pandox anual report 2005 (eng)

Annual Report

PANDOX – ANNuAl rePOrt 2005 �

Contents

The Company

the year in brief . . . . . . . . . . . . . . . . . . . . . 4

Business trends . . . . . . . . . . . . . . . . . . . . . . 6

Message from the CeO . . . . . . . . . . . . . . . . . 8

Vision, business concept,

objectives and strategies . . . . . . . . . . . . . . . �0

the Pandox Model . . . . . . . . . . . . . . . . . . . �2

types of lease . . . . . . . . . . . . . . . . . . . . . . �4

Human resources . . . . . . . . . . . . . . . . . . . . �6

Pandox’ focus on the environment . . . . . . . . �8

Market overview . . . . . . . . . . . . . . . . . . . . . �9

Corporate Governance . . . . . . . . . . . . . . . . 25

Board of Directors . . . . . . . . . . . . . . . . . . . 26

Management and Auditors . . . . . . . . . . . . . 27

The hotel portfolio

Hotel property portfolio . . . . . . . . . . . . . . . . 30

Operating companies . . . . . . . . . . . . . . . . . 32

list of properties . . . . . . . . . . . . . . . . . . . . 34

Hotel properties . . . . . . . . . . . . . . . . . . . . . 36

Financials

Financial overview . . . . . . . . . . . . . . . . . . . 48

Sensitivity analysis . . . . . . . . . . . . . . . . . . . 50

evaluation and fiscal situation . . . . . . . . . . . 52

Definitions . . . . . . . . . . . . . . . . . . . . . . . . 53

ten-year overview . . . . . . . . . . . . . . . . . . . . 54

Quarterly data 2004–2005 . . . . . . . . . . . . . 56

Financial statements 2005 . . . . . . . . . . . . . 57

report of the Board of Directors . . . . . . . . . . 58

Income statement and comments . . . . . . . . 60

Balance sheet and comments . . . . . . . . . . . 62

Changes in equity . . . . . . . . . . . . . . . . . . . 64

Cash flow statement with comments . . . . . . . 65

Accounting principles . . . . . . . . . . . . . . . . . 66

Notes to the Accounts . . . . . . . . . . . . . . . . . 68

Proposed disposition of earnings . . . . . . . . . 74

Auditors’ report . . . . . . . . . . . . . . . . . . . . . 75

PANDOX – ANNuAl rePOrt 2005 �

About Pandox

Pure business concept with focused strategy

• Pandox is one of northern Europe’s leading pure hotel property companies. The Company has built up specialist expertise within the key areas of hotel markets, hotel operations, hotel properties and business development. Active ownership, with well-developed and strategic plans for each hotel, enables the creation of good prerequisites for stable and improved cash flows, and thereby growth in value for the shareholders.

• Pandox’ strategy is to own one type of asset – hotel properties. Its focus is strengthened by a priori-tised market segment. Pandox is to own large hotel properties in Sweden, major locations in Europe, as well as developing regions in eastern Europe.

• The hotels should be in central, natural and strong locations such as city centres, airports and exhibi-tion centres. The hotels should be in the upper medium to high price range and focus on the busi-ness and leisure segments.

• The hotels owned by Pandox are operated and marketed by the most powerful players in the hotel market, who with well-known brands and dynamic independent distribution channels create strong market positions and thereby stable revenues.

• Revenues are created by flexible lease agreements related to the operator’s turnover and results or through management agreements where Pandox assigns a third party to manage operations, or alter-natively through its own management. Irrespective of the form of operation, Pandox contributes via its active ownership to increasing total cash flows and reducing risks.

• At the end of the year, the Company owned 36 hotel properties, of which one asset management assignment and five operating companies. Pandox owns and develops assets in Sweden, Denmark, Belgium, Germany, Switzerland, UK, and the Bahamas.

The Companythe year in brief . . . . . . . . . . . . . . . . . . . . . . 4

Business trends . . . . . . . . . . . . . . . . . . . . . . 6

Message from the CeO . . . . . . . . . . . . . . . . . 8

Vision, business concept,

objectives and strategies . . . . . . . . . . . . . . . �0

the Pandox Model . . . . . . . . . . . . . . . . . . . �2

types of lease . . . . . . . . . . . . . . . . . . . . . . �4

Human resources . . . . . . . . . . . . . . . . . . . . �6

Pandox’ focus on the environment . . . . . . . . �8

Market overview . . . . . . . . . . . . . . . . . . . . . �9

Corporate Governance . . . . . . . . . . . . . . . . 25

Board of Directors . . . . . . . . . . . . . . . . . . . 26

Management and Auditors . . . . . . . . . . . . . 27

4 PANDOX – ANNuAl rePOrt 2005 PANDOX – ANNuAl rePOrt 2005 5

the year in brief

Significant events in 2005

Property management revenues and total revenuesPandox’ property revenues amounted to SEK 574.0 M (592.9), which for

comparable units represented an increase of 2.3 percent against with last

year. The Group’s total revenue amounted to SEK 778.6 M (762.8).

Sales in SwedenOn 1 July, Pandox sold twelve Swedish hotel properties for a total amount of

SEK 1.1 billion. The capital gain after tax upon this divestment amounted to

approximately SEK 450 M. These properties are included in the operating

results of the first six months of 2005.

ProfitsThe pre-tax profit for 2005, excluding non-recurring items, amounted to

SEK 222.9 M (228.6). Profit after tax, including non-recurring revenues,

amounted to SEK 688.3 M (124.7).

Cash flowCash flow from ongoing operations, excluding non-recurring items, amoun-

ted to SEK 301.4 M (298.9).

Acquisition in BasleIn February 2005, Pandox acquired the hotel property Radisson SAS Hotel

Basle with 205 rooms at an acquisition cost of SEK 280 M. The property was

taken over financially on 1 January 2005.


Acquisitions in Brussels and CopenhagenPandox acquired two hotel properties in the autumn 2005 – one in

Brussels and one in Copenhagen with 315 and 203 rooms respecti-

vely for a total acquisition cost of about SEK 380 M. The hotel opera-

ting companies in both hotel properties will be run under Pandox’

management.

Increased demandDemand for hotel rooms increased in Sweden in 2005. The number

of rooms sold rose by about 6 percent.

Improved room occupancyRoom occupancy in Pandox’ Swedish prioritised market segment

amounted to 60.5 percent (57.4), representing an increase of 3.1

percentage points. Room occupancy in northern Europe’s major cities

was 67.1 percent (65.7), representing a rise of 1.5 percentage points.

Rising RevPAR in StockholmIn Sweden’s largest hotel market, Stockholm, revenue per available

room (RevPAR) increased by 8.3 percent.

Key figures 2005 2004

Property revenues, SEK M 574.0 592.9

Operating net, SEK M 470.2 477.9

Profit before tax 1), SEK M 222.9 228.6

Profit after tax 2), SEK M 688.3 124.7

Cash flow 1), SEK M 301.4 298.91) Excluding non-recurring revenues.2) Including non-recurring revenues.

Accounting principlesPandox applies the Swedish Annual Accounts Act and generally accepted accounting principles, as well as taking

into account the recommendations of the Swedish Accounting Standards Board. As the company is delisted from

the Stockholm Stock Exchange, Pandox do not have to follow the accounting principles recommended by IFRS.


Offensive acquisitions improve quality and potential

Pandox carried out transactions for more

than SEK 1.7 billion in 2005, of which

SEK 660 M represent acquisitions.

The Radisson SAS Hotel Basle was acquired for

SEK 280 M. Basle is Switzerland’s second

largest city with 500,000 inhabitants. It is a

well-developed destination with a large con-

gress and exhibition centre, as well as a

number of large sports stadiums, which

render Basle an attractive location for major

events. The hotel is centrally located and is

a full-service product with 205 rooms, con-

ference facilities, swimming pool, restaurant

and bar.

Copenhagen Hotel 27, which was previously

marketed under the name of Mermaid, was

acquired in November 2005. The hotel has

203 rooms and is located in central Copen-

hagen, close to Tivoli and the Ströget shop-

ping street. The hotel, which was closed at

the time of taking possession, has per-

formed badly for several years and requires

significantly active measures. The action

plan that was prepared in conjunction with

the acquisition started with the recruitment

of new management and board with expe-

rience of turnaround cases. A vision has been

established with the ambition of creating

one of Copenhagen’s leading medium-price

hotels with the help of the product’s size,

strategic location and attractive design. One

of the first measures was to change the

name to Copenhagen Hotel 27 so as not to

be associated with the hotel’s historic profile.

The total development program is estimated

to cost about DKK 60 M. Further to this

acquisition, Pandox owns 687 rooms in

central Copenhagen.

The Royal Crown Hotel Brussels was acquired

and taken over in the autumn. It has 315

rooms and is located close to Place Rogier in

central Brussels. The hotel is a full-service

product with well-developed conference

facilities, gym, restaurant, and bar. Built in

1976, the hotel has tried from the start to

establish itself in the higher price segment,

but without having succeeded. Pandox’

vision is to develop the hotel to one of the

leading medium-price hotels in central

Brussels with a focus on the business, con-

ference and tourist segment. The develop-

ment program includes a new distribution

strategy, upgrading and development of the

current product offer, modernisation of the

organisation, new property technology, and

more. The investment is estimated to

amount to approximately EUR 12 M, and is

forecasted to take up to two years to imple-

ment. Pandox owns more than 1,000 rooms

in central Brussels further to the acquisition

of the Royal Crown, and strengthens its posi-

tion as one of the leading players.

Pandox sold twelve hotel properties during

the year for a total of SEK 1.1 billion. All

hotels were located in Sweden. They had

been acquired on different occasions at the

end of the 1990s, and under Pandox’ man-

agement underwent development programs

resulting in a capital gain of approximately

SEK 450 M.

The transactions in 2005 contributed to the

continued improvement of the Company’s

structure and potential. The revenue struc-

ture has been strengthened in major inter-

national hotel markets, and the proportion of

revenues coming from Stockholm, Brussels,

London, Copenhagen, Gothenburg and

Basle now amounts to about 80 percent.

The proportion of result-based rents has

increased through a rise in hotel operating

companies run under own management,

and is estimated to be about 15 percent in

2006. The average size has increased to

218 rooms. The above implies that Pandox’

hotel property portfolio in terms of revenue

structure, brand names, size, quality and

profitability must be considered as being

one of the best in Europe.

business trends


Dynamic hotel property portfolio

Pandox’ portfolio currently contains many

interesting development projects that will

further improve both profitability and quali-

ty. A number of examples are as follows:

The Crowne Plaza Brussels City Centre is current-

ly undergoing total refurbishment, spread

over five different phases. The first two

phases have been completed and covered

the recruitment of new management and

the implementation of professional control

methods, as well as the total refurbishment

of 216 rooms and related corridors. The lobby

floor has been improved, and restaurant and

bar areas have been upgraded and made

more effective. Phase three was started at

the end of 2005 and covers the develop-

ment of a new conference centre and the

total refurbishment of about 140 hotel

rooms, of which eight business suites. All

in all, the total investment is estimated to

amount to about EUR 14 M.

The Elite Park Avenue Hotel is currently under-

going total refurbishment, spread over four

phases. The first two phases have been

completed and covered the upgrading of

178 hotel rooms, of which eight suites

including bathrooms, as well as the lobby

area with restaurant, pub and bar. The third

phase started at the beginning of the year

and covers a further 84 hotel rooms, of

which 29 junior suites, as well as corridors

and property technology. All in all, the total

investment is estimated to amount to

approximately SEK 100 M, and is being car-

ried out in close cooperation with the opera-

tor Elite Hotels.

The Royal Crown Hotel Brussels will be the sub-

ject of an investment and development pro-

gram to be started in 2006 with the objec-

tive of creating one of Brussels’ leading

hotels for business and conference guests

and tourists. The investment will cover

the total refurbishment of the property, up-

grading of the product offer, as well as the

modernisation of the organisation. The

total investment is estimated to amount to

approximately EUR 12 M.

The Copenhagen Hotel 27 is currently under-

going an upgrading program in four phases.

The first phase is in progress and covers the

total refurbishment of 55 hotel rooms and a

facelift of the lobby area. The total invest-

ment is estimated to amount to about

DKK 60 M.

The Scandic St Jörgen is currently undergoing

an upgrading of rooms and conference

areas with the objective of strengthening the

hotel’s market position, and to it being one

of Malmö’s leading hotels. The development

project also covers the closing of the current

restaurant, Times, and the development of

shopping areas. The total investment is esti-

mated to approximately SEK 45 M, and is

being carried out in close cooperation with

the operator.

The Scandic Copenhagen will be subject in

2006 to an investment program in the cur-

rent conference and banquet areas with the

objective of strengthening the hotel as one

of the leading properties in Copenhagen.

The project also includes improvements to

the lobby areas and a restaurant. The total

investment is estimated to amount to about

SEK 50 M.

Scandic Hallandia will be subject in 2006 to an

investment in order to increase the number

of rooms and refurbishment of conference,

restaurant and room product and property

technology. The total investment is estimat-

ed to amount to about SEK 40 M.

The First Hotel Grand Borås will undergo an

investment program in 2006 concerning the

hotel product and property technology with

the objective of modernising the hotel and

strengthening its position as Borås’ leading

hotel. The total investment is estimated to

amount to SEK 12 M.

8 PANDOX – ANNuAl rePOrt 2005

message from the ceo

Quality and potential are being

strengthened2005 was a further successful year for Pandox

with good profit-growth, a high rate of transac-

tions, as well as several offensive investments

in the existing portfolio, which both improved

the quality and potential of the hotel properties.

Revenues rose by 2.3 percent for comparable

units.

Hotel portfolio with high qualityPandox was formed in 1995 and was quoted

on the Stockholm Stock Exchange in 1997. It is

now in private ownership since 2004 further to

Eiendomsspar AS and Sundt AS making a pub-

lic offer for all shares in the Company. After ten

years of good development, Pandox has posi-

tioned itself as one of the leading pure hotel

property companies in Europe. At the end of

the year, the Company owned 36 hotel proper-

ties, of which one asset management assign-

ment and five operating companies. Business

operations are established in seven countries.

In addition to the home market in Sweden,

Pandox owns hotel properties in Denmark,

Belgium, Germany, Switzerland, UK, and

the Bahamas.

The quality of the portfolio is very high. The

majority of revenues come from markets with

both international and domestic demand,

which in turn creates stable revenues with good

potential. The average size of the hotels is 218

rooms. All properties are situated in strong and

natural hotel locations such as in city centres or

close to large airports and exhibition centres.

The hotels are run in different operational

forms in close cooperation with strong and well-

known brand names such as Hilton, Radisson

SAS, Scandic, Elite Hotels, Choice Hotels of

Scandinavia, Crowne Plaza and First Hotels, or

are marketed through independent distribution

and sales channels. Revenues in the Company

are created partly through lease agreements

where Pandox transfers the right to a third party

to operate the hotel and receives rent linked to

the operator’s turnover, or alternatively via man-

agement agreements where Pandox assigns a

third party to manage the operation, or through

an own operating company where the hotel is

run under franchise agreement or without a

brand name. Pandox is an active owner and

controls operations via a strategic plan estab-

lished and adapted for each respective hotel.

Each plan is updated twice a year and the

action programs are carried out in accordance

with the Company’s working methodology –

known as the Pandox Model.

Offensive acquisitions and divestmentsPandox’ underlying growth continues to be

good. The operating net rose by 2.7 percent for

comparable units despite several major invest-

ments being made during the year which re-

duced capacity and thereby revenues. Pandox

carried out transactions for more than SEK 1.7

billion during the year, of which SEK 1.1 billion

pertained to the sale of hotel properties. This

divestment was the largest in the Company’s

history. The sold hotels had been acquired on

different occasions at the end of the 1990s,

and under Pandox’ management underwent

various development programs with the objec-

tive of improving cash flows in the hotel opera-

tions and thereby the value of the assets.

Examples of measures implemented

include the change of brand names, upgrading

and development of the products, rationalisa-

tion measures, better management systems,

etc. The sale of twelve Swedish hotels

generated a capital gain of approximately

SEK 450 M, which will be used for new strate-

gic acquisitions. Three acquisitions were also

made during the year. The Radisson SAS Hotel

Basle with 205 rooms was acquired in the

spring. A new development plan for the hotel is

currently being prepared in close cooperation

with Radisson SAS. The hotel is located in cen-

tral Basle close to the shopping and business

district. Basle is a well-developed destination

with strong business and conference activities,

and with its strategic position in central Europe,

has many international exhibitions and sports

events – thus creating a stable hotel market.

The Royal Crown Hotel in Brussels with 315

rooms and the Copenhagen Hotel 27 with 203

rooms in Copenhagen were incorporated in the

autumn. Both acquisitions include both the pro-

perty and hotel operations and are typical Pan-

dox acquisitions. The hotels are located in good

international hotel markets that are currently

growing. The Royal Crown Hotel is situated

close to Place Rogier, which is witnessing

strong development with several new and large

office complexes. The Copenhagen Hotel 27

is located two blocks from Rådhusplatsen with

less than ten minutes’ walk to Tivoli. Both hotels

are large, which creates prerequisites for good

profitability in their operations and thereby im-

proved value in the property. The hotels, which

currently perform badly, require significantly

active measures. The Copenhagen Hotel 27,

which was closed when Pandox took posses-

sion, has reopened with a new name, new

board and new management. The strategy is to

develop operations under own management

and to steer towards a vision of creating one of

Copenhagen’s best medium-price hotels with

the help of the hotel’s size and strong location,

as well as a modern and attractive design. The

development program is estimated to amount

to DKK 60 M.

The Royal Crown Hotel was operated under

a management agreement with Accor under

the brand name of Mercure when Pandox took

possession. The hotel tried to become estab-

lished in the 1980s as a high-priced hotel, but

did not succeed. Pandox’ strategy is to develop

the product towards a new market position,

and to create one of Brussels’ leading business

and conference hotels in the medium-price

segment. This repositioning implies radical

changes with a new brand name and a power-

ful distribution strategy. The hotel’s product

offer will be adapted to new requirements, and

the organisation will be changed and moder-

nised. The strategy is to operate under own

management with the same team that carried

out the development of the Crowne Plaza. The

acquisition of the Royal Crown Hotel implies

that Pandox now owns more than 1,000 hotel

rooms in central Brussels and has established

itself as one of the leading players in one of

Europe’s most dynamic hotel markets. In addi-

8 PANDOX – ANNuAl rePOrt 2005

tion to the Royal Crown Hotel with 315 rooms,

there are the Hilton Brussels City with 285

rooms, the Crowne Plaza Brussels City Centre

with 356 rooms, and the Scandic Grand Place

with 100 rooms.

Value of cooperation with brand namesOne of the trends in the hotel market is the con-

tinued reorganisation of the hotel sector. Most

evident is the impact of the major international

hotel companies. During the year, we have wit-

nessed major divestments of properties where

hotel companies have chosen to control opera-

tions via long-term management agreements.

The motives pertain to increased demands

from the capital market to identify hidden

values in the hotel companies’ balance sheets

and to reduce future financial investment com-

mitments in properties. The consequence of

the hotel companies’ new strategies is the signi-

ficant reduction of one’s position as hotel pro-

perty owner, and through management agree-

ments trying to transfer the risks to the property

ownership. In view of this situation, there is

good reason to analyse the value of the interna-

tional brand names. Historically, there are two

motives that have dominated why a hotel pro-

perty owner has chosen to seek cooperation

with a hotel company, compared with operating

hotels with own management. One of them is to

participate in the hotel company’s brand name

and systems, which strengthens and renders

more visible the property’s position. Another

strong argument is that the companies have

been prepared to provide guarantees or sign

leases for the right to operate the hotels, which

has given the owner a minimum yield and re-

duced risk. In the future, reasons to cooperate

will subsequently rest entirely on the hotel com-

panies’ ability to create profitability and a return

on investment for the owner via their ability to

market and manage the hotels. If one does not

succeed, there will be a manifest risk that the

owner will choose another form of cooperation

upon the expiry of the agreement. When look-

ing at the length of management agreements,

the hotel companies appear themselves to

doubt their ability in view of that they often wish

to have agreements of 30-40 years with unilat-

eral right of extension. The strategy is easy to

follow. Good revenues are often created in the

international companies’ systems, but the ef-

fectiveness of the operations is low, in addition

to there being high demands on the owners to

invest. The return on investment is often quite

simply not that which was promised. The rea-

son is that the large hotel companies’ systems

are often expensive and bureaucratic. Instead

of coming to grips with one’s internal efficiency,

one tries to shift the burden over to the owners.

The question is whether one will succeed? It is

quite possible that several hotel property com-

panies will acquire their own operational compe-

tence in order to increase their future flexibility.

Destination development are increasingly important Another current question concerns destination

development. Locations with good knowledge

of how to develop and market their city to-

wards, for example, international conference

and exhibition organisers, create higher growth

and more stable demand than locations that do

not possess such competence. Destination de-

velopment therefore start to be an increasingly

important component when deciding major in-

vestments. Many towns and cities have realised

the financial benefits of being an attractive des-

tination. Experts on destination development

believe that Europe will be split into a Premium

League, a First Division and a broad division re-

garding attractiveness for visitors. The ultimate

gain is considerable tax revenues in the form of

shopping, hotel accommodation and new jobs

– which should interest political players. For

example, in order for Stockholm to be able to

compete in the future, significant investments

will be required where target-oriented efforts

are made to attract more low-price airlines, de-

veloped sports and concert stadiums, contin-

ued infrastructure investments and considera-

ble patience. You must sow before being able

to harvest. Gothenburg is a classic example of

how to build up a destination in the long-term.

Good outlook for 2006The quality of Pandox’ hotel property portfolio

continues to improve. Work with restoring the

Elite Park Avenue to one of the leading hotels

in Gothenburg was started during the year.

Most of the rooms have been totally refurbished

and a broad offer of food and drink has been

launched, where the Park Aveny Café was

designated Business Restaurant of the Year

2005 by the Dagens Industri newspaper. The

upgrading of the Crowne Plaza Brussels City

Centre was started in 2004 and two of the five

phases have been completed. Despite disrup-

tions in operations, the hotel gained market

shares during the year and was host to the US

Secretary of State during her visit to Brussels.

The Scandic Park in Stockholm now has a new

lobby that acts as a good complement to the

previous room refurbishments, and strength-

ens the hotel’s position as one of the leading

four-star hotels in the city. The Radisson SAS

Grand Hotel in Helsingborg has completed a

development program of its rooms, and has

created a hotel arcade with restaurants, bar,

café, newsstand, meeting rooms, and more.

The surrounding world continues to witness

good growth and a high level of activity, which

are the most important reasons for demand

within the hotel sector continuing to be good.

Together with relatively low additional capacity,

good prerequisites have been created for 2006.

In this positive picture, Pandox has the oppor-

tunity to continue to develop better than the

market. The Company’s acquisitions in 2005,

combined with development projects and new

agreements, mean that profit and cash flow for

comparable units will be better in 2006 than

last year.

Stockholm, February 2006

Anders Nissen

CEO

PANDOX – ANNuAl rePOrt 2005 9

�0 PANDOX – ANNuAl rePOrt 2005 PANDOX – ANNuAl rePOrt 2005 ��

vision, business concept, objectives and strategies

Leading and

profitable

Pandox’ principal task from a share-holders’ perspective is to create con-ditions that enable an increase in the value of the Company through the development of cash flow in the hotel property portfolio combined with pro-fitable acquisitions and divestments. The Company’s vision, business con-cept, objectives and strategies have been formulated with this philosophy acting as the principal point of depar-ture.

VisionPandox’ vision is to be the leading and most

profitable hotel property company in northern

Europe with regard to expertise, systems and

working methods, such as through active

ownership of hotel properties.

Business conceptPandox’ business concept is to actively own,

develop and to lease hotel properties based on

expertise within hotel properties, hotel opera-

tions and business development.

Both the business concept and vision place

stringent demands on specialist skills within

three areas – hotels and hotel operations, hotel

properties and business development. Con-

stant updating, development and training are

therefore required within the different areas of

expertise. By breaking down Pandox’ business

concept into fundamental components, the fol-

lowing comments may be made.

Prerequisites for an increase in cash flow

are created through development and active

measures within the hotel properties. The dis-

tribution of revenues and earnings is deter-

mined by incentives via flexible leases that pro-

vide both the operator and the owner with the

impetus to continually develop their business

operations. A special working method to enable

the follow-up and analysis of each hotel prop-

erty has been developed – known as the Pan-

dox Model.

Leasing hotels is a very complex process

and requires deep insight into the prevailing

competition in the local market. A market study

that includes demand and its distribution

between the different price and project seg-

ments must be performed. The analysis shall

include the best available brand names as well

as the product quality that has the best profita-

bility potential. The hotel lease agreement

should be formulated in a manner that the par-

ties’ intentions and quality requirements be

clear. Investment and maintenance plans must

be decided and responsibilities be allocated.

Cooperation issues regarding the way the busi-

ness shall be managed, evaluated and control-

led are included in the leasing process.

There are different forms of partnership to

choose from depending upon local conditions

and each hotel’s history and current position:

• Lease agreement with a partner that handles

both operations and distribution.

• Lease agreement with a partner that only

acts as operator, and that is supplemented

by a franchise agreement with a distributor.

• Own operator company with a management

agreement.

• Own operator company without a manage-

ment agreement, but that is supplemented

by a franchise agreement with a distributor.

The first alternative dominates, but all of the

forms of partnership are included in Pandox’

business operations.

Overall objectiveThe principal objective is to achieve an optimal

return on investment and growth in value

through specific knowledge of hotels, hotel

properties, and business development.

Financial goalsPandox’ equity/assets ratio should amount to at

least 25 percent. This solvency ratio require-

ment should be viewed against the background

of Pandox’ acquisition strategy and tax situa-

tion. The equity/assets goal shall be regularly

reviewed in order to achieve an optimal return

on investment for the shareholders.

StrategyA number of strategies have been defined to

enable Pandox to achieve its established goals

and objectives.

Pandox’ principal strategy is to own one

type of property – hotel properties.

�0 PANDOX – ANNuAl rePOrt 2005 PANDOX – ANNuAl rePOrt 2005 ��

Portfolio strategy In order to maximise revenues and cash flow,

Pandox concentrates on one prioritised, expan-

sive market segment. Pandox’ market segment

comprises hotel properties in Sweden, major

cities in northern Europe, as well as developing

regions in eastern Europe. The hotel properties

shall be centrally situated in natural and strong

hotel locations such as city centres, airports

and exhibition centres. The hotels shall be in

the medium to high price range, and focus on

business travellers and tourists. Pandox be-

lieves that hotels included in this market seg-

ment have the best chances of success in a

growing hotel business cycle, while risks are

limited in the event of a downturn. This is due

to hotel markets in large locations being more

stable and having better growth potential, be-

cause they attract more capital and people.

Strong and strategic locations are always im-

portant in the hotel industry, and the size of the

hotel provides profitability benefits – which in

turn increases Pandox’ potential for improved

return on investment.

Strategy for active ownershipPandox further develops its focus and expertise

in the chosen market segment through active

ownership. Active ownership is adapted to

each situation with regard to both procedures

and partnership strategy, with the aim to add

value through higher cash flow or through limit-

ing the risk involved. Examples of active owner-

ship are set out below.

AcquisitionsPandox has built up its own expertise in the

field of acquisitions and acquisition methods.

This implies that Pandox analyses, evaluates,

negotiates and executes all acquisitions in-

house, and enables a deep insight into acquisi-

tions and their real potential and risks, while in-

creasing knowledge of the market.

Choice of partnersPandox works together with all competitive

market players where joint forms of cooperation

can be developed and applied for the optimisa-

tion of total cash flow.

Strategic alliancesPandox can deepen the cooperation with its

prioritised partners in order to jointly make ac-

quisitions and undertake restructuring pro-

grams or major investments.

Leases and agreements structurePandox enters into all forms of leases and ma-

nagement agreements to create joint incentives

and benefit the development of total cash flow.

Own operationsPandox has its own expertise for operating ho-

tels. Experience has shown that there are situa-

tions when this is the most profitable and most

effective way of improving cash flow.

Participation in the restructuring processPandox plays an active role in the ongoing

restructuring of the hotel property market.

Pandox participate through acquisitions,

divestments and choice of partner.

Cash flow strategyPandox adapts to each individual situation with

the support of the working methodology of the

Pandox Model. Pandox is thus able to actively

participate in the development and implemen-

tation of cash flow strategies together with its

partners.

Active ownership via divestment of parts of the existing portfolioPandox cultivates its portfolio in accordance

with its portfolio strategy. The majority of divest-

ments are managed directly by the Company.

�2 PANDOX – ANNuAl rePOrt 2005 PANDOX – ANNuAl rePOrt 2005 �3

Improved cash flow with limited risk

Hotel properties have characteristics that are distinctly different to other types of property, and demand spe-cialist skills and knowledge. Value-growth is complex and is based on revenues and profits being influenced by several factors such as the under-lying hotel market, choice of brand name, price and product segment, type of lease, and active ownership. Successful results demand that the hotels be continuously reviewed and analysed with the help of well-deve-loped working methodology that provides support to the decision- making process.

In order to maintain and benefit from the

knowledge and experience that the organisa-

tion constantly develops, the Company has pro-

duced and developed business procedures

and operating systems. These are used on a

daily basis and the results are documented.

Clear and user-friendly processes improve the

quality of analyses and decision-making, and

facilitate the transmission of knowledge while

reducing the risk of losing important experi-

ence and skills when key people leave.

Pandox’ principal procedures consist of the

Pandox Model, Market Survey and Financial

Reporting.

Pandox’ working methodology to generate

increased cash flow with limited risk is known

as the Pandox Model, and is the Company’s

most important principal operating procedure.

The model includes four different stages,

before implementation and follow-up. Each

hotel property is regularly evaluated based on

the four stages of the Pandox Model. Similarly,

each investment and divestment is preceded

by such an evaluation. The four stages are

market analysis, market strategy, profitability

optimisation, and lease optimisation (see

diagram on the opposite page).

The operating tools described in the follow-

ing market survey section are used within the

Pandox Model.

Market surveyThe point of departure for a market survey is to

assess the market situation and trends within a

specific market, based on current and correct

market information. To support this principal

procedure, Pandox employs a market informa-

tion system, external marketing systems and

databases, research and analyses, as well as

the Company’s networks and media monitor-

ing. Taken together, market surveys provide up-

to-date and reliable knowledge of prevailing

market conditions.

Market information systemPandox has an IT system that contains infor-

mation about the hotel market in terms of occu-

pancy, average room rates, growth trends,

comparative past performance figures, as well

as a target group analysis. The system covers

the major part of Pandox’ market. The assem-

bled information is structured by location, geo-

graphical area, as well as price and product

segments.

Database and external market systemsPandox has access to a database that contains

basic information about all hotels in Pandox’

markets. The Company also has an agreement

with various consultancy firms that constantly

monitor and analyse European and American

hotel markets in particular.

NetworksCompanies and individuals that are important

for Pandox’ operations are assembled in a da-

tabase, divided into various markets and func-

tions of the individuals concerned.

Media monitoringArticles about hotels published in Sweden and

abroad are registered daily.

Hotel product analysisThe hotel product analysis is a tool used as

the pandox model


support to establish a hotel’s position and

standard compared with competitors.

Manuals for lease and management agreementsOur manuals for lease and management agree-

ments provide a description of the various

types of hotel agreements that Pandox uses,

and how they shall be formulated. They contain

clear allocation of responsibility and checklists

to support ongoing operations. The manuals

are also an excellent tool for assessing risk ex-

posure in connection with acquisitions.

Hotel evaluation and investmentThis system developed by Pandox assesses the

profitability of a hotel business, and can conse-

quently establish the value of a hotel property.

The system is used for acquisitions and major

investments.

Financial reportingPandox’ focus on increased cash flow and the

optimisation of return on investment in its hotel

properties requires a detailed evaluation of pro-

posed and implemented measures. Pandox

has therefore developed a system to enable the

financial reporting and follow-up of target-varia-

bles. Financial reporting is based on the annual

budget prepared for each hotel property, which

is followed up on a monthly basis at both hotel

and Group level. Long-term forecasts are

drawn up for several years ahead as an integral

part of the budget process in conjunction with

the strategic plans prepared according to the

Pandox Model. The ongoing revenue reporting

follows changes observed within the hotel mar-

ket, and provides good underlying data for the

quarterly forecasts prepared per hotel property

and for the Group. All in all, this financial sys-

tem provides current information and data that

enable the continuous assessment of the port-

folio’s potential and risks, and consequently the

active measures that should be prioritised.

Market analysisA market analysis is performed in order to assess a hotel’s profitability potential and subsequent ability to pay the agreed rent. The local market is identified and analysed with regard to demand, competition and the cur-rent and future offer.

Market strategyFurther to the market analysis, a strategic plan for each hotel property is established based on each respec-tive hotel’s specific prerequisites and market profile. The strategic plan for the property influences the choice of hotel operator and distributor. The property’s continued area of use is unconditionally evaluated during the preparation of the strategic plan.

Profitability optimisationHotel operations shall be managed by the hotel operator in the most effective way possible. In view of that the value of a property is influenced by the profitability of the related hotel opera-tions, the operator is Pandox’ most important partner. The hotel operator is constantly assessed in order to ensure positive developments of the hotel’s operations and the value of the property.

Lease optimisationThe optimal cash flow of each respec-tive hotel property is divided between the operator, Pandox and other related parties. The lease is formulated in such a way that all parties involved are given an incentive to continuously improve the hotel property’s overall profitability. Pandox uses revenue-based, result-based, management and fixed-fee leases, or a combination of them.

Possibility to acquire hotel property

Action plan with concrete measures

Evaluation of each hotel property and the hotel property portfolio

Market analysis Market strategy Profitability optimisation

Lease optimisation

Sales as per the strategy

The Pandox Model

�4 PANDOX – ANNuAl rePOrt 2005

Incitement for both the operator and Pandox

types of lease

The value of hotel property is largely determined by the structure of the lease.

To produce a good hotel lease that is dynamic

for both parties is a complicated process. In ad-

dition to legal expertise, substantial knowledge

of conditions within the hotel industry is re-

quired, as well as insight into the priorities of

each respective party. The point of departure is

that the hotel property owner should have the

initiative in matters that create cash flow.

Specific characteristicsEach hotel property has its own specific cha-

racteristics. The value of a hotel property is

more dependent on the profitability of the ope-

ration’s (the tenant’s) business than is the case

with office or industrial premises. Leasing costs

represent a large part of a hotel’s operating ex-

penses, where the hotel property is the raw ma-

terial in the finished product that is rented out

in the form of hotel rooms. Furthermore, a hotel

property in general has one single tenant – the

hotel operator. Another characteristic is that,

unlike for example office buildings, cash flow is

generated in the hotel property, which in turn

increases demands for skills, expertise and in-

sight into the underlying hotel market.

Each hotel lease is the result of a compre-

hensive market analysis that includes changes

in the market and competition from different

players both in the short and long term.

The structure of each hotel lease is adapted

to each prevailing situation, and reflects Pan-

dox’ active ownership. By using various tech-

niques, Pandox can limit the risk in a declining

market and simultaneously participate in a

market that is showing an upward trend.

Should the operator’s liquidity weaken, Pandox

has the expertise and ability to manage the

hotel itself, which indeed has occurred on

several occasions.

Types of leaseThe choice of type of lease is essentially gover-

ned by the following factors – type of hotel, as-

sessment of the hotel market, the operator that

will manage the hotel, and length of the lease.

Pandox uses all four types of lease found in the

hotel property sector.

Revenue-basedRevenue-based hotel leases are linked to sales

generated by the hotel business. This form of

lease provides Pandox with a share of growth in

both the market as a whole and in the market

share. To limit the risk, these leases generally

specify a minimum guaranteed amount of

rental revenue (guarantee/base rent).

Result-basedA result-based hotel lease implies that the hotel

property owner receives a share of the hotel

operator’s operating net. The operating net is

created by the prevailing market situation,

market share, and the hotel operator’s ability to

run the business efficiently. This type of lease

requires that the hotel property owner under-

stands the operator’s financial control system.

Result-based hotel leases can also specify

minimum guaranteed rental revenue. This form

of lease is suitable in markets with rapid growth

in conjunction with changes in the business

that create strong growth in earnings.

Fixed-fee hotel leaseFixed-fee hotel leases with an index linked to

�4 PANDOX – ANNuAl rePOrt 2005

DuE-DATE STRuCTuRE

OF THE LEASE AGREEMEnTS

SEK M

0

100

200

300

400

2011+20102009200820072006

the development of the Consumer Price Index

(CPI) are used in mature markets and in well-

established hotel products. A fixed-fee lease

limits the risk but also the potential.

Management agreementA management agreement can be perceived as

a sort of agent contract. The main characteris-

tic is that the hotel property owner also owns

the hotel business. Through a management

agreement, an operator/manager is assigned to

operate and manage the hotel on behalf of the

hotel property’s owner - ”manage the man-

ager” - for which a management fee is paid to

the operator/manager.

Management agreements can be suitable

for hotel property companies with specialist

expertise where one can integrate the opera-

tor’s activities with its ownership, and thereby

obtain a greater portion of the operating net.

With this type of agreement, unlike the leases

described above, the property owner does not

have to take into account the indirect rights of

possession, as there is no tenant.

Pandox’ lease structurePandox’ lease structure reflects its active and

situation-adapted ownership. The lease struc-

ture is governed by factors such as anticipated

market trends, local competition, planned in-

vestments, as well as choice of operators and

distributors. By combining various types of

lease, Pandox has achieved a lease structure

that is 85 percent flexible, which provides Pan-

dox with increased cash flow in a rising market

while simultaneously offering a 55 percent pro-

tection against downturns in the market

through fixed-fee leases and rental guarantees.

Elite Park Avenue Hotel, Gothenburg. The hotel is currently undergoing a total refurbishment. The investment is estimated to amount to about SEK 100 M and is completed in collaboration with the operator Elite Hotels.

REnTAL REVEnuE 2005 By TyPE OF LEASE

Revenue-based leases, 50%

Revenue-based leaseswith guarantee, 34%

Management leases,own operation, 8%

Fixed leases, other tenants, 5%

Fixed leases, 3%

PANDOX – ANNuAl rePOrt 2005 �5


human resources

Pandox’ knowledge bank – Competence and expertise provide added-value

Anders Nissen, Chief Executive Officer, born in 1957. Anders Nissen has a strong background from the ho-tel industry, and has been active within the sector for nearly 20 years. His operating experience includes being as well as holding leading positions within the group management team of the hotel operator Reso. In the beginning of 1993, Anders became CEO of Se-curum Hotel & Turism AB, where he led the process of structuring Securum’s hotel activities. Anders was a key player behind the initiative to form Pandox, and has been CEO since the Company was started in 1995.

Nils Lindberg, Chief Financial Officer, born in 1947. Nils Lindberg has considerable experience in the economic and financial area within industry and the banking sector. He has worked as controller and treasurer of Dow Chemical Nordic Region, as well as bank manager with Nordbanken and business man-ager within Securum Finans. Nils joined Pandox in 1995, and is responsible for economic and financial issues within the Group with a focus on financial con-trol and reporting, as well as the management of the Group’s financing.

Anette Österberg, Analyst, born in 1975. Anette Österberg is a graduate in business economics from the European Business School in London. She has also studied property valuation at the Royal Institute of Technology (KTH) in Stockholm. Upon completion of her studies, Anette worked with Corporate Finance at Deloitte & Touche. She was recruited by Pandox in the spring of 2003 as analyst, and works with acquisitions, market analysis, market communication and decision-making support for the business area managers.

Salme Olsson, Property Accountant, born in 1944. Salme Olsson has studied economics at Stockholm University. She joined Pandox in 1995 after having previously worked within the Beijer Group and AEG, and now currently works within Pandox’ finance and accounting department.

Jesper Engman, Business Area Manager and Analyst, born in 1974. Jesper Engman is a graduate engineer from the Royal Institute of Technology (KTH) in Stock-holm and Nottingham Trent University with a speciali-sation in property finance. He has experience of the hotel property sector through working for First Host and Hotellus International. Jesper joined Pandox in 2000 as analyst, and works with acquisitions, divest-ments and market analysis. He is also manager of one of Pandox’ three business areas since 2004.

Lars Häggström, Business Area Manager and International Property Manager, born in 1954. Lars Häggström is a graduate engineer and has considera-ble experience of the hotel sector, with an emphasis on property-related questions. He was technical man-ager of Scandic Hotels from 1993 to 1998, and prop-erty manager of Hotellus International from 1998 to 2000 when Pandox acquired the company. Lars has business area responsibility for the international hotels, as well as several major Swedish properties. He has furthermore managed the re-branding of five large Hilton hotels as well as the ongoing further-de-velopment of the Crowne Plaza Brussels City Centre.

Mikael Planell, Business Area Manager, born in 1960. Mikael Planell is responsible for a large part of Pandox’ Swedish hotel property portfolio, as well as operations in Copenhagen. He has a solid back-ground from the hotel sector with 20 years as hotel manager and area manager, both in Sweden and abroad. Before joining Pandox in the beginning of 2005, he was manager of operating and business development for Accor Hotels’ Nordic operations.

Anders Nissen

Jill Jansson

Salme Olsson

Louise Ceder

Nevio Sagberg

Folke Holmqvist

Johnny


Ann-Sophie Forsmark, Property Accountant, born in 1971. Ann-Sophie Forsmark is a graduate economist from the IHM Business School. She joined Pandox in 1999 after having previously been employed by Rid-darstaden AB, Marco Polo and Fritidsresor. Ann-So-phie works within Pandox’ finance and accounting department.

Nevio Sagberg, Corporate Counsel, born in 1965. Further to obtaining his law degree at Lund University and studying at the University of Montreal, Nevio Sag-berg worked first for a district court and then for a lawyer’s office before joining Pandox in 1996. His tasks have included building up the Company’s legal department and preparing various hotel lease and agreement manuals. In addition to legal questions, Nevio works with acquisitions and provides business area managers and the Company’s management with underlying support for decision-making. He also acts as secretary of the Parent Company’s board of directors.

Folke Holmqvist, Property Manager Sweden, born in 1943. Folke Holmqvist is a construction engineer with 25 years’ experience of the building sector and five years as CEO of a hotel company. He became property manager of Securum Hotel & Turism AB in 1993 and took part in the formation of Pandox. Folke has been project manager for several major refur-bishment programs, and as Property Manager for the Swedish properties works closely with the three busi-ness area managers.

Jonas Pettersson, Controller, born in 1971. Jonas Pettersson is a graduate in business administration and economics from Stockholm University, and has also studied to become an electrical engineer at the Royal Institute of Technology (KTH) in Stockholm. He has previously worked with Corporate Finance at Deloitte & Touche and Nordea Securities, and most re-cently comes from the position as group controller of the industrial company DeLaval. Jonas was recruited by Pandox as Controller in the autumn of 2005.

Jill Jansson, Assistant to the CEO, born in 1952. Jill Jansson joined Pandox in September 2005 as Assist-ant to the CEO. Her position implies providing support to the board of directors and management of the Company, as well as internal and external communi-cation including the annual report and accounts. Jill comes most recently from Ventelo Sverige AB, and has also worked within group functions at Pharmacia.

Åsa Nilsson, Property Support, born in 1979. Åsa Nilsson has studied property entrepreneurship and is currently studying operational engineering at univer-sity level in parallel with her work at Pandox. She has previously been operational assistant at Jones Lang LaSalle before joining Pandox in 2003. Åsa works with property operations and related support.

Louise Ceder, Receptionist, born in 1970. Louise Ceder is responsible for daily office procedures, to-gether with the Assistant to the CEO. She has been with Pandox since 2000.

Anders Hallin, Hotel Manager and Business Area Manager, born in 1963. Anders Hallin is both hotel manager of the Radisson SAS Östersund and Business Area Manager. He has solid experience of the hotel industry and comes most recently from Mora Hotell.

Nils Lindberg

Åsa Nilsson

Jonas Pettersson

Jesper Engman

Lars Häggström

Ann-Sophie Forsmark

Mikael Planell

Anette Österberg


A holistic view that contributes to sustainable development

Hotels are in general very focused on the environment. Pandox endeavours to work in the same spirit, and main-tains an environment policy that sti-pulates that the Company shall coope-rate with its hotel operators so as to create good prerequisites for their environmental work and participation in development measures.

Pandox has produced sector-adapted tools to

facilitate environmental work. Examples of

these tools include environment aspect lists,

checklists, and instruments for the environ-

mental evaluation of property management in

conjunction with the procurement of opera-

tional services.

Environmental visionPandox shall provide attractive hotel properties

with good environmental performance, and fol-

low developments within the environment sector.

Environmental burdenFor Pandox, the most central environmental

impact arises when the Company is involved in

new and rebuilding projects. Purchasing pro-

cedures are also very important from an en-

vironmental viewpoint by placing demands on

suppliers and contractors so that Pandox may

reduce negative environmental effects within

its operations. The Company therefore gives

priority to suppliers and contractors that share

its environmental values.

Environmental inventoryAn environmental inventory of Pandox’ hotel

properties provides the Company with under-

lying data for an assessment of the properties’

environmental status and a perception of how

various environmental problems can be solved.

Environment policyTogether with each hotel operator, Pandox shall

actively ensure a gradual reduction of the bur-

den on the environment. As hotel property

owner, the Company has significant potential to

contribute to a long-term and sustainable de-

velopment of the environment based on a ho-

listic approach and covering all operational as-

pects. Decisions shall support the minimum

use of resources and maximum recycling in or-

der to protect and preserve the environment. In

addition to following current legislation and

sector-related regulations, Pandox shall en-

deavour to improve its environment policy

through the following measures:

• To further develop environmental skills by

continuously identifying and fulfilling training

and information requirements.

• To perform necessary environment reviews

upon the purchase or sale of land and buil-

dings as well as major refurbishments and

new building in order to avoid future environ-

mental liabilities.

• Upon the purchase and supply of services,

to select solutions, products and material

from a life-cycle perspective regarding

finances, energy, function and environment.

• To take preventive measures in order to mini-

mise the emission of harmful substances

from the Company’s hotel properties.

• To sort refuse and waste from construction,

demolition and property management.

• Pandox shall prioritise suppliers, contractors

and consultants that have a specific environ-

ment policy. Pandox shall fulfil by a comforta-

ble margin the environmental requirements

of the countries where the Company is opera-

tional.

pandox’ focus on the environment


market overview

Broad improvements

in a year of recovery

Nearly all markets showed good growth in occupancy during the year. Major international markets have also witnessed good trends in average room rates, although there is a ten-dency that growth in demand is weakening.

Market trends*

The year 2005 witnessed a period of recovery,

although despite this trend certain markets are

still below the levels of the previous period of

prosperous business activity. The United

States, Asia and the Middle East have ex-

ceeded the record years of the beginning of

the millennium. The steady growth in Europe

has still not been sufficient to achieve previous

peak levels.

The United States have had a record year

with both high room occupancy and good ave-

rage rates. Occupancy was 63 percent and the

average room rate was USD 91, representing

an increase of 8 percent in RevPAR compared

with 2004. In the first half-year, it was primarily

leisure travellers who stood for the strong dri-

ving force within the hotel market.

Within Europe, it is the eastern and central

regions that have experienced the best growth.

Eastern Europe has previously had the abso-

lutely lowest average room rates in Europe, but

has caught up in the last year, narrowing the

gap between east and west. Trends have been

less encouraging in Germany, where economic

growth has had difficulty in picking up. The

hotel market has also experienced considera-

ble expansion in capacity, which in turn has put

pressure on the market. According to the Ger-

man Hotel Association (IHA), there are cur-

rently 323 new hotels under construction in

Germany. Another reason for the weaker trends

in Germany is that exhibitions and fairs are held

every other year, and that 2005 was unfortu-

nately an off-year in this respect.

Barcelona and Madrid are two of the few

European cities where average room rates

declined. Both cities are suffering from consi-

derable additional capacity, which is expected

to continue and thereby have a dampening

effect on trends.

LondonLondon normally follows New York in the hotel

economic cycle, although it has recently fallen

behind. This is partly explained by the diffe-

rence in the pattern of demand. London has

primarily benefited from low-budget travellers

on short vacations, while international demand

has been the strong driving force in American

cities. International guests spend an average of

seven days in New York compared with only

three days for domestic guests, which has been

a clear advantage in an already strong market.

London also suffered from the terrorist attacks

in the summer, resulting in a further slowdown.

Demand, primarily from the leisure segment,

was affected the most while price trends were

relatively unchanged. After a strong 2004, the

year 2005 was therefore a disappointment for

London. Room occupancy was 75 percent, im-

plying a decline of two percent compared with

the previous year. The average room rate ma-

naged better with GBP 107 – representing a

rise of 4 percent compared with 2004.

ParisParis declined by a relatively small amount in

the downturn further to the peak year of 2000.

The city’s RevPAR fell by 15 percent between

2000 and 2003, compared with the decrease

in RevPAR in London of 37 percent. Paris

started to rise early in 2004 and has witnessed

good trends also this year. Room occupancy

rose by six percent to 71 percent. Average

room rates were however the driving force be-

hind the city’s RevPAR with an increase during

the year of 7 percent to EUR 131.

Amsterdam The year 2005 started with very strong growth

in occupancy, while average room rates re-

mained at last year’s level. The rate of growth

slowed during the year but has nonetheless al-

ways been stable. Room rates improved slightly

during the year, but are in general at a lower

level than other major cities in Europe. Amster-

dam’s RevPAR is far behind the peak year of

MARKETinG DEVELOPMEnT 2005

%

Occupancy

0

2

4

6

8

SwedenEuropeUSA

ARRRevPAR

*All figures for Sweden, Norway and Finland are for a rolling 12-month period from December 2004 to November 2005. Other countries refer to the calendar year 2005.

20 PANDOX – ANNuAl rePOrt 2005 PANDOX – ANNuAl rePOrt 2005 2�

market overview

OCCuPAnCy LEVELS AnD PRiCE DEVELOPMEnT 2005, EuROPE

Occupancy

ARR%– 4 –2 0 2 4 6 8

Brussels

Paris

Berlin

London

Amsterdam

OCCuPAnCy LEVELS AnD PRiCE DEVELOPMEnT 2005, nORDiC REGiOn

0 4 8 12 16 20

Occupancy

ARR%

Helsinki

Oslo

Copenhagen

Gothenburg

Malmö

Stockholm

2000, but should continue to rise further to the

year’s total increase of 6 percent due primarily

to growth in demand.

BrusselsBrussels had a very good start to the year with

growth in both average rates and room occu-

pancy. Trends have since then been stable.

Brussels achieved the highest rise of all major

European cities in average room rates in 2005,

resulting in an increase of 3 percent and a rise

in room occupancy of 2 percent. Brussels suc-

ceeded in 2005 to recover about half of the

RevPAR decline from the most recent eco-

nomic downturn.

BerlinAfter a good 2004, Berlin experienced negative

trends in 2005. Major additions to capacity sig-

nificantly affected the city during the year. Just

in 2005 for example, openings have taken

place of a 251-roomed Express by Holiday Inn,

a 274-roomed Dorint Novotel, a 267-roomed

Courtyard, as well as a 505-roomed Maritim.

The city dropped both in room occupancy and

average rates during the year. RevPAR was

close to 2 percent below 2004.

CopenhagenCopenhagen had a very good year for several

reasons. The 200th anniversary of HC

Andersen was celebrated in 2005, which

attracted both national and international guests.

The city also had several conferences that

brought in business travellers. More cruise

ships than usual also had a positive effect. Room

occupancy increased by 7 percent during the

year, with an overall total of 72 percent. Average

room rates rose by 12 percent to DKK 755.

HelsinkiThe hotel market in Helsinki has been relatively

stable for a couple of years, but witnessed good

growth in 2005. The increased integration with

the Baltic countries has started to have positive

effects on both ferry traffic and the hotel mar-

ket. The World Athletic Championships were

held in Helsinki in August, leading to a signifi-

cant rise in both occupancy and average room

rates. Demand has however had some diffi-

culty and room occupancy rose by only 1 per-

cent in 2005 to 67 percent. Average room rates

for the year were EUR 103, representing an in-

crease of 6 percent.

OsloOslo had a very strong year. The highest rise in

RevPAR was due to increasing demand, and

average rates also rose during the year. Room

occupancy was 69 percent, representing an in-

crease of 5 percent. Average room rates rose by

3 percent to NKK 750.

StockholmGrowth in demand was very strong in Stock-

holm, and almost the entire region had good

growth during the year. In February, the munici-

pality of Stockholm achieved positive growth in

RevPAR on a rolling 12-month basis for the first

time since the economic downturn that hit the

Stockholm hotel market in 2002/2003. Of the

various geographic markets in Stockholm, the

northern parts grew most during the year,

where demand increased by 13 percent for the

full-year, while the western area rose by 6 per-

cent and the south by 2 percent. Demand in

the city centre increased by 6 percent, while

the high-price segment rose by 4 percent.

Stockholm closed the year with room occu-

pancy of 66 percent, representing an improve-

ment of 3 percent compared with 2004. Average

room rates were 3 percent higher than last year.

GothenburgGothenburg produced surprising results and

turned upwards with great determination. The

year was encouraging and witnessed stable im-

provement due primarily to growth in demand.

Gothenburg is skilled at selling itself as an at-

tractive destination both for tourists and busi-

ness travellers. Good coordination between in-

dustry and commerce and the municipality lies

behind the successful marketing, and has

made Gothenburg less sensitive to economic

fluctuation. Average room rates improved

steadily during the year and closed at almost 1

percent better than last year. Room occupancy

was 63 percent, representing an increase of 3

percent compared with the previous year.


MalmöThe largest event ever in the Malmö region was

organised in 2005 when the qualifying heats of

the America’s Cup were held at the end of the

summer, thus having a very positive effect on

hotels. Room occupancy was an overall 62 per-

cent, representing an increase of 4 percent.

The underlying demand rose by 9 percent. Av-

The Radisson SAS Arlandia Hotel is Sweden’s largest airport hotel with direct link to Arlanda International Airport. A significant upgrading and product development program has been carried out over the last two years.

RevPAR TREnDS, EuROPE

London

Paris

Brussels

Amsterdam

Berlin

Euro

Sources: Deloitte, Swedish Tourist Authority, and SCB.

50

75

100

125

150

175

200520042003200220012000

RevPAR TREnDS, nORDiC REGiOn

Copenhagen

Oslo

Helsinki

Stockholm

Gothenburg

Malmö

Euro

Sources: Deloitte, Swedish Tourist Authority, SCB, Finlands Statistik, Danmarks Statistik, Statistisk Sentralbyrå.

40

55

70

85

100

200520042003200220012000


market overview

As a result of a continued good underlying hotel

market combined with trends such as ”asset-

light”, that is, divestments of properties, the

transactions market has rocketed upwards and

reached record levels in 2005. The sector has

for some time now attracted new types of inves-

tors. A broader group is now looking at hotels in

an effort to achieve a better return on investment

than found in the stock market or more tradi-

tional types of property with offices and shops.

We have been able to observe hotel compa-

nies go towards ”asset-light” over a certain

period of time, and their sales of properties

have gone quickly. Demand is considerable for

both individual and portfolio acquisitions. The

greatest activity has been observed in Great

Britain, where nearly half of all transactions

were completed.

One example of major transactions was the

InterContinental Hotel Group’s ”sale and ma-

nagement back” of 73 Holiday Inn properties

in the amount of EUR 1.5 billion. Purchasers

of the properties comprised a consortium with

Lehman Brothers, Realstar Group and GIC

Real Estate (LRG). Whitbread sold 46 Marriott

Hotels in Great Britain during the year to Condor

Overseas Holdings (a joint venture between

Marriott International and Whitbread) as a

stage in their focus towards the budget sector.

The transaction amounted to EUR 1 billion.

Hilton also made a major transaction during the

year with the sale of 11 properties to Stardon

UK Ltd, amounting to EUR 160 M. The largest

transaction of the year was the British Hilton

Group’s sale of its international hotel division to

the American Hilton Hotels Corporation. The

acquisition price amounted to GBP 3.3 billion.

After 40 years as separate companies, all

Hilton hotels will now be run within one and the

same company.

There have also been many transactions in

Scandinavia. The most active player was the

newly started Norwegian hotel property com-

pany, Norgani Hotels ASA, which became

listed on the Oslo Stock Exchange in the

autumn. Several major portfolio acquisitions

were made upon the forming of the company.

Pandox, Capona and the Wenaas Group sold

the properties that formed the basis.

Further transactions are expected within

the market. The hotel portfolio Hospitality

Europe BV (HEBV) will either be listed on the

stock exchange or will be sold. Condor Over-

seas Holdings is planning to sell its properties.

Record high volumes in the transactions market


Competition analysis

Interest for the hotel market continues to in-

crease, and is coming from a rising number of

actors – American, Irish and Spanish investors

have been particularly active in Europe this

year. The different types of investor are also

broadening. Private equity companies are pur-

chasing more and more, while other finance

companies and funds that previously only fo-

cused for example on the stock market, have

started to invest in the hotel market. Major

changes are also taking place in view of opera-

tor companies selling their properties. Opportu-

nities for consolidation are rising in number.

The tempo has also been high in Scandinavia.

For example, Pandox has made three individual

acquisitions this year, as well as a major divest-

ment in the form of a portfolio to Norgani –

Scandinavia’s new hotel property company.

Capona AB Geographical coverage: Sweden and Norway

Number of hotels: 22 hotel properties, of which

3 in Norway and the rest in Sweden.

Number of rooms: 2,500 (December 2005)

Pure hotel property company, but also operates

two hotels (Wisby Hotell via a wholly owned

subsidiary, and Aronsborgs Konferenshotell via

a 50-percent-owned company). Listed on the

Stockholm Stock Exchange.

Major events in 2005: Capona sold two property

portfolios for a total amount of SEK 2,650 M.

One of the purchasers was Hotelleiendom AS

which bought 16 hotel properties in Septem-

ber. The other property portfolio of 14 hotels

was sold in July to Norgani Hotels ASA. In

conjunction with the sale, Capona acquired

a shareholding of about 6 percent in Norgani

for around NKK 70 M. Six hotel properties

located in Sweden were sold in September.

Capona sold its 30-percent holding in Hotell-

eiendom AS to Norgani during the year. In the

future, Capona will invest more in hotels lo-

cated in city centres.

norgani Hotels ASA Geographical coverage: Sweden, Denmark,

Norway and Finland

Number of hotels: 63 hotel properties, of which

41 in Sweden, 12 in Norway, 6 in Denmark and

2 in Finland.

Number of rooms: 7,605 (October 2005)

Norgani is a newly formed company that is

listed on the Oslo Stock Exchange. The com-

pany invests in large hotels with more than

100 rooms that are run by known operators

with revenue-based leases.

Major events in 2005: The company was

founded in 2005. Major portfolio acquisitions,

including from Pandox and Capona, have

formed the basis of the company. Norgani has

also acquired Hotelleiendom AS, a company

composed of 16 hotels located in Sweden.

Norgani plans to invest in the Baltic coun-

tries as well as in Iceland.

Host Hoteleiendom Geographical coverage: Sweden, Denmark

and Norway

Number of hotels: 18 (January 2005)

A Norwegian hotel property company that is

privately owned by Asmund Haare, who works

with and leases out his properties to the closely

related company Tribe Hotel Management

(which runs hotels under the First Hotels brand

name). The management company Tribe Hotel

Management owns and operates 9 hotels in

Norway, 20 in Sweden and 3 in Denmark. Tribe

Hotel Management also operates a further two

hotels in Denmark and two hotels in Sweden

via management agreements. The company is

however independent and can also have other

operators than Tribe in its property portfolio.

Wenaasgruppen AS (The Wenaas Group)Geographical coverage: Denmark, Norway

and Russia

Number of hotels: 17


The company was formed at the end of 1997

and is privately owned. The business concept

is to own hotel properties that are leased

through long-term contracts. In addition to ho-

tels, the Wenaas Group invests in shipping, tex-

tiles and shares.

Major events in 2005: Wenaas acquired the

Radisson SAS Royal Hotel in central St Peters-

burg for USD 30 M. Rezidor SAS Hospitality

will continue to operate the hotel. The company

is currently investing in large cities in Russia,

Scandinavia and other parts of western and

eastern Europe.

Vital Forsikring ASAGeographical coverage: Sweden and Norway

Number of hotels: 3 in Sweden

A Norwegian privately owned life insurance and

pension company that has invested SEK 4.2

billion in Swedish properties in recent years. In

Sweden, the company owns the Mercedeshu-

set, Spårvagnen, Nordic Sea and Nordic Lights

properties in Stockholm as well as the Radisson

SAS Hotel in Gothenburg.

Major events in 2005: Acquired 50.1 percent

shareholding in Kista Galleria for SEK 1.2

billion.


market overview

RBS nordisk Renting Geographical coverage: Sweden, Norway, Den-

mark, Finland and Switzerland.


Number of rooms: 1,530 of which most are in

Sweden.

The company is a wholly owned subsidiary

of The Royal Bank of Scotland, and acquires

or builds large properties. Operations and

management are taken care of by the clients

themselves or external managers.

Major events in 2005: RBS has reduced its

commitments within the hotel sector in recent

years. The company’s largest client is Rezidor

SAS. No known acquisitions within the hotel

sector were made during the year.

London & Regional Properties (L&R)Geographical coverage: Sweden, Finland,

Germany, England and Lithuania

Number of hotels: about 60

Number of rooms: about 10,000

(October 2005)

L&R is one of the UK’s largest privately owned

property companies, with property assets esti-

mated to be worth more than EUR 5 billion, of

which about 1.6 billion in the Nordic Region.

Offices were opened in Stockholm in 2002 that

have the responsibility for expansion in the

Nordic Region and northern Europe. The com-

pany works primarily within four business

areas: long-term property investment, outsour-

cing, development of commercial properties,

investments in and the development of hotels.

The company made its first purchase in Fin-

land, the hotel property company Dividum, in

the autumn of 2004 and thereby obtained 31

hotels in its property portfolio. Dividum is to

invest in expanding in the Baltic countries.

Major events in 2005: A number of acquisi-

tions were made during the year, including

Berns Hotel and Holiday Club in Finland.

Kapiteeli Geographical coverage: Finland


Number of rooms: 2,740 rooms of which half

in Helsinki (June 2005)

Kapiteeli is Finland’s second largest hotel

property company. It is a wholly state-owned

nationwide property investment company that

leases out, sells and develops the properties

and land that it owns. Properties that the state

no longer needs are transferred to the company

from Senatfastigheterna (previously Statens

Fastighetsverk). Kapiteeli’s strategy is to divest

hotels that are located within growth areas,

as well as to expand through cooperation with

other investors in the market. The largest

partner is the Hilton Group, which together

contributes with 92 percent of the total return

on investment from hotel properties.

Major events in 2005: The company refur-

bished and expanded the Scandic City

Tampere Hotel in 2004/2005 at a cost of

EUR 21 M. The hotel was reopened in July.

Thon Holding ASGeographical coverage: Norway and Brussels


Number of rooms: 6,200

The company is privately owned by Olav Thon,

and is active within property, hotel and restau-

rant operations, trading of goods, and industry.

The company has its own hotel chain, Thon

Hotels (previously Rainbow Hotels), which rep-

resents 30 percent of the property portfolio.

Hospitality Europe BVGeographical coverage: Belgium, Germany,

Netherlands, France, Sweden and the

Czech Republic

Number of hotels: 8Number of rooms: 3,227 (October 2005)

One of the largest pure hotel property compa-

nies in Europe with regard to market value, with

registered offices in Rotterdam and London.

The company has a large proportion of Shera-

ton Hotels in its portfolio. Other brand names

include Renaissance and Hyatt.

The company is owned by American and

European investors, and is planning either to

divest or to become listed on a stock exchange.

Strategic Hotel Capital Geographical coverage: North America,

Mexico, France, Hamburg and Prague



Global hotel investment company that is

registered on the New York Stock Exchange.

The company focuses on hotels in the upper

price segment, and works with Hyatt, Marriott,

Intercontinental and Ritz Carlton.

Major events in 2005: None in Europe.

Host MarriottGeographical coverage: USA, Canada, Mexico,

Great Britain, Poland, Spain and Italy.

Number of hotels: 145 of which 6 in Europe

The company was formed in 1992 as a result

of dividing Mariott Hotels into a hotel manage-

ment company and a property company.

Major events in 2005: Host Marriott acquired

38 hotels from Starwood for about USD 4 billion.

EuROPE’S LARGEST HOTEL COMPAniES

2005 (2004) Hotel operator Rooms 2005 Rooms 2004 Hotels 2005 Hotels 2004

1 (1) Accor 235,205 226,272 2,159 2,098

2 (3) Best Western 73,455 71,497 1,126 1,106

3 (2) Intercontinental Hotels 72,273 72,882 469 462

4 (4) Louvre Hotels 60,730 60,529 861 858

5 (5) Hilton International 53,154 52,827 252 245

6 (7) Sol Melia 43,083 42,240 205 207

7 (8) TUI AG/TUI Hotels & Resorts 40,377 40,661 170 168

8 (9) Choice 34,794 35,681 404 433

9 (6) Marriott International 29,722 45,801 144 280

10 (10) NH Hoteles 28,037 27,228 200 195

Source: MKG 01.11.2005


corporate governance

Work of the Board of DirectorsExpertise and experience of the following areas

are important in an international hotel property

company such as Pandox:

• Hotel operations and the hotel market

• Financing

• Property and the real-estate sector

• Business development

• Brand name strategies

• Development of international companies.

The Board of Directors of Pandox, which is

composed of six members, has broad experi-

ence and knowledge of these areas.

Work proceduresThe Board of Directors has adopted work pro-

cedures and directives for the Chief Executive

Officer and has given management instructions

on reporting. Every year, Pandox’ Board of Di-

rectors establishes and documents the objec-

tives and strategy of the Company. The Board

has also adopted a finance policy, an approval

policy and guidelines for decision-making, as

well as a particular strategy regarding acquisi-

tions.

The Board of Directors of Pandox holds five

ordinary meetings each year. In addition to the

ordinary meetings, the Board held two extraor-

dinary meetings during the year to discuss cer-

tain business issues.

The Board meetings follow an established

annual agenda. The meetings review and

discuss the external and internal reporting of

operating results and the Company’s financial

position, as well as various business matters.

Other important items that are regularly studied

and reviewed are marketing, strategy, and

budget issues.

Board material is sent to the members approxi-

mately one week in advance. The Company’s

auditors attend at least one meeting each year

to present a report of their audit and their re-

view of the Company’s internal control systems.

In addition to their ongoing audit, the Compa-

ny’s auditors were also commissioned by the

Board to carry out special reviews of major

lease agreements during the year. According

to this assignment, all agreements shall be in-

spected during a three-year period according

to a rolling timetable.



Board members

Christian Ringnes, Chairman Born in 1954

CEO of Eiendomsspar AS.

Member of the Board of Pandox since 2004.

Other appointments:

Chairman of NSV-Invest AS and Mini Bottle

Gallery AS.

Board member of Schibsted ASA, Norsk

Scania AS and Nationaltheatret (Deputy

Chairman).

Leiv AskvigBorn in 1957

CEO of Sundt AS.


Other appointments:

Deputy Chairman of Verdipapirsentralen ASA.

Board member of Imarex ASA.

Olaf GauslåBorn in 1961

CFO of Eiendomsspar AS.


Bengt KjellBorn in 1954

Executive Vice President, Head of Investments,

Industrivärden AB.


Other appointments:

Chairman of Kungsleden AB.

Member of the Board of Helsingborgs Dagblad

AB, Indutrade AB, Isaberg Rapid AB, Munters

AB and Össur HF.

Björn-Åke WilseniusBorn in 1944


Other appointments:

Chairman of BDB Bankernas Depå AB.

Member of the Board of Bergen Energi AB and

Finansiell ID-teknik BID AB.

Mats WäpplingBorn in 1956

Deputy CEO, NCC AB.


Other appointments:

Member of the Board of SWECO AB.

The Board of Directors of Pandox is composed and dimensioned so as to enable the establishment and implemen-tation of the Company’s goals and strategy, to actively and effectively support the management team in the further-development of the Company, and to monitor and control operations.



Senior executives

The management team is responsible for the Company’s current operations and reports to the Board of Direc-tors. Management prepares and implements strategies and action plans, and ensures that set targets be met. Other important areas of responsibility include overall planning, personnel development and an ongoing dia-logue with the capital market.

Anders nissenBorn in 1957

Chief Executive Officer

Employed since 1995

nils LindbergBorn in 1947

Chief Financial Officer

Employed since 1995

Auditors

The task of the auditors is to examine the Company’s accounts, administration and financial information. The audit results in 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 GustafssonBorn in 1959

Authorised Public Accountant

KPMG

Willard MöllerBorn in 1943

Authorised Public Accountant

SET Revisionsbyrå AB

Bild över hela uppslaget

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Xxxxxxxxxxxx x

Xxxxxxxxxxxxx

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Ingång till kapHotel property portfolio . . . . . . . . . . . . . . . . 30

Operator companies . . . . . . . . . . . . . . . . . . 32

list of properties . . . . . . . . . . . . . . . . . . . . 34

Hotel properties . . . . . . . . . . . . . . . . . . . . . 36

The hotel portfolio


hotel property portfolio

Hotel property portfolio of

high quality

Pandox’ property portfolio is com-posed of 36 hotel properties with a total of approximately 7,800 rooms, of which one hotel under asset manage-ment and five with own operations. The Company’s revenue structure and the hotel properties’ location, size and brand names provide the portfo-lio with the highest quality.

Revenue structurePandox’ revenues are generated through flexi-

ble lease agreements within the underlying ho-

tel market or from its own operations. The reve-

nue structure is sound whereby more than 85

percent of lease revenues come from large

growth locations with stable demand for hotel

services such as Stockholm, Gothenburg, the

Öresund region, Brussels, and London.

Brand namesAn important component when creating high

revenue levels is to have access to the market’s

strongest brand names and the best distribu-

tion networks. 98 percent of the Pandox portfo-

lio is marketed through strong brand names

such as Scandic, Hilton, Radisson SAS and

Quality.

Size and locationA hotel’s location and size are two quality fac-

tors that both contribute to stable profitability.

All of Pandox’ hotels have natural and strong lo-

cations. The average Pandox hotel has 218

rooms, which is four times the overall average

in Sweden.

Physical and technical standardsAll Pandox’ hotels are regularly evaluated and

reviewed in accordance with the Pandox

Model, leading to cash-flow-generating invest-

ment and maintenance measures. During the

last two years, Pandox has made investments

amounting to approximately SEK 235 M

excluding acquisitions, and carried out mainte-

nance for approximately SEK 65 M. Pandox

estimates that the hotel operators have carried

out programs at similar levels in accordance

with the intentions expressed in their leases.

During the year, Pandox renegotiated the

leases for the Radisson SAS Plaza Hotel in Karl-

stad, Scandic Hallandia, Scandic Grand Öre-

bro, Scandic Kramer in Malmö, Hotel Mr Chip

in Kista and First Hotel Grand in Borås.

Development of Pandox’ hotel property portfolioActive ownership has increased the quality of

Pandox’ hotel property portfolio. Acquisitions

have provided further large hotels in developed

markets. Divestments have increased the aver-

age size of the hotels and reduced the number

of minor locations.

PROPERTy REVEnuE 2005 By GEOGRAPHiC AREA

Stockholm, 24%

Rest of Sweden, 18%

Gothenburg, 11%

Öresund, 19%

Belgium, 10%

London, 8%

Germany, 7%

Switzerland, 3%


A U S T R I A

FI

NL

AN

D

AL

BA

NI

EN

SICILY

Malta

Lux.

F R A N C E

S P A I N

U N I T E D

K I N G D O M

IRELAND

G E R M A N Y

P O L A N D

E S T O N I A

L A T V I A

L I T H U A N I A

PORTUGAL

DENMARK

H U N G A R Y

R O M A N I A

BULGARIENJ U G O S L A V I E N

SARDINIA

CORSICA

MOROCCO A L G E R I A T U N I S I A

SWITZERLAND

CZECH REPUBLIC

B E L O R U S S I A

U K R A I N A

R U S S I A

SLOVAKIA

Ibiza

MajorcaMenorca

BELGIUM

HOLLAND

RU

SS

IA

GR

EK

LA

ND

SW

ED

EN

NO

RW

AY

IT

AL

IE

N

MOLDAVIEN

1

1

1

11

1

1

1

1

1

1

41

1

2

1

3

2

27

Small hotels in weak

hotel markets

Large hotels with stronglocations in prioritised

towns and cities

Strong intern-ational brand names in the medium and high-price segments

Local brand names in the low and medium-price segments

Development of Pandox’ hotel property portfolio 1995–2005

BRAND NAME AND SEGMENT

SIZE

AN

D L

OC

ATIO

N Pandox’ portfolio

2005

Pandox’ portfolio

1995

CUBA

USABAHAMAS

PROPERTy REVEnuE By GEOGRAPHiC AREA, SEK M Stockholm Gothenburg Öresund Rest of Sweden international Total

Total revenue 139.0 55.5 108.7 103.5 142.0 548.8

Of which hotel 1) 131.6 55.1 97.7 98.6 141.4 524.4 Of which offices 0.0 0.1 7.5 1.9 0.0 9.4 Of which shops 5.2 0.2 2.7 1.1 0.0 9.2 Of which other 2.2 0.1 0.9 2.0 0.6 5.9

Other property revenue 8.7 3.3 5.8 5.5 2.0 25.2

Total property management revenue 147.8 58.8 114.5 108.9 143.9 574.0

Operation and maintenance –29.8 –8.5 –22.8 –17.7 –25.0 –103.8

Operating net 118.0 50.3 91.7 91.3 118.9 470.2

Adjusted operating net 2) 108.5 50.3 91.7 63.9 118.9 433.3

Book value 3) 1 138.6 742.5 1 055.6 611.6 1 544.4 5 092.7

Direct yield % 9.5 6.8 8.7 10.5 7.7 8.51) Including rent for hotel equipment.2) Excluding operating net from the as of 1 July divested hotel properties.3) Including hotel equipment. Excluding the newly acquired hotel properties Hotel 27 in Copenhagen and Royal Crown in Brussels that were not charged any internal rent in 2005.

Pandox hotel properties

The figures indicate the number of hotel properties per town/city• Asset Management

Development of Pandox’


Operating companies

Pandox’ business concept is to be an active hotel property owner based on specialist competence and skills within the hotel market, hotel opera-tions, hotel property management and business development.

The Company has developed a business model

that contains different alternatives as to how

the Company may enable the improvement of

cash flows. The most common form is to sign a

lease with a partner who then manages the re-

lated operations and markets the hotel under

its own or franchise a brand name. A second

form is that another partner be assigned to

manage the hotel on behalf of Pandox. A third

alternative is that Pandox operates the hotel it-

self and supplements marketing activities with

a franchise agreement with a well-known brand

name or via an independent distributor.

Pandox’ current portfolio contains five ope-

rations as well as an asset management assign-

ment, which are estimated to generate sales of

approximately SEK 350 M in 2006. The stra-

tegy is to build up independent companies so

that the majority of responsibility may be dele-

gated to each respective company’s board of

directors and management team. The business

activities are monitored, evaluated and ana-

lysed at regular board meetings that often

include external board members.

Pandox’ most important task is to support

the companies’ business processes by appoin-

ting professional boards of directors and ma-

nagement teams, as well as to contributing to

management systems and working methods

being established in the companies so that

the business development potential may be

materialised.

Crowne Plaza Brussels City CentreThe operation and property were acquired at the end of 2003

and are one of the leading business and central city meeting

hotels in Brussels. The company is run under a franchise

agreement with Crowne Plaza, which is one of the brand

names of the Intercontinental Group. Distribution takes place

via one of the world’s most powerful channels – Holidex.

An upgrading and modernisation program is currently in

progress at a cost of approximately EUR 14 M.

Royal Crown Hotel BrusselsThe operation and property were acquired in the

autumn of 2005. Since Pandox took over, the hotel is

marketed via independent distribution channels. The

strategy is to develop the hotel to one of the leading

upper medium price hotels with business and con-

ference guests and tourists, at an estimated cost of

about EUR 12 M for the entire restructuring.

Eric van Dalsum, 44 years, Hotel Manager.Dutch citizen. Resident in Belgium. Many years of solid hotel experience from management positions at several large Radisson SAS hotels around the world. Has worked in France, England, Germany, China, Egypt, Ireland and Indonesia.

Aldert Schaaphok, 46 years, Hotel Manager and Board Member of Crowne Plaza. Dutch citizen. Has lived in Brus-sels for 11 years. Owns and runs an independent consul-tancy firm that is specialised in the hotel industry with a busi-ness concept of performing various management assign-ments with the objective of improving the companies’ profita-bility. Hotel manager of various business hotels since 1990 in Holland, Germany and Belgium. Before starting his own business in 2002, Aldert was Vice President Operations of Dorint Hotels & Resorts.

operating companies


Copenhagen Hotel 27The operation and property were acquired in 2005.

The hotel is marketed via independent distribution

channels since Pandox took over. The strategy is

to develop the hotel to one of the leading upper

medium price hotels in Copenhagen with the help

of the hotel’s strong location, size and attractive

design. The development program is estimated to

cost about DKK 60 M.

Mora HotellThe property was acquired in 1995 and operation

were taken over in 2003. The property was sold to

Norgani in 2005, but Pandox still owns and runs the

hotel operation. Under Pandox management, the

hotel has been upgraded and modernised, which

has led to significant improvements in results.

Radisson SAS Hotel ÖstersundThe property was acquired in 1995 and operation

was taken over in 2004. The hotel is marketed

via a franchise agreement with Radisson SAS. An

action plan has been implemented under Pandox’

management in order to increase the effectiveness

of operations, which in turn has led to an improve-

ment in results.

Pelican Bay Hotel & Resort at LucayaPandox has an asset management assignment to

assist the owner Sundt AS in supporting the compa-

ny’s management in the development of operation.

The hotel is located on Grand Bahama Island and

has 186 rooms, of which 96 are junior suites. Oper-

ation is marketed as a resort hotel via independent

distribution channels. In the first year, management

has focused on creating operational procedures

and standards as well as building up related skills

and competence.

Magnus Alnebeck, 41 years, Hotel Manager.Swedish and St Lucia citizenship. 20 years’ international hotel experience (Intercontinental, Cunard, Radisson SAS, Forte).

Ronni Guldbrandsen, 46 years, Hotel Man-ager. Danish citizen. More than 20 years of experience within the hotel and restaurant sector, including as restaurateur and product development manager of DSB Restaurants, hotel manager and purchasing manager at Scandic Hotels, administrative manager at Choice Hotels, and own hotel operations.

Mikael Jonasson, 51 years, Hotel Manager.Swedish citizen. Solid background in the hotel and restaurant sector. International experi-ence from Denmark, England and Mexico.

Anders Hallin, 43 years, Hotel Manager and Business Area Manager. Swedish citizen. Anders comes most recently from Mora Hotell and has solid experience of the hotel industry.


list of properties

Type of number year of constr. Total surface Of which Offices Shops Other Right of Property Tax assessment Property Operator/Brand name lease Location of rooms extension (sqm) hotel1) (sqm) (sqm) (sqm) (sqm) disposal designation value (SEK M)

Stockholm

Radisson SAS Arlandia Hotel, Arlanda Rezidor/Radisson SAS Og International airport 337 1979/89 15,260 15,260 – – – Land leasehold Benstocken 1:5 92.0

Hilton Stockholm Slussen Hilton International/Hilton O City centre 288 1989 18,416 15,725 2,097 – 594 Land leasehold Överkikaren 31 345.0

Scandic Järva Krog, Stockholm Hilton International/Scandic O Northern Stockholm 215 1971/97 11,300 11,300 – – – Land leasehold Tanken 2 57.4

Scandic Park, Stockholm Hilton International/Scandic O City centre 198 1969/88 12,290 10,290 – – 2,000 Lönnen 30 174.0

Quality Hotel, Nacka Choice Hotels Scandinavia/Quality Og Sickla-Nacka 162 1986 10,830 8,090 2,705 – 35 Sicklaön 363:2 90.4

Scandic Upplands Väsby Hilton International/Scandic O Stockholm north 150 1986 6,955 6,955 – – – Vilunda 6:48 27.6

Mr Chip Hotel, Kista Kista Hotell AB/ – Og Stockholm north 150 1984 5,517 5,517 Land leasehold Knarrarnäs 7 64.1

TOTAL STOCKHOLM 1,500 80,568 73,137 4,802 – 2,629 850.5

Gothenburg

Scandic Crown, Göteborg Hilton International/Scandic O City centre 338 1988 24,380 21,800 – 300 2,280 Stampen 5:5 191.0

Elite Park Avenue Hotel, Göteborg Elite Hotels/Elite Og City centre 291 1950/74/90 21,998 21,998 – – – Lorensberg 28:4 289.0

Scandic Mölndal, Göteborg Hilton International/Scandic O City centre 208 2000 11,000 11,000 – – – Laken 1 61.8

TOTAL GOTHEnBuRG 837 57,378 54,798 – 300 2,280 541.8

Öresund region

Scandic Copenhagen Hilton International/Scandic O City centre 484 1970/99 31,500 25,200 – – 6,300 99943-2 –

Scandic S:t Jörgen, Malmö Hilton International/Scandic Og City centre 265 1967/95 21,485 14,655 – 4,230 2,600 S:t Jörgen 11 120.0

Copenhagen Hotel 27 Pandox/– Io City centre 203

Scandic Star, Lund Hilton International/Scandic Og Central 196 1991 15,711 15,711 – – – Porfyren 2 77.4

Radisson SAS Grand Hotel, Helsingborg Sverigeråd AB/Radisson SAS Og City centre 164 1926/29/96 8,555 7,325 – 1,230 – Högvakten 1+7 55.6

Scandic Kramer, Malmö Hilton International/Scandic O City centre 113 1875/1994 6,913 6,373 – 540 – Gripen 1 47.8

TOTAL ÖRESunD REGiOn 1,425 84,164 69,264 – 6,000 8,900 300.8

Regional towns and other locations

Scandic Grand, Örebro Hilton International/Scandic O City centre 219 1985 12,900 10,900 – – 2,000 Land leasehold Mältaren 1 40.6

Scandic Winn, Karlstad Hilton International/Scandic Og City centre 199 1984/90 10,580 10,580 – – – Negern 2 38.6

Scandic Swania, Trollhättan Hilton International/Scandic Og City centre 196 1918/83/89 10,399 10,399 – – – Svan 7 46.6

Radisson SAS Hotel, Östersund Pandox i Östersund AB/Radisson SAS Io City centre 177 1978 8,766 8,766 – – – Tenant-owner Borgens 3 33.8

First Hotel Grand, Borås Västsvenska Hotellfastigheter AB/First Hotel Og City centre 158 1972/87/90/97 9,593 9,365 – – 228 Land leasehold Prometeus 3 36.8

Elite Stora Hotellet, Jönköping Elite Hotels/Elite Og City centre 135 1860/1930/95 11,378 9,379 – 899 1,100 Alhambra 1 44.6

Scandic Hallandia, Halmstad Hilton International/Scandic O City centre 130 1890-talet/50/75 7,617 6,813 360 427 17 Erik Dahlberg 14 &15 35.7

Radisson SAS Plaza Hotel, Karlstad Plaza Hotell & Restaurang i Karlstad AB/Radisson SAS Og City centre 131 1929/91 5,907 5,907 – – – Höken 1 28.6

Scandic Billingen, Skövde Hilton International/Scandic F City centre 106 1888/1939/65 7,743 6,844 – – 899 Fjolner 7 21.2

TOTAL REGiOnAL TOWnS AnD OTHER LOCATiOnS 1,451 84,883 78,953 360 1,326 4,244 326.5

international 2)

Hilton London Docklands Hilton International/Hilton O Docklands 365 1991 22,800 21,500 – – 1,300 HM Land Registry: SGL465779 –

Crowne Plaza Brussels City Centre Pandox/Crowne Plaza Io City centre 356 1910 28,095 28,095 – – – –

Royal Crown Hotel Brussels Pandox/– Io City centre 315

Hilton Brussels City Pandox/Hilton M City centre 285 1910/30 13,850 13,850 – – – Saint-Josseten-Noode (1div) 032 –

Radisson SAS Hotel, Basle Rezidor/Radisson SAS Og Central 205

Scandic Grand Place, Brussels Hilton International/Scandic O City centre 100 1900/91 4,500 4,500 – – – –

Scandic Antwerpen Hilton International/Scandic O Ring road 204 1974 13,200 13,200 – – – 24th div, Borgerhout 1st div, Ar –

Hilton Bremen Hilton International/Hilton O City centre 235 1991 21,000 15,100 – – 5,900 Grundbuch Altstadt IV, Blatt 60 –

Hilton Dortmund Hilton International/Hilton O Exhibition centre 190 1990 12,500 11,300 – – 1,200 Grundbuch Dortmund, Blatt 897 –

Scandic Lübeck Hilton International/Scandic O Ring road 158 1991 9,700 8,800 – – 900 Grundbuch Lübeck, Blatt 54545 –

Pelican Bay Hotel & Resort at Lucaya, Freeport, Grand Bahama Island Sundt GB Management/– AM Resort 186

TOTAL inTERnATiOnAL 2,599 125,645 116,345 – – 9,300 –

TOTAL PAnDOX 7,812 432,638 392,497 5,162 7,626 27,353 2,019.6

1) Includes hotel, restaurant and conference surfaces. 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, AM = Asset management agreement.


REnTAL REVEnuE 2005 By

COOPERATiOn PARTnERS

Scandic, 46%

Radisson SAS, 14%

Hilton, 24%

Elite Hotels, 6%

Crowne Plaza, 4%

First Hotels, 2%

Quality Hotels, 2%

Other, 2%

DEVELOPMEnT OF AVERAGE HOTEL SizE

Number of rooms per hotel

0

50

100

150

200

250

0504030201009998

REVEnuES FROM CEnTRAL LOCATiOnS

AnD inTERnATiOnAL HOTEL MARKETS

SEK M

0

100

200

300

400

500

0504030201009998

Type of number year of constr. Total surface Of which Offices Shops Other Right of Property Tax assessment Property Operator/Brand name lease Location of rooms extension (sqm) hotel1) (sqm) (sqm) (sqm) (sqm) disposal designation value (SEK M)

Stockholm

Radisson SAS Arlandia Hotel, Arlanda Rezidor/Radisson SAS Og International airport 337 1979/89 15,260 15,260 – – – Land leasehold Benstocken 1:5 92.0

Hilton Stockholm Slussen Hilton International/Hilton O City centre 288 1989 18,416 15,725 2,097 – 594 Land leasehold Överkikaren 31 345.0

Scandic Järva Krog, Stockholm Hilton International/Scandic O Northern Stockholm 215 1971/97 11,300 11,300 – – – Land leasehold Tanken 2 57.4

Scandic Park, Stockholm Hilton International/Scandic O City centre 198 1969/88 12,290 10,290 – – 2,000 Lönnen 30 174.0

Quality Hotel, Nacka Choice Hotels Scandinavia/Quality Og Sickla-Nacka 162 1986 10,830 8,090 2,705 – 35 Sicklaön 363:2 90.4

Scandic Upplands Väsby Hilton International/Scandic O Stockholm north 150 1986 6,955 6,955 – – – Vilunda 6:48 27.6

Mr Chip Hotel, Kista Kista Hotell AB/ – Og Stockholm north 150 1984 5,517 5,517 Land leasehold Knarrarnäs 7 64.1

TOTAL STOCKHOLM 1,500 80,568 73,137 4,802 – 2,629 850.5

Gothenburg

Scandic Crown, Göteborg Hilton International/Scandic O City centre 338 1988 24,380 21,800 – 300 2,280 Stampen 5:5 191.0

Elite Park Avenue Hotel, Göteborg Elite Hotels/Elite Og City centre 291 1950/74/90 21,998 21,998 – – – Lorensberg 28:4 289.0

Scandic Mölndal, Göteborg Hilton International/Scandic O City centre 208 2000 11,000 11,000 – – – Laken 1 61.8

TOTAL GOTHEnBuRG 837 57,378 54,798 – 300 2,280 541.8

Öresund region

Scandic Copenhagen Hilton International/Scandic O City centre 484 1970/99 31,500 25,200 – – 6,300 99943-2 –

Scandic S:t Jörgen, Malmö Hilton International/Scandic Og City centre 265 1967/95 21,485 14,655 – 4,230 2,600 S:t Jörgen 11 120.0

Copenhagen Hotel 27 Pandox/– Io City centre 203

Scandic Star, Lund Hilton International/Scandic Og Central 196 1991 15,711 15,711 – – – Porfyren 2 77.4

Radisson SAS Grand Hotel, Helsingborg Sverigeråd AB/Radisson SAS Og City centre 164 1926/29/96 8,555 7,325 – 1,230 – Högvakten 1+7 55.6

Scandic Kramer, Malmö Hilton International/Scandic O City centre 113 1875/1994 6,913 6,373 – 540 – Gripen 1 47.8

TOTAL ÖRESunD REGiOn 1,425 84,164 69,264 – 6,000 8,900 300.8

Regional towns and other locations

Scandic Grand, Örebro Hilton International/Scandic O City centre 219 1985 12,900 10,900 – – 2,000 Land leasehold Mältaren 1 40.6

Scandic Winn, Karlstad Hilton International/Scandic Og City centre 199 1984/90 10,580 10,580 – – – Negern 2 38.6

Scandic Swania, Trollhättan Hilton International/Scandic Og City centre 196 1918/83/89 10,399 10,399 – – – Svan 7 46.6

Radisson SAS Hotel, Östersund Pandox i Östersund AB/Radisson SAS Io City centre 177 1978 8,766 8,766 – – – Tenant-owner Borgens 3 33.8

First Hotel Grand, Borås Västsvenska Hotellfastigheter AB/First Hotel Og City centre 158 1972/87/90/97 9,593 9,365 – – 228 Land leasehold Prometeus 3 36.8

Elite Stora Hotellet, Jönköping Elite Hotels/Elite Og City centre 135 1860/1930/95 11,378 9,379 – 899 1,100 Alhambra 1 44.6

Scandic Hallandia, Halmstad Hilton International/Scandic O City centre 130 1890-talet/50/75 7,617 6,813 360 427 17 Erik Dahlberg 14 &15 35.7

Radisson SAS Plaza Hotel, Karlstad Plaza Hotell & Restaurang i Karlstad AB/Radisson SAS Og City centre 131 1929/91 5,907 5,907 – – – Höken 1 28.6

Scandic Billingen, Skövde Hilton International/Scandic F City centre 106 1888/1939/65 7,743 6,844 – – 899 Fjolner 7 21.2

TOTAL REGiOnAL TOWnS AnD OTHER LOCATiOnS 1,451 84,883 78,953 360 1,326 4,244 326.5

international 2)

Hilton London Docklands Hilton International/Hilton O Docklands 365 1991 22,800 21,500 – – 1,300 HM Land Registry: SGL465779 –

Crowne Plaza Brussels City Centre Pandox/Crowne Plaza Io City centre 356 1910 28,095 28,095 – – – –

Royal Crown Hotel Brussels Pandox/– Io City centre 315

Hilton Brussels City Pandox/Hilton M City centre 285 1910/30 13,850 13,850 – – – Saint-Josseten-Noode (1div) 032 –

Radisson SAS Hotel, Basle Rezidor/Radisson SAS Og Central 205

Scandic Grand Place, Brussels Hilton International/Scandic O City centre 100 1900/91 4,500 4,500 – – – –

Scandic Antwerpen Hilton International/Scandic O Ring road 204 1974 13,200 13,200 – – – 24th div, Borgerhout 1st div, Ar –

Hilton Bremen Hilton International/Hilton O City centre 235 1991 21,000 15,100 – – 5,900 Grundbuch Altstadt IV, Blatt 60 –

Hilton Dortmund Hilton International/Hilton O Exhibition centre 190 1990 12,500 11,300 – – 1,200 Grundbuch Dortmund, Blatt 897 –

Scandic Lübeck Hilton International/Scandic O Ring road 158 1991 9,700 8,800 – – 900 Grundbuch Lübeck, Blatt 54545 –

Pelican Bay Hotel & Resort at Lucaya, Freeport, Grand Bahama Island Sundt GB Management/– AM Resort 186

TOTAL inTERnATiOnAL 2,599 125,645 116,345 – – 9,300 –

TOTAL PAnDOX 7,812 432,638 392,497 5,162 7,626 27,353 2,019.6

1) Includes hotel, restaurant and conference surfaces. 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, AM = Asset management agreement.


36 hotels with strategic locations in Sweden, Denmark, Belgium, Germany, Switzerland, UK, and the Bahamas.

Hotel property portfolio


Radisson SAS Arlandia Benstocksvägen 1, Stockholm-Arlanda, +46-8-506 840 00

Operator: RezidorBrand name: Radisson SASLease: Revenue-based with

guaranteed rent

The Radisson SAS Arlandia Hotel is Sweden’s largest airport hotel with direct link to Arlanda International Airport. The hotel product comprises 337 rooms, restaurant, bar, large conference department, swim-ming pool and exercise facilities, and is primarily

designed for business travellers, conference groups and charter tourists. A significant upgrading and product development program has been carried out over the last two years with a total investment of more than SEK 65 M. The building was constructed in 1979 and extended in 1989, and has five floors. There are also two small wooden buildings that are part of the conference facilities.

Scandic Järva Krog Järva Krog, Solna, +46-8-517 345 00

Operator: Hilton InternationalBrand name: ScandicLease: Revenue-based

The Scandic Järva Krog is strategically located in northern Stockholm next to the E4 motorway going out to Arlanda International Airport. The hotel is primarily oriented towards business travellers and

conference attendees. The building was recently re-furbished and contains 215 rooms, good conference facilities and a relaxation centre. The hotel was built in 1971 and refurbished in 1996/1997, with a total surface of 11,300 square metres.

Operator: Hilton InternationalBrand name: HiltonLease: Revenue-based

Hilton Stockholm Slussen is a first-class full-service hotel of international standard located at Slussen in central Stockholm and is oriented towards business travellers, conference groups and tourists. The hotel

has 288 rooms, a congress hall, conference facilities, two restaurants, bar, exercise facilities and a swim-ming pool. The hotel is comprised of two buildings con-structed in 1989.

Hilton Stockholm Slussen Guldgränd 8, Stockholm, +46-8-517 353 00


The Scandic Park is located in the centre of Stockholm at Humlegården. The product is of high standard and has a large proportion of international guests, and contains 198 rooms, conference facili-ties and a restaurant.

The hotel was built in 1969 and underwent considerable refurbishment in 1988. The property was further refurbished and entirely upgraded during the period 2001-2005. The total surface is 12,290 square metres, consisting entirely of hotel surface.

Scandic Park Karlavägen 43, Stockholm, +46-8-517 348 00


Quality Hotel nacka Värmdövägen 84, Nacka, +46-8-506 160 00

Operator: Choice Hotels ScandinaviaBrand name: QualityLease: Revenue-based with

guaranteed rent

Quality Hotel is located in Nacka-Sickla, which is one of Stockholm’s growth areas. The hotel is the market area’s largest with 162 rooms, a well-devel-

oped conference product, restaurant and relaxation centre. The hotel consists of two buildings and is oriented towards business travellers and conference attendees. The building was constructed in 1986.

Scandic upplands Väsby Hotellvägen 1, Upplands Väsby, +46-8-517 355 00


The Scandic Upplands Väsby is centrally located close to Upplands Väsby between Stockholm and Arlanda International Airport and has 150 rooms, a restaurant and conference facilities. It offers a

reasonably priced product in a good location for motorists. The hotel has undergone an upgrading program. The building was constructed in 1986.

Mr Chip Hotel Färögatan 9, Kista, +46-8-750 56 00

Operator: Kista Hotell ABBrand name: –Lease: Revenue-based with

guaranteed rent

The hotel has a strategic location in Kista, which is one of Stockholm’s most expansive areas and centre for leading companies within the IT and telecom sectors. The hotel has 150 rooms, conference facili-

ties, a restaurant and bar, and is oriented towards business travellers. The hotel was built in 1984 and has a total surface of 5,517 square metres.


The Scandic Crown is located in the centre of Gothenburg and is one of the city’s largest hotels with 338 rooms, conference facilities and a restau-rant. The hotel has undergone an important develop-

ment program in recent years, with an increase in the number of hotel rooms as well as an upgrading of the existing rooms and lobby areas. The hotel has a total surface of 24,600 square metres of which 89 percent is hotel surface. The building was constructed in 1988

Scandic Crown Polhemsplatsen 3, Gothenburg, +46-31-751 51 00

hotel properties


Scandic Mölndal Åbro, Mölndal, +46-31-751 52 00


The Scandic Mölndal is located in central Mölndal and is the market area’s leading hotel. It was opened in 2000 and is designed for business travellers of the future with high IT standard. The hotel is adapted

to Scandic Hotels’ environmental requirements and contains 208 rooms, a restaurant and conference facilities. The total surface amounts to 11,000 square metres.

Elite Park Avenue Hotel Kungsportsavenyn 36–38, Gothenburg, +46-31-758 40 00

Operator: Elite Hotels of Sweden Brand name: EliteLease: Revenue-based with

guaranteed rent

The Elite Park Avenue Hotel is one of Sweden’s most well-known hotels and enjoys an excellent location on Kungsportsavenyn in Gothenburg. The hotel has 291 rooms, a restaurant, bar and considerable conference and banquet facilities.

The building was constructed in 1950 and extended in 1974. A major refurbishment program was carried out in the beginning of the 1990s. A major refur-bishment and upgrading project was started on 1 January 2005 in cooperation with the new operator, Elite Hotels of Sweden. The program is estimated to be completed in 2006.

Scandic Copenhagen Vester Sögade 6, Copenhagen, +45-3314 3535


The Scandic Copenhagen is one of Scandinavia’s largest hotels located in central Copenhagen with a high proportion of international guests. Further to an extension in 2000, the hotel has 484 rooms as well as considerable conference and banqueting facili-

ties. The hotel product includes several restaurants, a café, pub and bar. The hotel was built in 1970 and underwent a major refurbishment program in 1998-2000. The hotel has a total surface of 31,500 square metres, of which 80 percent are hotel surface.

Copenhagen Hotel 27 Löngangstraede 27, Copenhagen, +45 7027 5627

Operator: PandoxBrand name: Lease: Internal revenue-based

The Copenhagen Hotel 27 is located in central Copenhagen, about 200 metres from Rådhusplat-sen and within walking distance of Tivoli, Ströget

and Börsen. The hotel has 203 rooms furnished in Scandinavian style, breakfast room, outdoor terrace, and parking. A major refurbishment and reposition-ing program is currently in progress.


Scandic S:t Jörgen Stora Nygatan 5, Malmö, +46-40-693 46 00

Operator: Hilton InternationalBrand name: ScandicLease: Revenue-based with

guaranteed rent

The Scandic St Jörgen is Malmö’s largest hotel and is excellently located. It is a first-class hotel with 265 rooms, conference facilities, a restaurant and bars, and is oriented towards business travellers, tourists

and conference groups. An upgrading and product development program is currently in progress, cover-ing hotel rooms and the hotel property in general. The building was constructed in 1967 and was partially refurbished in 1995.

Scandic Star Lund Glimmervägen 3–5, Lund, +46-46-285 25 00


guaranteed rent

The Scandic Star is Lund’s largest hotel and is lo-cated close to the Ideon IT centre. The hotel has 196 rooms, of which 150 suites, large conference and

restaurant facilities as well as a relaxation centre. The hotel is primarily oriented towards business travellers and conference attendees. The building was constructed in 1991.

Radisson SAS Grand Hotel Helsingborg Stortorget 8–12, Helsingborg, +46-42-38 04 00

Operator: RezidorBrand name: Radisson SASLease: Revenue-based with

guaranteed rent

The Radisson SAS Grand Hotel Helsingborg is centrally located at Stortorget. It is a first-class hotel oriented towards business travellers, tourists and conference groups. The hotel has a classic profile

and contains 164 rooms, conference facilities, as well as a hotel arcade with lounge, bar, café, travel agency, beauty salon and a newsstand. The building was constructed in 1926 and refurbished in 1996. In February 2005, the hotel was merged with the adjacent Best Western Hotel Högvakten, which is also owned by Pandox.

Scandic Kramer Stortorget 1, Malmö, +46-40-693 54 00


The Scandic Kramer is one of Sweden’s most classic hotels located at Stortorget in central Malmö. The ho-tel has 113 rooms, a restaurant, bar and conference facilities. Scandic Kramer is of international standard

and is primarily oriented towards business travellers. The building was constructed in 1875 and was entirely refurbished in 1994.

hotel properties


Scandic Winn Karlstad Norra Strandgatan 9–11, Karlstad, +46-54-776 47 00


guaranteed rent

The Scandic Winn is Värmland’s largest business ho-tel located in the centre of Karlstad. It contains 199

rooms, a restaurant, banqueting rooms, conference facilities, relaxation centre and a garage. Scandic Winn is oriented towards business travellers and conference groups. The building was constructed in 1984 and extended in 1990.

Scandic Grand Örebro Fabriksgatan 21–23, Örebro, +46-19-767 43 00


The Scandic Grand, which is Örebro’s largest busi-ness hotel and located in the city centre, provides full service, and offers 219 rooms as well as well-

developed conference facilities. The building was constructed in 1985. The total surface is 12,900 square metres, of which 84 percent consist of hotel surface.

Scandic Swania Trollhättan Storgatan 47-49, Trollhättan, +46-520-890 00


guaranteed rent

The Scandic Swania Trollhättan is the region’s leading hotel. It is centrally located with 196 rooms and well-developed conference and restaurant facilities, and

is oriented towards business travellers, conference groups and tourists. The building was constructed in the beginning of the 1990s and was refurbished in 2001.

Radisson SAS Hotel Östersund Prästgatan 16, Östersund, +46-63-55 60 00

Operator: Pandox i Östersund ABBrand name: Radisson SASLease: Internal revenue-based

The Radisson SAS Hotel Östersund is a first-class hotel oriented towards business travellers, tourists and conference groups. It is located in central Östersund and has 177 rooms, a restaurant, bar, conference facilities and a swimming pool. The hotel and restaurant products have been upgraded and developed in recent years.

The building was constructed in 1978 and is owned via a tenant owners’ cooperative. The hotel comprises 48 percent of the building’s total surface. Through its share in the cooperative, Pandox owns and is responsible for the hotel part of the property as well as two more premises.


First Hotel Grand Borås Hallbergsgatan 14, Borås, +46-33-10 82 00

Operator: Västsvenska Hotellfastigheter ABBrand name: First HotelLease: Revenue-based with

guaranteed rent

The Grand is Borås’ largest full-service hotel with well-developed conference, restaurant and entertain-ment facilities. The hotel has 158 rooms and enjoys

the best location in Borås. The building was constructed in 1972 and was refurbished in 1987, 1990 and 1997.

Elite Stora Hotellet Jönköping Hotellplan, Jönköping, +46-36-10 00 00

Operator: Elite HotelsBrand name: EliteLease: Revenue-based with

guaranteed rent

The Stora Hotellet is Jönköping’s best known first-class hotel located in the centre of the town. The hotel is a classic hotel oriented towards business travellers, conference attendees and tourists. It

contains 135 rooms, a restaurant, pub, conference facilities and a banqueting room for 400 people. The building was constructed in 1860, was extended in the 1930s and refurbished in 1995 and 2002.

Scandic Hallandia Halmstad Rådhusgatan 4, Halmstad, +46-35-295 86 00


The hotel is located adjacent to Nissan in the centre of Halmstad. Scandic Hallandia has 130 rooms refurbished as per Scandic’s environment concept. The hotel also has large conference facilities, the well-known restaurant Svea, as well as

a relaxation centre with bubble pool and sauna. The building was constructed in the 19th century and underwent two extensions between 1950 and 1975.

Radisson SAS Hotel Plaza Karlstad Västra Torggatan 2, Karlstad, +46-54-10 02 00

Operator: Plaza Hotell & Restaurang i Karlstad AB

Brand name: Radisson SASLease: Revenue-based with

guaranteed rent

The hotel is located in central Karlstad. Radisson SAS Hotel Plaza is one of Karlstad’s most popular ho-tels for business travellers and conference attendees.

This first-class hotel has 131 rooms, two restaurants, a pub, nightclub and conference facilities. The building was constructed in 1929 and extended in 1991 at the same time as the property was totally refurbished.

hotel properties


Scandic Billingen Skövde Trädgårdsgatan 10, Skövde, +46-500-74 50 00

Operator: Hilton InternationalBrand name: ScandicLease: Fixed

A classic hotel, with a good location opposite the rail-way station in central Skövde. The Scandic Billingen is a full-service hotel oriented towards business travellers and contains 106 rooms, extensive

restaurant and entertainment operations as well as conference facilities. The building was constructed in 1888 and ex-tended in 1939 with an annex. An additional floor was built in 1965.

Crowne Plaza Brussels City Centre Rue Gineste 3, Brussels, +32-2 203 6200

Operator: Pandox Brand name: Crowne PlazaLease: Internal revenue-based

The Crowne Plaza in central Brussels is a traditional hotel with 356 rooms, large conference and banqueting facilities, a restaurant, breakfast room, bar, and fitness centre. The building is in classic hotel style with a total surface of 28,095 square metres spread over 11 floors.

Pandox has started an extensive refurbishment and upgrading program with a total investment of ap-proximately EUR 14 M. The hotel is operated by Pandox.

Hilton London Docklands 265 Rotherhithe Street, London, +44-207 231 1001


Hilton London Docklands is located in the growth area of Docklands opposite Canary Wharf and the Tower of London. It has a unique design built in several old warehouses, and contains 365 rooms, two restaurants, conference facilities and a Living Well

health club. The hotel is oriented towards business travellers, incentive trips and tourists. A considerable development program is currently in progress. The hotel was built in 1991 and the total surface amounts to 22,800 square metres, of which 94 percent are hotel surface.

Hilton Brussels City Place Rogier, Brussels, +32-2 203 3125

Operator: Pandox Brand name: HiltonLease: Management agreement

Further to an extensive investment program that was completed in the beginning of 2002, the hotel has been converted from a tourist hotel to a high standard international establishment. The Hilton Brussels City

contains 285 rooms, a restaurant, bar, fitness centre and conference facilities. The total surface amounts to 13,850 square me-tres consisting entirely of hotel surface. Management agreement with Hilton.


Scandic Grand Place Brussels Rue d’Arenberg 18, Brussels, +32-2 548 1811


The Scandic Grand Place Brussels is located close to Grand Place. The product is of high standard and contains 100 rooms, a restaurant, and conference facilities.

The hotel was originally built in 1900 and underwent a total refurbishment program in 1991. The total surface amounts to 4,500 square metres.

Royal Crown Hotel Brussels Rue Royale 250, Brussels, +32-2 220 6611

Operator: PandoxBrand name: Lease: Internal revenue-based

The Royal Crown Hotel Brussels is located in the centre of the city close to the financial district, shop-ping at Place Rogier and the Botanical Gardens. The

hotel has 315 rooms, a restaurant, bar, conference facilities, fitness centre, and a garage. A compre-hensive refurbishment and repositioning program is currently in progress at a cost of about EUR 12 M.

Scandic Antwerp Lt Lippenslaan 66, Antwerp, +32-3 235 9191


The Scandic Antwerp is located by a ring road outside the city of Antwerp. The hotel has 204 rooms, with well-developed conference facilities and a restaurant. A refurbishment program has recently

been completed, covering hotel rooms, the lobby, as well as conference facilities, restaurant, public areas and a new fitness centre. The hotel was built in 1974, and the total surface amounts to 13,200 square metres.

Hilton Bremen Böttcherstrasse 2, Bremen, +49-421 369 60


The Hilton Bremen is located in the centre of the city. The hotel has 235 rooms, a large atrium with restaurant and bar, excellent conference facilities, and a swimming pool. Bremen is part of a growth

area with well-developed industry and tourism. The hotel has recently undergone a comprehensive investment program with the upgrading of the entire product. The total surface amounts to 21,000 square metres, of which 72 percent is hotel surface.

hotel properties


Scandic Lübeck Travemünder Allee 3, Lübeck, +49-451 370 60

Hilton Dortmund An der Buschmühle 1, Dortmund, +49-231 108 60


The Hilton Dortmund is located close to the Westfalenhallen area with considerable congress, exhibition and sporting activities. The hotel is built with modern design and contains 190 rooms, well-developed conference and banqueting facilities, as

well as a large swimming pool and relaxation area. Dortmund’s hotel market covers the Ruhr region with more than 16 million inhabitants. The hotel is currently undergoing a comprehensive investment program. The hotel was built in 1990 and has a total sur-face of 12,500, of which 80 percent is hotel surface.


The Scandic Lübeck is just walking distance from the old town of Lübeck, and close to the exit roadway towards Hamburg. The hotel has a modern design and contains 158 rooms and a large conference department.

The hotel was built in 1991 and the total surface amounts to 9,700 square metres, of which 91 percent is hotel surface. The property is currently undergoing an upgrading program.

Radisson SAS Hotel Basle Steinentorstrasse 25, Basle, + 41-61-227 27 27

Operator: RezidorBrand name: Radisson SAS HotelsLease: Revenue-based with

guaranteed rent

The Radisson SAS Basle is located in central Basle close to the old town centre and shopping district.

The hotel has 205 rooms, conference facilities, restaurant, and a large relaxation area.

Pelican Bay at Lucaya Seahorse Road at Port Lucaya, Grand Bahama Island, +1-242 373 95 50

Operator: Sundt GB ManagementBrand name: Lease: Asset management agreement

Pelican Bay at Lucaya is owned by Sundt AS and is operated by Pandox under an asset management agreement. The hotel is located on Grand Bahama Island and is a resort complex with full service facili-

ties. The property contains 186 rooms, of which 96 are suites. The area includes three swimming pools, and beaches and golf courses are close by. The property is composed of two buildings.

Financial overview . . . . . . . . . . . . . . . . . . . 48

Sensitivity analysis . . . . . . . . . . . . . . . . . . . 50

Valuation and tax situation . . . . . . . . . . . . . 52

Definitions . . . . . . . . . . . . . . . . . . . . . . . . 53

Ten-year overview . . . . . . . . . . . . . . . . . . . . 54

Quarterly data 2004-2005 . . . . . . . . . . . . . 56

Financial statements 2005 . . . . . . . . . . . . 57

Report of the Board of Directors . . . . . . . . . . 58

Income statement and comments . . . . . . . . 60

Balance sheet and comments . . . . . . . . . . . 62

Changes in equity . . . . . . . . . . . . . . . . . . . 64

Cash flow statement and comments . . . . . . . 65

Accounting principles . . . . . . . . . . . . . . . . 66

Notes to the accounts . . . . . . . . . . . . . . . . . 68

Proposed disposition of earnings . . . . . . . . . 74

Auditors’ report . . . . . . . . . . . . . . . . . . . . . 75

Financials

48 PANDOX – ANNuAl RePORT 2005 PANDOX – ANNuAl RePORT 2005 49

financial overview

Well-weighted risk profile

Financial policyThe basic objective of Pandox’ financial opera-

tions is to achieve the lowest possible financing

costs while simultaneously limiting the risks re-

lated to interest rates, foreign currencies and

borrowings. The interest-rate risk is the risk that

changes in interest-rate levels could negatively

affect the Group’s results. Currency risk is the

risk that the Group’s balance sheet and income

statement could be negatively affected by

changes in the value of the Swedish krona. Fi-

nally, the borrowing risk is the risk that external

financing may become more difficult to find.

Interest-rate risk/interest-rate strategyPandox’ basic objective is that interest-rate ex-

posure shall be adapted so that increased costs

as a result of reasonable changes in interest

rates shall be compensated by higher revenue.

The interest-rate risk must therefore be limited

through contracting periods of varying lengths

with the aim of creating an optimal due-date

structure and fixed-interest periods. The long-

term objective is that the average fixed-interest

period be matched with the average point in

time when rental revenues, based on under-

lying leases, are estimated to be affected by a

change in interest rates.

Currency risk/currency risk strategyPandox is exposed to currency risks due to cer-

tain of the Group’s assets being denominated

in foreign currencies. Pandox’ policy is to

hedge its entire exposure by raising loans in the

local currency of each respective country and

by hedging the net investment in foreign subsi-

diaries by means of appropriate currency hed-

ging instruments.

Methodology and systemsPandox has developed and implemented sys-

tems and procedures to enable the continuous

monitoring and reporting of interest-rate risk

trends.

Financing strategyIn order to gain flexibility and administrative be-

nefits, Pandox has centralised when possible

all borrowing in the Parent Company. The

objective is to work with long-term framework

agreements that provide scope for borrowing

with varying maturities and fixed margins. Deri-

vative instruments such as swaps are prefera-

bly used for the extension of fixed-interest rate

periods.

Capital structureThe objective for the Group’s capital structure

is that the equity/assets ratio should amount to

at least 25 percent in order to meet financial

strength requirements, and to thereby enable

continued expansion.

FinancingAs of 31 December 2005, the Pandox Group’s

interest-bearing liabilities amounted to SEK

3,165.3 M (3,080.4). The loan portfolio had an

average fixed-interest rate period of 3.8 years

(2.8) and the average rate of interest on loans

amounted to 4.07 percent (4.07). The finan-

cing of hotel properties is raised in each re-

spective local currency in accordance with the

Interest struCture1), seK M

until year seK DKK eur GBP CHF total share,% Interest,%2)

2006 560.3 – 328.7 227.6 54.5 1,171.1 37.0 3.2

2007 174.0 – 53.9 – – 227.9 7.2 5.3

2008 100.0 157.8 – – – 257.8 8.1 4.7

2009 125.0 – 1.8 – – 126.8 4.0 4.7

2010 250.0 – – – – 250.0 7.9 4.9

2011 and later 625.0 126.4 216.7 – 163.6 1,131.7 35.8 4.3

total 1,834.3 284.2 601.1 227.6 218.1 3,165.3 100.0 4.1

Share, % 58.0 9.0 19.0 7.0 7.0 100.0

Average interest rate, % 4.1 4.1 4.1 5.4 2.4 4.1

Average interest rate period, years 3.8 5.9 3.7 0.2 6.0 3.8

1) Converted to SEK.2) Average interest rate in percent.


financial policy. At the same point in time, the

Pandox Group’s liquid funds amounted to SEK

236.4 M (58.0). In addition, there was an unu-

tilised overdraft facility of SEK 100 M (100) and

unutilised credit facilities of SEK 656 M.

equity capitalThe Pandox Group’s equity capital as per the

balance sheet at 31 December 2005 amoun-

ted to SEK 2,307.7 M of which SEK 1,222.0 M

was restricted equity and SEK 1,085.7 M

unrestricted equity.

The Pandox Group’s cash flow before changes

in working capital, investments and non-recur-

ring revenue amounted in 2005 to SEK

301.4 M (298.9).

Working capitalPandox receives rental revenue in advance and

pays most of its operating costs and interest

expense in arrears, meaning that the Group

does not normally have to finance any working

capital.


sensitivity analysis

Factors that affect Pandox

Pandox’ operations and profitability are affected by a number of factors, of which the most important are described below.

the hotel marketThe development of Pandox’ earnings and the

value of its hotel properties are dependent

upon trends within the hotel market, which in

turn closely follow general economic develop-

ments.

Business travel and conference activities

normally increase during periods of high eco-

nomic activity, while there is a corresponding

decrease during periods of low economic acti-

vity. There is thus a strong connection between

economic trends (GDP) and trends within the

hotel market. Developments of GDP can be clo-

sely monitored, whereas factors that influence

local hotel markets are significantly more com-

plex. The most important influential factors are

local economic conditions, the proportion of

new hotel capacity in the market, how well-de-

veloped a market is concerning brand names

and segments, currency fluctuations, as well as

extraordinary events.

new capacityNew capacity introduced to the market implies

an increased risk for local players. Depending

upon existing demand, additional hotel rooms

through the construction of a new hotel can

lead to a rapid negative influence on occupancy

rates and average prices. To deal with this risk,

Pandox has developed an information system

that continually monitors planned new con-

structions within its market areas, and thus

enabling Pandox to be prepared and proactive.

Lease structurePandox has a large proportion of variable (reve-

nue and result-based) leases, which represen-

ted 92 percent of total rental revenue in 2005.

About 30 percent of variable leases contained

a guaranteed rent, meaning that only 62 per-

cent of rental revenues were fully variable

downwards. A change in the occupancy rate

and the average room revenue consequently

affects Pandox very differently, depending on

the direction of change.

The choice of lease agreement is based on

optimal distribution of cash flow between

Pandox and the operator so that both parties

are motivated to continuously increase the

hotel property’s overall profitability. Factors that

may influence risks associated with variable

leases are the hotel property’s location, market

segment and brand name/operator. Pandox’

strategy is to operate in a selected market seg-

ment, which in combination with its hotels mar-

ket expertise and systems, limits Pandox’ lease

risk.

PartnersPandox’ lease structure, with a large proportion

of variable leases, means that the Company is

more dependent on the individual tenant/

operator’s business than other property com-

panies. The Company’s strategy to actively coo-

perate with the market’s most competitive and

powerful operators with well-established brand

names, reduces both the related operative and

financial risks. Pandox’ largest tenants in terms

of revenue are Scandic, Hilton, Radisson SAS,

Elite Hotels, Crowne Plaza, Choice Hotels and

First Hotels, which together accounted for

more than 98 percent of all leasing revenue in

2005.

Leasing levelThe leasing level as of 31 December was 99

percent. Vacant space amounting to 1,949 m2

consisted entirely of store and office premises.

If for any reason a hotel operator should choose

to terminate its lease agreement, Pandox may

either select a new suitable operator as tenant

or operate the hotel under its own manage-

ment. With Pandox’ specialist expertise in the

hotel sector, the risk of vacant hotel space is

seen as being extremely low.

For other commercial space, which repre-

sents approximately 9 percent of total space in

the Company’s properties, Pandox is exposed

to the same fluctuations in supply and demand

for premises experienced by other property ow-

ners.

Changed risk potentialHistorically, the hotel industry and hotel pro-

perty sector have always been associated with

high risk. The market has however changed

significantly in recent years. Owners have be-

come more professional with restructured com-

panies and focused strategies, with a greater

holistic view and specialised expertise. Reports

from public companies have substantially im-

proved information about the transparency of

the market. The proportion of established

strong brand names with efficient operations

has increased. For streamlined companies with

own expertise in hotel operations, hotel proper-

ties and business development, and that are

active owners, the potential risk is considerably

lower than it has been in historic terms.

Decisions by public authoritiesThe hotel market can be affected by decisions

made by public authorities. Two examples of


earnInGs IMPaCt 2005

SEK M

Change in rental revenue

Occupancy rate +5 percentage points +43.0

Occupancy rate –5 percentage points –39.7

Average room revenue SEK +50 +29.0

Average room revenue SEK –50 –27.6

Other commercial premises +/–5%1) +/–3.8

Change in other variables

Interest expense during the year +/–1 percentage point +/–11.7

Average interest expense +/–1 percentage point1) +/–31.7

Exchange rate fluctuation +/–5 % +/–1.8

Operating and maintenance costs +/–5 % +/–5.21) 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.

such decisions are changes in taxation related

to claims for travel expenses or rules concer-

ning valued added tax both in general and for

the hotel and restaurant industry in particular.

Property taxProperty tax on Pandox’ Swedish properties

amounts to 1.0 percent of the tax assessment

value. Changes in the tax rate or in the tax as-

sessment value, which are adjusted annually,

affect Pandox’ earnings. However, an increase

only has a limited impact on the Company’s

earnings because many lease agreements are

formulated so that the property tax be passed

on to the tenant. Property tax on properties out-

side Sweden is generally less than one per cent

of the book value. About 39 percent of the pro-

perty tax was debited to tenants in 2005, which

means that the net effect on Pandox’ earnings

amounted to SEK 25 M.

site leasehold rentsAs of 31 December 2005, Pandox held six pro-

perties via site leasehold rights. Rents on these

properties are currently calculated in such a

manner that a municipality that normally owns

the land receives what is deemed to be a reaso-

nable real rate of interest on the estimated mar-

ket value of the land in question. Site leasehold

rents generally run for periods of 10 to 20

years.

Interest ratesInterest expense is Pandox’ largest single cost

item. Continuous fluctuations in interest rates

will therefore have an impact on Pandox’ ear-

nings. In order to limit its financial risk, the

Company’s average fixed-interest period is 3.8

years. The full effect of a change in interest

rates is accordingly not felt by Pandox for seve-

ral years.

Currency riskPandox’ policy is to hedge its entire currency

exposure, including shareholders’ equity, by fi-

nancing properties in local currencies and by

hedging the net investment in foreign subsidia-

ries by means of appropriate currency instru-

ments. Transaction exposure is limited as reve-

nue and costs are usually in the same cur-

rency.

sensitivity analysisThe table below illustrates how Pandox’ ear-

nings are affected by changes in certain key

factors.


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 valuationPandox 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 industry.

The cash flow calculation is built up from un-

derneath, with the property operator’s income

statement as the point of departure. This in

turn is based on assumptions as to how the un-

derlying 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 opera-

tor company’s results and forecasts, together

with the formulation of the lease agreement,

provide underlying data to estimate revenues,

which subsequently constitute the basis of the

cash flow calculation. The value calculated is

the present value of the next ten years’ cash

flow, with a supplement for the present value

of the hotel properties’ residual value after

ten years.

The valuation model is based on the follo-

wing assumptions:

• Changes in rental revenue during the cal-

culation period are based on the formulation

of individual leases and on underlying factors.

• Inflation is assumed to amount to an average

of 2.0 percent annually during the calcula-

tion period.

• Operating costs are assumed to increase in

line with inflation.

• The rate of interest used in the calculation

is based on the real interest rate plus a risk

premium based on location, lease, and form

of ownership.

An internal valuation of Pandox’ 36 hotel pro-

perties in accordance with this method resulted

in a total value as of December 2005 that sub-

stantially exceeds the book value. In accordance

with the Swedish Financial Accounting Stan-

dards Council’s recommendation No 17, each

individual property’s recovery value was recon-

ciled with its book value, further to which it was

noted that no write-downs were necessary.

The Company’s tax situation

The Pandox Group’s property hol-dings are reported for accounting purposes as fixed assets.The consolidated book value as of 31 December 2005 amounted to SEK 5,324.2 M excluding equipment, of which the consolidated surplus values amounted to SEK 762.8 M.

accounting of deferred taxPandox applies the Swedish Financial Accoun-

ting Standards Council’s recommendation

RR:9 on income tax. In short, this recommen-

dation implies that both deferred tax liabilities

and tax claims are to be included in the finan-

cial statements and that any changes will affect

the income statement as deferred tax.

Pandox’ consolidated balance sheet as of

31 December 2005 includes a deferred tax lia-

bility in the net amount of SEK 101.7 M cor-

responding to the difference between a defer-

red tax liability of SEK 208.5 M and a deferred

tax claim of SEK 106.9 M. The deferred tax lia-

bility refers mainly to the estimated deferred tax

based on the difference between the proper-

ties’ consolidated book value and the fiscal re-

sidual value of each respective legal unit. The

difference in value has arisen as an effect of

surplus value upon acquisitions of property in

companies, known as pure intrinsic acquisi-

tions, as well as fiscal depreciation that ex-

ceeds book depreciation. Tax deduction for an-

nual depreciation of properties has normally

been made at the rate of 3 to 5 percent of a

property’s acquisition cost. As a result, the

amount of fiscal depreciation exceeds that of

book depreciation, and the difference between

the book value and the fiscal value of a property

increases year on year. The deferred tax liability

generated by asset acquisitions before 2004

has been calculated using the present value

method based on the shortest period of owner-

ship estimated for each property, and cor-

responds to an average tax rate of approxima-

tely 10 percent. This is based on the Swedish

Financial Accounting Standards Council’s re-

gulation for assessing deferred tax upon pure

intrinsic acquisitions, where the tax effect is

taken into consideration when calculating the

acquisition price. Since 2004 the principle that

no deferred tax liability should be calculated at

pure asset acquisitions. The deferred tax rela-

ting to the difference between book deprecia-

tion and fiscal depreciation is calculated based

on the applicable tax rate.

The deferred tax claim pertains mainly to

deficit deductions and the fiscal surplus value

regarding limited partnerships. At the end of

2005, there were remaining deficit deductions

totalling SEK 272 M in the Swedish companies.

The valuation of deferred tax claims is based on

their potential utilisation against future taxable

profits, and is calculated according to the appli-

cable tax rate. Consequently, no deficit deduc-

tions in non-Swedish companies were reported

at the end of 2005.

valuation


Definitions of key data

Property-related key figuresDirect yield 1Adjusted operating net as a percentage of the

book value of properties and hotel equipment

at the end of the year. The book value of hotel

equipment is included in the dominator in view

of that the equipment rental is included in the

numerator.

Direct yield 2Adjusted operating net including property-rela-

ted administration as a percentage of the book

value of the properties.

Operating netHotel property revenue less operating and

maintenance costs, property tax, ground rent

and other property costs.

Property-related administrationThe portion of total administration costs that is

directly related to the management and deve-

lopment of a property. Other administration

costs include central administration and costs

for maintaining the Company’s market listing.

Adjusted operating net Operating net adjusted for properties sold and

purchased during the year.

Total property revenueThe sum of rental revenue and other property

revenue.

Financial key figuresReturn on equityProfit after net financial items and paid tax as a

percentage of average equity.

Return on total assets Profit after net financial items, plus financial

costs as a percentage of average total assets.

Interest coverage ratioProfit after net financial items, less one-off

items, plus interest costs as a percentage of

interest costs.

Equity/asset ratioEquity at the end of the year as a percentage of

total assets.

Hotel market-related key figuresOccupied roomsNumber of sold room nights during a given pe-

riod of time – normally one year.

Available roomsAvailable rooms capacity during a given period

of time – normally one year.

Occupancy rateNumber of occupied rooms as a percentage of

the number of available rooms.

Average room rateTotal revenue from sold rooms divided by the

number of occupied rooms.

RevPAR (Revenue Per Available Room)Total revenue from sold rooms divided by the

number of available rooms

Market penetrationThe occupancy rate of an individual hotel in re-

lation to the average for the market.

GOP (Gross Operating Profit)Net profit in hotel operator companies before

depreciation, rent, net financial items and

taxes.


Condensed consolidated income statement

seK M 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Property operations

Rental revenue 123.8 140.6 218.5 254.0 476.3 551.1 536.2 535.1 562.7 548.8

Other property revenue 12.4 11.6 16.1 18.0 21.4 24.0 26.0 26.5 30.2 25.2

total property revenue4) 136.2 152.2 234.6 272.0 497.7 575.1 562.2 561.6 592.9 574.0

Operating and maintenance costs –30.5 –31.5 –47.8 –54.2 –88.9 –96.7 –93.2 –100.1 –118.7 –103.8

Operating net 105.7 120.7 186.8 217.8 408.8 478.4 469.0 461.5 474.2 470.2

Depreciation1), 2) –23.9 –26.0 –36.0 –40.3 –45.8 –56.2 –63.2 –64.3 –70.3 –78.2

Income from property operations 81.8 94.7 150.8 177.5 363.0 422.2 405.8 397.2 403.9 392.0

Hotel operations

Operating revenue 29.0 41.5 18.5 – 28.2 39.7 60.1 81.3 216.8 250.2

Operating costs1) –29.8 –42.2 –18.7 – –25.5 –39.3 –58.2 –75.7 –204.4 –239.4

Operating income hotel operations4) –0.8 –0.7 –0.2 – 2.7 0.4 1.9 5.6 12.4 10.8

Gross income 81.0 94.0 150.6 177.5 365.7 422.6 407.7 402.8 416.3 402.8

Administrative costs1) –15.3 –17.2 –19.2 –21.6 –31.8 –33.9 –34.5 –35.5 –39.3 –42.5

Non-recurring revenue/expense 0.9 1.0 1.4 5.3 1.9 8.6 28.8 7.4 – 444.4

Operating income 66.6 77.8 132.8 161.2 335.8 397.3 402.0 374.7 377.0 804.7

Non-recurring financial charges – – – – – – – – –56.1 –

Net financial items for current operations –69.0 –50.3 –71.3 –77.5 –150.7 –178.1 –171.0 –159.2 –148.4 –137.4

Income after financial items –2.4 27.5 61.5 83.7 185.1 219.2 231.0 215.5 172.5 667.3

Deferred tax3) 0.2 –0.3 – – –27.0 –28.3 –44.2 –50.3 –47.6 36.8

Paid taxt – – – –0.3 –1.4 –0.2 –0.1 11.4 –0.2 –15.8

Acquired income/expense – – – – – – – – – –

Income/loss for the year –2.2 27.2 61.5 83.4 156.7 190.7 186.7 176.6 124.7 688.3

1) The depreciation rate on properties is 1.0 percent as of 2000 and amounted in 2004 to SEK 70.3 M. Depreciation in administration and hotel operations amounted in 2004 to respectively SEK 0.3 M and SEK 0.0 M (in 2003 to SEK 0.4 M and SEK 0.0 M; in 2002 to SEK 0.4 M and SEK 0.0 M; in 2001 to SEK 0.5 M and SEK 0.0 M; in 2000 to SEK 0.6 M and SEK 0.0 M; in 1999 to SEK 0.7 M and SEK 0.0 M; in 1998 to SEK 0.5 M and SEK 0.2 M; in 1997 to SEK 0.4 M and SEK 0.1 M and in 1996 to SEK 0.5 M and SEK 0.3 M).

2) A depreciation rate of 1.0 in 1999 would have amounted to SEK 29.4 M (1998 SEK 26.5 M, 1997 SEK 19.6 M and 1996 SEK 18.3 M).3) As of 2001, Pandox applies the Swedish Accounting Standards Council’s recommendation on income tax (RR:9). Comparative figures for 2000 have been restated to take this into account.4) The 2004 figure has been adjusted regarding rental revenue within hotel operations of SEK 3.7 M.

ten-year overview


Condensed consolidated balance sheet

seK M, as of 31 December 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

assets

Properties including hotel equipment 1,239.5 1,874.3 2,085.2 2,393.7 4,784.5 5,036.8 4,961.4 5,276.7 5,262.8 5,477.5

Other fixed assets 18.5 17.3 16.5 14.5 13.0 5.4 6.9 7.2 6.9 113.7

Current assets 25.3 23.7 14.6 17.9 61.9 37.1 29.5 34.6 58.6 201.7

Cash and bank 43.7 14.4 82.9 3.9 16.4 86.7 213.2 137.5 58 236.4

total assets 1,327.0 1,929.7 2,199.2 2,430.0 4,875.8 5,166.0 5,211.0 5,456.0 5,386.3 6,029.3

equity and liabilities

Shareholders’ equity 555.7 582.9 830.1 883.6 1,670.8 1,772.1 1,853.9 1,919.2 1,923.0 2,307.7

Deferred tax liability – – – – 8.8 37.0 83.5 135.9 184.3 208.5

Interest-bearing liabilities 703.7 1,078.3 1,281.8 1,463.6 2,934.7 3,178.5 3,070.6 3,211.9 3,080.4 3,165.3

Non-interest-bearing liabilities 67.6 268.5 87.3 82.8 261.5 178.4 203.0 189.0 198.5 347.8

total equity and liabilities 1,327.0 1,929.7 2,199.2 2,430.0 4,875.8 5,166.0 5,211.0 5,456.0 5,386.3 6,029.3

Key data

Property-related key data

Book value of properties including hotel equipment 1,239.5 1,874.3 2,085.2 2,393.7 4,784.5 5,036.8 4,961.4 5,276.7 5,262.8 5,477.5

Total property revenue, SEK M 136.2 152.2 234.6 272 497.7 575.1 562.2 561.6 592.9 574.0

Operating net, SEK M 105.7 120.7 186.8 217.8 408.8 478.4 469 461.5 474.2 470.2

Adjusted operating net, SEK M1) 104.6 169.1 194.6 229.2 459.4 484.3 472.7 464.1 474.2 433.3

Direct yield 1, %2) 8.4 9.0 9.3 9.6 9.6 9.6 9.5 9.3 9.1 8.5

Direct yield 2, % 7.9 8.6 8.9 9.2 9.3 9.3 9.2 9.0 8.8 8.2

Financial key data

Interest coverage ratio, multiple 1.0 1.5 1.8 2.0 2.2 2.2 2.3 2.3 2.6 2.63)

Return on total assets, % 5.1 5.9 6.6 7.0 8.1 8.0 7.8 7.1 7.0 14.2

Return on equity, % neg 4.8 7.6 9.7 11.6 11.0 12.6 12.0 12.0 30.8

Equity/assets ratio, % 41.9 30.2 37.7 36.4 34.6 34.3 35.6 35.2 35.7 38.3

Cash flow from current operations, SEK M 21.3 53 96.8 119.1 228.2 267.2 265.8 272.4 298.9 301.4

Investments excluding acquisitions, SEK M 27.3 11.2 22.6 28.6 101.3 149.1 67.3 60.8 70.5 165.1

Property acquisitions, SEK M – 667.0 260.0 331.0 2,340.3 141.9 – 370.7 – 661.3

1) Further to the sale of twelve hotel properties in 2005.2) Direct yield based on the book-value of the hotel properties adjusted for the two newly acquired properties, which were not charged any internal rent in 2005.3) Excluding non-recurring income due to the sale of hotel properties.


quarterly data

Quarterly data 2004–2005

COnDenseD InCOMe stateMents

2004 2005seK M Q1 Q2 Q3 Q 4 Q1 Q2 Q3 Q 4

Total property revenue 143.7 152.3 147.6 153 140.5 157.5 135.5 140.5

Operating net 116.7 124.0 121.1 116.1 113.4 128.2 113.9 114.6

Income from property operations 98.6 106.5 103.7 98.8 93.9 108.1 95.9 94.4

Income from hotel operations –0.6 4.4 0.0 4.9 1.3 6.1 0.9 2.5

Operating income 88.7 101.5 94.3 92.5 85.4 104.2 528.8 86.2

Net financial items –40.5 –76.4 –34.7 –52.9 –33.4 –35.7 –35.4 –33.0

Income after financial items 48.3 25.1 59.5 39.6 52.0 68.5 493.4 53.2

Income after tax 37.6 21.2 46.2 19.7 41.4 54.5 494.7 97.6

COnDenseD COnsOLIDateD BaLanCe sHeets

2004 2005

seK M 31 Mar 30 Jun 30 sep 31 Dec 31 Mar 30 Jun 30 sep 31 Dec

assets

Properties including hotel equipment 5,315.2 5,292.0 5,281.9 5,262.8 5,573.3 5,665.9 5,281.9 5,477.5

Other fixed assets 7.1 7.1 7.1 6.9 6.4 6.4 7.1 113.7

Current assets 46.7 59.6 64.8 58.6 62.1 86.9 64.8 201.7

Cash and bank 182.6 136.1 90.6 58.0 202.6 131.9 90.6 236.4

total assets 5,551.6 5,494.8 5,444.4 5,386.3 5,844.4 5,891.1 5,444.4 6,029.3

equity and liabilities

Shareholders’ equity 1,954.9 1,979.9 2,017.2 1,923.0 1,963.9 1,899.7 2,017.2 2,307.7

Deferred tax liability 146.5 150.6 164.0 184.3 195.0 209.0 164.0 208.5

Interest-bearing liabilities 3,218.3 3,143.1 3,039.1 3,080.4 3,462.8 3,546.7 3,039.1 3,165.3

Non-interest-bearing liabilities 231.9 221.2 224.1 198.5 222.7 235.7 224.1 347.8

total equity and liabilities 5,551.60 5,494.80 5,444.40 5,386.30 5,844.4 5,891.1 5,444.4 6,029.3

PrOPertY-reLateD KeY Data

2004 2005 Q1 Q2 Q3 Q 4 Q1 Q2 Q3 Q 4

Direct yield 1, % 9.3 9.1 9.1 9.1 8.7 8.5 8.5 8.5

FInanCIaL KeY Data

2004 2005 Q1 Q2 Q3 Q 4 Q1 Q2 Q3 Q 4

Interest coverage ratio, multiple 2.2 2.4 2.5 2.6 2.5 2.8 2.7 2.6

Return on total assets, % 6.9 7.2 7.2 7.0 6.6 6.7 6.4 14.2

Return on equity, % 10.9 11.0 10.8 12.0 11.9 11.6 10.6 30.8

Equity/assets ratio, % 35.2 36.0 37.1 35.7 33.6 32.2 40.1 38.3

Cash flow from current operations, SEK M 66.5 80.4 77.0 75.0 71.5 16.2 141.5 72.2

Investments excluding acquisitions, SEK M 16.3 30.5 5.9 17.8 38.3 47.4 36.9 42.5

Property acquisitions, SEK M – – – – 277.0 – – 384.3


Property revenues and total revenuesPandox’ property revenues for 2005 amounted to SEK 574.0 M (592.9), which for comparable units represented an increase of 2.3 percent against with last year. The Group’s total revenue amounted to SEK 778.6 M (762.8).

Sales in SwedenOn 1 July, Pandox sold twelve Swedish hotel properties for a total amount of SEK 1.1 billion. The capital gain after tax upon this divestment amounted to approximately SEK 450 M. These properties are included in the operating results of the first six months of 2005.

ProfitsThe pre-tax profit for 2005, excluding non-recurring items, amounted to SEK 222.9 M (228.6). Profit after tax, including non-recurring revenues, amounted to SEK 688.3 M (124.7).

Cash flowCash flow from ongoing operations, excluding non-recurring items, amounted to SEK 301.4 M (298.9).

Financial statements2005


Report of the Board of Directors

The Board of Directors and Chief Executive Officer of Pandox AB, Swedish corporate registration num-ber 556030-7885, herewith submit the annual report and consolidated accounts of the Company for the financial year 2005.

Operations and strategyPandox is one of northern Europe’s leading

pure hotel property companies. The Company

has built up specialist expertise within the key

areas of hotel markets, hotel operations, hotel

properties and business development. Active

ownership, with well-developed and strategic

plans for each hotel, enables the creation of

good prerequisites for stable and improved

cash flows, and thereby growth in value for the

shareholders.

Pandox’ strategy is to own one type of asset

– hotel properties. Its focus is strengthened by

a prioritised market segment. Pandox is to own

large hotel properties in Sweden, major loca-

tions in Europe, as well as developing regions in

eastern Europe.

The hotels should be in central, natural and

strong locations such as city centres, airports

and exhibition centres. The hotels should be in

the upper medium to high price range and

focus on the business and leisure segments.

The hotels owned by Pandox are operated

and marketed by the most powerful players in

the hotel market, who with well-known brands

and dynamic independent distribution chan-

nels create strong market positions and thereby

stable revenues.

Revenues are created by flexible lease

agreements related to the operator’s turnover

and results or through management agree-

ments where Pandox assigns a third party to

manage operations, or alternatively through its

own management. Irrespective of the form of

operation, Pandox contributes via its active

ownership to increasing total cash flows and

reducing risks.

At the end of the year, the Company owned

36 hotel properties, of which one asset manage-

ment assignment and five operating companies.

Pandox owns and develops assets in Sweden,

Denmark, Belgium, Germany, Switzerland, UK,

and the Bahamas.

accounting principlesPandox applies the stipulations of the Swedish

Annual Accounts Act and generally accepted

accounting principles, as well as the recom-

mendations of the Swedish Accounting Stan-

dards Board unless otherwise stated. As an un-

listed company, Pandox is not subject to the

IFRS accounting requirements.

Ownership situationSince 2003/2004 Pandox is owned by the

Norwegian companies Eiendomsspar AS and

Sundt AS through their wholly-owned Swedish

company APES Holding AB.

Continued growth in the united statesThe American market had a historically good

year 2005. Room occupancy was 64.5 per-

cent, representing a rise of 2.9 percent compa-

red with last year. Average room rates in-

creased by 5.3 percent to USD 90.84 and Rev-

PAR (revenue per available room) rose in total

by 8.4 percent. Uncertainty regarding an unba-

lanced US economy with a growing budget de-

ficit still however remains.

signs of improvement in europeIn Europe, both room occupancy and average

rates in general developed positively during the

year with an increase in RevPAR of 4.6 percent

compared with last year. In London, growth was

driven by rising average rates while room oc-

cupancy was slightly negatively affected further

to the terrorist attacks in the summer. All in all,

RevPAR rose by about 2 percent in London.

The market in Brussels also developed better

than last year with an increase of 3.5 percent.

Apart from Berlin, which witnessed a fall of

approx 2 percent due to overcapacity, positive

trends have been experienced in all major

markets, including Paris with a rise of 7 percent

in Rev PAR.

The Swedish market is characterised by a

stable rate of growth. Major locations are doing

better than the overall average of Sweden.

Room occupancy has gradually increased, and

the previously declining average rates have

risen slightly. Stockholm is in a stable improve-

ment phase where the city centre and the five-

star segment lead current trends. The munici-

pality of Gothenburg rose by almost 6 percent

in RevPAR, due primarily to improved room

occupancy. In Malmö, demand was affected

positively by the qualifying heats of the

America’s Cup in August. The underlying

growth is at a stable but low level.

Pandox’ portfolio shows continued strengthPandox’ hotels in Stockholm have witnessed

very good demand, and they perform better

than the market in general. Scandic Park has

increased most as a result of competing hotel

undergoing refurbishment and that capacity

was subsequently reduced within the market.

The refurbishment of Elite Park Avenue in

Gothenburg continues as planned. The closing

of certain parts of the hotel during the year had

a negative influence on capacity. The Scandic

Crown is performing in line with the market.

Pandox’ hotels in Malmö have developed

better than the market and were given a boost

by the qualifying heats of the America’s Cup.

Pandox’ hotels in Copenhagen are performing

well in a strong market. Bremen has expe-

rienced relatively good trends in level with the

market, while Pandox’ hotel in Lübeck has per-

formed slightly less well than the market. The

market in Dortmund, including the Pandox

Hilton hotel declined in RevPAR compared

with the previous year.

Hilton London Docklands is in a very com-

petitive market, with a lot of new capacity, and

has marginally lost some market share to the

newly built hotels. Pandox’ hotel in Antwerp

follows the market which in principle is un-

changed compared with last year.

Pandox’ geographical sub-market in Brus-

sels increased by 3.5 percent during the year.

The Crowne Plaza continues to take market

shares in spite of the hotel undergoing conside-

rable refurbishment, but also due to excellent

sales and marketing measures. Pandox’ two

other hotels have developed slightly under the

market average. The Radisson SAS Hotel in

Basle has performed better than the market so

far this year, where room occupancy in parti-

cular is improving.

financial statements


revenues and operating net – property operations Property revenue for the year amounted to

SEK 574.0 M (592.9). For comparable units,

the portfolio improved by 2.3 percent in spite

of two major refurbishment projects reducing

capacity. In general, the improved hotel market

in Stockholm and Copenhagen in particular

has led to good growth in revenues. Property

costs, excluding depreciation, decreased to

SEK 103.8 M (118.7) due primarily to the sale

of 12 Swedish hotel properties.

Operating net amounted to SEK 470.2 M

(474.2). For comparable units however, the

operating net improved by 2.7 percent compa-

red with the same period last year. Adjusted

direct yield before administrative costs was

8.5 percent (8.6) for the period.

revenues and income – hotel operationsRevenues from hotel operations come from the

Hilton Brussels City, which is operated through

a management agreement with Hilton, as well

as the Crowne Plaza Brussels, Radisson SAS

Hotel Östersund and Mora Hotell, which are

directly operated by Pandox. Revenues of SEK

15.8 M from the new operations Royal Crown

and Hotel 27 are also included.

Total revenues from operational activities for

the year amounted to SEK 250.2 M (216.8).

Income declined by SEK 1.6 M to SEK 10.8 M

(12.4), which is totally attributable to start-up

costs related to the newly acquired operations.

IncomeConsolidated income for the Group for 2005,

excluding non-recurring items, amounted to

SEK 222.9 M (228.6). The decline in income is

attributable to the Company having sold 12

hotel properties on 1 July 2005. Income after

tax and including amounts received from the

sale of the 12 Swedish properties amounted to

SEK 688.3 M.

Financing and cash flow Net financial items relating to current opera-

tions for the period January-December 2005

amounted to SEK –137.4 (–148.4). The Group’s

interest-bearing liabilities amounted as of 31

December 2005 to SEK 3,165.3 M (3,080.4).

The loan portfolio has a spread due-date struc-

ture with an average fixed-interest period of

3.8 years. The average interest rate on loans at

31 December was 4.1 percent. Financing of

Swedish properties has been made in Swedish

kronor, while properties outside Sweden have

essentially been financed in each respective

local currency. Available liquid funds, including

an unutilised bank overdraft facility and credit

facilities for a total of SEK 756 M, amounted to

SEK 992.0 M (523.0). Cash flow before chan-

ges in working capital, investments and exclu-

ding non-recurring items and tax improved by

SEK 2.5 M and amounted to SEK 301.4 M

(298.9).

Investments The Pandox Group’s investments amounted for

the year to SEK 165.1 M (70.5). These invest-

ments essentially pertained to the refurbish-

ment of the Elite Park Avenue in Gothenburg

and the Crowne Plaza in Brussels, as well as

product improvements in a number of other

properties. The book value of hotel properties,

including furniture, fixtures and equipment,

amounted to SEK 5,477.5 M (5,262.8). In

February 2005, Pandox acquired the hotel

property Radisson SAS Basle with 205 rooms

at an acquisition cost of CHF 45 M. The pro-

perty was taken over financially on 1 January

2005. In the last quarter, the hotel properties

Royal Crown in Brussels with 315 rooms and

the Hotel 27 in Copenhagen with 203 rooms

were acquired for a total acquisition cost of

approximately SEK 380 M.

asset managementPandox has an asset management assignment

since January 2005 to assist the owner Sundt

AS and the management of the Hotel Pelican

Bay on Grand Bahama Island to develop

operations. The hotel, which has 186 rooms,

has experienced positive trends and the newly

recruited management team has focused on

implementing procedures and standards, as

well as producing underlying data for strategic

planning.

PersonnelCentral administration counted 14 employees

as at 31 December 2005. Figures concerning

average number of employees, as well as sala-

ries and other remuneration, are set out in

Note 16.

the work of the Board of Directors during 2005The Board of Directors of Pandox has been

composed of six members since the Annual

General Meeting of Shareholders held in 2005.

During the year, the Board has held one statu-

tory constituent meeting and four ordinary

meetings in accordance with the established

annual agenda. The meetings have reviewed

and discussed external and internal reporting

of operating results and the Company’s finan-

cial position as well as various business mat-

ters. Other important items that are regularly

studied and reviewed each year are marketing,

strategy, finance, and budget issues. In addi-

tion to the scheduled ordinary meetings held

during the year, two extraordinary meetings

were held to examine and discuss certain busi-

ness issues.

Parent Company Property activities in the Group’s property-

owning companies are administered by staff

employed by the Parent Company, Pandox AB.

The cost of these services has been invoiced

to the Group’s subsidiaries. Invoicing in 2005

amounted to SEK 30.8 M (31.7). The profit for

the year after tax amounted to SEK 609.6 M

(0.1).

Outlook for 2006The surrounding world continues to witness

good growth and a high level of activity, which

are the most important reasons for demand

within the hotel sector continuing to be good.

Together with relatively low additional capacity,

good prerequisites have been created for 2006.

In this positive picture, Pandox has the oppor-

tunity to continue to develop better than the

market. The Company’s acquisitions in 2005,

combined with development projects and new

agreements, mean that profit and cash flow for

comparable units will be better in 2006 than

last year.


Income statement

Group Parent CompanyseK M 2005 2004 2005 2004

Property operations

Rental revenue1) note 2,3 548.8 562.7 – –

Other property revenue1) 25.2 30.2 – –

total property revenue 574.0 592.9 – –

Property costs –103.8 –118.7 – –

Operating net 470.2 474.2 – –

Depreciation as per plan note 4 –78.2 –70.3 – –

Income from property operations 392.0 403.9 – –

Hotel operations

Operating revenue 250.2 216.8 – –

Operating costs1) –239.4 –204.4 – –

Operating income from hotel operations note 2, 16 10.8 12.4 – –

Gross income 402.8 416.3 – –

Administrative costs note 4, 15, 16 –42.5 –39.3 –42.1 –37.9

Non-recurring revenue/expense – – – –

Other revenue – – 30.8 31.7

Operating income 360.3 377.0 –11.3 –6.2

Interest income note 7 6.8 3.2 67.7 93.2

Interest expense –139.8 –146.9 –114.4 –109.0

Shareholders’ contribution – – – –

Dividend from shares in subsidiaries – – 700.0 –

Dividend via Group contributions – – – 77.6

Non-recurring financial costs note 6 – –56.1 – –56.1

Other financial income and costs –4.4 –4.7 –20.2 1.2

Extraordinary income note 5 444.4 – 5.8 –

net financial items 307.0 –204.5 638.9 6.9

Provision to tax allocation reserve – – – –0.3

Shareholders’ contribution – – –38.0 –

Income before tax 667.3 172.5 589.6 0.4

Tax note 8 –15.8 –0.2 – –0.3

Deferred tax note 8 36.8 –47.6 20.0 –

InCOMe FOr tHe Year 688.3 124.7 609.6 0.1

specification of external revenue

Revenue from property operations 574.0 592.9

Of which internal rentals –45.6 –46.9

Revenue from hotel operations 250.2 216.8

total external revenue 778.6 762.8

1) For comparability with the year’s results, figures for 2004 have been adjusted by SEK 3.7 M pertaining to rental income from operating companies.



Comments on the income statement

rental revenue Rental revenue pertains to hotel premises,

hotel furniture and equipment, and other com-

mercial premises. Rental revenue for 2005 de-

creased in relation to the previous year and

amounted to SEK 548.8 M (562.7).

Other property revenueOther property revenue is primarily comprised

of costs debited for heat, electricity and pro-

perty tax.

BreaKDOWn OF OtHer PrOPertY reVenue

seK M 2005 2004

Payment for operating costs 9.2 10.2

Invoicing of property tax 16.0 20.0

total 25.2 30.2

The difference between the years is an effect of

the sale of twelve hotel properties in the year.

Property costsOperating costsOperating costs are costs that directly pertain to

the operation of the properties, such as heat,

water, electricity, and maintenance. Costs are

reported gross, meaning that the portion of

costs debited to tenants is reported as revenue

under the heading Other Property Revenue,

and that total costs are reported among costs in

their full amount.

Maintenance costsMaintenance costs are costs incurred to main-

tain the standards of buildings and equipment.

Pandox’ leases are in most cases structured so

that the tenants - the hotel operators - be re-

sponsible for the greater part of interior mainte-

nance of the properties.

Ground rentA total of six properties owned by Pandox are

held under site leasehold rights. The conditions

and maturities in all cases are based on prevai-

ling market terms.

Property taxPandox’ Swedish hotel properties are liable to

property tax at the rate of 1 percent of the tax

assessment value. Properties located outside

Sweden are subject to varying percentages and

underlying basis.

Other costsThese costs include costs of legal counsel on

leasing matters, insurance premiums, and

costs of leasing external premises.

BreaKDOWn OF PrOPertY COsts

seK M 2005 2004

Operating costs 18.9 26.4

Maintenance costs 29.5 36.7

Ground rents 7.0 8.0

Property tax 41.1 40.0

Other costs 7.3 7.6

total 103.8 118.7

The decrease in property costs is a result of the

sale of twelve hotel properties in the year.

Operating netThe operating net for 2005 amounted to SEK

470.2 M, representing a decrease of SEK 4.0

M. Adjusted direct yield, excluding administra-

tive costs, amounted to 8.5 percent (8.6).

Hotel operationsFor accounting purposes, the hotel operations

conducted by Pandox are charged with internal

rent. The internal rent is linked to the operator’s

revenue and based on what are deemed to be

market conditions. The internal rent is debited

to hotel operations and credited to revenue in

property management. In 2005, Pandox opera-

ted the Hilton Brussels City through a manage-

ment agreement with Hilton, as well as the di-

rect operational management of the Crowne

Plaza Brussels City Centre, Mora Hotell, and

Radisson SAS Hotel Östersund. The Royal

Crown Brussels and Copenhagen Hotel 27 ac-

quisitions were not charged any internal rent in

2005.

administrative costsAdministrative costs relate to central adminis-

tration, as well as foreign hotel property admi-

nistration. All central administrative staff is

based at the Stockholm office. The remunera-

tion of staff and auditors is set out in Notes 15

and 16.

non-recurring financial costsNon-recurring financial costs pertain to the

premature redemption of interest swaps.


Balance sheet


assets

Fixed assets

Tangible fixed assets

Properties note 9 5,324.1 5,163.9 – –

Equipment note 10 153.9 99.4 0.5 0.5

5,478.0 5,263.3 0.5 0.5

Financial fixed assets

Shares and participations in subsidiaries note 11 – – 2,482.7 1,967.4

Amounts due by Group companies – – 2,548.0 2,882.6

Other long-term receivables 6.3 6.4 48.2 4.8

6.3 6.4 5,079.4 4,854.8

Deferred taxes recoverable 106.9 – – –

total fixed assets 5,591.2 5,269.7 5,079.4 4,855.3

Current assets

Inventories 1.6 0.7 – –

Accounts receivables 11.5 13.0 – –

Tax receivables – 2.4 – –

Other receivables 85.2 26.5 3.8 1.4

Prepaid costs and accrued revenue 55.7 16.0 2.2 1.5

Other shares and participations 47.8 – – –

Cash and bank 236.4 58.0 161.7 22.3

total current assets 438.1 116.6 167.6 25.2

tOtaL assets 6,029.3 5,386.3 5,247.1 4,880.5

Comments on the balance sheet

Properties and equipmentThree hotel properties were acquired and twelve

were sold in 2005. Depreciation of properties

amounted to SEK 78.2 M (70.3), and the year’s

investments to SEK 165.1 M (70.5). The book

value of equipment, including hotel furniture

and fixtures amounted to SEK 153.9 M (99.4).

Depreciation amounted to SEK 16.6 M (10.8)

and investments to SEK 40.0 M (31.2).

The greater part of the book value of furniture,

fixtures and equipment, representing SEK

153.9 M, pertains to that used by hotel opera-

tors. In certain cases, these items are included

as an unspecified portion of rent, and in other

cases as a separate rental charge. When these

items are included in rental revenues, Pandox

includes their value in the property value used

to calculate direct yield from the properties. At

the end of the year, the book value of the pro-

perties, including hotel furniture, fixtures and

equipment, amounted to SEK 5,477.5 M.

Other items consist of administration equip-

ment with a book value of SEK 0.5 M.

Other long-term receivablesPertain to a long-term promissory note and to a

pledged deposit.

InventoriesRelate to stocks of consumables in the hotel

operations.

trade accounts receivablePandox’ accounts receivable normally consists

entirely of rental receivables. Since rent is ge-

nerally paid quarterly and monthly in advance,

amounts outstanding at year-end mainly com-

prise accrued revenue-based rents.

Other receivablesShort-term receivables such as those pertain-

ing to costs that are to be debited to external

parties.

Prepaid costs and accrued revenueThis item is comprised mainly of prepaid costs

for the following year, such as insurance premi-

ums and rents.




eQuItY anD LIaBILItIes

equity

Restricted equity

Share capital 373.5 373.5 373.5 373.5

Restricted reserves 848.5 842.1 830.0 830.0

1,222.0 1,215.6 1,203.5 1,203.5

Unrestricted equity

Unrestricted reserves 397.4 582.7 64.6 286.9

Profit for the year 688.3 124.7 609.6 0.1

1,085.7 707.4 674.2 287.0

total shareholders’ equity 2,307.7 1,923.0 1,877.7 1,490.5

untaxed reserves

Tax allocation reserve 2004 – – 0.3 0.3

– – 0.3 0.3

Liabilities

Liabilities to credit institutions note 12 3,165.3 3,080.4 2,360.2 2,801.5

Trade accounts payable 66.5 47.3 19.6 26.7

Liabilities to Group companies – – 959.7 541.6

Deferred tax liability note 8 208.5 184.3 – –

Tax liabilities 0.6 0.3 0.3 0.3

Other liabilities 104.0 18.3 0.8 1.6

Accrued expenses and prepaid revenue note 13 176.7 132.7 28.5 18.0

total liabilities 3,721.6 3,463.3 3,369.6 3,389.7

tOtaL eQuItY anD LIaBILItIes 6,029.3 5,386.3 5,247.1 4,880.5

Pledged assets note 14 3,508.4 3,654.4 6.2 –

Contingent liabilities note 14 – – 685.6 91.4

Cash and bank depositsThe liquidity of the Pandox Group is primarily

managed by the Parent Company through a

central bank account structure where liquidity

is assembled in a joint interest-bearing transac-

tion account. Surplus liquidity can also be in-

vested as a fixed term bank deposit. In addi-

tion, Pandox has an unutilised bank overdraft

facility of SEK 100 M and credit facilities for a

total of SEK 656 M.

restricted reserves Parent CompanyOpening balance adjusted for non-exercised

options.

Liabilities to credit institutionsAs at 31 December 2005, Pandox’ total inte-

rest-bearing liabilities amounted to SEK

3,165.3 M, spread over ten lenders and five

currencies. Because financing is arranged

mainly through long-term credit agreements,

the majority of the debt is considered as long-

term. As regards fixed-interest rates, debt

amounting to SEK 1,171.1 M carries a fixed

interest rate for a period of less than one year.

Further details are set out in the Financial

Overview section on page 44.

Deferred tax liabilityIn 2004 the net deferred tax liabilities consisted

of a deferred tax recoverable of SEK 51.0 M

and a deferred tax liability of SEK 235.3 M. The

deferred tax items from 2005 are accounted for

on a gross basis. Further details are set out in

the Pandox’ Tax Situation section on page 52.

accrued expenses and prepaid incomeThe amount pertains essentially to accrued in-

terest expense and prepaid rent.

Pledged assetsThis item refers mainly to property mortgages

pledged to credit institutions as collateral for

loans.

Contingent liabilitiesThe Parent Company’s contingent liabilities

refer mainly to guarantees to banks with regard

to subsidiaries’ debts.


Changes in equity

restricted unrestricted Profit seK M share capital reserves reserves for the year total

Group 2004

Opening balance 373.5 838.0 531.1 176.6 1,919.2

Appropriation of profits – – 176.6 –176.6 0.0

Movement between unrestricted and restricted equity – 4.1 –4.1 – 0.0

Dividend – – –112.1 – –112.1

Translation differences including tax effect – – –8.8 – –8.8

Profit for the year – – – 124.7 124.7

373.5 842.1 582.7 124.7 1,923.0

restricted unrestricted Profit seK M share capital reserves reserves for the year total

Group 2005

Opening balance 373.5 842.1 582.7 124.7 1,923.0

Appropriation of profits – – 124.7 –124.7 0.0

Dividend – – –273.9 – –273.9

Group contribution – – –44.7 – –44.7

Translation differences including tax effect – 6.4 8.6 – 15.0

Profit for the year – – – 688.3 688.3

373.5 848.5 397.4 688.3 2,307.7

Premium restricted unrestricted Profit seK M share capital reserve reserves reserves for the year total

Parent Company 2004

Opening balance 373.5 620.0 210.0 312.8 86.2 1,602.5

Appropriation of profits – – – 86.2 –86.2 0.0

Dividend – – – –112.1 – –112.1

Profit for the year – – – – 0.1 0.1

373.5 620.0 210.0 286.9 0.1 1,490.5

Premium restricted unrestricted Profit seK M share capital reserve reserves reserves for the year total

Parent Company 2005

Opening balance 373.5 620.0 210.0 286.9 0.1 1,490.5

Appropriation of profits – – – 0.1 –0.1 0.0

Dividend – – – –273.9 – –273.9

Group contribution – – – 51.5 – 51.5

Profit for the year – – – – 609.6 609.6

373.5 620.0 210.0 64.6 609.6 1,877.7

Translation differences include a tax effect of SEK –10.9 M (–0.9) regarding currency hedging of non-Swedish operations. The number of shares as at 31 December 2005 amounted to 24.900.000 with one vote per share and a nominal value of SEK 15 per share.



Cash flow statement


Current operations

Profit/loss before financial items 360.3 377.0 –11.2 –6.2

Depreciation 78.5 70.6 0.3 0.3

Income from sale of fixed assets 444.4 – 5.8 –

Interest income 6.8 3.3 67.7 95.5

Interest expense and other financial costs1) –186.6 –212.1 –134.7 –166.2

Tax paid –15.8 –0.2 0.0 –0.3

Cash flow from current operations before change in working capital and investments 687.6 238.6 –72.1 –76.9

Change in working capital

Increase/decrease (±) in operating receivables –95.3 –29.9 –3.0 –0.5

Increase/decrease (±) in operating liabilities 99.2 33.7 923.5 –445.5

total change in working capital 3.9 3.8 920.5 –446.0

Cash flow from current operations after change in working capital and investments 691.5 242.4 848.4 –522.9

Investment operations

Investment shares and participations –65.5 – –598.7 –4.3

Investments in properties and equipment –165.1 –70.5 –0.3 –0.1

Acquisition of properties and equipment –661.2 – – –

Sale of fixed assets 609.1 – 1.9 –

total investments –282.7 –70.5 –597.1 –4.4

Cash flow after investments 408.8 171.9 251.3 –527.3

Financing operations

Change in financial fixed assets – –7.9 –168.2 –792.8

Change in interest-bearing loans 44.9 –131.4 –441.3 1,287.9

Dividend –273.9 –112.1 497.6 –112.1

Dividend via Group contributions – – – 77.6

Cash flow from financing operations –229.0 –251.4 –111.9 460.6

Change in liquid funds 179.8 –79.5 139.4 –66.7

Liquid funds at the beginning of the year 58.0 137.5 22.3 89.0

Exchange rate difference in liquid assets –1.4 – – –

Liquid funds at the end of the year 236.4 58.0 161.7 22.3

Change in liquid funds 179.8 –79.5 139.4 –66.71) 2004 year’s figures include a non-recurring cost for the premature redemption of interest swaps in the amount of SEK 57.8 M.

Adjusted for an one-off income of SEK 444.4 M the cash flow from current operations

amounts to SEK 301.4 M (298.9). Cash flow per share rose to SEK 12.10 (12.00).

Comments on the cash flow statement


Accounting principles

The annual report and accounts have been prepared in accordance with the Swedish Annual Accounts Act and generally accepted accounting principles, as well as taking into account the recommendations of the Swedish Accounting Standards Board if not stated otherwise. Pandox’ accounting and evaluation principles are in general unchanged compared with last year.

Consolidated accountsThe consolidated accounts for the Group in-

clude all subsidiaries as at financial year-end.

The Swedish Financial Accounting Standards

Council’s recommendation RR 1:00 has been

applied in the preparation of the financial state-

ments. The consolidated accounts have been

prepared in accordance with the purchase

method, whereby assets and liabilities have

been taken over at market value in accordance

with an acquisition analysis. The difference

between acquisition value and acquired share-

holders’ equity has been added to land and

buildings as surplus value. Surplus value is

amortised in accordance with the same princi-

ple used for properties. Estimated deferred tax

liability with respect to Group surplus value and

estimated deferred tax recoverable are repor-

ted net as a deferred tax liability in the balance

sheet.

Proportional consolidationThe Radisson SAS Hotel Östersund property is

owned as a participation in a tenant-owners as-

sociation where the members have a joint influ-

ence over operations.

The financial structure of the ownership

may be compared with a joint venture in which

each shareholder manages his/her own costs

and revenue. Against this background, the pro-

perty has been consolidated in accordance

with the proportional method.

taxPandox applies the Swedish Financial Accoun-

ting Standards Council’s recommendation

RR:9 regarding income tax. Briefly, the recom-

mendation implies that both deferred tax liabili-

ties and tax recoverable shall be included in the

financial statements, and that any changes

shall affect the income statement as deferred

tax. The deferred tax relating to the difference

in book depreciation and fiscal depreciation

shall be calculated using the prevailing tax rate.

Acquisitions before 2004 are based on the

deferred tax liability relating to the asset acqui-

sition and shall however be based on the ac-

quisition price and be calculated from each

respective property’s shortest estimated period

of ownership, resulting in an average tax rate

of approximately 10 percent. Since 2004, the

principle that no deferred tax liability should

be calculated at pure asset acquisitions.

The deferred tax recoverable pertaining

to estimated tax recoverable related to deficit

deductions in the Company are valued based

on the estimated potential utilisation against

future taxable profits, and are calculated based

on the prevailing tax rate.

Property operationsThe Group’s properties are reported in the ba-

lance sheet as fixed assets in view of the pur-

pose of the holdings being the long-term ow-

nership, management and development of the

properties.

Hotel operationsThe hotel operations conducted by Pandox are

charged with internal rent for accounting pur-

poses. The internal rent is linked to the opera-

ting companies’ revenue and based on what

are deemed to be market conditions. The inter-

nal rent is expensed to hotel operations, and

carried as revenue in property operations.

tangible fixed assets When new construction and additions are car-

ried out, all direct costs including project costs

are capitalised. In the case of refurbishments,

direct costs related to the improvement of pro-

perties compared with their original condition

are capitalised.

Costs of repairing a property to its original

condition are not capitalised. An exception to

this principle involves the costs of measures

taken further to neglected maintenance esta-

blished at the time of an acquisition, and where

the acquisition price is adjusted accordingly.



Costs of tenant-related modifications that imply

that the rent may be increased are capitalised

and depreciated over the remaining period of

the lease.

Depreciation according to plan is calculated

on the acquisition value at the following per-

centages: %

Buildings 1.0

Building fixtures 4–6.7

Land improvements 3.5

Equipment 6.7–33

Pandox changed the depreciation rate for buil-

dings from 1.5 percent to 1 percent with effect

from 2000.

Depreciation according to plan is calculated

on the acquisition value and a residual value of

0 kronor.

Write-down of fixed assetsThe Group’s properties are continuously valued

in accordance with an internal cash flow

model, which also fulfils the requirement to cal-

culate the utilisation value in accordance with

RR:17 whereby the recoverable value, which is

the greater of the net sales value and the utili-

sation value, is compared with the property’s

book value in order to assess the need for a

possible write-down.

LeasingPandox reports all leasing contracts as opera-

tional. Leasing contracts entered into concern

private cars and office machines. They are not

significant in size and do not therefore influ-

ence an assessment of the Group’s results and

financial position.

revenueManagement revenue pertains to rental reve-

nue as well as re-debited operating costs and

property tax. Revenue and costs related to the

operations of hotel operators are reported sepa-

rately in the consolidated income statement.

Rental revenue is spread over a period of time

in accordance with the terms of each lease.

This implies that rent paid in advance is repor-

ted as prepaid rental revenue.

shares and participationsShares and participations in subsidiaries and

subsidiaries of subsidiaries have been stated at

acquisition value with the exception of holdings

that may have been written-down to their esti-

mated actual value.

Financial instrumentsInterest swaps are used to change underlying

financial liabilities’ interest-due structure. Re-

venue and costs related to interest swaps are

reported net as interest costs, and are spread

over the duration of each contract.

International subsidiariesInternational subsidiaries are stated as per the

current rate method, which implies that the in-

come statement is restated at the average ex-

change rate of the period, and the balance

sheet at the exchange rate prevailing on the

closing day. The exchange rate difference that

arises as a result of this method is recorded di-

rectly against the Group’s equity. Any compa-

nies acquired during the year are included in

the Group at an amount relating to the period

following such acquisition.

receivables and liabilities expressed in foreign currenciesReceivables and liabilities expressed in foreign

currencies are restated at the rate of exchange

prevailing on balance sheet date. Any differen-

ces that may arise are either credited or debi-

ted to income. When loans or forward contracts

are entered into to hedge investments in inter-

national subsidiaries, any exchange rate diffe-

rences that may arise are offset in the Group by

an amount corresponding to the differences

arising from the recalculation of the net assets

of international subsidiaries.

Other receivables and liabilitiesReceivables have been stated in the amounts

expected to be received. Other assets and liabi-

lities have been stated at nominal values.


Notes to the accountsnOte 1 – seGMent rePOrtInG

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 2005 stockholm Gothenburg Öresund rest of sweden International adjustment total

Property revenue 147.7 58.8 114.5 109.0 143.9 –45.61) 528.4

Property costs –27.7 –8.4 –23.5 –19.0 –25.0 –103.7

Operating net 120.1 50.3 91.0 90.0 118.9 –45.6 424.7

Book value of properties 1.138.6 742.5 1.055.6 611.6 1.929.2 5.477.5

Investments 39.6 53.1 12.1 9.9 50.3 165.1

Operating revenue – hotel operations 66.1 184.1 250.2

Operating costs – hotel operations –59.1 –180.2 45.6 –193.7

Operating profit – hotel operations 7.0 3.9 45.6 56.4

Year 2004 stockholm Gothenburg Öresund rest of sweden International adjustment total

Property revenue 159.8 75.8 102.0 133.9 121.4 –46.9 –546.0

Property costs –35.3 –8.5 –23.5 –26.0 –25.4 –118.7

Operating net 124.5 67.3 78.5 107.9 96.0 –46.9 427.3

Book value of properties 1.366.6 698.1 870.3 966.5 1 361.3 5 262.8

Investments 17.0 1.1 7.1 6.8 38.5 70.5

Operating revenue – hotel operations 63.6 153.2 216.8

Operating costs – hotel operations –58.1 –146.3 46.9 –157.5

Operating profit – hotel operations 5.5 6.9 46.9 59.31) Pertains to adjustment of internal rental.

nOte 2 – rentaL reVenue

Revenues from hotel operations pertain to business, which is operated under a management agreement with Hilton, 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 opera-ting 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 45.6 M for the year 2005 (46.9).

nOte 3 – GeOGraPHICaL DIstrIButIOn OF rentaL reVenue

% 2005 2004

Sweden 65 71

Denmark 9 8

United Kingdom 7 7

Germany 7 6

Belgium 9 8

Switzerland 3 –

total 100 100



nOte 4 – DePreCIatIOn aCCOrDInG tO PLan Group Parent CompanyseK M 2005 2004 2005 2004

Buildings –60.7 –59.0 – –

Land improvements –0.9 –0.8 – –

Equipment –16.6 –10.5 –0.3 –0.3

total depreciation –78.2 –70.3 –0.3 –0.3

Depreciation amounts to a total of SEK 78.2 M of which SEK 77.9 M (70.3) refers to property operations and SEK 0.3 M (0.5) to administration.

nOte 5 – nOn-reCurrInG reVenue/COsts

Total Group non-recurring revenue of SEK 444.4 M of which 438.7 refers to a capital gain generated by the sale of hotel properties and 5.7 M generated by the sale of shares.

nOte 6 – nOn-reCurrInG FInanCIaL COst

The cost refers to the premature redemption of interest swaps.

nOte 7 – Interest reVenue Parent COMPanY

The interest revenue of the Parent Company is divided into SEK 65.0 M from Group companies and SEK 2.7 M from other companies.

nOte 8 – DeFerreD taX anD aCtuaL taX Group Parent CompanyseK M 2005 2004 2005 2004

Deferred tax expense for the year

Deferred tax expense relating to temporary differences 6.7 –48.5 – –

Deferred tax relating to group contribution –17.4 – 20.0 –

Deferred tax income due to acquired deductible deficits 58.5 – – –

Deferred tax expense relating to other provisions –11.0 0.9 – –

Deferred tax reported in the income statement 36.8 –47.6 20.0 –

actual tax in the income statement –15.8 –0.2 – –0.3

Difference between reported tax and nominal tax rate of 28%

Reported consolidated profit before tax 667.3 172.5 589.5 –

Tax as per applicable tax rate of 28% –186.9 –48.3 –165.1 –

Acquired tax deductibles 58.5 – – –

Tax effect due to nontaxable income 108.4 – 196.0 –

Tax effect of nondeductible costs and other tax adjustments 17.2 –14.8 –10.9 –

Tax effect due to group contributions 17.4 – – –

Tax effect relating to foreign operations 6.4 15.3 – –

reported tax expense 21.0 –47.8 20.0 –

Deferred tax recoverable

Deficit deductions 76.3 0.1 – –

Other temporary differences 24.4 44.2 – –

Other deferred tax recoverable 6.2 6.7 – –

total deferred tax recoverable 106.9 51.0 – –

Deferred tax liabilities

Differences between book value and fiscal value of properties 204.1 230.9 – –

Other deferred tax liabilities 4.4 4.4 – –

total deferred tax liabilities 208.5 235.3 – –

total deferred tax liabilities/recoverable net –101.6 –184.3 – –


nOte 9 – LanD anD BuILDInGs GroupseK M 2005 2004

Opening acquisition value 5,697.6 5,669.9

Acquisition of properties 717.5 –

Investments 125.1 39.3

Sales –658.0 –

Translation differences – balance sheet 77.4 –11.6

Closing accumulated acquisition value 5,959.6 5,697.6

Opening depreciation –533.7 –475.1

Acquired accumulated depreciation –83.9 –

Sales 49.4 –

Depreciation for the year –61.6 –59.8

Translation differences – balance sheet –5.6 1.2

Closing accumulated depreciation –635.4 –533.7

Closing residual value 5,324.1 5,163.9

Tax assessment value of Swedish properties 2,019.6 2,413.1

Of which land 750.1 852.0

The acquisition value of land, buildings and equipment includes the value of the Company’s hotel property in Östersund, which is owned through a 47.6 percent share in the Borgens housing cooperation. In accordance with the Swedish Financial Accounting Standards Council’s recommendation RR:17, the book value of each property has been reconciled with its recovery value, further to which it was noted that no write-downs were necessary.

nOte 10 – eQuIPMent Group Parent CompanyseK M 2005 2004 2005 2004

Opening acquisition value 168.3 141.3 2.3 2.2

Acquisition of equipment 60.4 – – –

Investments 40.0 31.2 0.3 0.1

Sales/disposals –10.6 –3.5 – –

Translation differences – balance sheet 4.1 –0.7 – –

Closing accumulated acquisition value 262.2 168.3 2.6 2.3

Opening depreciation –68.9 –58.7 –1.8 –1.5

Sales/disposals 10.1 0.3 – –

Acquired accumulated depreciation –32.7 – – –

Depreciation for the year –16.6 –10.8 –0.3 –0.3

Translation differences – balance sheet –0.2 0.3 – –

Closing accumulated depreciation –108.3 –68.9 –2.1 –1.8

Closing residual value 153.9 99.4 0.5 0.5



nOte 11 – sHares anD PartICIPatIOns In suBsIDIarIes number Par Percent Book seK M Corp. reg. no. registered office of shares value owned value

Parent Company

Hotab Förvaltnings AB 556475–5592 Stockholm 1.000 100 100 285.1

Pandox Förvaltning AB 556097–0815 Stockholm 550 100 100 304.7

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

Mora Hotell AB 556475–9461 Stockholm 1.000 100 100 0.1

Fastighets AB Stora Hotellet i Jönköping 556469–4064 Stockholm 1.000 100 100 30.1

Nya P.A. Hotell AB 556495–0078 Stockholm 1.000 100 100 0.2

Pandox Hotel Management AB 556469–9782 Stockholm 1.000 100 100 0.1

Malmö Favorit Hotell AB 556475–9446 Stockholm 1.000 100 100 2

Grand Hotell i Kristianstad AB 556515–9216 Stockholm 10.000 10 100 0.6

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 45.3

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

Pandox i Östersund AB 556466–1352 Stockholm 1.000 100 100 2.7

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 S.A. 446188 Brussels 3.000 – 100 291.4

Convention Hotel International AG 270.3.001.168–3 Basle 14.000 – 100 6.2

Hotellus Denmark A/S 28970927 Copenhagen 5.000 – 100 0.6

Royal Crown Plaza SA 0476.704.322 Brussels 68.808 – 100 66.1

total Pandox aB 2.482.7

seK M Corp. reg. no. registered office

the Group

Arlanda Flyghotell KB 916500–8021 Stockholm

Fastighetsbolaget Utkiken KB 916611–7755 Stockholm

Fastighets AB Hotell Kramer 556473–6402 Stockholm

Grand i Borås Fastighets AB 556030–7083 Stockholm

Hotellus Nordic AB 556554–6594 Stockholm

Hotellus Fastighet 1 AB 556554–6602 Stockholm

Hotellus Säffle AB 556367–3697 Stockholm

Hotellus Järva Krog AB 556351–7365 Stockholm

Hotellus Mölndal AB 556554–6636 Stockholm

Bioeffect AB 556244–5030 Stockholm

Vestervold KB 916631–9534 Stockholm

Förvaltningsbolaget Hotel Grand i Örebro KB 969622–8197 Stockholm

Förvaltningsbolaget Ferrum KB 969622–6688 Stockholm

Förvaltningsbolaget Hotell Bromma KB 969622–8163 Stockholm

KB Sjöstjärnan Fastighetsförvaltning 916850–4554 Gothenburg

Hotellus Belgium NV – Belgium

Grand Hotel Brussels NV – Belgium

Town Hotell SA – Belgium

Hotellus Suomi OY – Finland

Hotellus Nord OY – Finland

Euro Lifim BV – Netherlands

Bru Hotels Holding BV – Netherlands

Hotellus Europa BV – Netherlands

Bru Hotels BV – Netherlands

Hotellus Deutschland GmbH – Germany

Atlantis GmbH – Germany


nOte 12 – LIaBILItIes tO CreDIt InstItutIOns Group Parent CompanyseK M 2005 2004 2005 2004

Liabilities that fall due within one year following balance sheet date 223.2 180.7 208.5 90.3

Liabilities that fall due between one and four years following balance sheet date 2,452.6 1,197.9 2,151.7 1,087.3

Liabilities that fall due five or more years following balance sheet date 489.5 1,701.8 1,623.9

total 3,165.3 3,080.4 2,360.2 2,801.5

nOte 13 – aCCrueD eXPenses anD PrePaID reVenue Group Parent CompanyseK M 2005 2004 2005 2004

Prepaid rents 40.2 43.0 – –

Accrued interest expenses 11.9 4.4 8.5 9.4

Property tax 3.3 10.9 – –

Other 121.3 74.4 20.0 8.6

total 176.7 132.7 28.5 18.0

nOte 14 – PLeDGeD assets anD COntInGent LIaBILItIes Group Parent CompanyseK M 2005 2004 2005 2004

Pledged assets for loans from credit institutions

Property mortgages 3,454.40 3,654.10 – –

Pledged deposit 54.0 0.3 6.2 –

Contingent liabilities – – 685.6 91.4

nOte 15 – auDIt Fees anD reMuneratIOn Group Parent CompanyseK M 2005 2004 2005 2004

KPMG

Audit assignments 1.4 1.4 0.8 0.8

Other assignments 0.1 0.1 0.1 0.1

set revisionsbyrå

Audit assignments 0.1 0.1 0.1 0.1

Other

Other assignments 0.4 0.5 0.2 0.2

total 2.0 2.1 1.2 1.2



nOt 16 – PersOnneL Group Parent Company 2005 2004 2005 2004

average number of employees

Men 141.0 116.0 7.0 6.0

Women 154.0 130.0 7.0 7.0

total 295.0 246.0 14.0 13.0

Of whom employed in Sweden 90.0 80.0 14.0 13.0

Of whom employed in Belgium 203.0 166.0 – –

Of whom employed in Denmark 2.0 – – –

Wages, salaries and other remuneration, seK M

Board of Directors and CEO

Wages, salaries and other remuneration 5.2 5.2 5.2 5.2

Social security costs 1.9 1.9 1.9 1.9

Pension costs 0.8 0.8 0.8 0.8

total 7.9 7.9 7.9 7.9

Other employees

Wages, salaries and other remuneration 76.4 64.8 10.1 8.1

Social security costs 22.9 17.2 2.8 2.5

Pension costs 3.1 2.8 1.8 1.4

total 102.4 84.8 14.7 12.0

Wages, salaries and other remuneration per country, seK M

Sweden

Board of Directors and CEO 7.9 7.9 7.9 7.9

Other employees 38.6 35.2 14.7 12

Belgium

Other employees 63.8 49.6 – –

total 110.3 92.7 21.6 19.9

Personnel employed in Belgium relate to the operator activities of the Crowne Plaza Brussels City Centre, the Hilton Brussels City, and the Royal Crown. Personnel employed in Denmark refers to Copenhagen Hotel 27.

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.

No reporting of sickness absence will be done in accordance with the exemption rule contained in prevailing legislation that states that statistics shall not be given if the number of employees in the group does not exceed ten people or if the information could be identified with one particular individual. The term “group” concerns both gender and age categories.


Proposed disposition of earnings

The following profits are at the disposition of the forthcoming Annual General Meeting of Shareholders:

seKBalance brought forward 64,556,033

Profit for the year 609,555,526

674,111,559

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

Dividend to the shareholders, seK5.50 per share 136,950,000

Amount to be carried forward 537,161,559

674,111,559

The Board of Directors believes that the proposed dividend is justifiable when taking into consideration the character, scope and risks placed by

business operations on the amount of shareholders’ equity and the Company’s consolidation needs, liquidity and financial position in general.

Stockholm, 8 February 2006

Christian Ringnes

Chairman Leiv Askvig Olaf Gauslå

Bengt Kjell Björn-Åke Wilsenius Mats Wäppling

Anders Nissen

Chief Executive Officer

Our audit report pertaining to this annual report and consolidated

financial statements was submitted on 9 February 2006.

Per Gustafsson Willard Möller

Authorised Public Accountant Authorised Public Accountant



Auditors’ Report

to the annual General Meeting of shareholders of PanDOX aB, swedish corporate registration 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 chief executive officer of PANDOX AB for the year 2005. These accounts and the administra-

tion of the company are the responsibility of the board of directors and the chief executive officer. 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 re-

quire that we plan and perform the audit to obtain reasonable 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 app-

lication by the board of directors and the chief executive officer and significant estimates made by the board of directors

and the chief executive officer when preparing the annual accounts and 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 con-

cerning 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 chief executive officer. We

also examined whether any board member or the chief executive officer has, in any other way, acted in contravention of

the Swedish Companies Act, the Swedish 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 Swedish Annual Ac-

counts Act and thereby give a true and fair view of the company’s and the group’s financial position and results of opera-

tions in accordance with generally accepted accounting principles in Sweden.

We recommend to the general 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 directors’ report and that the members of the board of directors and the chief executive officer be discharged from

liability for the financial year.

Stockholm, 9 February 2006

Per Gustafsson Willard Möller Authorised Public Accountant Authorised Public Accountant

76 PANDOX – ANNuAl RePORT 2005

A newsletter about the hotel industry

pandox upgrade

When Pandox was formed in 1995, the publica-

tion of a newsletter was started in order to market

the Company vis-à-vis the capital market prior to

being listed on the stock exchange. The news-

letter later went over to presenting public reports

distributed by the Company. In spite of Pandox

no longer being listed on the Stockholm Stock

Exchange, we continue to maintain the flow of in-

formation to people interested in the hotel sector

and the hotel property market, which is why

Pandox Upgrade is still regularly issued. Three

newsletters were published in 2005 with topics

such as market trends and current Swedish and

international hotel market questions.

You are most welcome to become a subscri-

ber. Pandox Upgrade is free of charge and may

be ordered from Pandox either by telephone at

+46 (0)8-506 205 50 or via [email protected]

76 PANDOX – ANNuAl RePORT 2005 Production: Pandox/n3prenör . Photo: ulf Blomberg and others . Printed by eO Print 2006 .

Pandox AB, Box 5364, SE-102 49 Stockholm, Sweden

Tel: +46-8-506 205 50 • Fax: 46-8-506 205 70 • www.pandox.se • e-mail: [email protected]

Corporate registration number: 556030-7885

pandox anual report 2005 (eng)

Real Estate

pandox focus

hotel operations

pandox strategy

copenhagen pandox

pandox model

large hotel properties

swedish hotel properties

type of asset hotel