive expansion, taking over larger hotels in           the rest of the market.
strong locations while disposing the smaller hotels.

in 2000, Pandox expanded its geographical strategy to also include northern
europe. this strategy was turned into reality thanks to the acquisition of             strong result
hotellus, with its 16 hotel properties, thereby creating a foundation for the          despite a troubled surrounding world, Pandox’
internationalisation of Pandox.                                                        cashflow increased during 2009.

Bought out from the stock exchange                                                     Key figures, SEK M                                                         2009     2008
Pandox was reprivatised in 2004. the company was deregistered following a              Property revenue                                                       895.2        915.5
public offer, and had new industrial owners through eiendomsspar as and                operating net                                                          778.2        782.7
sundt as.                                                                              operating revenue hotel operations                                   1,095.0      1,105.3
                                                                                       operating income hotel operations1)                                    –34.0         20.8
                                                                                       Profit before tax 2)                                                   252.5        280.4
Leading position in Europe
                                                                                       cash flow 2)                                                           446.4        444.5
after the privatisation, the acquisition speed increased and a number of major         1)   the negative result is primarily attributable to large investments
hotels in cities such as Berlin, Brussels, Basel, copenhagen, stockholm and                 made in holiday inn Brussels airport and intercontinental montreal.
                                                                                       2)   excluding non-recurring items.
malmö were acquired. these transactions reinforced the position of Pandox
as one of the leading hotel property players in europe.

6 | Pa nd o x 2009
growing operator activities
a natural part of Pandox’ active ownership is to operate its own hotels.          at the end of 2009, Pandox’ operating activities, including management
depending on local conditions, the best strategy can be to develop                agreements, embraced nine hotels with total revenues of seK 1,1 billion
operations ourselves, and then choose another solution at a later stage.          located in Berlin, Brussels, antwerp, montreal and the Bahamas. in recent
this creates a situation-adapted strategy – hotel by hotel. another reason        years, four operations that were acquired as under performers, and then
is that business cultures differ among various geographic areas. in scandi-       developed, have been leased to well-known operators with long-term
navia, leases dominate while in north america management and franchise            agreements. this in turn creates prerequisites for new acquisitions.
agreements are more common. europe has a mixture of both. it is there-                the philosophy behind Pandox’ operating activities is to build up each
fore important to master different strategies in order to successfully operate    hotel’s strategy and expertise locally. this implies that most decisions are
in an international hotel environment. own operational expertise also             delegated, and reporting is made to a board of directors with external
implies possessing specialist knowledge to evaluate the operators one             members who are selected for their specialist competence. to be
has lease agreements with, and be able to realise acquisitions where both         successful with business processes requires an ability to attract the best
the property and the operations are included.                                     management, and that such persons will get genuine influence on
     as a consequence of the market trend, where hotel companies are              operations.
more becoming management companies, it is also natural for Pandox to
integrate vertically and assume responsibility for operations.

Hotels operated by Pandox
City            Hotel                                    Brand                   No. rooms     Location                          Profile
Berlin          hotel Berlin, Berlin                     independent             701           central                           full service conference hotel
montreal        hyatt regency                            hyatt                   605           central, entertainment district   full service
                intercontinental                         intercontinental        357           city centre, business district    Business and conference hotel
Brussels        crowne Plaza Brussels city – le Palace   crowne Plaza            354           city centre                       Business and conference hotel
                hotel Bloom!                             independent             305           central                           lifestyle
                hilton Brussels city                     hilton                  283           city                              Business hotel
                holiday inn Brussels airport             holiday inn             310           airport                           Business and conference hotel
antwerp         crowne Plaza                             crowne Plaza            264           ring road                         Business and conference hotel
Bahamas         Pelican Bay at lucaya                    independent             184           central, marina                   resort

                        Further details about how the operating activities function in practice are set forth on pages 18–25.

                                                                                                                                                       Pan dox 2009   |7
                                                               Pandox’ business model

          Knowledge within the entire value-growth chain – prerequisite for success

                                                               Value-growth chain

                                    the base for Pandox’ vision, strategy and choice of business model
                         are the value-growth chain in a hotel property. this can be divided into ten different parts:

10. Financing and taxes                                                                                                          1. Macro-economy

the choice of financing and legal structure is a key issue                                  the level of activity (global, regional or local) constitutes
that creates preconditions for stable value growth.                                       an important component for how demand shall be devel-
                                                                                           oped within the hotel market. macro also influences the
                                                                                               direction of the economy, which implies that one can
                                                                                          choose different points in time to enter a specific market.

9. Contract/agreement structure                                                                                        2. The hotel economic cycle

the hotel industry has many forms of contracts                                                     a part of the macro-economy can be divided into
and agreements, which influence a hotel’s                                                             five different phases: downturn, lower pace of
profitability, financing and value growth. in                                                    downturn, level-out, growth and peak. With know-
general, a contract or agreement should con-                                                     ledge of the pattern of a hotel economic cycle, one
tain mutual incitements so that the parties                                                        can exploit each situation by investing in different
work for the same objectives.                                                                     geographic markets and endeavouring to limit the
                                                                                                       risk in the markets that have poorer outlooks.

8. Asset management                                                                                                             3. Location and size

the hotel industry is capital-intensive and spe-                                                 two important factors are that hotels have strong
cialist expertise is required within both the hotel                                          locations and that they have the right size to contain a
and property operations in order to effectively                                                 critical volume and thereby good preconditions for
take care of and develop the properties.                                                                                                  profitability.

                                                                                                                    4. Competition – new capacity
7. Investments                                                                                                         – different market positions

a hotel must be constantly developed in                                                              each market is unique and deep knowledge of
order to maintain a strong market position.                                                      the local conditions is required in order to create a
                                                                                                      product that provides sustainable profitability.

6. Operational issues and management                                                                                                   5. Brand name

hotel operations are complicated and require a high level of                           a strong brand name strengthens the hotel’s market position
expertise, active presence and strong leadership. a good                                          and competition in the chosen product segment.
local hotel team creates both satisfied customers and
employees as well as high profitability.

8 | Pa nd o x 2009
& network  international network enables access to unique expertise

Pandox’ international network – a precondition for rapid development
Pandox has a small management organisation. a total of 17 people work at             mented by a national and international network composed of people with
the office in stockholm, of whom 10 are directly involved in the company’s           specialist expertise within market, management, hotel operations, property
development and management. in addition, one of the company’s business               development, brand names, finance and taxes. Pandox works active to att-
area managers is based in Brussels where the largest operating activities are        ract people to the network, which is a cornerstone for the company’s rapid
located. the model provides major benefits with rapid decision-making paths,         growth and development. the model places demands on both visionary and
a high level of interactivity, and considerable individual freedom. in order to be   operative leadership, as well as an ability to create forms of collaboration with
able to maintain all business processes in motion, the organisation is supple-       individuals with different backgrounds.

                                                                                                                                                      Pan dox 2009   |9
                                                           Pandox’ business model

                        Pandox’ corporate culture creates room for unique employees

                                                                   Aldert                                                  Mikael

Pandox’ basic management philosophy is                1. Leadership with spirit of enterprise. Pandox
                                                         believes in people and allows the individual to
                                                                                                             it is the individuals at
more about inspiration than control, and
more about the individual than the system.               have significant influence. for the right person,   Pandox which makes
                                                         this is an excellent environment, simultane-
one precondition for this is individual freedom          ously as it also implies significant demands on     the company so unique.
                                                         delivering results.
where entrepreneurship and “out of the box” solu-
                                                      2. Outside in. one of the driving forces is to
                                                                                                             the principal ingredients
tions can be created simultaneously as the envi-
ronment must be characterised by stringency and          constantly learn from new market trends and         are experience, the will
structure. the business climate therefore places         new products. the message to management
considerable demands on each person’s power of           is often – “go out and see”.                        to constantly improve,
                                                      3. Human touch. the point of departure is that
initiative and ability to deliver their own commit-
ments – where the points of departure are distinct       people with considerable motivation do not          to find new opportunities
and transparent goals.                                   need to be controlled, but instead inspired.
                                                         operations are of course monitored carefully,
                                                                                                             and to win, of course!
     the philosophy is expressed in a special
program called “force of individuals”, based on          but without reports and bureaucracy taking          – as well as a strong
five cornerstones:                                       an upper hand.
                                                      4. Down-to-earth. the motto is “Walk the talk”.        dose of responsibility
                                                      5. Lean. an important part of Pandox’ success
                                                                                                             and initiative.”
          at Pandox,                                     is to maintain high productivity that creates
                                                         prerequisites for good profits, which in turn
          hierarchy has been                             provides resources for development. the
                                                         implementation of modern organisation struc-
          replaced by power                              tures is part of the strategy.

          of enterprise.”                                 the Pandox team’s will to always find
                                                          solutions is outstanding – nobody
                                                          understands the word impossible!”
10 | Pa ndox 2009

             Liia                          Lars                                       Erik

                            to act quickly and informally is a great freedom,
                            which at the same time places heavy demands
                            on one’s own motivation. demands and expect-
                            ations are definitely high, but there is also room
                            for making mistakes – that is a challenge i like.”

                                        the dynamic of the cooperation
                                        within Pandox is the complete
                                        and transparent information.”

an informal environment with considerable freedom creates
room for personal responsibility, power of initiative and
devotion, which in turn leads to good results.”                       Pan dox 2009   | 11
                                                           Pandox’ business model

                Strategic   consistent strategy provides stability and spread of risks

Pandox’ vision is to be one of the                    for the vision to become reality, the company must       Business concept and strategy
                                                      retain its specialist expertise as to how the value-     Pandox’ business concept – based on expertise
world’s leading hotel property com-
                                                      growth chain interacts, and that the balance             within hotel properties, hotel operations and busi-
panies with regard to specialist                      between international and national revenues, brand       ness development – is to actively own, develop and
                                                      names and types of hotel are maintained. another         lease hotel properties.
expertise in both hotel and property
                                                      important aspect is to constantly develop the busi-
operations and active ownership.                      ness model in order to choose the best situation-
                                                      adapted strategy with regards to the local market.

                                                  Corner stones in Pandox’ strategy

one type of asset
– hotel properties                                   Business model                                          geographic market

1                                                   2                                                        3
        a hotel property has characteristics                    to maximise value-development in                        focusing on one type of asset
        that distinguish it from other types of                 each hotel requires a flexible busi-                    requires a broad geographic market
        property – which demands specialist                     ness model that creates potential for                   in order to create growth precondi-
        expertise in order to pursue active                     a situation-adapted strategy.                           tions and to be able to benefit from
        ownership.                                                                                                      changes in the hotel economic cycle.
                                                     Business position: Pandox has a contractual
Business position: Pandox owns 45 hotels             structure that embraces lease, management               Business position: Pandox is currently present
with a total of 10,800 rooms. the company has        and franchise contracts and agreements, as              in eight countries, of which sweden is the largest
never invested outside its core area.                well as contracts with independent players. the         market. major markets outside the domestic mar-
                                                     largest proportion includes leases that generate        ket include Brussels, copenhagen and montreal.
                                                     76 percent of revenues.                                 Pandox is represented in locations that have a
                                                                                                             mix of national and international demand.

  Hilton Stockholm Slussen, Sweden

                                                     Lease structure                                         Geographic distribution, share of hotel rooms

                                                                             Revenue-based lease, 33%
                                                                             Revenue-based leases
                                                                             with guarantee, 43%                                      Sweden, 56%
                                                                             Management agreements,                                   International, 44%
                                                                             own operation, 7%
                                                                             Franchise agreement,
                                                                             own operation, 8%
                                                                             Own operation, 10%

12 | Pa ndox 2009
Overall objective                                     specific goals are set each year for net operating
Pandox’ principal objective, through specialist       results, return on shareholders’ equity, value
expertise within hotels, hotel properties and busi-   growth in the existing hotel property portfolio, and
ness development, is to achieve optimal return on     equity/assets ratio. the goals are broken down to
investment and value growth in the hotel property     each individual property, and act as guidelines
portfolio.                                            upon investment decisions.

                                                                                                             choice of brand name
location and size                                     type of hotel                                          and partners

4                                                     5                                                      6
            large hotels with strong locations                    the hotels shall belong to the upper-                each hotel shall have the best possi-
            increase potential and reduce risks,                  medium and high-price segments.                      ble brand name that strengthens the
            as well as being attractive for both                                                                       profile – which requires that Pandox
            partners and guests. these hotels                                                                          maintain a broad network within
            have higher liquidity and are easier                                                                       domestic and international hotel
            to finance.                               Business position: the portfolio is a mix of                     companies.
                                                      high and medium-priced hotels. examples of
Business position: all Pandox hotels have             those in the high-price segment include the            Business position: Pandox works with twelwe
strong locations and an average of 240 rooms          intercontinental montreal, crowne Plaza Brus-          different brand names today, as well as with
– which is three to four times larger than the        sels city centre and hilton stockholm slussen.         independent distribution channels. the brand
average hotel in europe.                              medium-priced hotels cover many scandic                names are well-known and established which
                                                      hotels and the holiday inn Brussels airport.           provides a unique position and network.

  Clarion Hotel Grand, Östersund, Sweden                InterContinental, Montreal, Canada

                                                                                                                                             Pan dox 2009   | 13
            Pandox’ five business processes – for increased cash flow and limited risk

     With the value-growth chain as the starting point, Pandox has organised its operations into five business processes.

                      Market analysis
         To create knowledge of the market situation
                    and change patterns .

                     The Pandox Model
          The methodology process for the systematic
                   evaluation of each hotel .

                    Asset management
          Daily management and major investments
              in order to increase the value of the
                  properties in the long-term .

                       Economic and
                     financial reporting
             how operations are monitored through
            established goals, evaluated and valued.

              Market communication
                      Regular market activities
                    aimed towards target groups .

14 | Pa ndox 2009
the Pandox model
Market analysis                      Market strategy                       Profitability optimisation              Agreement optimisation
a market analysis is performed in    a strategic plan is established for   in view of that a property’s value      the optimal cash flow in each
order to assess the potential pro-   each hotel property based on the      is influenced by the hotel opera-       respective hotel property is then
fitability of a hotel, and thereby   respective location’s specific pre-   tions’ profitability, the operator is   divided among the operator,
its ability to pay rent. the local   requisites, the local market and      naturally Pandox’ most important        Pandox and other parties
market is identified and analysed    its position in the hotel economic    partner. in order to ensure positive    concerned. lease agreements
regarding demand, competition        cycle. When preparing the strate-     developments within the hotel           are formulated so that all parties
and the current and future offer.    gic plan, the property’s continued    operations and the value of             involved have an incentive to
                                     utilisation scope is evaluated        the property, the operator and          continuously improve the hotel
                                     objectively and impartially.          related activities are continuously     property’s overall profitability.

  Possibility to                                                                                                                 Action plan
  acquire hotel                                                                                                                  with concrete
  property                                                                                                                       measures

                               Market analysis        Market strategy          Profitability            Agreement
  Evaluation of                                                                optimization             optimization
  each hotel
  property and the
  hotel property

                                                                                                                         in accordance with the strategy

                                                                                                                                                 Pan dox 2009   | 15
                                                   Pandox’ contracts and agreements

                                the value of a hotel property is governed to a considerable degree by the content and
                              formulation of the hotel lease. the objective is to formulate an agreement where all parties
                              concerned are given an incentive to continuously improve the hotel property’s profitability.

       Each property has its own characteristics             anticipated market trends, local competition,          Result-based
       Before Pandox enters into a lease, a compre-          planned investments, as well as choice of oper-        a result-based hotel lease implies that the hotel
       hensive market analysis is performed that             ator and distributor. By combining various types       property owner receives a share of the hotel
       includes known changes in the market and              of leases, Pandox has achieved a lease struc-          operator’s operating net. this type of lease
       competition from various players both in the          ture that provides the company with increased          requires that the hotel property owner under-
       short and long-term. different models are             cash flow in a rising market while simultaneously      stands the operator’s financial control system.
       applied in the leases in order to limit the risk in   offering protection against downturns in the           result-based hotel leases can also specify a
       a declining market, simultaneously as Pandox          market through rental guarantees.                      minimum rent (guarantee/base rent).
       may participate in an upward trend. should an
       operator’s liquidity weaken, Pandox has the           Types of lease                                         Fixed-fee hotel lease
       expertise and ability to manage the related hotel     Revenue-based                                          fixed-fee hotel leases with an index linked to the
       operations, which indeed has occurred on              revenue-based hotel leases are linked to sales         development of the consumer Price index (cPi)
       several occasions.                                    generated by the hotel business. this form of          are used in mature markets and in well-estab-
                                                             lease provides Pandox with a share of growth in        lished hotel products. a fixed-fee lease limits the
       Lease structure                                       both the market as a whole and in the market           risk factor but also the potential.
       Pandox’ active and situation-adapted owner-           share. to limit the risk, these leases often specify
       ship is reflected in the various lease models. the    a minimum rent (guarantee/base rent).
       lease structure is governed by factors such as

Scandic Skogshöjd, Södertälje, Sweden

16 | Pa ndox 2009
                                                     RENTAL REVENUES 2009                                 LEASE AGREEMENTS
Management agreement                                 Per type of contract/agreements                      Maturity date structure
a management agreement can be perceived as a
sort of agent contract. the main characteristic is                            Revenue-based leases, 33%
                                                                                                                                     Year 2010, 3%
that the hotel property owner also owns the hotel                             Revenue-based leases
                                                                                                                                     Year 2011, 2%
                                                                              with guarantee, 43%
business. through a management agreement, an                                                                                         Year 2012, 2%
                                                                              Management agreements,
operator/manager is assigned to operate and                                   own operation, 7%                                      Year 2013, 20%
manage the hotel on behalf of the hotel property’s                            Franchise agreement,                                   Year 2014–, 73%
owner, for which a management fee is paid to the                              own operation, 8%

operator/manager.                                                             Own operation, 10%

Franchise agreement
in its own operations, franchise contracts can be
entered into where Pandox gains the benefits of a
larger system that embraces the hotel’s overall
marketing and sales.

                                                                           The Pandox Model in practice

                                                                    Pandox has developed a large number of hotel properties
                                                                    and hotel operations over the years . The philosophy
                                                                    behind Pandox’ operational activities is to build up each
                                                                    hotel’s strategy locally . One of the most important factors
                                                                    to succeed is to attract the best people and give them
                                                                    considerable influence and responsibility .
                                                                      The following pages describe some of our completed
                                                                    repositioning programs and projects . Some of the key
                                                                    people behind this successful process are also presented
                                                                    here .

                                                                    Scandic Skogshöjd and
                                                                    Quality Hotel Park Södertälje City          pages 18–19
                                                                    Hotel Berlin, Berlin                        pages 20–21
                                                                    Holiday Inn Brussels Airport                pages 22–23
                                                                    InterContinental and Hyatt in Montreal      pages 24–25

                                                                                                                                    Pan dox 2009   | 17
                                                       The Pandox Model in practice

   Södertälje                           Successful restructuring of the hotel market

Two “sleeping beauties”                                old-fashioned design, functions and technology.        was performed at several levels. First, a number of
Pandox acquired Best Western Skogshöjd                 The other hotel, Quality Hotel Park, was a previ-      activities were organised in order to become better
and Quality Hotel Park in Södertälje, including        ous leisure hotel located in central Södertälje. The   known in the area south of Stockholm, which also
the operations, in 2006. Both hotels were then in      product was shabby, and at the time of the acqui-      included becoming a more distinct part of Greater
need of product development, new leadership            sition was positioned as a medium-priced hotel         Stockholm and to attract shops and stores with a
and inspiration. Skogshöjd is the city’s largest and   despite an excellent location. In general, profita-    city profile. Skogshöjd, which had the strongest
best-known hotel with 225 rooms and large con-         bility was weak.                                       name, established the vision of assuming the role
ference facilities. at the end of the 1980s, the                                                              as an important conference hotel.
hotel was one of Sweden’s leading conference           Development of Södertälje as a destination
hotels, but time had taken its toll and when it was    The initial work focused on opening up the market      Transformation with clear objectives
acquired in 2006, the product was dreary with          and to strengthen Södertälje as a destination. This    as for Park, the goal was established of becoming

18 | Pa ndox 2009
southern Stockholm’s best business hotel. The        showed interest in the hotels. In 2009, a lease was     results are expected to be very good. Park Hotel
first phase was concentrated on Park, which was      signed with Choice Hotels Scandinavia for Park          has rapidly become a favourite among business
rapidly transformed to a business hotel with the     under the Quality brand, and in 2008 a lease was        travellers, and obtained a young public at week-
help of a new and tough design, a large lobby with   signed with Scandic with regard to Skogshöjd.           ends. Similar developments, with focus on the
lounge atmosphere, and a modern selection of                                                                 conference segment, are expected in Skogshöjd.
food and drinks. The second phase started the        Restructuring completed                                     For Pandox, the value of the assets has risen
transformation of Skogshöjd where the lobby and      The process of repositioning and restructuring          significantly since they were acquired. The driving
conference product were upgraded. during both        Södertälje’s hotel market has thereby been com-         forces have been modern products with distinct
phases, the hotels were operated by Pandox with      pleted. a sales and operating system must now           positions that are operated in effective and well-
a management team to maintain the business           be developed, which will be done with Pandox as         developed management systems, which
processes. Quite quickly, several hotel chains       strategic partner for each respective hotel. The        increased the overall profitability of both hotels.

                                                                                                           After a successful repositioning, Park and Skogshöjd are
                                                                                                           now close to their goal of becoming the leading business
                                                                                                           and conference hotels in southern Stockholm.

                                                                                                                                                     Pan dox 2009     | 19
                               The Pandox Model in practice

       From a boring hotel complex to a creative meeting place – Hotel Berlin, Berlin

                                Which hotel concept                           Hotel Berlin was built in the 1950s and for a long
                                is successful in a city that                  time was one of the best-known hotels in the city.
                                                                              Further to several extensions, it had also become
                                has everything? The question arose
                                                                              one of Berlin’s largest hotels. But in terms of con-
                                when Pandox acquired the then Clarion         cept, design, spirit and profitability, the product
                                Hotel Berlin in the summer of 2006. Fur-      performed below par. The principal target group
                                ther to the fall of the wall, the market in   consisted of tourist groups from across the world.
                                Berlin became significantly tougher.          While the profitable business and conference seg-
                                Many new hotels had opened with               ment chose other hotels. Hotel Berlin subse-
                                                                              quently had a real challenge ahead in order to rec-
                                modern concepts, and were technically
                                                                              reate the hotel’s historical position.
                                built in accordance with state-of-the-
                                art criteria.                                 New position with own profile
                                                                              The first phase was to survey the market in terms

20 | Pa ndox 2009
                                                                                                         Cornelia Kausch
                                                                                                         Managing Director,
                                                                                                         Hotel Berlin, Berlin
                                                                                                         Cornelia was literally born and raised in the family’s
                                                                                                         hotel operations, educated at Lausanne, and has
                                                                                                         many years’ international experience from leading
                                                                                                         positions at hotels in the upper segment. Together
                                                                                                         with Pandox, Cornelia has created the new Hotel
                                                                                                         Berlin, Berlin – and made it the leading meeting place
                                                                                                         in the city. With her unique competence and leader-
                                                                                                         ship based on a will for change and strong visions,
                                                                                                         she has successfully led the transformation of the
                                                                                                         hotel in a spirit characterised by belief in the individual
                                                                                                         and the ability to combine effectiveness with pleasure.

of products and competition. The conclusion was           façade, entrance and lobby became important          Berlin’s leading and creative meeting place
that most of the newly built hotels held high inter-      communication instruments and created a              after three years’ hard work, the hotel’s overall
national standards with regard to technology and          fun-profile where the guests can now be seen,        re-profiling is complete. despite the extensive
product. at the same time, the products were              welcomed and met by a different hotel with an        refurbishment, profitability has risen by 40 percent
similar and lacked a local profile. They were             exciting design and atmosphere. The rooms            due primarily to having regained the position as an
more “brand standards” than with an own soul.             product has been improved and the F&B product        excellent conference hotel. Hotel Berlin, Berlin
Hotel Berlin’s new position originated here – to          has been developed to support the new market         now has the potential to become established as
reposition the hotel to the most creative meeting         profile. Considerable work has also gone into        one of Berlin’s leading conference hotels. The
place with a distinct bond to the city of Berlin’s his-   creating a new market profile and a modern graph-    driving force has been the local management
tory and name. With the help of an investment             ical profile program. Substantial resources have     with Cornelia Kausch as leader who, step by
program of EUR 10 million, the hotel has been             been put into recruiting and training new employ-    step, has positioned the hotel as one of the city’s
repositioned and upgraded. The existing confer-           ees, as well as enabling all employees, via work-    leading meeting places and definitely one of the
ence product has been developed and ineffective           shops, to participate in the development process.    most creative.
areas converted to modern meeting rooms. The

                                                                                                                 Hotel Berlin, Berlin welcomes guests as a creative and different
                                                                                                                 meeting hotel with exciting design and atmosphere.

                                                                                                                 Nothing has been overlooked. The investment program has
                                                                                                                 embraced everything from the facade to the room product.

                                                                                                                                                      Pan dox 2009     | 21
                                                       The Pandox Model in practice

              Brussels                            With the vision to create the best

Pandox acquired the                                    phase two, the lobby was developed with new            embodied business plan along with a long-term
property and operations of                             service products and a tough and tasteful design.      vision and objective, both for the owners and
                                                       Phase three included the meeting rooms, which          management. The results have been excellent.
Holiday Inn Brussels airport in 2006.
                                                       were given a new approach with a fun feeling. at       Holiday Inn was also the first hotel in Benelux to
The product is characterised by a                      the same time, the F&B offer was strengthened          be approved in accordance with IHG’s global
strong location close to the airport, in               with a modern look, and the pool and fitness area      brand standard launch. The development pro-
the centre of a growing business park.                 was upgraded to modern standards. To carry out         gram, which amounted to approximately EUR 8
Good size with 310 rooms, and a full-                  a change program of this size right in the middle of   million, also included major organisational devel-
service product with two restaurants,                  a rapidly declining market requires a stringent and    opments.

bar, pool and 15 conference rooms.

However, trends were on a downward slope, and
the hotel needed extensive refurbishment and
development. new leadership was required that
could inspire the staff and implement a modern
organisation. a number of strategic changes were
initially carried out at management level, and a
dialogue was started with the franchiser, Holiday
Inn, in order to establish stronger cooperation with
the IHG system. at board and management level,
a vision was established to create the best upper-
medium-priced hotel at Brussels airport, with key
words such as full service, attractive design and
high effectiveness.

Successful change step by step
The development program was started in the
summer of 2008. The first phase involved produc-
ing and implementing a new rooms concept. In

22 | Pa ndox 2009
                                     Charles Boelen
                                     Managing Director,
                                     Holiday Inn Brussels Airport
                                     Charles Boelen is the man behind the successful refurbishment of
                                     Holiday Inn Brussels Airport. Charles has an extensive background
                                     within the hotel industry and has previously worked at the Crowne Plaza
                                     Brussels City Centre. He is extremely results-oriented but always with
                                     an eye on the client’s best interests.
                                         Charles’ secret weapon is his smile, and it is not at all surprising
                                     that he introduced “the SKOJ experience” as part of the new hotel.
                                     SKOJ is indeed exactly the same as having a good time, it brings out
                                     our childhood emotions and stimulates creativity and productivity,
                                     encourages new knowledge and gets everyone to exert themselves
                                     just a little bit more. Many people would no doubt say that Charles is
                                     SKOJ personified.

Key words in the development program with Holiday Inn Brussels Airport have been full service, attractive design and high effectiveness.

SKOJ is an appreciated aspect of the new hotel.
SKOJ includes a number of features with much
humour and a twinklie in the eye approach.

              A new room concept was part of the
                                                                                                              Pan dox 2009     | 23
          first phase in the repositioning process.
                                                                       The Pandox Model in practice

                      Montreal                                        For both business and pleasure

    Pandox developed its strategy in 2007 to also                              Pure magic!                                    design, management and style, the hotel
    embrace north america. The reason was to estab-                            The InterContinental                           has created a new concept with more bou-
                                                                               Montreal, with 357 rooms, was                  tique atmosphere. The range of food and
    lish a broad geographic market in order to look for
                                                                               acquired in the summer of 2007. The hotel      drinks consists mainly of Canadian raw
    profitable acquisitions and development projects.                          was positioned as a traditional business       materials and production methods. The
    The strategy has so far been applied in clusters,                          hotel with international style. The product    management comes from Quebec, which
    where Montreal has become the base with two                                lacked a local profile and competed primar-    has strengthened the local embodiment
                                                                               ily within its own pitch. The InterContinen-   and created a more European feeling. The
    hotels and a total of nearly 1,000 rooms. Both
                                                                               tal’s competitors had a similar approach –     response has been purely magical! The
    acquisitions have been typical for Pandox where
                                                                               good hotels that one can find in any large     hotel has already received several awards.
    the hotels have required extensive development                             city. This became our strategic point of       So far, developments have embraced all
    with regard to product, profitability and leadership.                      departure. Through changes in layout,          rooms, corridors, lobby and the F&B offer.

The creation of a local profile has been one of the starting points
within the transformation of the InterContinental Montreal.

Both of Pandox’ hotels in Montreal are currently in the
middle of a transformation process – and the results
so far have exceeded the expectations.

    24 | Pa ndox 2009
                                                                                              Bernard Chênevert
                                                                                              Managing Director,
                                                                                              InterContinental Montreal
                                                                                              Educated at Lausanne, with more than 15 years’ experience
                                                                                              of the hotel industry and repositioning of hotels. Bernard was
                                                                                              furthermore responsible for the transformation of W Montreal,
                                                                                              which received the Hotel of the Year Worldwide 2007 award.
                                                                                                  Bernard’s recipe for success is based on the philosophy
                                                                                              that a good team is one that purposefully moves operations
                                                                                              forwards with continuously ongoing projects that render
                                                                                              operations more effective. To succeed requires close
                                                                                              contact and dialogue with the guests and to be able to
                                                                                              identify and adapt to their changing needs. It is a question
                                                                                              of constantly improving processes and offers so as to
                                                                                              exceed the guests’ expectations.

The next stage is to develop the conference
product and to continue the implementation of
a modern organisation.

On the way to becoming
something very special!
Hyatt, with 605 rooms, was acquired in 2008.
The hotel is strategically located in the centre of
the leisure and entertainment district, where the
city of Montreal is investing considerable capital to
strengthen the destination. The hotel’s vision is to
become Montreal’s best conference and festival

                                                         hotel. The dynamics that surround the city’s fes-   meeting room has really become something
                                                         tivals and entertainment must also be felt in the   very special! The same atmosphere will now be
                                                         hotel. The first phase in the repositioning pro-    implemented in the reception and lobby, starting
                                                         cess has been completed with the large ball-        in november 2010. Montreal will subsequently
                                                         room and the meeting rooms being upgraded           obtain next year an entertainment hotel that
                                                         with a new style and a high fun factor. The large   goes hand in hand with the city’s ambitions.

                                                        The InterContinental Montreal
                                                         exuding a timeless elegance
                                                             that provides an exciting
                                                                                                                                           Pan dox 2009   | 25
                                                         experience again and again.
                                                      Market communication

     Pandox’ hotel market day – one of the sector’s most important meeting places

Pandox arranges a hotel market day each           companies, politicians and media come together.
year, where current issues that affect the        They can listen to interesting presentations that
industry and sector are presented and dis-        increase knowledge and insight about the sector’s
cussed. The event has been held every             conditions, and are given the opportunity to net-
year since 1997 and interest is constantly        work and obtain a forecast and prognosis for next
growing. Recent years have seen a full            year. The evening always closes with a banquet in
house with around 300 people taking part,         a pleasant and relaxed environment. The event is
of which a large part is composed of inter-       held in november at the Hilton Stockholm Slus-
national guests.                                  sen, which apart from being owned by Pandox is
                                                  a conference hotel of the highest class. In recent
The hotel market day is a dynamic meeting place   years, items taken up have included the effect of
where hotel owners, operators, brand names,       low-price airlines on the hotel industry, the signifi-
banks, public opinion lobbyists, construction     cance of shopping tourism for a destination, as

                                                                                                           well as the signification of the term “brand profit-
                                                                                                           ability” and the business models it offers. The
                                                                                                           theme for 2009 was economic trends under the
                                                                                                           heading “The effects of the financial crisis on vari-
                                                                                                           ous players within the hotel industry”.
                                                                                                                The speakers are top-quality. In november, we
                                                                                                           had the honour of presenting annika Winsth, CFo
                                                                                                           of nordea, S. Kirk Kinsell, President of the EMEa
                                                                                                           InterContinental Hotels Group, Urban Jansson,
                                                                                                           company director with considerable knowledge of
                                                                                                           the hotel industry, as well as Torgeir Silseth, CEo
                                                                                                           of Choice Hotels Scandinavia. Staffan olsson,
                                                                                                           well-known handball profile and Swedish national
                                                                                                           handball team manager, also talked about differ-
                                                                                                           ent leadership styles and the characteristics of a
26 | Pa ndox 2009                                                                                          successful coach.
national team coach                              Regular information about
and Pandox’ marketing                            market trends and acquisitions
The Swedish Handball association, with the       When Pandox was formed in 1995, a newsletter         property market. Pandox Upgrade is therefore
support of Sweden’s olympic Committee and        was started in order to promote the Company vis-     issued on a regular basis. Three newsletters were
together with Pandox, entered into an agree-     à-vis the capital market prior to being floated on   published in 2009, covering market trends and cur-
ment in the spring of 2009 with Staffan olsson   the stock market. This publication later became      rent Swedish and international hotel market topics.
that enables him to stay in Sweden and con-      part of the public reports that the Company
tinue to lead the Swedish national team tog-     issued. despite the Company no longer being          You are most welcome to become a subscriber
ether with ola Lindgren. The agreement           listed on the Stockholm Stock Exchange, Pandox       Pandox Upgrade is free of charge and can
implies that the important national team man-    continue to maintain the flow of information to      be ordered from Pandox by telephone at
ager issue be solved regarding Sweden host-      those who are interested in the hotel and hotel-     +46 (0)8 506 205 50 or via
ing the World Championship 2011 and further
ahead to the olympic Games in London in
2012. The solution also implies that Staffan
olsson will continue as trainer at Hammarby                                                                                                                           PA N D O X

Handball. He will furthermore work with mar-

                                                                                                                                                                                                                                  NO. 2 • 2008
                                                                                                                            MAR K ET INFO R MATIO N FR O M PAND O X       ONE OF THE LEADING HOTEL PROPERTY COMPANIES IN EUROPE

keting issues at Pandox. Pandox is extremely
proud to be able to contribute to Staffan
remaining national team manager.

Staffan Olsson, National manager of the
Swedish handball team, and member
of the marketing group within Pandox.
                                                                                                                           Strong half-year despite
                                                                                                                           increase in supply

                                                                                                                           Hotel room of the future
                                                                                                                           without boundaries

                                                                                                                   Pandox communicates its acquisitions and
                                                                                                                   other changes in the hotel property portfolio
                                                                                                                   in separate fact sheets and folders.

                                                                                                                                                                        Pan dox 2009                                 | 27

          Overview                        2009 was gloomier than for a long time

The first half-year 2009 felt like a helter-        regard to how different price segments developed           Different patterns in New York and London
skelter. The sector experienced a sub-              over the year, all segments fell in RevPaR com-            new York and London are two markets that nor-
                                                    pared with the previous year, with the largest             mally follow each other in trends, although with a
stantial international downturn, with the
                                                    downturn being noted in the luxury segment. The            certain lage of time where new York as a rule is
american hotel industry at the head of              trends in all segments are the same as the national        first to show upward and downward phases. This
the economic cycle. a small improve-                average with lower occ upancy compared with                does not seem to apply this time. London’s aver-
ment could be perceived by the end of               last year and a fall in average rates – resulting in       age rates started to fall already in august 2008,
the summer in the United States, partic-            RevPaR for the whole of the United States closing          while new York maintained its prices up until Sep-
ularly in new York’s high-price segment,            at 17 percent down compared with 2008.                     tember the same year. In 2009, new York was hit
                                                         new York has been one of the world’s major            considerably harder with a significant fall in Rev-
where the downturn in occupancy
                                                    cities hardest hit in the downturn – albeit from a         PaR while London remained surprisingly stable in
started to subside. Whether this is a               high level. occupancy fell by 6 percent compared           the prevailing world at large. occupancy in Lon-
temporary break in trends or the                    with 2008 and average rates were 22 percent                don started to recover already in the summer of
first sign of a real recovery for the               lower than last year. occupancy for 2009 closed            2009, while new York’s volumes first started to
sector remains to be seen.                          at 77 percent and the average rate at USd 215.             recover in the autumn. RevPaR in new York fell by
                                                         In many large European cities, the first half-        26 percent for the full-year, but was only 4 percent
For the full-year, occupancy in the United States   year 2009 was somewhat hair-raising with a fall in         down in London compared with 2008.
closed at 55 percent, which is 9 percent lower      RevPaR of between 20 and 30 percent compared                    Most major European cities were under pres-
than the previous year. demand for hotel rooms      with 2008. The downturn has since continued,               sure during the year. In Western Europe, revenues
fell by 6 percent during the year. The number of    although at a slower pace, and a real change in            per room fell by 15 to 20 percent. Eastern Europe
available rooms increased during the period by 3    trends cannot yet be perceived.                            was hit even harder with falls in RevPaR of 40, 30
percent, and the fall in occupancy was thereby 9         one shining exception is London. occupancy for        and 26 percent respectively in Riga, Prague and
percent in total.                                   2009 closed at 82 percent, representing an increase        Warsaw for the full-year.
     average rates closed at USd 98, representing   of 2 percent compared with the previous year. How-              Berlin closed at 70 percent occupancy, which
a decline of 9 percent compared with 2008. With     ever, average rates fell by 5 percent for the full-year.   is 1 percent lower than 2008. The average rate

 The transactions market collapsed in 2009
 The transactions market ran completely              The global transactions market was a stagger-              turnover in the same period was USD 1.0 billion,
 out of steam in 2008, and did not show any          ing 78 percent lower in the first half-year 2009           implying a fall of 86 percent. Asia stood for the
 signs of improvement in 2009. Turnover for          compared with the same period in 2008.                     smallest transactions volume during the period
 the full-year will probably be in line with         Europe, the Middle East and Africa represented             with USD 0.9 billion, representing a decrease of
 2002, which has so far been the worst year          the largest downturn in transactions in absolute           55 percent compared with the year before.
 in the new millennium with a volume of 10           terms, where turnover closed at USD 1.9 billion                Of the total number of transactions, only 13
 billion dollars.                                    – representing a fall of 76 percent compared               exceeded USD 100 million, compared with 34 in
                                                     with the previous year. In the United States,              the first half-year 2008.

28 | Pa ndox 2009
was EUR 83, which is 8 percent below 2008.            recovery could be perceived in the last quarter        hotels, representing a decrease of 4 percent
RevPaR in Berlin was EUR 58 for the full-year         due to the large number of meetings held in the        against the previous year. Prices declined by 2
2009, representing a fall of 9 percent. Munich        city in conjunction with the international climate     percent for the year. Mölndal showed similar
closed 2009 with 68 percent occupancy, repre-         meeting in december. occupancy in 2009 was 64          patterns. RevPaR fell by 8 percent in Mölndal and
senting a decline of 3 percent, and average rates     percent in Copenhagen – a decline of 6 percent         by 6 percent in the centre of Gothenburg.
fell by 14 percent.                                   compared with the previous year. The average               Malmö managed quite well during the year,
     Paris managed less well than London and          rate was dKK 855, representing a decrease of 5         due partly to domestic demand, but also through
closed the year with occupancy at 74 percent,         percent against last year.                             the city taking a number of customers from the
which was 5 percent lower than the previous year.          The Swedish market was drawn down during          Copenhagen region. RevPaR retreated by 3 per-
Prices were under pressure and closed 9 percent       the year by the general international decline.         cent compared with 2008, due to both lower
below 2008 with an average rate of EUR 214.           Hardest hit was the high-price segment in the          prices and volume. The average rate was SEK
RevPaR was EUR 158, representing a fall of            city of Stockholm, followed by the municipality        878, compared with SEK 882 for the year 2008.
around 14 percent compared with 2008.                 of Stockholm.                                          The high-price segment in the city centre showed
     occupancy in Brussels declined by 6 percent           The municipality of Stockholm closed 2009         the same pattern as for the municipality in general.
compared with the previous year, and average          with a downturn in RevPaR of 10 percent com-               The Swedish regional cities, which as a rule
rates by 11 percent, resulting in RevPaR closing at   pared with 2008, due principally to lower average      lag slightly behind Stockholm, Gothenburg and
EUR 68 for the year, representing a fall of 16 per-   rates. The five-start segment lost 11 percent in       Malmö in the economic cycle, showed a general
cent. In antwerp, occupancy was 9 percent down        price in 2009, while occupancy slightly increased      downturn in RevPaR in the latter part of the year,
and average rates 10 percent down, giving a fall of   by 3 percent. occupancy closed at 79 percent           due primarily to pressure on prices.
18 percent in RevPaR.                                 while the average rate was SEK 1,518 in 2009.
                                                                                                             all market data concerns the calendar year 2009.
                                                           Gothenburg has so far managed the down-
General downturn in Scandinavia                       turn relatively well, due substantially to an inten-                                                   122.0
Copenhagen, which has seen quite a lot of addi-       sive entertainment summer with several interna-
tional capacity in recent years, was under consid-    tional concerts in the city. occupancy closed at 68
erable pressure for most of the year. a certain       percent for Gothenburg’s city-centre four-star


The lack of financial capital, the difficulty in      Many people probably believed that transaction         12.7 15.6 10.0
appraising economic outlooks and the general          volumes would start to increase in the autumn
feeling of uncertainty are the principal causes of    of 2009 as a consequence of “distressed                  00    01     02    03     04    05     06      07     08     09*
the continued low activity. Furthermore, high         assets” coming out onto the market. However,
yield requirements and low turnover have              it would seem so far that banks prefer to work                       Global transaction trends
resulted in the market becoming uncertain             with their customers and try to solve their prob-                   Year 2000-2009, USD billions
about the real level of market prices.                lems rather than force bankruptcies and to con-                            * YTD September 2009

                                                      sequently generate losses.                                           Source: Jones Lang LaSalle Hotels

                                                                                                                                                        Pan dox 2009        | 29
      Pandox owns hotels with strategic locations in Sweden,
      denmark, Belgium, Germany, Switzerland, United
      Kingdom, Bahamas and Canada.

    Hotel pro
      Pandox works with many different brand names
      – all are well-known and established, which provides
      a unique position and network.

30 | Pa ndox 2009

          Pan dox 2009   | 31
                                                                                                           Type of                            Number    Year of constr.          area
     Property                                           Operator/Brand name                                lease   Location                  of rooms   extension              (sqm)

     Radisson BLU arlandia Hotel, arlanda               Rezidor/Radisson BLU                               og       International airport         335   1979/89               15,260
     Hilton Stockholm Slussen                           Hilton                                             o        City centre                   289   1989                  18,416
     Scandic Skogshöjd, Södertälje                      Scandic                                            o        Södertälje/Central            225   1972/81/87            14,115
     Scandic Järva Krog, Stockholm                      Scandic                                            o        Stockholm north               215   1971/97               11,300
     Scandic Park, Stockholm                            Scandic                                            o        City centre                   201   1969/88               12,290
     Quality Hotel, nacka                               Choice Hotels Scandinavia/Quality                  og       Sickla-nacka                  164   1986                  10,830
     Mr Chip Hotel, Kista                               Kista Hotell aB                                    og       Stockholm north               150   1984                   5,517
     Quality Hotel Park Södertälje City                 Choice Hotels Scandinavia                          o        Södertälje/City centre        157   1890s/1984            10,292
     Scandic Upplands Väsby                             Scandic                                            o        Stockholm north               150   1986                   6,955
     TOTaL STOcKhOLM                                                                                                                            1,886                        104,975

     Scandic Crown, Gothenburg                          Scandic                                            o        City centre                  338    1988                  24,380
     Elite Park avenue Hotel, Gothenburg                Elite Hotels                                       og       City centre                  317    1950/74/90            21,998
     Scandic Mölndal, Gothenburg                        Scandic                                            o        City centre                  208    2000                  11,000
TOTaL GOThENBURG                                                                                                                                 863                          57,378

     Scandic Copenhagen                                 Scandic                                            o        City centre                   484   1970/99               31,500
     Scandic S:t Jörgen, Malmö                          Scandic                                            og       City centre                   288   1967/95               21,485
     Radisson BLU Hotel, Malmö                          Rezidor/Radisson BLU                               og       City centre                   229   1971/88               18,969
     Clarion Collection Hotel Twentyseven               Choice Hotels Scandinavia/Clarion                  og       City centre                   200   1913/55/65             7,568
     Scandic Star, Lund                                 Scandic                                            og       Central                       196   1991                  15,711
     Clarion Hotel Grand, Helsingborg                   Choice Hotels Scandinavia                          og       City centre                   164   1926/29/96             8,555
     Scandic Kramer, Malmö                              Scandic                                            o        City centre                   113   1875/1994              6,913
     TOTaL ÖRESUNd                                                                                                                              1,674                        110,701

     Regional cities and other location
     Scandic Grand, Örebro                              Scandic                                            o        City centre                  221    1985                  12,900
     Scandic Winn, Karlstad                             Scandic                                            og       City centre                  199    1984/90               10,580
     Scandic Swania, Trollhättan                        Scandic                                            o        City centre                  198    1918/83/89            10,399
     Clarion Hotel Grand, Östersund                     Choice Hotels Scandinavia/Clarion                  og       City centre                  176    1978                   8,766
     First Hotel Grand, Borås                           Utlanda Hotell aB/First Hotels                     og       City centre                  158    1972/87/90/97          9,593
     Scandic Plaza, Borås                               Scandic                                            og       City centre                  135    1988                  10,592
     Elite Stora Hotellet, Jönköping                    Elite Hotels                                       og       City centre                  135    1860/1930/95          11,378
     Clarion Hotel Plaza, Karlstad                      Plaza Hotell & Restaurang i Karlstad aB/Choice     og       City centre                  131    1929/91                5,907
     Scandic Hallandia, Halmstad                        Scandic                                            o        City centre                  154    1890s/1950/75/2007     7,617
     Scandic Billingen, Skövde                          Scandic                                            og       City centre                  107    1888/1939/65           7,743
     Vildmarkshotellet, Kolmården                       Parks & Resorts Scandinavia                        og       Resort                       213    1985                  10,300
     TOTaL REGiONaL ciTiES aNd
     OThER LOcaTiONS                                                                                                                            1,827                         95,475

     Crowne Plaza Brussels City Centre                  Pandox/Crowne Plaza                                Fr       City centre                  354    1910                  28,095
     Holiday Inn Brussels airport                       Pandox/InterContinental                            Fr       airport                      310    1971                  21,072
     Hotel BLooM!, Brussels                             Pandox                                             Io       City centre                  305    1976                  23,445
     Hilton Brussels City                               Pandox/Hilton                                      M        City centre                  283    1910/30               13,850
     Scandic Grand Place, Brussels                      Scandic                                            o        City centre                  100    1900/91                4,500
     Crowne Plaza antwerp                               Pandox/InterContinental                            Fr       Central                      264    1971                  18,340
     Scandic antwerp                                    Scandic                                            o        Ring road                    204    1974                  13,200
     Hotel Berlin, Berlin                               Pandox                                             Io       City centre                  701    1958/87/96            41,093
     Hilton Bremen                                      Hilton                                             o        City centre                  235    1991                  21,000
     Hilton dortmund                                    Hilton                                             o        Exhibition centre            190    1990                  12,500
     Scandic Lübeck                                     Scandic                                            o        Ring road                    158    1991                   9,700
     Hilton London docklands                            Hilton                                             o        docklands                    365    1991                  22,800
     Hyatt Regency, Montreal                            Pandox/Hyatt Hotels                                M        Central                      605    1976                  44,148
     InterContinental Montreal                          Pandox/InterContinental                            M        Central                      357    1991                  31,091
     Radisson BLU Hotel, Basel                          Rezidor/Radisson BLU                               og       Central                      205    1957/63/72            17,800
     Pelican Bay at Lucaya, Grand Bahama Island         Sundt GB Management/Pandox                         aM       Resort                       184                           7,983
     TOTaL iNTERNaTiONaL                                                                                                                       4,820                         330,617
     TOTaL PaNdOx                                                                                                                             11,070                         699,146
1)   Includes hotel, restaurant and conference areas.
2)   Excluding Copenhagen (included in Öresund).

o = Revenue-based, og = Revenue-based with guaranteed rent, or = Revenue and result-based, R = Result-based,
F = Fixed, Io = Internal revenue-based, M = Management agreement, Fr = Franchise, aM = asset management agreement

     Pandox’ hotel operations (hotels operated by Pandox)

32 | Pa ndox 2009
                                                                                                Tax asses-
     Of which    Offices   Shops    Other   Right of         Property                           ment value
hotels1) (sqm)    (sqm)    (sqm)    (sqm)   disposal         designation                        (SEK M)      Pandox’ market segment

                                                                                                                                                  Proportion of total
      15,260          –        –        –   Land leasehold   Benstocken 1:5                         132.7                                         number of rooms
      15,725      2,097        –      594   Land leasehold   Överkikaren 31                         365.9    Stockholm
      14,115          –        –        –                    Yxan 8                                  46.2    Number of hotels               9
                                                                                                             Number of rooms            1,886
      11,300          –        –        –   Land leasehold   Tanken 2                                77.6
                                                                                                             Property revenues, SEK M   167.7
      10,290          –        –    2,000                    Lönnen 30                              213.0                                                17%
                                                                                                             Operating net, SEK M       141.2
       8,090      2,705        –       35                    Sicklaön 363:2                          84.8
       5,517                                Land leasehold   Knarrarnäs 7                            50.2
      10,110        182        –        –                    Herkules 13                             35.6
       6,955          –        –        –                    Vilunda 6:48                            34.6
      97,362      4,984        –    2,629                                                         1,040.6                                         Proportion of total
                                                                                                                                                  number of rooms
      21,800          –     300     2,280                    Stampen 5:5                            170.0    Number of hotels               3
      21,998          –       –         –                    Lorensberg 28:4                        208.0    Number of rooms             863
      11,000          –       –         –                    Laken 1                                 55.2    Property revenues, SEK M    85.2
      54,798          –     300     2,280                                                           433.2    Operating net, SEK M        78.0

      25,200          –        –    6,300                    99943-2                                    –
      14,655          –    4,230    2,600                    S:t Jörgen 11                          222.0
      18,969                                                 Carolus 33                             123.0                                         Proportion of total
                                                                                                                                                  number of rooms
       7,568                                                 169 Vester Kvarter København               –
      15,711          –        –        –                    Porfyren 2                             102.4
                                                                                                             Number of hotels               7
       7,325          –    1,230        –                    Högvakten 8                             59.4    Number of rooms            1,674
       6,373          –      540        –                    Gripen 1                                73.8    Property revenues, SEK M   182.3
      95,801          –    6,000    8,900                                                           580.6                                                15%
                                                                                                             Operating net, SEK M       151.6

      10,900          –        –    2,000   Land leasehold   Mältaren 1                              50.6
      10,580          –        –        –                    negern 2                                49.0
      10,399          –        –        –                    Svan 7                                  48.5                                         Proportion of total
       8,766          –        –        –                    Borgens 6                               33.8                                         number of rooms
       9,365          –        –      228   Land leasehold   Prometeus 3                             31.9    Regional cities and
       7,961      2,631                                      Balder 6                                62.8    other locations
       9,379          –     899     1,100                    alhambra 1                              60.6    Number of hotels              11
                                                                                                             Number of rooms            1,827
       5,907          –       –         –                    Höken 1                                 39.6                                                15%
                                                                                                             Property revenues, SEK M   120.1
       6,813        360     427        17                    Erik dahlberg 14 & 15                   44.8
                                                                                                             Operating net, SEK M       104.3
       6,844          –       –       899                    Fjolner 7                               27.6
      10,300                                                 Marmorbrottet 1:18                      37.2

      86,914      2,991    1,326    4,244                                                           486.4
                                                                                                                                                  Proportion of total
                                                                                                                                                  number of rooms
      28,095          –        –        –                                                               –
      21,072                                                                                                 Number of hotels              16
      23,445                                                                                                 Number of rooms            4,820
      13,850          –        –        –                    Saint-Josseten-noode (1div) 032            –    Property revenues, SEK M   339.9
       4,500          –        –        –                                                               –    Operating net, SEK M       303.1
      16,780      1,560                     Land leasehold
      13,200          –        –        –                    24th div, Borgerhout 1st div, ar           –
      15,100          –        –    5,900                    Grundbuch altstadt IV, Blatt 60            –
                                                                                                                                                  Proportion of total
      11,300          –        –    1,200                    Grundbuch dortmund, Blatt 897              –                                         number of rooms
       8,800          –        –      900                    Grundbuch Lübeck, Blatt 54545              –    Hotel operations
      21,500          –        –    1,300                    HM Land Registry: SGL465779                –    Number of hotels                9
      29,000          –        –        –                                                               –    Number of rooms             3 326
      31,091                                                                                                 Operating revenues, SEK M 1,095.0
      17,000                         800                                                                     Operating profit, SEK M     177.7
     303,809      1,560        –   10,100                                                               –
     638,684      9,535    7,626   28,153                                                         2,540.8

                                                                                                                                                 Pan dox 2009    | 33

            Radisson BLU arlandia hotel , arlanda airport                      Quality hotel Nacka
            number of rooms: 335 operator: Rezidor/Radisson BLU                number of rooms: 164 operator: Choice Hotels Scandinavia/Quality

            hilton Stockholm Slussen                                           Mr chip hotel, Kista
            number of rooms: 289 operator: Hilton                              number of rooms: 150 operator: Kista Hotell aB

            Scandic Skogshöjd, Södertälje                                      Quality hotel Park Södertälje city
            number of rooms: 225 operator: Scandic                             number of rooms: 157 operator: Choice Hotels Scandinavia

            Scandic Järva Krog                                                 Scandic Upplands Väsby
            number of rooms: 215 operator: Scandic                             number of rooms: 150 operator: Scandic

            Scandic Park, Stockholm                                            Scandic crown, Gothenburg
            number of rooms: 201 operator: Scandic                             number of rooms: 338 operator: Scandic

34 | Pa ndox 2009

             Elite Park avenue hotel, Gothenburg                                                           clarion collection hotel Twentyseven, copenhagen
             number of rooms: 317 operator: Elite Hotels                                                   number of rooms: 200 operator: Choice Hotels
                                                                                                           Scandinavia/Clarion Collection

             Scandic Mölndal, Gothenburg                                                                   Scandic Star, Lund
             number of rooms: 208 operator: Scandic                                                        number of rooms: 196 operator: Scandic

             Scandic copenhagen, copenhagen                                                                clarion hotel Grand, helsingborg
             number of rooms: 484 operator: Scandic                                                        number of rooms: 164 operator: Choice Hotels Scandinavia

             Scandic S:t Jörgen, Malmö                                                                     Scandic Kramer, Malmö
             number of rooms: 288 operator: Scandic                                                        number of rooms: 113 operator: Scandic
                                                                   other locations
                                                                                     regional cities and

             Radisson BLU hotel, Malmö                                                                     Scandic Grand, Örebro
             number of rooms: 229 operator: Rezidor/Radisson BLU                                           number of rooms: 221 operator: Scandic

                                                                                                                                                                  Pan dox 2009   | 35
other locations
                  regional cities and

                                                                                                           other locations
                                                                                                                             regional cities and
                                        Scandic Winn, Karlstad                                                                                     Elite Stora hotellet, Jönköping
                                        number of rooms: 199 operator: Scandic                                                                     number of rooms: 135 operator: Elite Hotels

                                        Scandic Swania, Trollhättan                                                                                clarion hotel Plaza, Karlstad
                                        number of rooms: 198 operator: Scandic                                                                     number of rooms: 131 operator: Plaza Hotell & Restaurang
                                                                                                                                                   i Karlstad aB/Choice

                                        clarion hotel Grand, Östersund                                                                             Scandic hallandia, halmstad
                                        number of rooms: 176 operator: Choice Hotels Scandinavia                                                   number of rooms: 155 operator: Scandic

                                        First hotel Grand, Borås                                                                                   Vildmarkshotellet, Kolmården
                                        number of rooms: 158 operator: Västsvenska Hotellfastigheter aB/                                           number of rooms: 213 operator: Parks & Resort Scandinavia aB
                                        First Hotels

                                        Scandic Plaza, Borås                                                                                       Scandic Billingen, Skövde
                                        number of rooms: 135 operator: Scandic                                                                     number of rooms: 107 operator: Scandic

                  36 | Pa ndox 2009

                crowne Plaza Brussels city centre                                    crowne Plaza antwerp
                number of rooms: 354 operator: Pandox/Crowne Plaza                   number of rooms: 264 operator: Pandox/Crowne Plaza

                holiday inn Brussels airport                                         Scandic antwerp
                number of rooms: 310 operator: Pandox/Holiday Inn                    number of rooms: 204 operator: Scandic

                hotel BLOOM!, Brussels                                               hotel Berlin, Berlin
                number of rooms: 305 operator: Pandox                                number of rooms: 701 operator: Pandox

                hilton Brussels city                                                 hilton Bremen
                number of rooms: 283 operator: Pandox/Hilton                         number of rooms: 235 operator: Hilton

                Scandic Grand Place, Brussels                                        hilton dortmund
                number of rooms: 100 operator: Scandic                               number of rooms: 190 operator: Hilton

                                                                                                                                          Pan dox 2009   | 37

                Scandic Lübeck                                                       intercontinental Montreal
                number of rooms: 158 operator: Scandic                               number of rooms: 357 operator: Pandox/InterContinental Hotels

                hilton London docklands                                              Radisson BLU hotel, Basel
                number of rooms: 365 operator: Hilton                                number of rooms: 205 operator: Rezidor/Radisson BLU

                hyatt Regency Montreal                                               Pelican Bay at Lucaya, Bahamas
                number of rooms: 605 operator: Pandox/Hyatt Hotels                   number of rooms: 184 operator: Sundt GB Management/Pandox

38 | Pa ndox 2009
                                                                                              Hotel BLOOM!, Brussels

Financial overview  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .              40
Sensitivity analysis  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .            42
Valuation and tax situation  .  .  .  .  .  .  .  .  .  .  .  .  .                       44
Definitions  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .   45
Ten-year overview  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .               46
Quarterly data 2008–2009  .  .  .  .  .  .  .  .  .  .  .  .  .                          48

Financial statements 2009  .  .  .  .  .  .  .  .  .  .  .  .  .                         49
Report of the Board of Directors  .  .  .  .  .  .  .  .                                 50
Income statement and comments  .  .  .  .  .  .  .                                       52
Balance sheet and comments  .  .  .  .  .  .  .  .  .  .                                 54
Changes in equity  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .               56
Cash flow statement and comments  .  .  .  .  .                                          57
Accounting principles  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .                    58
Notes to the Accounts  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .                    60
Proposed disposition of earnings  .  .  .  .  .  .  .                                    66
Auditor’s report  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .          67

                                                                                                Pan dox 2009   | 39

Well-weighted risk profile

  Radisson BLU, Basel

Financial policy                                         creating an optimal due date structure and fixed          Financing strategy
The basic objective of Pandox’ financial opera-          interest periods. The long term objective is that         In order to gain flexibility and administrative bene-
tions is to achieve the lowest possible financing        the average fixed interest period be matched with         fits, Pandox has centralised when possible all bor-
costs while simultaneously limiting the risks            the average point in time when rental revenues,           rowing in the Parent Company. The objective is to
related to interest rates, foreign currencies and        based on underlying leases, are estimated to be           work with long-term framework agreements that
borrowings. The interest rate risk is the risk that      affected by a change in interest rates. Interest          provide scope for borrowing with varying maturi-
changes in interest rate levels which could nega-        swaps are mainly used for extension of fixed inter-       ties and fixed margins. derivative instruments
tively affect the Group’s results. Currency risk is      est rate periods.                                         such as swaps are preferably used for the exten-
the risk that the Group’s balance sheet and income                                                                 sion of fixed interest rate periods.
statement which could be negatively affected by          Currency risk/currency risk strategy
changes in the value of the Swedish krona. Finally,      Pandox is exposed to currency risks due to certain        Capital structure
the borrowing risk is the risk that external financing   of the Group’s assets being denominated in foreign        The objective for the Group’s capital structure is
may become more difficult to find.                       currencies. Pandox’ policy is to hedge the majority       that the equity/asset ratio long term should meet
                                                         part of its exposure by raising loans in the local cur-   internal and external financial strength require-
Interest rate risk/interest rate strategy                rency of each respective country and by hedging           ments in order to enable continued expansion.
Pandox’ basic objective is that interest rate expo-      with appropriate currency hedging instruments.
sure shall be adapted so that increased costs as a                                                                 Financing
result of reasonable changes in interest rates shall     Methodology and systems                                   as of 31 december, the Pandox Group’s interest
be compensated by higher revenue. The interest           Pandox has developed and implemented systems              bearing liabilities amounted to SEK 6,850.5 M
rate risk must therefore be limited through con-         and procedures to enable the continuous monitor-          (6,808.6). The loan portfolio has a spread due-
tracting periods of varying lengths with the aim of      ing and reporting of interest rate risk trends.           date structure with an average fixed-capital period

40 | Pa ndox 2009
of 7.5 years is without financial covenants and has     Equity capital                                         Working capital
an average fixed-interest period of 2.3 years (1.7).    The Group’s equity capital as per the balance          Pandox receives rental revenue in advance and
The average interest rate on loans at 31 decem-         sheet at 31 december 2009 amounted to SEK              pays most of its operating costs and interest
ber was 2.6 percent (3.6). The financing of hotel       2,996.7 M of which SEK 1,424.6 M was restricted        expense in arrears while hotel operations normally
properties is raised in each respective local cur-      equity and SEK 1,572.1 M unrestricted equity.          receive revenues in arrears. altogether the Group
rency in accordance with the financial policy. The          The Pandox Group’s cash flow before changes        normally has a relatively small working capital to
Group’s liquid funds amounted to SEK 326.4 M            in working capital, investments, other revenue and     finance.
(347.7). In addition, there was an unutilised credit    capital gains amounted to SEK 446.4 M (444.5).
facility of SEK 1,182 M. a facility of another SEK
300 M has been signed just after the end of 2009.

Year due                                         SEK        DKK         EUR        GBP         CHF           CAD       USD        Total    Share,% Interest, %2)
2010                                            834.9      449.8     1,578.3      251.9        62.6      137.7        447.1     3,762.3       54.9             1.6
2011                                            125.0          –        23.8          –           –      119.0            –       267.8        3.9             4.6
2012                                            225.0          –           –          –        62.6          –            –       287.6        4.2             4.2
2013                                             75.0          –       208.5          –           –          –            –       283.5        4.1             5.1
2014                                            350.0          –       417.0          –           –          –            –       767.0       11.2             3.2
2015 and later                                  350.0      140.1       614.0          –       125.2      253.0            –     1,482.3       21.7             3.9
Total                                         1,959.9      589.9     2,841.6      251.9       250.4      509.7        447.1     6,850.5      100.0             2.6
Share, %                                           29          9          40          4           4          7            7         100
average interest rate, %                          3.4        2.2         2.4        1.2         3.1        3.5          0.7          2.6
average interest rate period, years               2.6        1.5         2.3        0.1         3.1        4.1          0.1          2.3
1)   Converted to SEK.
2)   average interest rate in percent.

                                                                                                                                                Pan dox 2009   | 41

Factors that affect Pandox
Pandox’ operations and profitability are                location, market segment and brand name/opera-         who are active owners, the potential risk is consid-
affected by a number of factors, of which the           tor. Pandox’ strategy is to operate in a selected      erably lower than it has been in historic terms.
most important are described below.                     market segment, which in combination with its
                                                        hotels market expertise and systems, limits Pan-       Decisions by public authorities
The hotel market                                        dox’ agreement risk.                                   The hotel market can be affected by decisions
The development of Pandox’ earnings and the                                                                    made by public authorities. Two examples of such
value of its hotel properties are dependent upon        Partners                                               decisions are changes in taxation related to claims
trends within the hotel market, which in turn           Pandox’ agreement structure, with a large propor-      for travel expenses or rules concerning value
closely follow general economic developments.           tion of variable leases, means that the Company is     added tax both in general and for the hotel and
    Business travel and conference activities nor-      more dependent on the individual tenant/opera-         restaurant industry in particular.
mally increase during periods of high economic          tor’s business than other property companies. The
activity, while there is a corresponding decrease       Company’s strategy to actively cooperate with the      Property tax
during periods of low economic activity. There is       market’s most competitive and powerful opera-          Property tax on Pandox’ Swedish properties
thus a strong connection between economic               tors with well established brand names, reduces        amounts to 1.0 percent of the tax assessment
trends (GdP) and trends within the hotel market.        both the related operative and financial risks. Pan-   value. Changes in the tax rate or in the tax assess-
developments of GdP can be closely monitored,           dox’ largest tenants in terms of revenue are Scan-     ment value affect Pandox’ earnings. However, an
whereas factors that influence local hotel markets      dic, Hilton, Rezidor, Elite Hotels, InterContinental   increase only has a limited impact on the earnings
are significantly more complex. The most impor-         Hotels Group, Choice Hotels and First Hotels,          because many lease agreements are formulated
tant influential factors are local economic condi-      which together accounted for 85 percent of all         so that the property tax be passed on to the ten-
tions, the proportion of new hotel capacity in the      rental revenue in 2009.                                ant. Property tax on properties outside Sweden is
market, how well developed a market is concern-                                                                generally less than one per cent of the book value.
ing brand names and segments, currency fluctua-         Leasing level                                          about 59 percent of the property tax was debited
tions, aswell as extraordinary events.                  The leasing level as of 31 december was 99.8           to tenants in 2009, which means that the net effect
                                                        percent. Vacant space amounting to 1,700 sqm           on Pandox’ earnings amounted to SEK 24 M.
New capacity                                            consisted entirely of store and office premises.
new capacity introduced to the market implies an            If for any reason a hotel operator should          Site leasehold rents
increased risk for local players. depending upon        choose to terminate its lease agreement, Pandox        as of 31 december 2009, Pandox held seven
existing demand, additional hotel rooms through         may either select a new suitable operator as ten-      properties via site leasehold rights. Rents on these
the construction of a new hotel can lead to a rapid     ant or operate the hotel under its own manage-         properties are currently calculated in such a man-
negative influence on occupancy rates and aver-         ment. With Pandox’ specialist expertise in the         ner that a municipality that normally owns the land
age prices. To deal with this risk, Pandox has          hotel sector, the risk of vacant hotel space is seen   receives what is deemed to be a reasonable real
developed an information system that continually        as being extremely low.                                rate of interest on the estimated market value of
monitors planned new constructions within its               For other commercial space, which represents       the land in question. Site leasehold rents generally
market areas, and thus enabling Pandox to be            approximately 8.5 percent of total space in the        run for periods of 10 to 20 years.
prepared and proactive.                                 Company’s properties, Pandox is exposed to the
                                                        same fluctuations in supply and demand for prem-       Interest rates
Agreement structure                                     ises experienced by other property owners.             Interest expense is Pandox’ largest single cost
Pandox has a large proportion of variable leases,                                                              item. Fluctuations in interest rates will therefore
which represented 94 percent of total rental reve-      Changed risk potential                                 have an impact on Pandox’ earnings. In order to
nue in 2009.                                            Historically, the hotel industry and hotel property    limit its financial risk, the Company’s average fixed
     about 33 percent of variable leases contained      sector have always been associated with high           interest period is 2.3 years. The full effect of a
a guaranteed rent, meaning that 61 percent of           risk. The market has however changed signifi-          change in interest rates is accordingly not felt by
rental revenues were fully variable downwards. a        cantly in recent years. owners have become more        Pandox until after this period.
change in the occupancy rate and the average            professional with restructured companies and
room revenue consequently affects Pandox very           focused strategies, with a greater holistic view and   Currency risk
differently, depending on the direction of change.      specialised expertise. Reports from public com-        Pandox’ policy is to hedge the major part of its
     The choice of agreement is based on optimal        panies have substantially improved information         currency exposure, including shareholders’ equity,
distribution of cash flow between Pandox and the        about the transparency of the market. The propor-      by financing properties in local currencies and by
operator so that both parties are motivated to          tion of established strong brand names with effi-      hedging through means of appropriate currency
continuously increase the hotel property’s overall      cient operations has increased. For streamlined        instruments. Transaction exposure is limited as
profitability. Factors that may influence risks asso-   companies with own expertise in hotel operations,      revenue and costs are usually in the same cur-
ciated with variable leases are the hotel property’s    hotel properties and business development, and         rency.

42 | Pa ndox 2009
  Quality Hotel Park Södertälje City

Sensitivity analysis                               Earnings impact 2009, SEK
The table to the right illustrates how Pandox’     Change in rental revenue
 earnings are affected by changes in certain key   occupancy rate +5 percentage points                                                                                                    +53.0
                                                   occupancy rate –5 percentage points                                                                                                     –52.4
                                                   average room rate SEK +50                                                                                                              +34.0
                                                   average room rate SEK –50                                                                                                               –34.0
                                                   other commercial premises +/–5 %1)                                                                                                     +/–1.7

                                                   Change in other variables
                                                   Interest expense during the year +/–1 percentage point                                                                               +/–37.6
                                                   average interest expense +/–1 percentage point1)                                                                                     +/–68.5
                                                   Exchange rate fluctuation +/–5 %                                                                                                      +/–2.4
                                                   operating and maintenance costs +/–5 %                                                                                                +/–2.6
                                                   1)   The figures in the table are standardised so that the effects of changes in rental revenue and interest rates are immediate, although such
                                                        changes do not have full impact in reality until leases and loan agreements are renegotiated.

                                                                                                                                                                            Pan dox 2009     | 43

Hotel property
portfolio value
The valuation of hotel properties with their
specific characteristics demands extensive
knowledge and expertise of the hotel market
and hotel operations.

Cash flow valuation
Pandox continuously evaluates all of its hotel
properties in accordance with a valuation model
based on the properties’ cash flow, and which is
adapted to the characteristics specific to the hotel
    The cash flow calculation is built up from
underneath, with the property operator’s income
statement as the point of departure. This in turn is
                                                            Hotel Twentyseven, Copenhagen
based on assumptions as to how the underlying
hotel market will develop in terms of occupancy
and average rates, as well as how each specific
operator’s respective key ratios and figures
develop in this market. The operator company’s          The Company’s tax situation
results and forecasts, together with the formula-
tion of the agreement, provide underlying data to
estimate revenues, which subsequently constitute        The Pandox Group’s property holdings are                 exceeds book depreciation. Tax deduction for
the basis of the cash flow calculation. The value       reported for accounting purposes as fixed                annual depreciation of properties has normally
calculated is the present value of the next ten         assets. The consolidated book value as of                been made at the rate of 3 to 5 percent of a prop-
years’ cash flow, with a supplement for the pres-       31 december 2009 amounted to SEK                         erty’s acquisition cost. as a result, the amount of
ent value of the hotel properties’ residual value       8,735.8 M excluding equipment, of which                  fiscal depreciation exceeds that of book deprecia-
after ten years.                                        the consolidated surplus values amounted                 tion, and the difference between the book value
    The valuation model is based on the following       to SEK 1,694.1 M.                                        and the fiscal value of a property increases year on
assumptions:                                                                                                     year. The deferred tax liability generated by asset
•	 Changes in rental revenue during the calcula-        Accounting of deferred tax                               acquisitions has been calculated using the pres-
    tion period are based on the formulation of indi-   Pandox applies the Swedish Financial accounting          ent value method based on the shortest period of
    vidual agreements and on underlying factors.        Standards Council’s recommendation (RR 9) on             ownership estimated for each property, and corre-
•	 Inflation is assumed to amount to an average         income tax. In short, this recommendation implies        sponds to an average tax rate of approximately 10
    of 2.0 percent annually during the calculation      that both deferred tax liabilities and tax claims are    percent. This is based on the Swedish Financial
    period.                                             to be included in the financial statements and that      accounting Standards Council’s regulation for
•	 operating costs are assumed to increase in           any changes will affect the income statement as          assessing deferred tax upon pure intrinsic acquisi-
    line with inflation.                                deferred tax.                                            tions, where the tax effect is taken into consider-
•	 The rate of interest used in the calculation is           Pandox’ consolidated balance sheet as of 31         ation when calculating the acquisition price. The
    based on the real interest rate plus a risk pre-    december 2009 includes a deferred tax liability in       deferred tax relating to the difference between
    mium based on location, lease, and form of          the net amount of SEK 146.8 M corresponding to           book depreciation and fiscal depreciation is calcu-
    ownership.                                          the difference between a deferred tax liability of       lated based on the applicable tax rate.
                                                        SEK 363.0 M and a deferred tax claim of SEK                   The deferred tax claim pertains mainly to defi-
an internal valuation of Pandox’ 46 hotel proper-       216.2 M. The deferred tax liability refers mainly to     cit deductions. at the end of 2009, there were
ties in accordance with this method resulted in a       the estimated deferred tax based on the differ-          remaining deficit deductions totalling SEK 780 M
total value as of december 2009 that substantially      ence between the properties’ consolidated book           in the Swedish companies. The valuation of
exceeds the book value. In accordance with the          value and the fiscal residual value of each respec-      deferred tax claims is based on their potential utili-
Swedish Financial accounting Standards Coun-            tive legal unit. The difference in value has arisen as   sation against future taxable profits, and is calcu-
cil’s recommendation no 17, each individual prop-       an effect of surplus value upon acquisitions of          lated according to the applicable tax rate. Conse-
erty’s recovery value was reconciled with its book      property in companies, known as pure intrinsic           quently, no deficit deductions in non-Swedish
value, further to which it was noted that no write      acquisitions, as well as fiscal depreciation that        companies were reported at the end of 2009.
downs were necessary.

44 | Pa ndox 2009

                                                    Hotel Twentyseven, Copenhagen

definitions of key data
Property related key figures                           Financial key figures                                    Hotel market related key figures
Direct yield                                           Return on equity                                         Occupied rooms
operating net as a percentage of the average           Profit after net financial items and paid tax as a       number of sold room nights during a given period
book value of properties and hotel equipment           percentage of average equity.                            of time – normally one year.
during the year.
                                                       Return on total assets                                   Available rooms
Operating net                                          Profit after net financial items, plus financial costs   available room capacity during a given period of
Hotel property revenue less operating and mainte-      as a percentage of average total assets.                 time – normally one year.
nance costs, property tax, ground rent and other
property costs.                                        Interest coverage ratio                                  Occupancy rate
                                                       Profit before tax less depreciation and net financial    number of occupied rooms as a percentage of
Property related administration                        items (EBITda) in relation to net financial items.       the number of available rooms.
The portion of total administration costs that is
directly related to the management and develop-        Equity/asset ratio                                       Average room rate
ment of a property. other administration costs         Equity at the end of the year as a percentage of         Total revenue from sold rooms divided by the
include central administration and costs for           total assets.                                            number of occupied rooms.
administration of non-Swedish entities.
Total property revenue                                                                                          (Revenue Per Available Room)
The sum of rental revenue and other property                                                                    Total revenue from sold rooms divided by the
revenue.                                                                                                        number of available rooms.

                                                                                                                Market penetration
                                                                                                                The performance of an individual hotel in relation
                                                                                                                to the average of the market.

                                                                                                                GOP (Gross Operating Profit)
                                                                                                                net profit in hotel operator companies before
                                                                                                                depreciation, rent, net financial items and taxes.

                                                                                                                                                  Pan dox 2009   | 45
TeN-yeAR oVeRVIew

Condensed consolidated income statement
SEK M                                                        2000           2001           2002           2003           2004           2005            2006           2007           2008      2009
Property operations
Rental revenue                                              476.3          551.1          536.2          535.1          562.7           548.8          605.0          747.5          872.3     850.6
other property revenue                                       21.4           24.0           26.0           26.5           30.2            25.2           29.9           34.7           43.2      44.6
Total property revenue                                      497.7          575.1          562.2          561.6          592.9           574.0          634.9          782.2          915.5     895.2

operating and maintenance costs                             –88.9          –96.7          –93.2         –100.1         –118.7         –103.8         –111.5          –126.3         –132.8    –117.0
Operating net                                               408.8          478.4          469.0          461.5          474.2          470.2          523.4           655.9          782.7     778.2

depreciation1)                                              –45.8          –56.2          –63.2          –64.3          –70.3           –78.2          –91.3         –129.3         –163.8    –193.6
Income from property operations                             363.0          422.2          405.8          397.2          403.9           392.0          432.1          526.6          618.9     584.6

Hotel operations
operating revenue                                            28.2           39.7           60.1           81.3          216.8          250.2          420.0           788.8        1,105.3    1,095.0
operating costs1)                                           –25.5          –39.3          –58.2          –75.7         –204.4         –239.4         –407.7          –768.2       –1,084.5   –1,129.0
operating income hotel operations                             2.7            0.4            1.9            5.6           12.4           10.8           12.3            20.6           20.8      –34.0
Gross income                                                365.7          422.6          407.7          402.8          416.3          402.8          444.4           547.2          639.7      550.6

administrative costs1)                                      –31.8          –33.9          –34.5          –35.5           –39.3          –42.5          –51.9          –55.4          –64.6     –68.3
other revenue/realisation results                             1.9            8.6           28.8            7.4               –          444.4           39.9            3.4            6.9         –
Operating income                                            335.8          397.3          402.0          374.7             377          804.7          432.4          495.2          582.0     482.3

non-recurring financial income & costs                          –              –              –              –          –56.1              –              –               –              –      79.5
net financial items for current operations                 –150.7         –178.1         –171.0         –159.2         –148.4         –137.4         –166.4          –232.4         –294.7    –229.8
Income after financial items                                185.1          219.2          231.0          215.5          172.5          667.3            266           262.8          287.3     332.0

deferred tax2)                                              –27.0          –28.3          –44.2          –50.3          –47.6            36.8          –33.0          –23.5           34.2     –10.1
Tax                                                          –1.4           –0.2           –0.1           11.4           –0.2           –15.8          –31.4           –9.3          –22.2     –20.4
Income/loss for the year                                    156.7          190.7          186.7          176.6          124.7           688.3          201.6          230.0          299.3     301.5
1)   The depreciation rate on properties is 1.0 as of 2000 and amounted to SEK 193.6 M (163.8) in 2009 of which SEK 0.4 M (0.3) relates to administration.
2)   as of 2001, Pandox applies the Swedish accounting Standards Council’s recommendation in income tax (RR:9). Comparative figures for 2000 have been restated to take this into account.

46 | Pa ndox 2009
Condensed consolidated balance sheet
SEK M, as of 31 December                      2000      2001      2002      2003      2004      2005      2006      2007       2008         2009
Properties including hotel equipment        4,784.5   5,036.8   4,961.4   5,276.7   5,262.8   5,477.5   6,907.5   8,223.8    9,212.5      9,348.0
other fixed assets                             13.0       5.4       6.9       7.2       6.9     113.7     172.8     139.0      794.6        843.3
Current assets                                 61.9      37.1      29.5      34.6      58.6     201.7     174.4     223.1      241.2        158.4
Cash and bank                                  16.4      86.7     213.2     137.5      58.0     236.4     174.1     272.8      347.7        326.4
Total assets                                4,875.8   5,166.0   5,211.0   5,456.0   5,386.3   6,029.3   7,428.8   8,858.7   10,596.0     10,676.1

Equity and liabilities
Shareholders’ equity                        1,670.8   1,772.1   1,853.9   1,919.2   1,923.0   2,307.7   2,272.3   2,407.7    2,729.2      2,996.7
deferred tax liability                          8.8      37.0      83.5     135.9     184.3     208.5     279.7     352.5      335.2        363.0
Interest bearing liabilities                2,934.7   3,178.5   3,070.6   3,211.9   3,080.4   3,165.3   4,398.5   5,516.8    6,808.6      6,850.5
non-interest bearing liabilities              261.5     178.4     203.0     189.0     198.5     347.8     478.3     581.7      723.0        465.9
Total equity and liabilities                4,875.8   5,166.0   5,211.0   5,456.0   5,386.3   6,029.3   7,428.8   8,858.7   10,596.0     10,676.1

Key data
Property related key data
Book value of properties including
hotel equipment, SEK M                      4,784.5   5,036.8   4,961.4   5,276.7   5,262.8   5,477.5   6,907.5   8,223.8    9,212.5      9,348.0
Total property revenue, SEK M                 497.7     575.1     562.2     561.6     592.9     574.0     634.9     782.2      915.5        895.2
operating net, SEK M                          408.8     478.4     469.0     461.5     474.2     470.2     523.4     655.9      782.7        778.2
direct yield, %                                 9.6       9.6       9.5       9.3       9.1       8.5       8.1       8.6        9.2          8.4

Financial key data
Interest coverage ratio, multiple               2.5      2.6       2.6       2.7       2.2       3.2        2.9       2.7       2.5          4.5
Return on total assets, %                       8.1      8.0       7.8       7.1       7.0      14.2        5.9       6.1       6.2          5.5
Return on equity, %                            11.6     11.0      12.6      12.0      12.0      30.8       10.4      11.0      10.8         11.2
Equity/assets ratio, %                         34.6     34.3      35.6      35.2      35.7      38.3       30.6      27.2      25.8         28.1
Cash flow from current operations, SEK M      228.2    267.2     265.8     272.4     298.9     301.4      317.6     389.0     444.5        446.4
Investments excluding acquisitions, SEK M     101.3    149.1      67.3      60.8      70.5     165.1      282.6     274.9     269.3        312.5
Property acquisitions, SEK M                2,340.3    141.9         –     370.7         –     661.3    1,327.8   1,063.4     370.9        163.3

                                                                                                                                 Pan dox 2009   | 47

Quarterly data
                                                           2008                                          2009
SEK M                                           Q1        Q2           Q3         Q4         Q1         Q2           Q3         Q4
Total property revenue                       199.6     243.4        220.5      252.0      203.0      230.8        218.1      243.3
operating net                                165.3     209.3        187.7      220.4      171.0      201.9        188.9      216.4
Income from property operations              128.5     167.8        149.5      173.1      125.1      155.3        139.8      164.4
Income from hotel operations                 –15.8      18.4          8.0       10.2      –30.7        0.9         –1.6       –2.6
operating income                              96.4     170.0        142.6      173.0       77.5      138.6        123.3      142.9
net financial items                          –72.7     –67.7        –74.8      –79.5      –74.6      –57.4          6.9      –25.2
Income after financial items                  23.7     102.3         67.8       93.5        2.9       81.2        130.2      117.7
Income after tax                              17.2      77.6         51.5      153.0        0.7       57.0        114.5      129.3

                                                           2008                                          2009
SEK M                                       31 Mar    30 Jun       30 Sep     31 Dec     31 Mar     30 Jun       30 Sep     31 Dec
Properties including hotel equipment        8,165.3   8,547.9      8,778.1    9,212.5    9,309.9    9,319.1      9,228.8    9,348.0
other fixed assets                            324.2     466.2        558.6      794.6    1,214.2    1,180.6        869.4      843.3
Current assets                                167.8     231.2        253.7      241.2      166.0      202.6        181.9      158.4
Cash and bank                                 204.7     315.3        428.8      347.7      244.4      313.0        371.4      326.4
Total assets                                8,862.0   9,560.6     10,019.2   10,596.0   10,934.5   11,015.3     10,651.5   10,676.1

Equity and liabilities
Shareholders’ equity                        2,408.0   2,330.6      2,480.4    2,729.2    2,700.0    2,771.9      2,798.5    2,996.7
deferred tax liability                        357.0     370.6        386.6      335.2      336.0      352.4        363.2      363.0
Interest bearing liabilities                5,555.0   6,232.8      6,482.6    6,808.6    7,171.8    7,333.2      6,952.6    6,850.5
non-interest bearing liabilities              542.0     626.6        669.6      723.0      726.7      557.8        537.2      465.9
Total equity and liabilities                8,862.0   9,560.6     10,019.2   10,596.0   10,934.5   11,015.3     10,651.5   10,676.1

                                                           2008                                          2009
                                                Q1        Q2           Q3         Q4         Q1         Q2           Q3         Q4
direct yield, %                                 8.1     10.1           8.7        9.9        7.3        8.7          8.2        9.3

                                                           2008                                          2009
                                                Q1        Q2           Q3         Q4         Q1         Q2           Q3         Q4
Interest coverage ratio, multiple              1.8       3.1          2.4        2.8        1.7        3.7          2.8        6.1
Return on total assets, %                      4.1       7.6          6.1        7.2        2.9        5.2          7.2        6.4
Return on equity, %                            3.7      16.5         11.1       12.1        0.2       10.8         18.5       15.2
Equity/assets ratio, %                        27.0      24.4         24.8       25.8       24.7       25.2         26.3       28.1
Cash flow from current operations, SEK M      61.3     143.2        106.0      134.0       48.9      124.0        110.6      162.9
Investments excluding acquisitions, SEK M     56.8      52.4         84.3       75.8       86.3       76.8         78.1       71.3
Property acquisitions, SEK M                     –     370.9            –          –          –          –        163.3          –

48 | Pa ndox 2009
Financial statements 2009

Property revenues and total revenues
Pandox’ property revenues for 2009 amounted to SEK 895.2 M (915.5), which
for comparable units, including an adjustment for currency effects, represented
a decrease of 7 percent against 2008. The Group’s total revenue amounted to
SEK 1,778.5 M (1,804.1).

Cash flow
Cash flow from ongoing operations, excluding other revenue and capital gains,
amounted to SEK 446.4 M (444.5).

acquisitions during the year
Pandox became new owner of the hotel property Vildmarkshotellet in Kolmården
on 1 September. The purchase price for the property amounted to SEK 160 M
and includes 213 room, large conference facilities an a newly built spa.

The pre-tax profit for 2009, excluding other revenue and capital gains, amounted
to SEK 252.5 M (280.4). Profit after tax amounted to SEK 301.5 M (299.3).

                                                                                   Pan dox 2009   | 49
Financial StatementS

       Report of the Board of directors
       The Board of directors and Chief Execu-              Accounting principles                                   trends of 5 to 10 percent depending on their
       tive officer of Pandox aB, Swedish corpo-            Pandox does not apply IFRS. as an unlisted              location. Relatively few markets have shown
       rate registration number 556030-7885,                company, Pandox is not subject to the IFRS              any positive developments.
       hereby submit the annual report and con-             accounting requirements. Pandox applies the
       solidated accounts of the Company for                stipulations of the Swedish annual accounts             Pandox’ portfolio
       the financial year 2009.                             act and generally accepted accounting princip-          as indicated above, Pandox’ portfolio has
                                                            les, as well as the recommendations of the              developed better than the market. In general,
       Operations and strategy                              Swedish accounting Standards Board unless               the hotels in Malmö, Gothenburg and Swedish
       Pandox is one of Europe’s leading hotel pro-         otherwise stated.                                       regional cities have shown relatively stable
       perty companies. The Company has built up                                                                    trends compared with last year. Pandox’
       specialist expertise within the key areas of hotel   Ownership situation                                     Stockholm hotels have developed slightly less
       markets, hotel operations, hotel properties and      Pandox is since the beginning of 2004 owned             well than the market, although with relatively
       business development. active ownership, with         by the norwegian companies Eiendomsspar                 large individual differences among the hotels.
       well developed strategic plans for each hotel,       aS and Sundt aS through their wholly owned              The Hilton Stockholm Slussen and the newly
       enables the creation of good prerequisites for       Swedish company aPES Holding aB.                        refurbished Quality Hotel Park in Södertälje
       stable and improved cash flows, and thereby                                                                  came out best, while the hotels in northern
       growth in value for the shareholders.                The hotel market                                        Stockholm showed poorer trends.
            Pandox’ strategy is to own one type of pro-     Global demand in the hotel sector has fallen                 all Pandox hotels in Gothenburg have per-
       perty – hotel properties. Its focus is strengthe-    substantially since the end of 2008 as a result         formed better than the market as a whole, with
       ned by a prioritised market segment.                 of a troubled surrounding world with a broad            only a marginal downturn compared with last
            Pandox is to own large hotel properties in      financial crisis and subsequent economic                year. Pandox’ Malmö hotels have also shown
       Sweden, major locations in Europe, as well as        downturn.                                               strong trends, due partly to good demand in
       developing regions in Eastern Europe and                  RevPaR in the United States fell by 17 per-        conjunction with the U21 European Football
       north america.                                       cent during the year compared with 2008, and            Championship and considerable interest from
            The hotels should be in central and strong      was spread equally between price and volume.            denmark. In a tough Copenhagen market with
       locations such as city centres, airports and         The luxury segment was affected hardest, with           fewer international meetings the Scandic
       exhibition centres. The hotels should be in the      a fall in RevPaR of 24 percent. new York, which         Copenhagen and Clarion Collection Hotel 27
       upper medium to high price range and focus on        is placed in the beginning of the economic              reported relatively weak results for the period.
       the business and leisure segments.The hotels         cycle, recovered well in the last quarter of the             Pandox’ four German hotels have seen
       owned by Pandox are operated and marketed            year, and is relatively close to stabilisation of its   uneven trends. Hotel Berlin, Berlin, which is run
       by the most powerful players in the hotel mar-       revenues.                                               as own operations and has undergone sub-
       ket, who with well known brands and dynamic               Europe has experienced similar develop-            stantial repositioning, generated stable cash
       independent distribution channels create             ments as in the United States. The pattern nor-         flows compared with last year.
       strong market positions and thereby stable           mally progresses with a time-lapse of about six              The Hilton London docklands has mana-
       revenues.                                            months, but this time the markets have develo-          ged the downturn well, but has nonetheless
            Revenues are created by flexible agree-         ped almost in parallel. London managed well in          lost to competitive groups.
       ments related to the operator’s turnover and         2009, and declined by only 3 percent, which                  Pandox’ Belgian hotel portfolio has develo-
       results or through management agreements             was entirely attributable to lower average rates.       ped unevenly. Hotel Bloom and the Crowne
       where Pandox assigns a third party to manage         Berlin and Brussels both fell in volume and             Plaza Brussels City Centre have taken market
       operations, or alternatively through its own         price. Brussels came out worst with a decrease          shares. after a difficult start, the Hilton Brussels
       management. Irrespective of the form of opera-       in RevPaR of 16 percent, while Berlin declined          City has increased its volumes and is well-pla-
       tion, Pandox contributes via its active owner-       by 9 percent.                                           ced as 2010 gets under way. Similar patterns
       ship to increasing total cash flows and reducing          all of the major markets in Scandinavia            can be seen at the Scandic Grand Place. The
       risks.                                               experienced lower revenues during the year.             Holiday Inn Brussels airport was totally refur-
            at the end of the year, the Company’s port-     Copenhagen suffered already in the last quarter         bished during the year with the goal of beco-
       folio contained 46 hotel properties and nine         of 2008, and lost 11 percent in 2009 despite            ming Brussels airport’s best medium-priced
       hotel operations of which one asset manage-          several large international congresses at the           hotel. Revenues subsequently declined more
       ment assignment. Pandox owns and develops            end of the year. Stockholm and Helsinki fell by         than the market, but the hotel is showing good
       assets in Sweden, denmark, Belgium, Ger-             11 percent and around 16 percent respectively,          growth further to the launch of the new product
       many, Switzerland, the United Kingdom,               due primarily to less international travel.             in the autumn. In antwerp, the market is under
       Canada and the Bahamas.                                   The Swedish regional cities, which are nor-        considerable pressure in both price and
                                                            mally stable, also experienced downward                 volume. The Pandox-owned Scandic antwerp

50 | Pa ndox 2009
has managed to maintain volumes, while the              Financing and cash flow                              administrative court. The case has been put on
Crowne Plaza antwerp, which is run as own               net financial items relating to current opera-       hold awaiting the Supreme administrative
operations, has lost market shares due prima-           tions for the period January–december 2009           Court’s judgement in another (non-Pandox
rily to a fall in the number of meetings in the city.   amounted to SEK –229.8 M (–294.7).                   related) case. The Company is of the opinion
after a good start, revenues within Montreal’s               The Group’s interest-bearing liabilities        that all transactions and claims have been
hotel market decreased by almost 14 percent             amounted as of 31 december 2009 to SEK               made in accordance with applicable laws and
in 2009. Hyatt performed better than the mar-           6,850.5 M (6,808.6). The loan portfolio has a        therefore no reserves have been booked in the
ket, due mainly to greater focus on revenue             spread due-date structure with an average            Groups’ accounting.
management, while the InterContinental deve-            fixed-capital period of 7.5 years and an average
loped less well due entirely to the hotel’s total       fixed-interest period of 2.3 years. The average      Personnel
refurbishment during the year.                          interest rate on loans at 31 december 2009           Central administration counted 18 employees
                                                        was 2.63 percent. Financing of Swedish pro-          as at 31 december. Figures concerning aver-
Revenues and operating net                              perties has been made in Swedish kronor              age number of employees, as well as salaries
– property operations                                   (SEK), while properties outside Sweden have          and other remuneration are set out in note 16.
Property management revenues for the year               essentially been financed in each respective
amounted to SEK 895.2 M (915.5). For compa-             local currency.                                      The work of the Board of Directors 2009
rable units and currencies, the portfolio decli-             available liquid funds, including unutilised    The Board of directors of Pandox has been
ned by –7 percent. This fall is principally attribu-    bank overdraft and credit facilities totalling SEK   composed of seven members since the annual
table to the generally poorer underlying hotel          1,182 M amounted to SEK 1,508 M (1,521).             General Meeting of Shareholders held in 2009.
economic climate in all of Pandox’ sub-mar-             Further to the end of the year, agreements for       during the year, the Board has held four ordi-
kets. In particular, the refurbishment projects at      further credit facilities for a total of SEK 300 M   nary meetings in accordance with the establis-
the InterContinental Montreal and Holiday Inn           have been signed. available liquid funds, inclu-     hed annual agenda. The meetings have revie-
Brussels airport simultaneously reduced the             ding unutilised bank overdraft and credit facili-    wed and discussed external and internal report-
revenue capacity in the portfolio during the            ties now amount to SEK 1,808 M.                      ing of operating results and the Company’s
year. However, at the hotel property level in                Cash flow before changes in working capi-       financial position as well as various business
each respective sub-market, there are relatively        tal and investments, excluding non-recurring         matters. other important items that are regu-
large differences in results depending on their         items and tax, amounted to SEK 446.4 M               larly studied and reviewed each year are mar-
location, market segment, type of agreement             (444.5).                                             keting, strategy, finance, and budget issues.
and operator. Property costs excluding depre-
ciation amounted to SEK 117.0 M (132.8).                Investments                                          Parent Company
    The operating net declined in total by SEK          The Pandox Group’s investments, excluding            Property activities in the Group’s property-
4.5 M to SEK 778.2 M (782.7). For comparable            acquisitions, amounted for the year to SEK           owning companies are administered by staff
units, the operating net decreased by SEK 16.5          312.5 M (269.3). Investments pertained prima-        employed by the Parent Company, Pandox aB.
M, or by 2.1 percent. direct yield for the period       rily to refurbishment programs at the Holiday        The cost of these services has been invoiced to
was 8.4 percent (9.2).                                  Inn Brussels airport, Hotel Berlin, Berlin, Inter-   the Group’s subsidiaries. Invoicing in 2009
                                                        Continental Montreal, Hyatt Regency Montreal         amounted to SEK 51.1 M (55.2). The profit for
Revenues and income – hotel operations                  and the Radisson Blu Basle, as well as product       the year amounted to SEK 400.0 M (–161.1).
Total revenues from hotel operations amounted           improvements in a large number of properties.
to SEK 1,095.0 M (1,105.3). For comparable                    The net book value of hotel properties,        Outlook for 2010
units and adjusted for currency effects, reve-          including furniture, fixtures and equipment,         Revenues in the hotel sector are expected to
nues fell by about 13 percent, due primarily to         amounted to SEK 9,348.0 M (9,212.5). The             be gradually more stable in 2010. If one studies
the weaker hotel economic climate and a short-          market value of the hotel properties significantly   new York, which is placed in the beginning of
fall in revenues and profits subsequent to exten-       exceeds their book value.                            the economic cycle, and assuming that reve-
sive refurbishments at the InterContinental                                                                  nues will even out during the spring, the prere-
Montreal and Holiday Inn Brussels airport. The          Taxes                                                quisites are that the same pattern will spread to
overall loss from hotel operations amounted to          The Swedish Tax agency has in a reassess-            Europe during the summer and autumn –
SEK –34.0 M (20.8).                                     ment notice dated october 2007, decided to           which is good news. at the same time, prices
                                                        increase the assessed income of a number of          are under pressure, which will reduce producti-
Income                                                  Pandox’s subsidiaries by in total SEK 430 M          vity and subsequently profitability. Pandox fore-
The Group’s profit for 2009 before tax and              (corresponding tax effect of SEK 120.4 M) as a       casts that the Company will continue to pro-
excluding non-recurring items amounted to               consequence of the sale of real estate through       duce stable cash flows in 2010.
SEK 252.5 M (280.4).                                    non-Swedish subsidiaries carried out in 2005.
                                                        The decision has been appealed to the county

                                                                                                                                                    Pan dox 2009   | 51
Financial StatementS

       Income statement
                                                                       Group              Parent Company
       SEK M                                                        2009          2008      2009       2008
       Property operations
       Rental revenue                             note 1, 2, 3     850.6         872.3         –          –
       other property revenue                                       44.6          43.2         –          –
       Total property revenue                                      895.2         915.5         –          –

       Property costs                                             –117.0        –132.8         –          –
       Operating net                                               778.2         782.7         –          –

       depreciation as per plan                        note 4     –193.6        –163.8         –          –
       Income from property operations                             584.6         618.9         –          –

       Hotel operations
       operating revenue                                          1,095.0       1,105.3        –          –
       operating costs                                           –1,129.0      –1,084.5        –          –
       operating income from hotel operations    note 1, 2, 16      –34.0          20.8        –          –
       Gross income                                                 550.6         639.7        –          –

       administrative costs                     note 4, 15, 16     –68,3         –64.6     –62.3      –59.7
       other revenue                                    note 5         –           6.9      51.1       55.2
       Operating income                                            482.3         582.0     –11.2       –4.5

       Interest income                                 note 6       25.5          12.6     457.8      234.3
       Interest expense                                           –256.5        –310.5    –202.9     –279.8
       other financial income and costs                note 6       80.7           3.2     188.1     –168.2
       Net financial items                                        –150.3        –294.7     443.0     –213.7
       Income before tax                                           332.0         287.3     431.8     –218.2

       Tax                                             note 7      –20.4         –22.2      25.3          –
       deferred tax                                    note 7      –10.1          34.2     –57.1       57.1
       INCOME FOR THE YEAR                                         301.5         299.3     400.0     –161.1

       Specification of external revenue
       Revenue from property operations                             895.2         915.5
       of which internal rentals                                   –211.7        –216.7
       Revenue from hotel operations                              1,095.0       1,105.3
       Total external revenue                                     1,778.5       1,804.1

52 | Pa ndox 2009
Comments on the income statement
Rental revenue                                      Maintenance costs                                    Operating net
Rental revenue pertains to hotel premises, hotel    Maintenance costs are costs incurred to main-        The operating net for 2009 amounted to SEK
furniture and equipment, and other commercial       tain the standards of buildings and equipment.       778.2 M, representing a decrease of SEK 4.5 M.
premises. Rental revenue for 2009 decreased         Pandox’ leases are in most cases structured          direct yield amounted to 8.4 percent (9.2).
in relation to the previous year and amounted to    sothat the tenants – the hotel operators – are
SEK 850.6 M (872.3).                                responsible for the greater part of interior main-   Hotel operations
                                                    tenance of the properties.                           For accounting purposes, the hotel operations
Other property revenue                                                                                   conducted by Pandox are charged with internal
other property revenue is primarily comprised       Ground rent                                          rent. The internal rent is linked to the operator’s
of costs debited for heat, electricity and pro-     a total of seven properties owned by Pandox          revenue and based on what are deemed to be
perty tax.                                          are held under site leasehold rights. The condi-     market conditions. The internal rent is debited
                                                    tions and maturities in all cases are based on       to hotel operations and credited to revenue in
BReaKDOWn OF OtHeR PROPeRtY ReVenUe                 prevailing market terms.                             property management.
SEK M                             2009    2008                                                               In 2009 no hotel operations was acquired.
Payment for operating costs       10.3      9.5     Property tax                                         In May an agreement was settled with Choice
Invoicing of property tax         34.3     33.7     Pandox’ Swedish hotel properties are liable to       Hotels Scandinavia regarding the their take
Total                             44.6     43.2     property tax at the rate of 1 percent of the tax     over of the hotel operations in Quality Hotel
                                                    assessment value. Properties located outside         Park Södertälje. With that, eight hotel opera-
Property costs                                      Sweden are subject to varying percentages            tions remains in Pandox portfolio at the end of
Operating costs                                     and underlying basis.                                2009 of which five were directly operated by
operating costs are costs that directly pertain                                                          Pandox and three via management contracts.
to the operation of the properties, such as heat,   Other costs
water, electricity, and maintenance. Costs are      These costs include costs of legal counsel on        Administrative costs
reported gross, meaning that the portion of         leasing matters, insurance premiums, and             administrative costs relate to central adminis-
costs debited to tenants is reported as revenue     costs of leasing external premises.                  tration, as well as foreign hotel property admi-
under the heading other Property Revenue,                                                                nistration. all central administrative staff is
                                                    BReaKDOWn OF PROPeRtY cOStS
and that total costs are reported among costs                                                            based at the Stockholm office. The remunera-
                                                    SEK M                              2009     2008
in their full amount.                                                                                    tion of staff and auditors is set out in notes 15
                                                    operating costs                    21.9     23.6
                                                                                                         and 16.
                                                    Maintenance costs                  30.9     33.5
                                                    Ground rents                        1.5     12.7
                                                    Property tax                       58.5     57.2
                                                    other costs                         4.2      5.8
                                                    Total                             117.0    132.8

                                                                                                                                                 Pan dox 2009   | 53
Financial StatementS

       Balance sheet
                                                                                                                 Group                       Parent Company
       SEK M                                                                                                  2009          2008               2009       2008
       Fixed assets
       Tangible fixed assets
       Properties                                                                    note 8               8,735.8         8,665.8                  –            –
       Equipment                                                                     note 9                 613.5           547.4                1.3          0.7
                                                                                                          9,349.3         9,213.2                1.3          0.8

       Financial fixed assets
       Shares and participations in subsidiaries                                    note 10                       –            –             4,270.6      3,835.6
       other shares and participations                                              note 11                   610.2        544.4                   –            –
       amounts due by Group companies                                                                             –            –             3,885.3      2,965.5
       other long-term receivables                                                                             15.6         15.0                14.7         14.0
                                                                                                              625.8        559.4             8,170.6      6,815.1

       deferred taxes recoverable                                                                           216.2           234.5                   –        57.1
       Total fixed assets                                                                                10,191.3        10,007.1            8 ,171.9     6,872.9

       Current assets
       Inventories                                                                                              8.2          6.5                   –            –
       accounts receivables                                                                                    99.7         81.0                   –            –
       Tax receivables                                                                                          5.3            –                   –            –
       other receivables                                                                                       16.9        122.6                 5.6          5.5
       Prepaid costs and accrued revenue                                                                       28.3         31.1                 1.5          1.5
       Cash and bank                                                                                          326.4        347.7               199.3        111.4
       Total current assets                                                                                   484.8        588.9               206.4        118.4
       TOTAL ASSETS                                                                                      10,676.1        10,596.0            8,378.3      6,991.3

       Comments on the balance sheet
       Properties and equipment                            the end of the year, the book value of the pro-        quarterly and monthly in advance, amounts
       one hotel property was acquired in 2009.            perties, including hotel furniture, fixtures and       outstanding at year-end mainly comprise
       depreciation of properties amounted to SEK          equipment, amounted to SEK 9,348.0 M.                  accrued revenue-based rents.
       108.8 M (98.6), and the year’s investments to       other items consist of administration equip-
       SEK 224.1 M (138.3). The book value of equip-       ment with a book value of SEK 1.3 M.                   Other receivables
       ment, including hotel furniture and fixtures                                                               Short-term receivables such as those pertain-
       amounted to SEK 613.5 M (547.4). deprecia-          Other long-term receivables                            ing to costs that are to be debited to external
       tion amounted to SEK 85.2 M (65.5) and invest-      Pertain to a long-term promissory note and to a        parties.
       ments to SEK 89.4 M (131.0).                        pledged deposit.
           The greater part of the book value of furni-                                                           Prepaid costs and accrued revenue
       ture, fixtures and equipment, representing SEK      Inventories                                            This item is comprised mainly of prepaid costs
       613.5 M, pertains to that used by hotel opera-      Relate to stocks of consumables in the hotel           for the following year, such as insurance premi-
       tors. In certain cases, these items are included    operations.                                            ums and rents.
       as an unspecified portion of rent, and in other
       cases as a separate rental charge. When these       Trade accounts receivable                              Cash and bank deposits
       items are included in rental revenues, Pandox       Pandox’ accounts receivable normally consists          The liquidity of the Pandox Group is primarily
       includes their value in the property value used     of rental receivables and trade receivables in         managed by the Parent Company through a
       to calculate direct yield from the properties. at   hotel operations. Since rent is generally paid         central bank account structure where liquidity

54 | Pa ndox 2009
                                                                                                              Group                       Parent Company
SEK M                                                                                                      2009          2008               2009       2008
Restricted equity
Share capital                                                                                           373.5            373.5             373.5        373.5
Restricted reserves                                                                                   1,051.1          1,050.2             830.0        830.0
                                                                                                      1,424.6          1,423.7           1,203.5      1,203.5

Unrestricted equity
Unrestricted reserves                                                                                 1,207.6          1,006.2             129.1        219.4
Profit for the year                                                                                     301.5            299.3             400.0       –161.1
                                                                                                      1,572.1          1,305.5             529.1         58.3
Total shareholders’ equity                                                                            2,996.7          2,729.2           1,732.6      1,261.8

deferred tax liabilities                                                         note 7                  363.0          335.2                  –            –
                                                                                                         363.0          335.2                  –            –

Liabilities to credit institutions                                             note 11               6,850.5           6,608.6           4,199.7      4,559.2
Trade accounts payable                                                                                  87.3             100.1              21.3         23.2
Liabilities to Group companies                                                                             –                 –           2,335.4        987.5
Tax liabilities                                                                                         13.9              14.4                 –            –
other liabilities                                                                                       98.3             232.2               3.0          0.1
accrued expenses and prepaid revenue                                           note 13                 266.4             376.3              86.3        159.5
Total liabilities                                                                                    7,679.4           7,531.6           6,645.7      5,729.5
TOTAL EQUITY AND LIABILITIES                                                                        10,676.1          10,596.0           8,378.3      6,991.3

Pledged assets                                                                 note 14                4,961.9          5,239.2              12.2         12.2
Contingent liabilities                                                         note 14                    2.5              2.3           2,675.3      2,221.6

is assembled in a joint interest-bearing transac-     amounting to SEK 3,762.3 M carries a fixed               Contingent liabilities
tion account. Surplus liquidity can also be           interest rate for a period of less than one year.        The Parent Company’s contingent liabilities
invested as a fixed term bank deposit. In addi-       Further details are set out in the Financial over-       refer mainly to guarantees to banks with regard
tion, Pandox has unutilised credit facilities for a   view section on page 40.                                 to subsidiaries’ debts.
total of SEK 1,182 M.
                                                      Deferred tax liability
Restricted reserves Parent Company                    In 2009 the deferred tax items are accounted for
opening balance adjusted for non exercised            on a gross basis. Further details are set out in
options.                                              the Pandox’ Tax Situation section on page 44.

Liabilities to credit institutions                    Accrued expenses and prepaid income
as at 31 december 2009, Pandox’ total inte-           The amount pertains essentially to accrued
rest-bearing liabilities amounted to SEK              interest expense and prepaid rent.
6,850.5 M, spread over six lenders and seven
currencies. Because financing is arranged             Pledged assets
mainly through long-term credit agreements,           This item refers mainly to property mortgages
the majority of the debt is considered as long-       pledged to credit institutions as collateral for
term. as regards fixed interest rates, debt           loans.

                                                                                                                                                    Pan dox 2009   | 55
Financial StatementS

       Changes in equity
                                                                                                          Restricted              Unrestricted                        Profit
       SEK M                                                               Share capital                   reserves                  reserves                  for the year                      Total
       Group 2008
       opening balance                                                               373.5                     886.8                      917.4                      230.0                    2,407.7
       appropriation of profits                                                          –                         –                      230.0                     –230.0                          –
       other changes                                                                     –                      –1.9                        1.9                          –                          –
       dividend                                                                          –                         –                     –161.9                          –                     –161.9
       Group contribution                                                                –                         –                          –                          –                          –
       Translation differences including tax effect                                      –                     165.3                       18.8                          –                      184.1
       Profit for the year                                                               –                         –                          –                      299.3                      299.3
                                                                                     373.5                   1,050.2                    1,006.2                      299.3                    2,729.2

       Group 2009
       opening balance                                                               373.5                   1,050.2                    1,006.2                      299.3                    2,729,2
       appropriation of profits                                                          –                         –                      299.3                     –299.3                          –
       other changes                                                                     –                     –69.4                       69.4                          –                          –
       dividend                                                                          –                         –                          –                          –                          –
       Group contribution                                                                –                         –                          –                          –                          –
       Translation differences including tax effect                                      –                      70.3                     –104.3                          –                      –34.0
       Profit for the year                                                               –                         –                          –                      301.5                      301.5
                                                                                     373.5                   1,051.1                    1,270.6                      301.5                    2,996.7

       Parent Company 2008
       opening balance                                                               373.5                      830.0                     394.4                      –13.1                    1,584.8
       appropriation of profits                                                          –                          –                     –13.1                       13.1                          –
       dividend                                                                          –                          –                    –161.9                          –                     –161.9
       Group contribution                                                                –                          –                         –                          –                          –
       Profit for the year                                                               –                          –                         –                     –161.1                     –161.1
                                                                                     373.5                      830.0                     219.4                     –161.1                    1,261.8

       Parent Company 2009
       opening balance                                                               373.5                      830.0                     219.4                     –161.1                    1,261.8
       appropriation of profits                                                          –                          –                    –161.1                      161.1                          –
       dividend                                                                          –                          –                         –                          –                          –
       Group contribution                                                                –                          –                      70.8                          –                       70.8
       Profit for the year                                                               –                          –                         –                      400.0                      400.0
                                                                                     373.5                      830.0                     129.1                      400.0                    1,732.6

       Translation differences include a tax effect of SEK 43.5 M (–89.6) regarding currency hedging of non-Swedish operations. The number of shares as at 31 december 2009 amounted to 24,900,000 with
       one vote per share and a nominal value of SEK 15 per share.

56 | Pa ndox 2009
Cash flow statement
                                                                                                     Group                        Parent Company
SEK M                                                                                             2009          2008                2009       2008
Current operations
Profit/loss before financial items                                                                561.7        582.0               –11.2       –4.5
depreciation                                                                                      194.0        164.1                 0.4        0.3
Interest received                                                                                   4.6         12.6               457.8      234.3
Interest paid and other financial costs                                                          –247.0       –307.2               –88.4     –467.7
Tax paid                                                                                          –26.2        –14.8                   –          –
Cash flow from current operations before change in working capital and investments                487.1        436.7               358.6     –237.6

Change in working capital
Increase/decrease (±) in operating receivables                                                     87.5        –18.0                96.0       –2.2
Increase/decrease (±) in operating liabilities                                                    –98.8         45.7             1,349.2      365.9
Total change in working capital                                                                   –11.3         27.7             1,445.2      363.7
Cash flow from current operations after change in working capital and investments                 475.8        464.4             1,803.8      126.1

Investment operations
Investment shares and participations                                                              –65.7        –544.4             –434.9     –544.8
Investments in properties and equipment                                                          –313.5        –269.3               –1.0       –0.2
acquisition of properties and equipment                                                          –163.3        –370.9                  –          –
Sale of fixed assets                                                                                  –           1.8                  –        2.7
Total investments                                                                                –542.5      –1,182.8             –435.9     –542.3
Cash flow after investments                                                                       –66.7        –718.4            1,367.9     –416.2

Financing operations
Change in financial fixed assets                                                                      –            –              –920.5      –50.9
Change in interest-bearing loans                                                                   42.0        970.9              –359.5      665.0
dividend                                                                                              –       –161.9                   –     –161.9
Cash flow from financing operation                                                                 42.0        809.1            –1,280.0      452.2
Change in liquid funds                                                                            –24.7         90.6                87.9       36.0

Liquid funds at the beginning of the year                                                         347.7        272.8               111.4       75.4
Exchange rate difference in liquid assets                                                           3.4        –15.7                   –          –
Liquid funds at the end of the year                                                               326.4        347.7               199.3      111.4
Change in liquid funds                                                                            –24.7         90.6                87.9       36.0

Comments on the cash flow statement
adjusted for other revenue and capital gains of SEK 79.5 M (6.9) the cash flow from current operations amounts to SEK 446.4 M (444.5).
Cash flow per share rose to SEK 17.93 (17.85).

                                                                                                                                           Pan dox 2009   | 57
Financial StatementS

       accounting principles
       The annual report and accounts have                   dation implies that both deferred tax liabilities     Tangible fixed assets
       been prepared in accordance with the                  and tax recoverable shall be included in the          When new construction and additions are car-
       Swedish annual accounts act and gene-                 financial statements, and that any changes            ried out, all direct costs including project costs
       rally accepted accounting principles, as              shall affect the income statement as deferred         are capitalised. In the case of refurbishments,
       well as taking into account the recom-                tax. The deferred tax relating to the difference in   direct costs related to the improvement of pro-
       mendations of the Swedish accounting                  book depreciation and fiscal depreciation shall       perties compared with their original condition
       Standards Board if not stated otherwise.              be calculated using the prevailing tax rate.          are capitalised.
       Pandox’ accounting and evaluation prin-                    acquisitions based on the deferred tax lia-          Costs of repairing a property to its original
       ciples are in general unchanged compa-                bility relating to asset acquisitions shall be        condition are not capitalised. an exception to
       red with last year.                                   based on the acquisition price and be calcula-        this principle involves the costs of measures
                                                             ted from each respective property’s shortest          taken further to neglected maintenance esta-
       Consolidated accounts                                 estimated period of ownership, resulting in an        blished at the time of an acquisition, and where
       The consolidated accounts for the Group               average tax rate of approximately 10 percent.         the acquisition price is adjusted accordingly.
       include all subsidiaries as at financial year-end.         The deferred tax recoverable pertaining to           Costs of tenant-related modifications that
            The Swedish Financial accounting Stan-           estimated tax recoverable related to deficit          imply that the rent may be increased are capita-
       dards Council’s recommendation RR 1:00 has            deductions in the Company are valued based            lised and depreciated over the remaining period
       been applied in the preparation of the financial      on the estimated potential utilisation against        of the lease.
       statements. The consolidated accounts have            future taxable profits, and are calculated based          depreciation according to plan is calculated
       been prepared in accordance with the                  on the prevailing tax rate.                           on the acquisition value at the following percen-
       purchase method, whereby assets and liabili-                                                                tages:
       ties have been taken over at market value in          Property operations                                                                                 %
       accordance with an acquisition analysis. The          The Group’s properties are reported in the            Buildings                                   1.0
       difference between acquisition value and              balance sheet as fixed assets in view of the          Building fixtures                         4–6.7
                                                             purpose of the holdings being the long-term           Land improvements                           3.5
       acquired shareholders’ equity has been added
                                                                                                                   Equipment                                6.7–33
       to land and buildings as surplus value. Surplus       ownership, management and development of
       value is amortised in accordance with the same        the properties.
       principle used for properties. Estimated defer-                                                             Pandox changed the depreciation rate for buil-
       red tax liability with respect to Group surplus       Hotel operations                                      dings from 1.5 percent to 1 percent with effect
       value and estimated deferred tax recoverable          The hotel operations conducted by Pandox are          from 2000.
       are reported net as a deferred tax liability in the   charged with internal rent for accounting pur-            depreciation according to plan is calculated
       balance sheet.                                        poses. The internal rent is linked to the opera-      on the acquisition value and a residual value of
                                                             ting companies’ revenue and based on what             SEK 0.
       Tax                                                   are deemed to be market conditions. The inter-
       Pandox applies the Swedish Financial accoun-          nal rent is expensed to hotel operations, and         Write-down of fixed assets
       ting Standards Council’s recommendation RR            carried as revenue in property operations.            The Group’s properties are continuously valued
       9 regarding income tax. Briefly, the recommen-                                                              in accordance with an internal cash flow model,

58 | Pa ndox 2009
which also fulfils the requirement to calculate      Shares and participations                              Receivables and liabilities expressed in
the utilisation value in accordance with RR:17       Shares and participations in subsidiaries and          foreign currencies
whereby the recoverable value, which is the          subsidiaries of subsidiaries have been stated at       Receivables and liabilities expressed in foreign
greater of the net sales value and the utilisation   acquisition value with the exception of holdings       currencies are restated at the rate of exchange
value, is compared with the property’s book          that may have been written down to their esti-         prevailing on balance sheet date. any differen-
value in order to assess the need for a possible     mated actual value.                                    ces that may arise are either credited or debited
write-down.                                                                                                 to income. When loans or forward contracts
                                                     Financial instruments                                  are entered into to hedge investments in inter-
Leasing                                              Interest swaps are used to change underlying           national subsidiaries, any exchange rate diffe-
Pandox reports all leasing contracts as opera-       financial liabilities’ interest-due structure. Reve-   rences that may arise are offset in the Group by
tional. Leasing contracts entered into concern       nue and costs related to interest swaps are            an amount corresponding to the differences
private cars and office machines. They are not       reported net as interest costs, and are spread         arising from the recalculation of the net assets
significant in size and do not therefore influence   over the duration of each contract.                    of international subsidiaries.
an assessment of the Group’s results and
financial position.                                  International subsidiaries                             Other receivables and liabilities
                                                     International subsidiaries are stated as per the       Receivables have been stated in the amounts
Revenue                                              current rate method, which implies that the            expected to be received. other assets and lia-
Management revenue pertains to rental reve-          income statement is restated at the average            bilities have been stated at nominal values.
nue as well as re-debited operating costs and        exchange rate of the period, and the balance
property tax. Revenue and costs related to the       sheet at the exchange rate prevailing on the
operations of hotel operators are reported           closing day. The exchange rate difference that
separately in the consolidated income state-         arises as a result of this method is recorded
ment. Rental revenue is spread over a period of      directly against the Group’s equity. any compa-
time in accordance with the terms of each            nies acquired during the year are included in
lease. This implies that rent paid in advance is     the Group at an amount relating to the period
reported as prepaid rental revenue.                  following such acquisition.

                                                                                                                                                  Pan dox 2009   | 59
Financial StatementS

       notes to the accounts

       Primary segment
       Pandox’ primary segment is comprised of two operating branches – property operations and hotel operations. Information in accordance with segment reporting is presented
       in the consolidated income statement and balance sheet.

       Secondary segment
       Year 2009                                   Stockholm         Gothenburg             Öresund Rest of Sweden            International       Adjustment                 Total
       Property revenue                                  167.7               85.2              182.3              120.1               339.9             –211.7              683.5
       Property costs                                    –26.5               –7.2              –30.7              –15.8               –36.8                  –             –117.0
       operating net                                     141.2               78.0              151.6              104.3               303.1             –211.7              566.5

       Book value of properties                        1,386.2              756.1            1,488.1              998.8             4,718.8                   –           9,348.0

       Investments                                        50.6                 1.8               12.2               13.9              234.0                  –              312.5
       operating revenue – hotel operations               16.1                   –                8.9                  –            1,070.0                  –            1,095.0
       operating costs – hotel operations                –15.4                   –               –9.2                  –           –1,104.4              211.7             –917.3
       operating profit – hotel operations                 0.7                   –               –0.3                  –              –34.4              211.7              177.7

       Year 2008                                   Stockholm         Gothenburg             Öresund Rest of Sweden            International       Adjustment                 Total
       Property revenue                                  187.9               84.5              183.5              116.7               342.9             –216.7              698.9
       Property costs                                    –39.3               –8.1              –33.0              –16.3               –36.1                                –132.8
       operating net                                     148.6               76.4              150.5              100.4               306.8             –216.7              566.0

       Book value of properties                        1,360.5              766.8            1,518.7              834.7             4,731.8                               9,212.5

       Investments                                        56.7               23.6                9.2                19.8              160.0                                 269.3
       operating revenue – hotel operations               51.6                  –               10.4                   –            1,043.3                               1,105.3
       operating costs – hotel operations                –55.1                  –              –10.6                   –           –1,018.9              216.7             –867.9
       operating profit – hotel operations                –3.5                  –               –0.2                   –               24.4              216.7              237.4

       NOTE 2         RENTAL REvENUE
       Revenues from hotel operations pertain to business, of which three are operated under management agreements with Hilton, InterContinental and Hyatt respectively, as well as
       the five hotels operated by Pandox. Rent and remuneration for other property costs which were paid by these hotel operator companies to the property company are reported
       gross, i.e. they have not been eliminated in the income statement. This is done to provide a more accurate picture of the operating net generated by the property company and
       the operating income of the hotel operating company. The elimination of these items would imply that the total management revenue and the operating company’s operating
       costs would be reduced by SEK 211.7 M for the year 2009 (216.7).

       %                                                                     2009               2008
       Sweden                                                                  53                 54
       denmark                                                                  8                  9
       United Kingdom                                                           5                  5
       Germany                                                                 13                 12
       Belgium                                                                 15                 15
       Switzerland                                                              2                  2
       Canada                                                                   4                  3
       Total                                                                  100                100

60 | Pa ndox 2009
                                                                                                                                     Group                  Parent Company
SEK M                                                                                                                             2009              2008      2009       2008
Buildings                                                                                                                       –108.0              –97.8        –            –
Land improvements                                                                                                                 –0.8               –0.8        –            –
Equipment                                                                                                                        –85.2              –65.5     –0.4         –0.3
Total depreciation                                                                                                              –194.0             –164.1     –0.4         –0.3
depreciation amounts to a total of SEK 194.0 M of which SEK 193.6 M (163.8) refers to property operations and SEK 0.4 M (0.3) to administration.

NOTE 5           OTHER REvENUE
other revenue of SEK 6.9 M in 2008 refered to a compensation for a parking rental contract and sale of a minor office asset in Östersund. Property activities in the Group’s
property-owning companies are administered by staff employed by the Parent Company. The cost of these services has been invoiced to the Group’s subsidiaries. Invoicing in
2009 amounted to SEK 51.1 M (55.2).

The interest income of the Parent Company is divided into SEK 77.3 M (230.3) from Group companies, SEK 1.1 M (4.0) from external parties, and SEK 379.4 M from dividends
from subsidiaries. of SEK 188.1 M (–168.2) in other financial income and cost in the Parent Company, SEK 190.3 M (–167.8) pertains to currency effects in valuation of liabilities
in foreign currency at closing date exchange rate. of SEK 25.5 M (12.4) in Group interest income, SEK 4.6 M refers to external interest income and SEK 20.9 M refers to divi-
dends from other shares and participations. other finacial and costs in the Group amounts to SEK 80.7 M (3.2) of which SEK 79.5 M pertains to capital gains further to the sale
of shares in HoST Hotels & Resorts Inc.

                                                                                                                                     Group                  Parent Company
SEK M                                                                                                                             2009              2008      2009       2008
Deferred tax expense for the year
deferred tax expense relating to temporary differences                                                                           –38.5              –2.9      –0.7            –
deferred tax expense relating to deficit deductions                                                                              –15.9             109.9     –56.4         60.0
deferred tax expense relating to other provisions                                                                                 44.3             –80.0         –          0.8
Effect of income tax rate changes                                                                                                    –               7.2         –         –3.7
Deferred tax reported in the income statement                                                                                    –10.1              34.2     –57.1         57.1

Actual tax in the income statement                                                                                               –20.4              –22.2     25.3             –

Difference between reported tax and nominal tax rate
Reported profit before tax                                                                                                       332.0             283.3     431.8       –218.2
Tax as per applicable tax rate                                                                                                   –87.3             –83.0    –113.6         57.4
Tax effect due to nontaxable income                                                                                               36.8               0.1     134.5          0.0
Tax effect of nondeductible costs and other tax adjustments                                                                      –21.1              52.8     –52.7         –0.3
Tax effect relating to foreign operations                                                                                         41.1              34.9         –            –
Effect of income tax rate changes                                                                                                    –               7.2         –            –
Reported tax expense                                                                                                             –30.5              12.0     –31,8         57.1

Deferred tax recoverable
deficit deductions                                                                                                               205.2             222.5         –         56.4
other deferred tax recoverable                                                                                                    11.0              12.0         –          0.7
Total deferred tax recoverable                                                                                                   216.2             234.5         –         57.1

Deferred tax liabilities
differences between book value and fiscal value of properties                                                                    363.0              335.2        –            –
Total deferred tax liabilities                                                                                                   363.0              335.2        –            –
Total deferred tax liabilities/recoverable net                                                                                  –146.8             –100.7        –         57.1

The Group’s nominal tax rate is estimated at 26.9 percent and in the Parent Company it amounts to 26.3 percent. after income tax rate cut as per 1 January 2009 from 28.0
percent to 26.3 percent the deferred tax balance items was recalculated for the year 2008 in the Group as well as in the Parent Company to reflect the new tax rate. The
effects 2008 are presented under deferred tax expense for the year. The effective income tax rate in the Group amounted in 2009 to 9.2 percent (–4.2) and in the Parent
Company to 7.4 percent (26.2).

                                                                                                                                                                      Pan dox 2009   | 61
Financial StatementS

       NOTE 8         LAND AND BUILDINGS
       SEK M                                                                                                       2009          2008
       opening acquisition value                                                                                 9,641.4       8,589.3
       Reclassified as equipment                                                                                    –5.2         –14.0
       acquisition of properties                                                                                    89.4         360.5
       Investments                                                                                                 224.1         138.3
       Sales                                                                                                           –             –
       Translation differences – balance sheet                                                                    –151.0         567.3
       Closing accumulated acquisition value                                                                     9,798.7       9,641.4

       opening depreciation                                                                                       –975.6        –785.6
       Sales                                                                                                           –             –
       depreciation for the year                                                                                  –108.8         –98.6
       Translation differences – balance sheet                                                                      21.5         –91.4
       Closing accumulated depreciation                                                                         –1,062.9        –975,6
       Closing residual value                                                                                    8,735.8       8,665.8

       Tax assessment value of Swedish properties                                                                2,521.7       2,509.4
       of which land                                                                                               707.9         730.6

       The Group’s opening acquisition value and opening depreciation regarding 2008 have been adjusted with SEK –242.8 M and SEK 242.8 M respectively. The closing residual
       value has thus not been affected.

       NOTE 9         EQUIPMENT

                                                                                                                      Group                           Parent Company
       SEK M                                                                                                       2009          2008                   2009       2008
       opening acquisition value                                                                                   900.4        641.6                     3.6           3.4
       Reclassified from land and buildings                                                                          5.2         14.0                       –             –
       acquisition of equipment                                                                                     73.9         10.3                       –             –
       Investments                                                                                                  89.4        131.0                     1.0           0.2
       Sales/disposals                                                                                                 –         –3.5                       –             –
       Translation differences – balance sheet                                                                     –31.0        107.0                       –             –
       Closing accumulated acquisition value                                                                     1,037.9        900.4                     4.6           3.6

       opening depreciation                                                                                      –353.0        –486.7                    –2.9          –2.6
       Sales/disposals                                                                                                –           1.7                       –             –
       depreciation for the year                                                                                  –85.2         –65.5                    –0.4          –0.3
       Translation differences – balance sheet                                                                     13.8         –68.5                       –             –
       Closing accumulated depreciation                                                                          –424.4        –353.0                    –3.3          –0.3
       Closing residual value                                                                                     613.5         547.4                     1.3           0.7

       The Group’s opening acquisition value and opening depreciation regarding 2008 have been adjusted with SEK –266.0 M and SEK 266.0 M respectively. The closing residual
       value has thus not been affected.

62 | Pa ndox 2009
                                                                                     Registered          Number                              Percent
                                                             Corp. Reg. No.               office        of shares          Par value          owned           Book value
Parent Company
Hotab Förvaltnings aB                                         556475-5592         Stockholm                 1,000               100               100               285.1
Pandox Förvaltning aB                                         556097-0815         Stockholm                 5,500               100               100               304.7
Hotab 6 aB                                                    556473-6352         Stockholm                 1,000               100               100                 0.1
Fastighets aB Grand Hotel i Helsingborg                       556473-6329         Stockholm                 1,000               100               100                15.9
Pandox Fastighets aB                                          556473-6261         Stockholm                 1,000               100               100                 0.1
Fastighets aB Mora Hotell                                     556475-9370         Stockholm                 1,000               100                75                 5.7
Fastighets aB Stora Hotellet i Jönköping                      556469-4064         Stockholm                 1,000               100               100                30.1
Pandox Belgien aB                                             556495-0078         Stockholm                 1,000               100               100                 4.0
Pandox Hotel Management aB                                    556469-9782         Stockholm                 1,000               100               100                 0.1
Malmö Favorit Hotell aB                                       556475-9446         Stockholm                 1,000               100               100                16.1
Pandox Luxemburg aB                                           556515-9216         Stockholm                10,000                10               100                68.3
Fastighets aB Porpur                                          556349-8327         Stockholm                10,000               100               100                 0.1
Pandox i Halmstad aB                                          556549-8978         Stockholm                 1,000               100               100                 8.7
Pandox i Borås aB                                             556528-0160         Stockholm                 1,000               100               100                61.5
Grand i Borås Fastighets aB                                   556030-7083         Stockholm                 6,506               100               100                10.0
Hotell Värmdövägen 84 aB                                       556286-4826        Stockholm                 1,000               100               100                 4.3
Hotellus International aB                                      556030-2506        Stockholm             7,480,000               100               100               970.2
KB Lorensberg 49:2                                             916833-3269       Gothenburg                     –                 –               100                 0.0
Hotellus Östersund aB                                          556367-3697        Stockholm                 1,000               100               100                 3.0
ademrac Holding 1 aB                                           556683-3371        Stockholm                10,093               100               100               219.4
ademrac Holding 2 aB                                           556683-3363        Stockholm                10,010               100               100               219.6
ademrac aB                                                     556426-2748        Stockholm             1,790,042               100                6.6                3.4
Le nouveau Palace Sa                                                446188          Brussels                3,000                 –               100               291.4
Convention Hotel International aG                             Basel               14,000                 –               100                 6.2
Hotellus denmark a/S                                              28970927      Copenhagen                  5,000                 –               100             1,021.6
Hotel Bloom Sa                                                0476.704.322          Brussels               68,808                 –               100                67.3
Pandox Belgium Sa                                             0890.427.732          Brussels              100,000                 –               100               471.6
Pandox i Malmö aB                                              556704-3723        Stockholm                 1,000               100               100               142.0
Ypsilon Hotell aB                                              556481-4134        Stockholm                 1,000               100               100                39.8
Pandox Kolmården aB                                            556706-8316        Stockholm               100,000                 1               100                 0.1
Hotellus Sverige Ett aB                                        556778-8699        Stockholm                 1,000               100               100                 0.1
Hotellus Sverige Två aB                                        556778-8707        Stockholm                 1,000               100               100                 0.1
Total Pandox AB                                                                                                                                                   4,270.6

                                           Corp. reg. no.        Registered office                                               Corp. reg. no.          Registered office
Group                                                                                     Holcro nV                                          –                   Belgium
arlanda Flyghotell KB                      916500-8021                 Stockholm          Hotellus Suomi oY                                  –                    Finland
Fastighetsbolaget Utkiken KB               916611-7755                 Stockholm          Hotellus nord oY                                   –                    Finland
Fastighets aB Hotell Kramer                556473-6402                 Stockholm          Euro Lifim BV                                      –                netherlands
Hotellus nordic aB                         556554-6594                 Stockholm          Hotellus Europe BV                                 –                netherlands
Hotellus Järva Krog aB                     556351-7365                 Stockholm          Pandox Holland BV                                  –                netherlands
Hotellus Mölndal aB                        556554-6636                 Stockholm          Pandox Holland 2 BV                                –                netherlands
Bioeffect aB                               556244-5030                 Stockholm          Hotellus Luxemburg Sarl                            –                Luxemburg
Vestervold KB                              916631-9534                 Stockholm          Hotellus deutschland GmbH                          –                  Germany
Hotellus Mellansverige aB                  556745-4656                 Stockholm          atlantis GmbH                                      –                  Germany
Skogshöjd Handels & Fastighets aB          556066-0432                 Stockholm          Pandox Berlin GmbH                                 –                  Germany
Hotellus Belgium nV                                  –                   Belgium          Hotellus Canada Holdings Inc                       –                    Canada
Grand Hotel Brussels nV                              –                   Belgium          Hotellus Montreal Holdings Inc                     –                    Canada
Town Hotel Sa                                        –                   Belgium

                                                                                                                                                                 Pan dox 2009   | 63
Financial StatementS

       other shares and participations of SEK 610.2 M (544.4) refers to the american hotel property company HoST Hotels and Resorts Inc. The market value of the shares per
       2009-12-31 amounted to USd 11.67 per share or SEK 883.4 M for the whole investment.

                                                                                                                        Group                           Parent Company
       SEK M                                                                                                         2009          2008                   2009       2008
       Liabilities that fall due within one year following balance sheet date                                       738.9         877.8                   562.3         877.8
       Liabilities that fall due between one and four years following balance sheet date                            980.5       1,181.4                   809.1         815.8
       Liabilities that fall due five or more years following balance sheet date                                  5,131.1       4,749.4                 2,828.3       2,865.7
       Total                                                                                                      6,850.5       6,808.6                 4,199.7       4,559.3

                                                                                                                        Group                           Parent Company
       SEK M                                                                                                         2009          2008                   2009       2008
       Prepaid rents                                                                                                 54.7          61.0                       –             –
       accrued interest expenses                                                                                     16.3          28.8                    11.0          20.5
       Property tax                                                                                                   4.7           4.7                       –             –
       Unrealised hedge results                                                                                      64.1         126.8                    61.6         126.8
       other                                                                                                        126.6         155.0                    13.7          12.2
       Total                                                                                                        266.4         376.3                    86.3         159.5

                                                                                                                        Group                           Parent Company
       SEK M                                                                                                         2009          2008                   2009       2008
       Pledged assets for loans from credit institutions
       Property mortgages                                                                                         4,942.1       5,009.0                       –             –
       Pledged deposit                                                                                               22.3          32.8                    14.7          14.0
       Contingent liabilities                                                                                         2.5           2.3                 2,675.3       2,221.6

                                                                                                                        Group                           Parent Company
       SEK M                                                                                                         2009          2008                   2009       2008
       audit assignments                                                                                               3.5           2.8                    1.0           0.9
       other assignments                                                                                               1.4           1.6                      –             –

       SET Revisionsbyrå
       audit assignments                                                                                               0.1           0.1                    0.1           0.1

       other assignments                                                                                               0.2           0.2                      –             –
       Total                                                                                                           5.2           4.7                    1.1           1.0

64 | Pa ndox 2009
NOTE 16           PERSONNEL
                                                                                                                     Group                            Parent Company
                                                                                                                  2009          2008                    2009       2008
Average number of employees
Men                                                                                                                474            534                       9              8
Women                                                                                                              468            555                       9              9
Total                                                                                                              942          1,089                      18             17

of whom employed in Sweden                                                                                          31             61                      18             17
of whom employed in Belgium                                                                                        341            432                       –              –
of whom employed in Germany                                                                                        189            219                       –              –
of whom employed in Canada                                                                                         381            377                       –              –

Board of directors and senior managers and executives
Men                                                                                                                  11            11                      10             10
Women                                                                                                                 2             2                       2              2
Total                                                                                                                13            13                      12             12

Wages, salaries and other remuneration, SEK M
Board of Directors and CEO
Wages, salaries and other remuneration                                                                              5.6           5.6                      5.6           5.6
Social security costs                                                                                               1.6           1.4                      1.6           1.4
Pension costs                                                                                                       0.8           0.8                      0.8           0.8
Total                                                                                                               8.0           7.8                      8.0           7.8

Other employees
Wages, salaries and other remuneration                                                                           355.3          283.1                    15.0           16.0
Social security costs                                                                                             69.5           62.8                     5.0            3.9
Pension costs                                                                                                     11.6           10.0                     4.4            5.5
Total                                                                                                            436.4          355.9                    24.4           25.4

Wages, salaries and other remuneration per country, SEK M
Board of directors and CEo                                                                                          5.6           7.8                     5.6            7.8
other employees                                                                                                    19.6          37.7                    15.0           25.4

Belgium other employees                                                                                          132.4          165.8                       –              –
Germany other employees                                                                                           44.9           52.2                       –              –
Canada other employees                                                                                           158.4           97.5                       –              –
Total                                                                                                            360.9          363.7                    20.6           33.2

Personnel employed in Belgium relate to the operator activities of the Crowne Plaza Brussels City Centre, the Holiday Inn Brussels airport, the Crowne Plaza antwerp, the
Hilton Brussels City, and the Hotel BLooM!. Personnel employed in Germany to Hotel Berlin, Berlin and in Canada to InterContinental Montreal and Hyatt Regency Montreal.
    The remuneration of the Members of the Board is established by the annual General Meeting of Shareholders. The remuneration of the Chief Executive officer (CEo) is
composed of a basic salary, a bonus, a company car, and a retirement pension scheme. The age of retirement of the CEo is 65 years, with the possibility of retiring at the age
of 60. In the case of termination, the CEo shall be given a period of notice of 24 months by the Company, with a deduction clause. Upon resignation by the CEo, a period of
notice of 6 months shall apply.
    Sickness absence in the Parent Company amounted to 0.5 percent (0.9).

                                                                                                                                                                   Pan dox 2009   | 65
Financial StatementS

       Proposed disposition of earnings
       The following profits are at the disposition of the forthcoming annual General Meeting of Shareholders:
       Balance brought forward                                                                                                           SEK 129,148,129
       Profit for the year                                                                                                               SEK 399,973,745
                                                                                                                                         SEK 529,121,874

       The Board of directors and Chief Executive officer propose that the accumulated profits be appropriated as follows:

       dividend to the shareholders,
       SEK 10.50 per share                                                                                                               SEK 261,450,000
       amount to be carried forward                                                                                                      SEK 267,671,874
                                                                                                                                         SEK 529,121,874

                                                                    Stockholm, 9 February 2010

                                                                        Christian Ringnes

                                       Leiv Askvig                       Christian Sundt                          Olaf Gauslå

                                       Bengt Kjell                         Helene Sundt                          Mats Wäppling

                                                                          Anders Nissen
                                                                       Chief Executive Officer

                                                 our audit report pertaining to this annual report and consolidated
                                                    financial statements was submitted on 10 February 2010.

                                   Per Gustafsson                                                                Willard Möller
                              Authorised Public Accountant                                                Authorised Public Accountant

66 | Pa ndox 2009
auditor’s Report
To the annual meeting of the shareholders of Pandox AB
Corporate identity number 556030-7885

We have audited the annual accounts, the consolidated accounts, the accounting records and the administration of the board of
directors and the managing director of Pandox aB for the year 2009. These accounts and the administration of the company and the
application of the annual accounts act when preparing the annual accounts and the consolidated accounts are the responsibility of
the board of directors and the managing director. our responsibility is to express an opinion on the annual accounts, the consolidated
accounts and the administration based on our audit.
    We conducted our audit in accordance with generally accepted auditing standards in Sweden. Those standards require that we
plan and perform the audit to obtain high but not absolute assurance that the annual accounts and the consolidated accounts are
free of material misstatement. an audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
accounts. an audit also includes assessing the accounting principles used and their application by the board of directors and the
managing director and significant estimates made by the board of directors and the managing director when preparing the annual
accounts and the consolidated accounts as well as evaluating the overall presentation of information in the annual accounts and the
consolidated accounts. as a basis for our opinion concerning discharge from liability, we examined significant decisions, actions taken
and circumstances of the company in order to be able to determine the liability, if any, to the company of any board member or the
managing director. We also examined whether any board member or the managing director has, in any other way, acted in contra-
vention of the Companies act, the annual accounts act or the articles of association. We believe that our audit provides a reasonable
basis for our opinion set out below.
    The annual accounts and the consolidated accounts have been prepared in accordance with the annual accounts act and give a
true and fair view of the company’s and the group’s financial position and results of operations in accordance with generally accepted
accounting principles in Sweden. The statutory administration report is consistent with the other parts of the annual accounts and the
consolidated accounts.
    We recommend to the annual meeting of shareholders that the income statements and balance sheets of the parent company and
the group be adopted, that the profit of the parent company be dealt with in accordance with the proposal in the administration report
and that the members of the board of directors and the managing director be discharged from liability for the financial year.

                                                    Stockholm, 10 February 2010

                                    Per Gustafsson                              Willard Möller
                               Authorised Public Accountant              Authorised Public Accountant

                                                                                                                                          Pan dox 2009   | 67
                                                  Work of the Board of Directors

      Industrial expertise and experience create confidence and an ability to act

                                                 Board of Directors and auditors

CHRISTIAN RINGNES, b. 1954             LEIV ASKVIG, b. 1957                   OLAF GAUSLÅ, b. 1961                  BENGT KJELL, b. 1954
Chairman                               CEO of Sundt AS                        CFO of Eiendomsspar AS                CEO of AB Handel och Industri
CEO of Eiendomsspar AS                 Member of the Board of Pandox since    Member of the Board of Pandox since   Member of the Board of Pandox since
Member of the Board of Pandox since    2004.                                  2004.                                 1996.
                                       Other appointments:                                                          Other appointments:
Other appointments:                    Chairman of Oslo Børs VPS Holding                                            Chairman of Indutrade AB and Hemfosa
Chairman of NSV-Invest AS, Sundt AS,   ASA, Oslo Børs ASA and Alfarveg AS.                                          Fastigheter AB. Board member of
Dermanor AS and Mini Bottle Gallery    Board member of Eiendomsspar AS,                                             Skanska AB, Höganäs AB, Munters AB,
AS. Board member of Schibsted ASA,     Verdipairsentralen VPS ASA, Skips AS                                         Helsingborgs Dagblad AB and Skånska
Thor Corporation AS and Oslo City’s    Tudor and Agder OPS Vegselskap AS.                                           Byggvaror AB.
Town Architecture Council (Oslo Bys
Råd for Byarkitektur).

68 | Pa ndox 2009
Expertise and experience of the following areas       Work procedures                                        ings review and discuss the external and internal
are important in an international hotel property      The Board of directors has adopted procedures          reporting of operating results and the Company’s
company such as Pandox:                               for its own work along with directives for the Chief   financial position, as well as various business mat-
                                                      Executive officer, and has provided management         ters. Marketing, strategy and budget issues are
•	   Hotel operations and the hotel market            with instructions with regard to reporting. Every      also studied and reviewed each year. Underlying
•	   Financing                                        year, Pandox’ Board of directors establishes and       material is sent to the members approximately one
•	   Property and the real estate sector              documents the objectives and strategy of the           week in advance. The Company’s auditors attend
•	   Business development                             Company. The Board has furthermore adopted a           at least one meeting each year to present a report
•	   Brand name strategies                            finance policy, an approval policy and guidelines      of their audit and their review of the Company’s
•	   development of international companies.          for decision-making, as well as a particular strat-    internal control systems.
                                                      egy for acquisitions.                                       In addition to their ongoing audit, the Compa-
The Board of directors of Pandox, which is com-            The Board of directors of Pandox holds four       ny’s auditors were also commissioned by the
posed of seven members, has broad experience          ordinary meetings each year. The Board meetings        Board to carry out a special review of major lease
and knowledge of these areas.                         follow an established annual agenda. The meet-         agreements during the year.

                                                                                                                              The task of the auditors is to
                                                                                                                              examine the Company’s
                                                                                                                              accounts, administration and
                                                                                                                              financial information. The audit
                                                                                                                              leads to an audit report where
                                                                                                                              the auditors give an opinion as
                                                                                                                              to whether the annual accounts
                                                                                                                              and financial statements have
                                                                                                                              been prepared in accordance
                                                                                                                              with the Swedish Annual
                                                                                                                              Accounts Act and generally
                                                                                                                              accepted accounting principles.

                                                                                                                              PER GUSTAFSSON, b. 1959
                                                                                                                              Authorised Public Accountant

                                                                                                                              WILLARD MÖLLER, b. 1943
                                                                                                                              Authorised Public Accountant
                                                                                                                              SET Revisionsbyrå AB

CHRISTIAN SUNDT, b. 1977                 HELENE SUNDT, b. 1979                    MATS WÄPPLING, b. 1956
Board member of Sundt AS                 Styrelseledamot i Sundt AS               President and CEO of SWECO AB
Member of the Board of Pandox since      Member of the Board of Pandox since      Member of the Board of Pandox since
2008.                                    2008.                                    2003.

Other appointments:                      Other appointments:                      Other appointments:
Owner and chairman of CGS Holding        Owner and chairperson of Sundt           Board member of SWECO AB.
AS. Board member of Sundt Air Holding    Helene AS. Chairperson of Dronningen
AS, Sundt Sepa AS, Sundt Helene AS,      Eiendom AS, Lanternen Eiendom AS.
Sundt Air AS, Sundt Eiendom II AS and    Board member of Sundt Sepa AS and
Sundt Eiendom I AS.                      Sundt Christian Gruner AS.

                                                                                                                                               Pan dox 2009   | 69
                                             Management team

           Coaches                   Creative, passionate and bold
                               – Pandox’ leaders possess the right qualities

                                              Senior executives

      ANDERS NISSEN, b. 1957                LARS HÄGGSTRÖM, b. 1954           ALDERT SCHAAPHOK, b. 1959
      CEo                                   Vice President asset Management   Business area Manager and
      Employed since 1995                   and Business area Manager         director of operations
                                            Employed since 2000               Employed since 2004
      LIIA NÕU, b. 1965
      Vice President and CFo                MIKAEL PLANELL, b. 1960           ERIK HVESSER, b. 1969
      Employed since 2007                   Business area Manager             Business area Manager
                                            Employed since 2005               Employed since 2006

70 | Pa ndox 2009
                                                 Hotel managers in operating companies

MAGNUS ALNEBECK, b. 1964                                    BERNARD CHÊNEVERT, b. 1969                                    CHRISTEL CABANIER, b. 1970
Employed since 2005                                         Employed since 2008                                           Employed since 2008
Background: degree from SHM-Les Roches, Switzer-            Background: degree from Lausanne Hotel Management             Background: Considerable experience from several
land. Has worked for Intercontinental, Cunard, Radisson/    School. More than 15 years’ experience of the hotel           hotels in antwerp. Started as receptionist and became
SaS and Forte Hotels in Switzerland and London. Hotel       industry, including the repositioning of hotels. Led W        the youngest hotel manager in Belgium at just 25 years
manager for Ladera Resort, St. Lucia 1996–2004.             Montreal to Hotel of the Year Worldwide in 2007.              old. Christel is also a well-known TV profile in Belgium.
Pelican Bay at Lucaya, Grand Bahama Island                  InterContinental, Montreal, Canada                            Hotel BLOOM! Brussels, Belgium
Number of rooms: 184                                        Number of rooms: 357                                          Number of rooms: 305
Operator: Sundt GB Management/Pandox                        Operator: Pandox/InterContinental Hotels                      Operator: Pandox

RAYMOND SOUMAKO, b. 1961                                    ERIC VAN DALSUM, b. 1962                                      CHARLES BOELEN, b. 1968
Employed since 2009                                         Employed since 2004                                           Employed since 2007
Background: degree from the University of Montreal in       Background: degree from Lausanne Hotel Management             Background: Came to the InterContinental Group and
administration plus a Bachelor degree in Industrial Work    School. Has held several leading positions at major hotels    Crowne Plaza Brussels “Le Palace” in 2001, further to 10
Relations. More than 30 years’ experience within the        across the world within Hilton, Shangri-La Hotels &           years within Hilton International in Belgium, the nether-
hotel industry. over 20 years with IHG, and 10 with Star-   Resorts and Radisson SaS. Under Eric’s leadership, the        lands and France.
wood. also experience in the repositioning of hotels.       Crowne Plaza in Brussels was awarded Hotel of the Year        Holiday Inn Brussels Airport, Belgium
Member of the Hotel association of Greater Montreal         IHG Hotels Group EMEa in 2007.                                Number of rooms: 310
since 1995 and has been on the IaHI board for 5 years.      Crowne Plaza Brussels City Centre, Belgium                    Operator: Pandox/Holiday Inn
Hyatt Regency, Montreal, Canada                             Number of rooms: 354
Number of rooms: 605                                        Operator: Pandox/Crowne Plaza                                 KATHARINA SCHLAIPFER, b. 1974
Operator: Pandox/Hyatt                                                                                                    Employed since 2008
                                                            HANS WILS, b. 1959                                            Background: Has worked for several Hilton hotels,
CORNELIA KAUSCH, b. 1962                                    Employed since 2009                                           including in Germany, France and Belgium, and was most
Employed since 2006                                         Background: Considerable hotel experience within Mar-         recently at the Hilton Molino Stucky Venice in Italy where
Background: degree from Lausanne Hotel Management           riott, Golden Tulip and accor. Has worked for Sofitel since   she worked with business development.
School. Considerable experience of hotel operations and     2001 and was most recently at the Lafayette Square in         Hilton Brussels City, Belgium
personnel management. Has held several leading posi-        Washington dC, USa.                                           Number of rooms: 283
tions within accor Germany, Louvre Hotels Paris, Inter-     Crowne Plaza Antwerp, Belgium                                 Operator: Pandox/Hilton
Continental Hotels Germany and Corinthia Hotels Inter-      Number of rooms: 264
national.                                                   Operator: Pandox/Crowne Plaza
Hotel Berlin, Berlin, Germany
Number of rooms: 701
Operator: Pandox

                                                                                                                                                                 Pan dox 2009   | 71
                                                                      Management team

                                a small coordinated team with mutual driving forces

1. Josefin Bergqvist, acquisition and Investment             6. Anders Nissen, Chief Executive officer, b. 1957.           11. Liia Nõu, Vice President and CFo, b. 1965. Liia was
analyst, b. 1974. Josefin holds a master’s degree in hotel   anders nissen has a strong background from the hotel          recruited in 2007 and is responsible for economic and
management from Griffith University in australia, as well    industry and property sector, with more than 25 years’        financial issues within the Group. Her principal areas of
as a master’s degree in property finance from the Royal      experience. He started his career as hotel manager and        work are financial control and reporting, the Group’s over-
Institute of Technology (KTH) in Stockholm. Josefin has      advanced to different leading positions within the group      all financing, and acquisitions. Liia is a graduate in busi-
previously worked for CBRE hotels in London as analyst       management team of the hotel operator Reso. In the            ness administration and economics from the Stockholm
and operationally for Marriott International. She has been   beginning of 1993, anders became CEo of Securum               School of Economics (HHS), and was most recently nor-
with Pandox since august 2006 and is member of some          Hotel & Turism aB, where he led the process of structur-      dic CFo of GE Money Bank aB. She has also been CFo
of the Company’s international operative Boards.             ing Securum’s hotel activities. He was a key player behind    of Song networks, Tele2, Icon Medialab, further to work-
                                                             the initiative to form Pandox, and has been CEo since the     ing for Kuwait Petroleum and american Express.
2. Nils Lindberg, Senior advisor, b. 1947. nils has a long   Company was formed in 1995.
career at Pandox and was previously responsible for eco-                                                                   12. Ulrika Norrbrink, Property accountant, b. 1966.
nomic and financial issues. He decided two years ago to      7. Annelie Sundström Aguilar, assistant to the CEo, b.        Ulrika came to Pandox in 2006 after having previously
go over to an advisory role within the Group. His experi-    1974. annelie joined Pandox in the autumn of 2008. Her        worked for Expert Stormarknad aB, Proact IT Sweden
ence includes working as controller and treasurer of dow     position implies providing support to the CEo, the Board      aB and Lars Gullstedts Fastigheter aB. Ulrika currently
Chemical nordic Region, as well as bank manager with         of directors and senior executives. annelie’s tasks also      works within Pandox’ finance and accounting depart-
nordbanken and director within Securum. nils joined          include external communication, production of the annual      ment.
Pandox in 1995.                                              report and Upgrade, as well as the coordination of the Com-
                                                             pany’s events, along with Pandox’ annual Hotel Market day.    13. Erik Hvesser, Business area Manager, b. 1969. Erik
3. Ann-Sophie Forsmark, Property accountant, b.              She has considerable experience of service and administra-    is an economics graduate of the School of Economics &
1971. ann-Sophie is a graduate economist from the IHM        tion, and worked most recently at Morgan Stanley.             Business administration in oslo. He came to Pandox in
Business School. She joined Pandox in 1999 after having                                                                    2006 from the position as asset manager with norgani
previously been employed by Riddarstaden aB, Marco           8. Mikael Planell, Business area Manager, b. 1960. Solid      aSa. Erik has 15 years’ operating experience within the
Polo and Fritidsresor. ann-Sophie works within Pandox’       background within the hotel industry with more than 20        hotel industry as hotel manager, business area manager,
finance and accounting department.                           years’ experience, including as hotel manager and opera-      business controller, as well as various senior positions
                                                             tions manager in London, Benelux and Stockholm.               within Hilton/Scandic’s Swedish management team. He
4. Jonas Törner, Controller, b. 1971. Jonas is a graduate    Mikael’s areas of responsibility cover several of Pandox’     is currently responsible for the major part of Pandox’
in business administration and economics from Stock-         largest hotels such as Hotel Berlin, Berlin, which is Ger-    Swedish hotel property portfolio.
holm University. He has previously worked with Corpo-        many’s fifth largest hotel with 701 rooms. Before joining
rate Finance at nordea Securities and as group controller    Pandox in 2005, he was manager of operating and busi-         14. Aldert Schaaphok, Business area Manager and
for the industrial company deLaval. Jonas was recruited      ness development for accor Hotels’ nordic operations.         director of operations, based in Belgium, b. 1959. aldert
by Pandox as controller in 2005. during his time with                                                                      has solid experience of operations and concept develop-
Pandox, Jonas has worked with improving quality in Pan-      9. Michaela Borg, acquisition and Investment analyst,         ment, and has also been hotel manager of full-service
dox’ reporting flow, the monitoring of Pandox’ operating     b. 1968. Michaela is a graduate in business administra-       hotels in the netherlands, Belgium and Germany. Before
activities, as well as the development of Pandox’ valua-     tion within mathematics and statistics from Karlstad Uni-     coming to Pandox, he was Regional director operations
tion model for hotel properties.                             versity, and also holds two MBas from Stockholm Univer-       and Vice President operations of dorint Hotels & Resorts
                                                             sity within organisation, leadership and entrepreneurship.    aG. aldert was recruited by Pandox in 2004 on a consul-
5. Anette Paulsson, acquisition and Investment               She has previously worked at Coor Service Management.         tancy basis, and he is responsible for the Company’s
analyst, b. 1975. anette is a graduate in business admin-    Michaela joined Pandox in September 2008 and works            operational activities in Belgium and Montreal. He is also
istration and economics from the European Business           with market analysis, market communication, decision-         Board member of Hotel Berlin, Berlin.
School in London. She has also studied property valua-       making support for the CEo and business area manag-
tion at the Royal Institute of Technology (KTH) in Stock-    ers, as well as with acquisitions.                            15. Louise Ceder, Property Support, b. 1970. Louise
holm. Upon completion of her studies, anette worked                                                                        works with property support, and during the last year has
with Corporate Finance at deloitte & Touche. She was         10. Josefin Nilsson, Receptionist, b. 1983. Josefin is        produced a new website for reporting and follow-up.
recruited by Pandox in 2003 as analyst, and works with       responsible for daily office procedures and ensures that      Louise reports to our business area managers and has
acquisitions, market analysis, market communication and      everything flows properly. during the last year, she has      worked at Pandox since 2000.
decision-making support for the business area managers       supervised the redecoration of Pandox’ offices. She has
and upon acquisitions.                                       been with Pandox since 2006 and worked previously
                                                             within the travel sector.

72 | Pa ndox 2009
                              1.                                   2.                                     3.                                   4.

                              5.                                   6.                                     7.                                   8.

                              9.                                  10.                                    11.                                  12.

                             13.                                   14.                                   15..                                 16.

                             17.                                  18.                                    19.

16. Stefan Kornhammar, Property Manager, b. 1960.           17. Lars Häggström, Vice President asset Management        18. Staffan Olsson, director of Health, Sports and
Stefan is a graduate engineer and has 25 years’ experi-     and Business area Manager, b. 1954. Lars is a graduate     Coaching at Pandox, b. 1964. Staffan works on a half-
ence of the consultancy sector, of which 15 years within    marine engineer and has considerable experience of the     time basis for Pandox, primarily with marketing and event
this own firm. He has worked as consultant for Securum      hotel industry, with an emphasis on property-related       questions. His remaining time is spent as Manager of the
Hotell & Turism and Pandox since 1993. Stefan has been      questions. He was technical manager of Scandic Hotels      Swedish national Handball Team. Staffan is a legend in
project manager for several major rebuilding projects for   from 1993 to 1998, and VP Building & Technology of         the world of handball and has played 357 international
Radisson SaS, novatel and Scandic, as well as the           Hotellus International from 1998 to 2000. When Pandox      matches and scored 852 goals. He has won 2 World
recent conversion of Elite Park avenue in Gothenburg.       acquired the company in 2000, Lars became Business         Championship gold medals, 4 European Championship
Stefan was recruited as property manager of Pandox in       area Manager at Pandox. Lars now holds the position of     gold medals, 3 olympic silver medals, 1 World Champion-
the autumn of 2008, and he is responsible for the Com-      VP with responsibility for all of the Company’s property   ship silver medal and 2 World Championship bronze
pany’s properties in Sweden and denmark.                    issues and development projects, as well as a number of    medals, as well as a number of international champion-
                                                            the Company’s international hotels.                        ship medals as a professional player in Germany. Staffan
                                                                                                                       has represented Skånela IF, Huttenberg, niederwurz-
                                                                                                                       bach, HK Cliff, THW Kiel and Hammarby during his
                                                                                                                       career. Further details are available on page 27.

                                                                                                                       19. Enzo, Corporate dog
                                                                                                                                                            Pan dox 2009   | 73
                                                      CEO summary of the year 2009

                          Results           Pandox delivers – even in tough times

2009 was yet another successful year for              ated high liquidity – and which is still the case. The   The market was subsequently in free fall in the
Pandox. despite global anxiety, cash flow             high level of economic activity in combination with      beginning of 2009. during the year’s first nine
increased whereas revenues and profits                relatively little new capacity created a fantastic       months, revenues decreased by more than 30
declined. The driving force behind the                business climate for the hotel industry. There were      percent. The fall was even greater in the city’s
good developments is a combination of                 more guests than ever and they accepted that             business and luxury segments. Trends were the
the Company’s business model, the high                prices be raised several times a year. In this           same for markets such as Boston, atlanta and
quality of the property portfolio and lower           favourable world at large, the hotel industry also       Chicago. The euro area – which normally follows
interest costs.                                       received capital injections when new financial           developments with a lag of about two quarters –
                                                      players arrived, with limited – indeed in many           was now shadowing the american market with a
The past year was dramatic for the hotel industry,    cases totally without – industrial competence.
                                                                                                               minimal delay. In countries with a large proportion
demand, measured in RevPaR, decreased by a            They stoked the number of transactions within the
                                                                                                               of domestic demand, the downturn came gradu-
huge 20 percent in the United States and Europe.      sector to a level that we had never previously
                                                                                                               ally during the year.
The collapse was ruthless – all markets and seg-      experienced. The good liquidity increased the
                                                                                                                    However, trends changed in the autumn. The
ments were dragged down. and the fall came per-       value of assets and the interest in building new
                                                                                                               rate of downturn in volumes started to abate for
haps faster than ever before in modern times.         hotels was record high. The spiral just continued
                                                                                                               markets situated in the beginning of the economic
                                                      upwards, but in the end came to a halt.
                                                                                                               cycle. But prices continued to decline, which put
A stimulated surrounding world                             When the financial crisis then spread to the
                                                                                                               further pressure on operating results. However,
Even if the collapse as such came as a surprise,      hotel market and major parts of the artificial respi-
                                                                                                               over all, the year closed slightly better than the
there were a number of indicators that a downturn     ration disappeared, the downturn was even more
                                                                                                               dark predictions that were painted at the begin-
was dangerously at hand. Volumes were on the          dramatic. The market collapsed in new York’s
                                                                                                               ning of the year.
way down in the summer of 2008. Most sectors          high-price and luxury segments the day after the
and economies lived in a stimulated surrounding       bankruptcy of Lehman Brothers. The downturn
                                                                                                               Continued warning flag
world where demand was record high. The stimu-        then spread at lightening speed to other cities.
                                                                                                               an analysis shows that the course of events was
lation consisted of inexpensive capital, which cre-   a global hotel crisis had become reality.
                                                                                                               increasing significantly. The downturn phase was

                                          a fighting spirit was created with
                                          the motto: “We never give up”

74 | Pa ndox 2009
faster and deeper than normal. In the same way, the     number of structural problems that need to be          board of directors and management, who have
upturn came more rapidly and stronger than after        handled within the sector.                             not been involved in granting the credit, to handle
previous downturns. Current developments indicate                                                              the situation. By proceeding actively and quickly
a rapid recovery, which is supported by several         1. The banks                                           with the assets, significant values can be saved.
macro-economists’ opinions regarding 2010.              one problem concerns the banks, which risk                  Indeed, Pandox has its roots in such active
    a crucial question is whether the recession is      becoming major owners of hotels. This applies in       management of distressed credits from the major
already over, and whether or not we will see a          particular to banks and other financial players in     finance and property crisis in Sweden in the
strong recovery. We at Pandox believe that it is too    the United Kingdom. But large banks in the rest of     beginning of the 1990s.
early to say that the danger is over this time round.   Europe have also been active and taken part in              Irrespective of the model the banks choose,
Experience from previous downturns, the propor-         the inflated transaction market for hotels and hotel   they play a key role. In the Baltic States, the Scan-
tion of new hotel capacity expected in the market,      properties. It is now time to take care of the prob-   dinavian banks started early to build up specially
and impending rises in interest rates together lead     lems that the banks have considerably contrib-         adapted organisations to be able to manage and
us to not being too optimistic. We see two proba-       uted to through far too generous financing com-        transform bad credits to assets. apparently,
ble developments ahead of us. Either we will            bined with a lack of knowledge of how the sector       finance institutions in Europe are handling similar
experience developments for the economy and             functions. The banks have two strategies to            questions. a qualified guess is that we will see
our sector in the form of a W with a short and          choose between – one passive and one active.           greater activity in 2010 to ensure that as much
weak upturn followed by a further downturn – or         Experience unfortunately says that they will choose    value as possible be saved. Pandox is interested
alternatively we will see a long and slow recovery.     the former. But we hope that they choose a more        in taking part, and our experience from this type of
However, it would seem that it will take many           active strategy where they can obtain inspiration      situation is globally known within the sector.
years before RevPaR levels return to the heights        from the Swedish model from the beginning of the
seen in 2008.                                           1990s. at that time, the Swedish government            2. Hotel brokers
                                                        formed a special company, Securum, to take care        Hotel brokers represent the next problem area. a
Three problems that require a solution                  of distressed credits from the banking system. one     large number of new hotels and business transac-
In addition to weak economic trends, there are a        prerequisite for success is to allow a competent       tions have arisen based on calculations and valua-
                                                                                                                                                                       Photo: Jessica Gow

                                                                                                                                                 Pan dox 2009   | 75
tions based on eternal growth, and produced by           was carried out to prepare the operational activi-     since their acquisition in 2006 with regard to both
these so-called advisers. now that they have             ties for a poorer market and lower revenues. The       the product and the operating systems. The
cashed in their amply sufficient fees, they offer        action plans focused on strengthening products         results are good and the operator has shown con-
their services as managers of these stranded hotel       to maintain existing customers and to increase         siderable interest, which has led to both hotels
projects. They should be disqualified from provid-       productivity through lower and more flexible costs.    being leased with long contracts to Choice and
ing this kind of service. Perhaps it is time to intro-        Prior to a major change process, it is impor-     Scandic respectively.
duce ethical rules within the hotel industry?            tant that the entire organisation has the same driv-        The prospects for 2010 are difficult to judge.
                                                         ing forces, and that the leadership be situation-      Pandox’ point of departure is that the markets in
3. Operator-friendly agreements                          adapted. It is necessary to be able to lead with       the forefront of the economic cycle, particularly
The last major problem area is the one-sided             both demands and support simultaneously. With          new York, will achieve stable RevPaR during the
operator-friendly management agreements cre-             the spirit on which Pandox is based, this was rela-    summer, and the euro zone is expected to follow
ated by the large hotel companies in conjunction         tively easy. The model with delegated leadership       with a certain time-lag. Prices will be under pres-
with their massive sales of properties. This form of     and considerable personal scope and responsibil-       sure, which could create greater profitability
agreement is directly counter-productive through         ity was maintained. all plans were produced in         problems. The Scandinavia markets have in
offering low incentives for management compa-            coordination with the local management teams.          general a tough hotel year ahead. all in all, results
nies who have responsibility for the assets. The         Follow-up often took place in informal meetings        will deteriorate, but trends will nonetheless
structure does not reward knowledge of how prof-         where we focused more on inspiration than con-         improve, which should lead to better liquidity in
itability be developed, which primarily affects own-     trol. Solutions to problems were adapted to the        the market. Pandox’ own forecast is that cash
ers and banks. But the problem also spreads to           local conditions so that the management in each        flows will remain stable in 2010.
the guests through a “fat cat” attitude being imple-     location could develop competition advantages
mented in daily operations.                              based on their own competence. Substantial             Stockholm, February 2010
                                                         individual responsibility was given to find own
Coming early with the right decision                     solutions. a fighting spirit was created with the
Pandox’ activities in 2009 were primarily charac-        motto: “We never give up”.
terised by internal work. already in the spring of                                                              anders nissen
2008, we in the management team identified key           Well-positioned for yet another tough year             CEO
issues and created action plans with the objective       The hotel property Vildmarkshotellet was acquired
of being prepared for a difficult economic down-         during the year, thereby leading to Pandox
turn. The plans principally embraced four areas:         becoming part of the Kolmården destination,
To perform an overview of the Company’s infor-           which has seen impressive developments in
mation systems to enable fast and correct infor-         recent years. The vision is that the hotel shall
mation regarding operational developments. To            become one of Sweden’s most creative meeting
raise requirements regarding orderliness in all          places for both conferences and tourism. With
parts of the Company so as to reduce the risk of         regard to important investments in existing hotels,
negative surprises. The important question of            several projects were completed during the year.
mapping all investment and maintenance ques-             Hotel Berlin, Berlin, which was acquired in 2006,
tions within the Pandox sphere, which annually           is now repositioned further to an extensive devel-
amounts to approximately SEK 500 million,                opment program and new inspiring management.
directly or indirectly. With this knowledge, particu-    The InterContinental Montreal has been given a
lar emphasis was placed on product development           new image and, with its design in boutique style
and cash-flow generating measures, while tech-           and product offer, has every chance of achieving
nology-related investments were given lower pri-         the goal as RevPaR leader in the city. Holiday Inn
ority. a considerable amount of work was carried         Brussels airport has been upgraded and is now
out, starting already in 2007, to increase the pro-      the best medium-priced product in the area.
portion of variable interest-bearing liabilities. This   Radisson BLU Hotel in Basel has been refurbished
enabled the Company to benefit from falling inter-       in close cooperation with the operator, and has
est rates and to thereby compensate the simulta-         quickly increased its market share. Park and
neous decline in revenues. other significant work        Skogshöjd in Södertälje have been developed

                                    In fact it is simple, if you work together with
                                    the best people, you will often win.”

76 | Pa ndox 2009
                                          a large bunch of roses

If I may say so myself, the results were very satisfactory. In a difficult   during the year. Of the Swedish hotels, Hilton Stockholm Slussen
surrounding world, Pandox’ hotel property portfolio has performed            has impressed with a stringent revenue-management process and
significantly better than the market, and has been able to generate          Quality Hotel Park in Södertälje, Radisson BLU in Malmö, Elite Stora
cash flows that even exceed last year’s record levels. There are many        Hotellet in Jönköping and Elite Park Avenue in Gothenburg have
heroes involved in this process. I would like to take this opportunity       improved their market positions in difficult times. The saying still
to send roses out to those in the organisation. The first goes to the        stands: a good hotel with a strong location, run by a skilful team, will
Crowne Plaza Brussels City Centre, which year after year continues           always have a market – even in bad times.
to strengthen its market position irrespective of the business climate.          In this context, Pandox’ shareholders and board of directors
The next rose goes to Hotel Berlin, Berlin. The hotel is now reposi-         should not be forgotten. Despite the greater risks due to the poorer
tioned and an impressive amount of work has been carried out to              market – and we have also had several major ongoing investments –
improve the revenue structure through more and larger meetings, as           they kept to their original plans. This created a peaceful climate for
well as a well-organised process to adapt costs. The hotel is now            the management team, which then spread through the entire organi-
entering the next phase where the brand – Berlin’s most creative             sation. I am also extremely proud to send a large bunch to all my co-
meeting place – will be developed to the next level. Another rose            workers at Pandox. In fact it is simple, if you work together with the
goes to Hotel BLOOM! for its dynamic work with the organisation              best people, you will often win.

                                                                                                                                           Pan dox 2009   | 77
Production: Pandox in cooperation with Hallvarsson & Halvarsson. Photo: Ulf Blomberg, Getty Images, Johnér Bildbyrå. Printing: Jernström offset, Stockholm, 2010.

                                                                                                                                                                    Pandox aB · P o Box 5364 · SE-102 49 Stockholm, Sweden · Tel +46 (0)8 506 205 50 · Fax +46 (0)8 506 205 70 ·