07 PANDOX B
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K N O W L E D G E | C R E AT I V I T Y | S P E E D | N E T W O R K
P A N D O X’ R E P O R T I N G O F B U S I N E S S O P E R A T I O N S F O R 2 0 0 7
B PANDOX 2007
KNOW
NET
VITYPandox’ active ownership with specialist
expertise within hotels, property and business
development has created a high rate of growth
in cash fl ow and value.
The value of the Company is now 13 times
higher compared to when it was formed in
1995.
Anders Nissen
CEO
PANDOX 2007 C
LEDGE
SPEEDWORK
CREATI
07
The Company
The year in brief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Message from the CEO . . . . . . . . . . . . . . . . . . . . . . . . . 4
Vision, business concept, objectives and strategies . . . . . 8
The Pandox Model . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Types of agreements . . . . . . . . . . . . . . . . . . . . . . . . . 14
Hotel operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Market overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Human resources . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
The hotel portfolio
List of properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Hotel properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Finances
Financial overview . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Sensitivity analysis . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Evaluation and tax situation . . . . . . . . . . . . . . . . . . . . 40
Defi nitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Ten-year overview . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Quarterly data 2006–2007 . . . . . . . . . . . . . . . . . . . . 44
Contents
Pandox is one of Europe’s leading hotel property companies. The portfolio is of the highest quality,
embracing 44 hotels and 10 hotel operations with 10,200 rooms. The hotels are located in dynamic hotel
markets such as London, Berlin, Montreal, Stockholm, Copenhagen and Brussels. All hotels have strong
natural locations with an average size of 230 rooms.
Read more about Pandox’ business concept and strategy on page 8.
Montreal – new market
SPEED
10
CONTENTS
16
Hotel operations
NETWORK
Financial statements 2007
Report of the Board of Directors . . . . . . . . . . . . . . . . . 46
Income statement and comments . . . . . . . . . . . . . . . . 48
Balance sheet and comments . . . . . . . . . . . . . . . . . . . 50
Changes in equity . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Cash fl ow statement and comments . . . . . . . . . . . . . . . 53
Accounting principles . . . . . . . . . . . . . . . . . . . . . . . . 54
Notes to the Accounts . . . . . . . . . . . . . . . . . . . . . . . . 56
Proposed disposition of earnings . . . . . . . . . . . . . . . . . 62
Auditor’s report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Other information
Work of the Board of Directors . . . . . . . . . . . . . . . . . . . 64
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Senior executives and auditors . . . . . . . . . . . . . . . . . . 66
Pandox Upgrade . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
2007 was yet another excellent year for Pandox with higher revenues and
improved profi tability – and thereby growth in value for the Company’s
shareholders. We have carried out acquisitions for more than SEK 1 billion
during the year and invested a further SEK 275 million in the existing port-
folio. Read more in the Message from the CEO on page 4.
PANDOX B
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Brussels/Antwerp – strong positions
CREATIVITY
22
Human resources
KNOWLEDGE
2 PANDOX 2007
A new record year2007 was a new record year for the hotel industry with
strong demand, improved RevPAR and increased profi t -
ability. Activity within the transaction market continued to
be high and in line with 2006.
Property management revenues and total revenuesPandox’ property revenues amounted to SEK 782.2 M
(634.9), representing real growth of 23.2 percent. For com-
parable units, the increase was 10.2 percent. Operations
grew by 88 percent from SEK 420 to 789 M and actively
contributed to a rise in rental revenues. The Group’s total
revenues amounted to SEK 1,410.7 M (967.5).
The year in brief
Profi tThe pre-tax profi t for 2007, excluding non-recurring items,
amounted to SEK 259.4 M (226.1). Profi t after tax, includ-
ing non-recurring items, was SEK 230.0 M (201.6).
Key fi gures 2007 2006
Management revenues, SEK M 782.2 634.9
Operating net, SEK M 655.9 523.4
Profi t from operations, SEK M 20.6 12.3
Pre-tax profi t1), SEK M 259.4 226.1
Profi t after tax2), SEK M 230.0 201.6
Cash fl ow1), SEK M 389.0 317.6
1) Excluding non-recurring items.2) Including non-recurring items.
Accounting principles
Pandox does not apply IFRS in its accounts and fi nancial state-
ments because as an unlisted company it is not covered by
such requirement. Pandox applies the Swedish Annual Reports
Act and generally accepted accounting principles, as well as
the recommendations of the Swedish Accounting Standards
Board unless otherwise stated.
Cash fl owCash fl ow from current operations, excluding non-recurring
items, amounted to SEK 389.0 M (317.6), representing
growth of 22 percent.
Expansion to North AmericaPandox made its fi rst investment outside Europe in the summer of 2007 through
the acquisition of the well-known InterContinental in Montreal. The acquisition
creates a good foundation for selective expansion in Canada and North America
in general.
Shopping tourism on the agendaFor the tenth consecutive year, Pandox held a
well-attended Hotel Market Day on 20 November
2007. In addition to a review of sector trends and
market developments, the day’s main theme was
the growth in shopping tourism. Experts from
business and commerce, architecture and the
fashion world contributed to illustrating the theme
from different perspectives.
PANDOX 2007 3
• Pandox is one of Europe’s leading hotel property
companies. The Company has specialist know-
ledge and skills within the hotel market, hotel ope-
rations, hotel property management and business
development. Active ownership, with well-develo-
ped and strategic plans for each hotel, enables the
creation of good prerequisites for stable and im-
proved cash fl ows, and thereby growth in value for
the Company’s shareholders.
• Pandox’ strategy is to own one type of asset – hotel
properties. Its focus is strengthened by a prioriti-
sed market segment. Pandox is to own large hotel
properties in Sweden, major locations in Europe,
as well as developing regions in Eastern Europe
and North America.
• The hotel properties 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
business travellers and tourists.
• The hotels owned by Pandox are operated and
marketed by the most powerful players in the hotel
sector, who with well-known brands and dynamic
independent distribution channels create strong
market positions and thereby stable revenues.
• Revenues are created by fl exible lease agreements
related to the operators’ turnover and results or
through management agreements where Pandox
assigns a third party to manage operations, or al-
ternatively through its own management. Irrespec-
tive of the form of operation, Pandox contributes
via its active ownership to increase total cash fl ow
and reducing risks.
• At the end of the year, the Company’s portfolio con-
tained 44 hotel properties and 10 hotel operations
located in Sweden, Denmark, Belgium, Germany,
Switzerland, the United Kingdom, Canada and the
Bahamas.
About Pandox Pure business concept with focused strategy
Record levels during strong hotel year2007 was a very strong year in the hotel in-
dustry. Growth continued in both New York
and London. Sweden achieved historically
high levels both in prices and occupancy.
Two Swedish acquisitionsPandox acquired two
hotels in Södertälje in
2007 – Best Western
Hotell Skogshöjd and
Quality Hotel Park. Both
hotels have good deve-
lopment potential and
are in need of active
measures.
Strengthened position in Brussels/AntwerpPandox completed a major transaction in Belgium during the year and acquired Holiday
Inn Brussels Airport and the Crowne Plaza Antwerp. Pandox is now one of the largest
players in this market with a total of seven hotels and 1,819 rooms.
4 PANDOX 2007
MESSAGE FROM THE CEO
Have we passed
the peak?
2007 was a new record year for the hotel indus-
try with greater demand, improved RevPAR and
thereby profi tability in the major part of the
largest markets in Europe, Asia and the United
States. The driving force has primarily been ris-
ing average rates achieved in a world with extra-
ordinary market prerequisites. The critical
question now is – have we passed the peak?
If one studies the pattern of the hotel economic
cycle, one can see that New York, which is fi rst in
the cycle, has had growth in RevPAR for close to
fi ve years. Growth in the most recent 30 months has
been primarily composed of price rises. The reve-
nue structure has increased effectiveness and cre-
ated high profi tability in operations – and thereby
value-growth in the hotel properties. The trend at
the end of 2007 was for revenues per available
room to continue to increase.
When analysing London, which normally lies six
months after New York in the hotel economic cycle,
a similar historic pattern can be seen with good
growth since the decline at the beginning of the
new millennium. However, the trend in London is
currently a fall in the rate of growth. Similar pat-
terns can be observed in Paris, Brussels and
Amsterdam – while the two giants, New York and
London, are moving in the opposite direction. One
of the explanations could be that New York has
taken out about 10 percent of its hotel capacity
through hotels being converted into apartments
while Europe has gained capacity.
If one performs another analysis and studies the
hotel market from a macro-perspective, there is
reason to believe that market conditions will deterio-
rate. The global fi nancial instability that started last
year has now spread beyond the United States.
Bank systems have introduced restrictions,
increased requirements for fi nancing, and capital
has subsequently become more expensive. Private
consumption, which is an important driving force, is
expected to weaken.
Other factors that create uncertainty are that
productivity improvements in Euroland have in ge-
neral been low, which should cause alarm for the
central banks. This could imply that the interest
weapon may not be used as effectively to stimulate
growth which was done so successfully in the eco-
nomic downturn experienced at the beginning of
the new millennium. All in all, most sectors are talk-
ing about lower activity levels as 2008 gets started
compared with last year, and is sending out nega-
tive signals that create even more uncertainty. We
risk seeing interaction between several negative
trends simultaneously. Should this happen, there is
risk of a recession.
There is therefore reason to believe that we have
passed the peak. The question is rather how deep
and how long the downturn will be.
Playing fi eld is changing
In view of the above, we will see new business
patterns in the hotel industry, which will create new
prerequisites for hotel companies and investors.
The agreements structure will develop towards
greater risk-sharing between operators and owners.
More lease agreements will be entered into, and
guarantee components will return to the manage-
ment agreements. Liquidity in assets is expected to
remain at a good level, but interest from fi nancial
players and funds will decline from a high level. On
the other hand, interest from industrial players
could increase. Consequently, when the risk
increases, demand for industrial competence and
long-term strategy will increase.
Brands and their value-creation will be evalu-
ated more closely and there is reason to return to
some of the brand strategies that have been created
in recent years. Operational questions will be given
higher priority, and day-to-day management will
again become the most important issue for value-
creation in the hotel industry.
The above will lead to higher yields on both hotel
properties and hotel operations.
In this dynamic situation, Pandox has good pre-
requisites to continue to develop. 2007 was an
excellent year with increased revenues and
improved profi tability. Cash fl ow rose by 22 percent
in real terms and by 14 percent for comparable
units. During the year, we have made acquisitions
PANDOX 2007 5
for SEK 1,063 million, and invested in the existing
portfolio with a further SEK 275 million. The acqui-
sitions have increased the quality and potential for
the Company. The investments have mainly been
cash-fl ow creative such as upgrades, product
development and measures to raise effectiveness of
hotel operations, which in turn create good condi-
tions for stable profi tability developments.
Increased tempo and higher quality
At the end of the year, Pandox’ portfolio contained
44 hotel properties with more than 10,200 rooms as
well as ten hotel operations. The activity level has
increased signifi cantly since the Company returned
to private ownership in 2004. The combination of
committed and industrial owners together with that
it is easier to operate outside the stock exchange,
has improved the expansion prerequisites. Trans-
actions for a total of SEK 4,200 million have been
completed, of which acquisitions represented
SEK 3,100 million. The quality of the portfolio with
regard to revenues, locations, size and standard
has improved. Revenues currently come from eight
countries and are a mixture of international and
domestic markets. Sweden continues to be largest
with 58 percent of revenues, although the major
part of business development is now taking place
internationally. The agreement structure consists
mainly of leases (approximately 70 percent) and
hotels operated either by ourselves or via manage-
ment agreements (approximately 20 percent.) The
portfolio has a multi-brand character and is mar-
keted under a total of eleven brands and a number
of independent distribution channels. The products
belong to the profi table full-service segment. All
have strong locations and good size, which implies
that the operations have suffi cient critical mass to
create the right profi tability conditions. All in all, the
quality of the portfolio is considered to be of the
highest standard and one of the best in Europe.
Five acquisitions were made in 2007 for a total
of SEK 1,063 million. The hotels are located in
Brussels, Antwerp, Montreal, and two in Södertälje.
All of them were in need of active measures at the
time of acquisition and are thereby typical Pandox
purchases. With the addition of Holiday Inn Brus-
sels Airport and Crowne Plaza Antwerp, Pandox
now owns a total of seven hotels with 1,819 rooms
in the region. This implies that the Company is one
of the largest players in one of Europe’s most
dynamic hotel markets. Quality Hotel Park and Best
Western Hotell Skogshöjd, with a combined total of
374 rooms, were taken over in March and
increased Pandox’ presence in the Greater Stock-
holm region. Both hotels are located in central
Södertälje. The town is known for hosting the head
offi ces of Scania and AstraZeneca and being the
birthplace of the tennis legend Björn Borg. The
InterContinental Montreal was acquired in the sum-
mer and is the Company’s fi rst investment in North
America. The hotel has 357 rooms, has well-devel-
oped meeting facilities, as well as a broad food and
beverage concept. The location is strong, adjacent
to the city’s congress hall, Palais de Congrès. The
InterContinental Montreal is a well-known meeting
place and constitutes a good foundation for selec-
tive expansion in North America.
Success in operator activities
Pandox’ current portfolio consists of ten hotels op-
erated by the Company directly or via management
agreements. In total, the hotels contain 3,133
rooms and are located in Sweden, Germany,
Belgium, Canada and the Bahamas. To operate
hotels is a natural part of Pandox’ active ownership.
As a rule, operations are taken-over in conjunction
with the acquisition of an under-performance hotel
or when an operator in an existing hotel does not
achieve the profi tability requirements deemed nor-
mal in the specifi c market. The strategy of having
our own operating expertise has always been an im-
portant part of Pandox, and provides added-value
in several aspects. Flexibility increases when choos-
ing the most profi table strategy at each specifi c situ-
ation, simultaneously expansion prerequisites are
improved. Furthermore, the Company obtains a
current and correct picture of the existing profi tabil-
ity conditions in conjunction with lease negotiations.
In general, the development of operations has
been very good during the year. The Crowne Plaza
Pandox Hotel Market Day
For the tenth consecutive year, Pandox ar-
ranged a sector and market conference, known
in recent years as the Hotel Market Day. It all
started with a capital market day for investors
when the Company was listed on the stock ex-
change. The event has developed over the
years and is now seen as the hotel industry day
in Sweden.
This year’s conference was held on 20
November in Stockholm. Around 200 partici-
pants listened, posed questions and took part
in discussions. The day was opened as usual
with a review of sector trends and market devel-
opments. The main theme was then shopping
tourism. Several experts had been invited,
including the CEO of the Swedish Retail Insti-
tute, Fredrik Bergström, the architect Thomas
Sandell, as well as the fashion reporter and tv
host Sofi Fahrman. In addition, Alain L Thiry,
6 PANDOX 2007
MESSAGE FROM THE CEO
President of EMSi Marketing, was invited from the
United States to talk about the world’s largest shop-
ping destination – Mall of America.
Shopping tourism
Shopping tourism is a strongly growing part of overall
tourism. In ten years, the retail proportion of the total
tourist industry has increased from 20 to 28 percent.
In 2006, the tourist industry in Sweden generated
sales of SEK 215 billion, of which around 60 billion
are estimated to have benefi ted retail trade.
Brussels City Centre, which was acquired in 2003,
has undergone a large development program of EUR
14 million and is now showing, after the fi rst full op-
erational year further to the refurbishment, a magnifi -
cent improvement in results and quality. The hotel’s
CEO, Eric van Dalsum, and his team have signifi -
cantly increased revenues and profi tability and
thereby the value of the property. The hotel has ob-
tained several awards, including Guest Satisfaction
Award, Hotel Renovation Award and Quality Excel-
lence Award.
Hotel Berlin, Berlin with 701 rooms and acquired
in 2006 is currently undergoing a considerable repo-
sitioning program, and results are showing a positive
trend. Another spectacular refurbishment is the
develop ment of Hotel BLOOM! in Brussels. The hotel
is undergoing a complete renewal with a new fl ower
concept, and is expected to be totally open in the
spring of 2008. It is already the “talk of the town”
with considerable media coverage. Two hotel opera-
tions, Radisson SAS Hotel, Östersund and Copenha-
gen Hotel Twentyseven have been leased out during
the year. The latter has been developed from being
an empty property to one of Copenhagen’s leading
lifestyle hotels. Both will be operated by Choice
Hotels Scandinavia under the Clarion brand.
Outlook for 2008
The outlook for 2008 is more uncertain compared
with one year ago. Pandox’ principal scenario is that
the market makes a soft landing with regard to de-
mand with a continued good hotel market in most of
the areas where the Company is committed. RevPAR
trends will be driven by a combination of volume and
price, with greater focus on maintaining occupancy
comparable with 2007. The number of transactions
will fall and the bid processes will change towards a
large proportion of off-market deals. Yields are ex-
pected to increase as a result of more expensive
capital and greater insecurity. The latter could benefi t
Pandox, as we can act from a more long-term aspect
than certain fi nancial players. Overall, Pandox’ reve-
nues and profi ts for 2008 are expected to exceed last
year, due in part to the completion of several devel-
opment projects in the fi rst part of the year.
Stockholm, February 2008
Anders Nissen
Chief Executive Offi cer
PANDOX 2007 7
SPEED & CREATIVITY
The Pandox portfolio conti-
nues with a high activity level.
Ongoing projects in 2007:
Hotel BLOOM!, Brussels, 306 rooms, will be
completed in the spring of 2008. The hotel
has been developed from an old-fashioned
business hotel to a lifestyle hotel, and has
already become the “talk of the town”. Invest-
ment of about SEK 100 million.
InterContinental Hotel, Montreal, 357
rooms, will be given a new design and new
food and beverage concept, thus strengthen-
ing the hotel’s position and obtaining a Euro-
pean boutique atmosphere. Investment of
about SEK 70 million.
Hotel Berlin, Berlin, 701 rooms, will con-
tinue its repositioning with upgrading of meet-
ing rooms, fi tness centre, crew lounge, as
well as an attractive facade and entrance.
Investment of about SEK 75 million.
Holiday Inn Brussels Airport, Brussels, 310
rooms, will be upgraded with new rooms and
the development of new lobby areas and res-
taurant. Investment of about SEK 50 million.
Radisson SAS Hotel, Malmö, 229 rooms, will
soon start a development program covering
facade, entrance, lobby and the improvement
of rooms and conference facilities. Invest-
ment of about SEK 80 million.
Elite Park Avenue Hotel, Gothenburg, 291
rooms, is being developed with 31 new
rooms, spa and fi tness centre. Investment of
about SEK 30 million.
Elite Stora Hotellet, Jönköping, 135 rooms,
will have a new restaurant and upgrading of
rooms and lobby. Investment of about SEK 10
million.
Quality Hotel Park, Södertälje, 149 rooms,
will start an investment of a new food and
beverage concept, design, lobby, more park-
ing lots, as well as the improvement of rooms
and corridors. Investment of about SEK 25
million.
Quality Hotel, Nacka, 162 rooms, will be
developed with more rooms, upgrading of
meeting facilities, as well as the modernisa-
tion of the food and beverage concept. Invest-
ment of about SEK 15–20 million.
Range of products is important
Irrespective of whether shopping is the main
objective of the journey or not, the range of bou-
tiques and the commercial prerequisites are a
part of the experience. It is therefore important
that a city is able to offer an excellent range of
shopping in order to gain a good reputation as
a destination.
The opportunity for the hotels in this trend is
to make the shopper a satisfi ed guest who would
like to return to the destination and the hotel
again. The arrangement of happenings of vari-
ous kinds, such as “after shopping”, and coop-
eration with prominent and trendy brands are
successful and attractive concepts. Hotels must
also have good knowledge of the city’s range of
shopping. It is not just a question of sending
people to the central shopping streets, but also
to be able to provide advice about unusual or
exclusive areas and boutiques.
The hotel industry was well represented at Pandox Hotel
Market Day. Representatives from the different hotel
companies were there as well as international hotel
consultants and industry related organisations.
The fashion editor Sofi Fahrman and the CEO of the
Swedish Retail Institute, Fredrik Bergström, were some
of the interesting speakers.
8 PANDOX 2007
VISION, BUSINESS CONCEPT,
OBJECTIVES AND STRATEGIES
Pandox’ principal task from a shareholder’s perspec-
tive is to create conditions that enable an increase in
the value of the Company through the development
of cash fl ow in the hotel property portfolio, com-
bined with profi table acquisitions and divestments.
The Company’s vision, business concept, objectives
and strategies have been formulated with this phi-
losophy acting as the principal point of departure.
Vision
Pandox’ vision is to be the leading hotel property
company in Europe with regard to specialist exper-
tise in both hotel and property operations and active
ownership.
Business concept
Pandox’ business concept is to actively own, develop
and lease hotel properties based on expertise within
hotel properties, hotel operations and business de-
velopment.
Each hotel property has its own specifi c charac-
teristics. The value is more dependent on the opera-
tion’s (the tenant’s) profi tability than for example
offi ce or industrial premises. Furthermore, a hotel
property in general has one single tenant – the hotel
operator. Cash fl ow is generated in the hotel property.
This in turn increases demand on competence and
insight of the underlying market of the tenant, which
places considerable demand on specialist skills
within three areas: hotel and hotel operations, hotel
properties and business development. When the
business concept is broken down into its various
components, the Company can choose between the
following operational forms:
• Lease agreement with a partner that handles both
operations and distribution where Pandox’ role is
to contribute to the production of a strategic plan
and continuously evaluate operations via man-
agement group meetings.
• Lease agreement with a partner that only acts as
operator, and that is supplemented by a franchise
agreement with a distributor. Pandox’ role is as
above, but can imply that the Company is more
active in pure operating issues.
• Management agreement with a partner that runs
the operations on behalf of Pandox. The role of
Pandox is to monitor and evaluate operations via
board meetings and to actively participate in de-
velopment issues together with the management
company.
• Pandox manages the hotel operations itself.
Pandox’ role here is to organise the operations
via a local management team and to actively
participate in the development of the hotel.
The fi rst and last alternatives dominate, although all
forms of cooperation are included in Pandox’ busi-
ness concept. The trend is that own operations are
currently increasing most, which is partly attributable
to that the majority of international hotel companies
are no longer entering into lease agreements.
Overall objective
The principal objective is to achieve an optimal re-
turn on investment and growth in value through spe-
cifi c knowledge of hotels, hotel properties, and busi-
ness development.
Financial goal
The goal for the capital structure is that the Group
shall have an equity/assets ratio that fulfi ls internal
and external objectives with regard to fi nancial
strength in order to enable continued expansion.
This goal shall be regularly reviewed in order to
achieve an optimal return on investment for the
shareholders.
Strategies
The following strategies have been defi ned to enable
Pandox to achieve its established goals and objec-
tives.
Pandox’ principal strategy is to own one type of
property – hotel properties.
Portfolio strategy
In order to maximise revenues and cash fl ow,
Pandox concentrates on one prioritised, expansive
market segment.
Pandox’ market segment comprises hotel proper-
ties in Sweden, major cities in Europe, as well as
developing regions in Eastern Europe and North
America. The hotel properties shall be centrally situ-
ated 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
believes that hotels included in these market seg-
ments have the best chances of success in a growing
hotel economic 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
Leading and profi table Clarion Collection Hotel Twentyseven
PANDOX 2007 9
Clarion Collection Hotel Twentyseven – “the coolest place in Copenhagen”
Clarion Collection Hotel Twentyseven is
located in central Copenhagen, about 200
metres from Rådhusplatsen (Town Hall
Square) and within walking distance to
Tivoli, Ströget and the stock exchange. It is
a lifestyle hotel with 200 rooms, wine bar,
cocktail bar, Absolut Icebar and restaurant.
Pandox acquired the hotel property
– including the right to run the operations –
in the autumn of 2005. The hotel was closed
when purchased and was in considerable
need of refurbishment. The change process
was initiated immediately.
Focus on lifestyle
The hotel has been operated by Pandox
simultaneously as a total refurbishment
program has been carried out to develop
it to one of the leading lifestyle hotels in
Copenhagen. The refurbishment em-
braced all hotel rooms, the lobby, and the
adjacent restaurant and lounge bar. The
entire development program has cost more
than DKK 70 million.
The new concept also includes an Abso-
lut Icebar, which was ready for the inaugura-
tion in April 2007. The bar strengthens the
hotel’s design and lifestyle profi le. Through
this investment, Pandox has achieved its
goal and created one of Copenhagen’s lead-
ing medium priced hotels – “the coolest
place in town” – via a combination of size,
strategic location and attractive design.
When the development program was
complete, Pandox entered into a revenue-
based lease agreement with Choice Hotels
Scandinavia. Choice Hotels now operates
and markets the hotel under the name of
Clarion Collection Hotel Twentyseven.
CREATIVITY
growth potential, because they attract more capital
and people. Strong and strategic locations are
always important in the hotel industry, and the size
of the hotel provides profi tability benefi ts – which in
turn increases Pandox’ potential for improved
return on investment.
Strategy for active ownership
Pandox further develops its focus and expertise in
the chosen market segment through active owner-
ship. Active ownership is adapted to each situation
with regard to both procedures and partnership
strategy, with the aim to add value through higher
cash fl ow or through limiting the risk involved.
Examples of active ownership are set out below.
Acquisitions
Pandox has built up its own expertise in the fi eld of
acquisitions and acquisition methods. This implies
that Pandox analyses, evaluates, negotiates and ex-
ecutes all acquisitions inhouse, and enables a deep
insight into acquisitions and their real potential and
risks, while increasing knowledge of the market.
Choice of partners
Pandox works together with all competitive market
players where joint forms of cooperation can be de-
veloped and applied for the optimisation of total
cash fl ow.
Strategic alliances
Pandox can deepen the cooperation with its priori-
tised partners in order to jointly make acquisitions
and undertake restructuring programs or major in-
vestments.
Agreement structure
Pandox enters into all forms of leases and manage-
ment agreements to create joint incentives and
benefi t the development of total cash fl ow.
Own operations
Pandox has its own expertise for operating hotels.
Experience has shown that there are situations
when this is the most profi table and most effective
way of improving cash fl ow.
Participation in the restructuring process
Pandox plays an active role in the ongoing restruc-
turing of the hotel property market. This implies that
Pandox participates through acquisitions, divest-
ments and choice of partner.
Cash fl ow strategy
Pandox 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 implementation of cash fl ow
strategies together with its partners.
Divestments
Pandox cultivates its portfolio in accordance with its
portfolio strategy. The majority of divestments are
managed directly by the Company.
10 PANDOX 2007
In the summer Pandox acquired the well-
known InterContinental Montreal for CAD 49
million, equivalent to about SEK 330 million.
It is the Company’s fi rst investment outside
Europe. The acquisition creates a good foun-
dation for selective expansion in Canada and
North America in general.
The InterContinental Montreal is a full-service hotel
with restaurants, bar, fi tness centre and a large con-
ference and meeting department. The hotel has
357 rooms and the property is composed of 26
fl oors located in Old Montreal close to the fi nancial
district. It is part of the World Trade Centre and has
direct access to Montreal’s Convention Centre –
Palais des Congrès.
Considerable modernisation
Pandox and InterContinental Hotels Group have en-
tered into a management agreement and will closely
cooperate in developing, modernising and opera-
ting the hotel. It needs to be upgraded, and through
an investment program of more than CAD 11 million
– equivalent to SEK 70 million – all hotel rooms will
be refurbished and modernised, a new restaurant
product developed, and the meeting and lobby
areas upgraded.
Montreal is Canada’s second-largest city with
3.6 million inhabitants, representing about 11 per-
cent of the population of Canada. It has a diversi-
fi ed and competitive economy and several interna-
tional and multinational companies have their head
Montreal – new market
SPEED
Expansion to North America
offi ces located in the city. Montreal is also Canada’s
centre for space technology, the pharmaceuticals
industry, IT and biotechnology. The city’s GDP
growth was weak in 2005 and 2006. However,
stronger trends within the industrial and service
sectors are anticipated to provide GDP growth of
between 2.6 percent and 3.0 percent up to 2010.
Major tourist destination
Montreal is one of North America’s largest tourist
destinations. In 2006, the city had 7.6 million visi-
tors, of whom 73 percent were Canadians. The con-
siderable attractivness of the destination creates
strong demand for hotel rooms. The hotel market is
well-developed and most international operators are
10 PANDOX 2007
PANDOX 2007 11
07
represented in the city. Montreal’s hotel market also
benefi ts from the demand being diversifi ed. The ex-
cellent corporate climate generates good demand
from business travellers simultaneously as the city’s
attraction as tourist destination creates demand
from leisure travellers.
From a perspective of international events held
each year in Montreal, it is one of Canada’s – even
North America’s – largest conference and congress
cities. The Palais de Congrès is the largest confe-
rence centre, offering 18,500 m2 of exhibition area,
12,200 m2 meeting area, and can arrange confer-
ences for more than 20,000 delegates.
PANDOX 2007 11
12 PANDOX 2007
THE PANDOX MODEL
Hotel properties have characteristics that are dis-
tinctly different to other types of property, and de-
mand specialist skills and knowledge. Value
growth is complex and is based on revenues and
profi ts being infl uenced by several factors such as
the underlying hotel market, choice of brand
name, price and product segment, type of agree-
ment, and active ownership. Successful results
demand that the hotels be continuously reviewed
and analysed with the help of well-developed
working methodology that provides support to the
decision-making process.
In order to maintain and benefi t from the know-
ledge and experience that the organisation con-
stantly develops, Pandox has produced and deve-
loped business procedures and operating systems.
These are used on a daily basis and the results are
documented. Clear and user-friendly processes im-
prove the quality of analyses and decision-making,
and facilitate the transmission of knowledge while
reducing the risk of losing important experience
and skills when key people leave.
Pandox’ principal procedures consist of the
Pandox Model, Market Survey and Financial
Reporting.
The Pandox Model
Pandox’ working methodology to generate in-
creased cash fl ow with limited risk is known as the
Pandox Model, and is the Company’s most impor-
tant principal operating procedure. The model in-
cludes four different stages, before implementation
and follow-up. Each hotel property is regularly eval-
uated based on the four stages of the Pandox
Model. Similarly, each acquisition and divestment
is preceded by such an evaluation. The four stages
are market analysis, market strategy, profi tability
optimisation, and agreement optimisation (see dia-
gram on the opposite page).
The operating tools described in the following
market survey section are used within the Pandox
Model.
Market survey
The point of departure for a market survey is to as-
sess the market situation and trends within a spe-
cifi c market, based on current and correct market
information. To support this principal procedure,
Pandox employs a market information system, ex-
ternal marketing systems and databases, research
and analyses, as well as the Company’s networks
and media monitoring. Taken together, market sur-
veys provide up-to-date and reliable knowledge of
prevailing market conditions.
Market information system
• Pandox has an IT system that contains informa-
tion about the hotel market in terms of occu-
pancy, average room rates, growth trends, com-
parative past performance fi gures, as well as a
target group analysis. The system covers the
major part of Pandox’ market. The assembled
information is structured by location, geographi-
cal area, as well as price and product segments,
and is updated each month.
• Pandox also has access to external databases
that contain basic information about all hotels in
Pandox’ markets. The Company furthermore
has an agreement with various consultancy
fi rms that constantly monitor and analyse Euro-
pean and American hotel markets in particular.
Networks
Pandox works via external consultants and con-
tacts, either where the competence needs to be
strengthened or to gain access to expertise that is
not available within the Company. This network is
assembled in a database, divided into markets and
functions.
Media monitoring
Articles about hotels published in Sweden and
abroad are registered daily.
Hotel product analysis
The hotel product analysis is a tool used as support
to establish a hotel’s position and standard com-
pared with competitors.
Manuals for lease and management agreements
Our manuals for lease and management agree-
ments form the basis for the various types of hotel
agreements that Pandox uses. They contain clear
allocation of responsibility and checklists to support
ongoing operations. The manuals are also an excel-
lent tool for assessing risk exposure in connection
with acquisitions.
Hotel valuation and investment
This system developed by Pandox assesses the
profi tability of a hotel business, and can conse-
Improved cash fl ow with limited risk
PANDOX 2007 13
Market analysis
A market analysis is performed in or-
der to assess the potential profi tability
of a hotel, and thereby its ability to pay
rent. The local market is identifi ed and
analysed regarding demand, competi-
tion and the current and future offer.
Market strategy
A strategic plan is established for each
hotel property based on the respective
location’s specifi c prerequisites, the
local market and its position in the
hotel economic cycle. When preparing
the strategic plan, the property’s con-
tinued utilisation scope is evaluated
objectively and impartially.
Profi tability optimisation
In view of that a property’s value is
infl uenced by the hotel operations’
profi tability, the operator is naturally
Pandox’ most important partner. In
order to ensure positive developments
within the hotel operations and the
value of the property, the operator
and related activities are continuously
evaluated.
Agreement optimisation
The optimal cash fl ow in each re-
spective hotel property is then divided
among the operator, Pandox and other
parties concerned. Lease agreements
are formulated so that all parties invol-
ved have an incentive to continuously
improve the hotel property’s overall
profi tability.
Possibility to
acquire hotel
property
Action plan
with concrete
measures
Evaluation of
each hotel property
and the hotel
property portfolio
Market analysis Market strategy Profi tability
optimisation
Agreement
optimisation
Divestment in
accordance with the strategy
The Pandox Model
Elite Park Avenue Hotel, Gothenburg
quently establish the value of a hotel property.
The system is used for acquisitions and major
investments.
Financial reporting
Pandox’ focus on increased cash fl ow and the opti-
misation of return on investment in its hotel proper-
ties requires a detailed evaluation of proposed and
implemented measures. Pandox has therefore de-
veloped a system to enable the fi nancial reporting
and follow-up of target variables.
Financial reporting is based on the annual bud-
get prepared for each hotel property, which is fol-
lowed-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 bud-
get process in conjunction with the strategic plans
prepared according to the Pandox Model. The
ongoing revenue reporting follows changes
observed within the hotel market, and provides
good underlying data for the quarterly forecasts
prepared per hotel property and for the Group.
All in all, this fi nancial system provides current
information and data that enable the continuous
assessment of the portfolio’s potential and risks,
and consequently the active measures that should
be prioritised.
14 PANDOX 2007
Types of agreement – incentive for both parties
AGREEMENT DUE-DATE STRUCTURE
SEK ’000
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
2012–2011201020092008
RENTAL REVENUES 2007
BROKEN DOWN BY TYPE OF AGREEMENT
Revenue-based leases, 44%
Revenue-based leaseswith guarantee, 30%
Management agreementsown operations, 21%
Fixed leases, other tenants, 4%
Fixed leases, 1%
THE PANDOX MODEL
Specifi c characteristics
Each hotel lease is the result of a comprehensive
market analysis that includes changes in the mar-
ket and competition from different players both in
the short and long-term.
By using various techniques, 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.
Pandox’ agreement structure
Pandox’ agreement structure refl ects its active and
situation adapted ownership. The lease structure is
governed by factors such as anticipated market
trends, local competition, planned investments, as
well as choice of operators and distributors. By
combining various types of agreement, Pandox has
achieved a agreement structure that provides
Pandox with increased cash fl ow in a rising market
while simultaneously offering protection against
downturns in the market through fi xed-fee leases
and rental guarantees.
Types of agreement
Revenue based
Revenue based hotel leases are linked to sales ge-
nerated 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 based
A result based hotel lease implies that the hotel
property owner receives a share of the hotel opera-
tor’s operating net. This type of lease requires that
the hotel property owner understands the opera-
tor’s fi nancial control system. Result based hotel
leases can also specify minimum guaranteed rental
revenue (guarantee/base rent).
Fixed fee hotel lease
Fixed fee hotel leases with an index linked to the
development of the Consumer Price Index (CPI)
are used in mature markets and in well-established
hotel products. A fi xed fee lease limits the risk but
also the potential.
Management agreement
A management agreement can be perceived as a
sort of agent contract. The main characteristic is
that the hotel property owner also owns the hotel
business.
Through a management agreement, an opera-
tor/manager is assigned to operate and manage the
hotel on behalf of the hotel property’s owner –
“manage the manager” – for which a management
fee is paid to the operator/manager.
The value of a hotel property is governed to a considerable degree by the formulation of the hotel agree-
ment. To produce a good agreement that is dynamic for both parties is a complicated process. In addi-
tion to legal expertise, substantial knowledge of conditions within the hotel industry is required, as well
as insight into the priorities of each respective party.
Clarion Hotel Grand, Östersund
PANDOX 2007 15
KNOWLEDGE & NETWORK
During the year, Pandox acquired two
hotels in Södertälje – Best Western Hotell
Skogshöjd and Quality Hotel Park. The
acquisition included both hotel properties
and operations, and entered into force on
1 March 2007 for both hotels.
Södertälje is located about 40 km south of
Stockholm. The town has a well developed
business community with companies such as
AstraZeneca, Scania and Swedish Volkswa-
gen. Södertälje’s hotel market is infl uenced
signifi cantly by these large companies, as
well as by the dynamics of southern Greater
Stockholm including the proximity to Stock-
holm International Fairs.
Maintaining local profi le
Best Western Hotell Skogshöjd is a traditional
hotel in central Södertälje. It has 225 bed-
rooms, well-developed conference and mee-
ting activities with a total of 11 different
rooms, several restaurants, and the newly
built Skogs höjd Spa. Quality Hotel Park has
an excellent location in central Södertälje with
direct access to shopping streets. It has 149
rooms and conference facilities for both large
and small groups.
Both hotels are in need of product devel-
opment. The plan is that Quality Hotel Park
will start a development program during 2008
for approximately SEK 25 million. The new
CEO for both hotels is Anders Hallin, pre-
viously hotel manager of the Pandox Radisson
SAS Hotel Östersund.
Two acquisitions in Södertälje
16 PANDOX 2007
Hotel operations
NETWORK
16 PANDOX 2007
Active ownership
In 2007, Pandox has managed twelve operations
with a total of 3,509 rooms, of which two have been
sold to Choice Hotels, who will operate the Clarion
Collection Hotel Twentyseven and Clarion Hotel
Grand, Östersund from now on.
Further to these changes, Pandox enters 2008
with ten operating companies with 3,133 rooms that
are expected to generate about SEK 970 million in
revenue during the year.
The strategy for Pandox’ own hotel operations is
to build up independent companies, where the
major part of responsibility is delegated to each
respective company’s board of directors and man-
agement team. The operations are monitored,
developed and analysed through regular board
meetings where the companies’ boards also com-
prise external members. Pandox’ most important
tasks are to support the companies’ business pro-
cesses through the appointment of professional
boards and management teams, as well as to assist
with management systems and working methods
being established in order to optimally utilise the
development potential in each respective unit.
HOTEL BERLIN, BERLIN
Both the hotel property and the operations were acquired in the spring of 2006. The hotel is marketed via in-
dependent distribution channels. The strategy is to reposition the hotel towards the more profi table meeting
and events segment and to develop effective and modern forms of operation. The development program is
currently in full progress. Since Pandox took over, new conference and meeting facilities with nine rooms
have been developed. Existing areas have been upgraded. Soft refurbishment has been carried out in all
rooms. The company also now has a new management team and board of directors.
INTERCONTINENTAL MONTREAL
Pandox acquired the hotel property and operations in 2007. The InterContinental Montreal has
357 rooms of international size. It is a full-service product with restaurants, bar, fi tness centre and
a large conference and meeting department. The hotel is located in Old Montreal close to the
fi nancial district. Pandox and InterContinental Hotels have entered into a management agreement
and will closely cooperate in developing, modernising and operating the hotel.
The hotel will undergo major refurbishment in 2008, covering the design and product offer of
rooms and conference facilities. The hotel will also have a new fi tness centre and lounge. The
strategy is to develop a boutique atmosphere with a French touch. The investment is estimated to
amount to about SEK 70 million.
CROWNE PLAZA ANTWERP
Pandox acquired the hotel property and oper-
ation in the spring of 2007. Pandox operates
the hotel under a franchise agreement with
InterContinental Hotels Group. Crowne Plaza
Antwerp has 262 rooms and well developed
conference activities. The location is good with
direct access to Antwerp’s ring-road and proxi-
mity to the city’s historic centre. The hotel
needs to be upgraded and modernised. Stra-
tegic plans for the hotel are currently being
prepared, and the development program is es-
timated to be in progress for two to three years.
PELICAN BAY AT LUCAYA
The hotel is located on Grand Bahama Island and has
186 rooms, of which 96 are junior suites. The hotel is
marketed as a resort hotel via independent distribution
channels. Pandox has an asset management agreement,
which implies that the Company provides the owner,
Sundt AS, with support to the company’s management
and for the development of operations. This has led to the
appointment of a new management team and board of
directors. A new reception area has been created. In ad-
dition, the Sabor restaurant has been further developed
in a previous bar area, thus improving the local profi le of
the hotel. The prerequisites for constructing a multi-
building with meeting capacity, breakfast and banquet
facilities are currently being evaluated.
QUALITY HOTEL PARK
The hotel property and operation were acquired
in the spring of 2007. The hotel is operated by
Pandox under a franchise agreement with Choice
Hotels. It has an excellent location in the centre
of Södertälje with direct access to the shopping
district. The hotel – with 149 rooms and confer-
ence capacity for both large and small groups –
will be refurbished and developed in 2008.
PANDOX 2007 17
07
PANDOX 2007 17
CROWNE PLAZA BRUSSELS CITY CENTRE
The operation and hotel property were acquired at
the end of 2003 and represent one of the leading
business and city meeting hotels in Brussels. The
hotel is operated under a franchise agreement with
Crowne Plaza, which is one of the brand names of
the InterContinental Hotels Group. Distribution takes
place via one of the world’s most powerful channels –
Holidex. The hotel has recently undergone an up-
grading and modernisation program at a cost of EUR
13 million, and has won several prestigious awards.
HOTEL BLOOM!
The operation and hotel property were
acquired in the autumn of 2005. The hotel is
marketed through independent distribution
channels, and is in the fi nal phase of being
repositioned to a living and dynamic lifestyle
hotel where each room is decorated by a
young artist under the theme of fl owers. The
restructuring is estimated to cost about EUR
13.5 million and will be completed in the
spring of 2008.
Hotel Location Rooms Hotel Manager
Hotel Berlin, Berlin Berlin 701 Cornelia Kausch
InterContinental Montreal Montreal 357 Gilles Hervieux
Crowne Plaza Brussels City Centre Brussels 354 Eric van Dalsum
Holiday Inn Brussels Airport Brussels 310 Charles Boelen
Hotel BLOOM! Brussels 306 Aldert Schaaphok, acting
Hilton Brussels City Brussels 283 Noël de Munck
Crowne Plaza Antwerp Antwerp 262 Lucien Corthals
Best Western Hotell Skogshöjd Södertälje 225 Anders Hallin
Clarion Collection Hotel Twentyseven* Copenhagen 200 Christopher Alm
Pelican Bay at Lucaya** Bahamas 186 Magnus Alnebeck
Clarion Hotel Grand, Östersund* Östersund 176 Bibbi Högbom
Quality Hotel Park Södertälje 149 Anders Hallin
Total 3,509
*Operations were sold in 2007 to Choice Hotels.
** Asset management agreement. The hotel is owned by
Sundt AS.
BEST WESTERN HOTELL SKOGSHÖJD
The hotel property and operation were acquired in
the spring of 2007. The hotel is operated by Pandox
with a membership in Best Western. Skogshöjd is a
traditional hotel in central Södertälje with 225 bed-
rooms, well developed conference and meeting fa-
cilities with a total of 11 rooms, several restaurants,
and a newly built spa. An analysis of the hotel is cur-
rently in progress prior to the forthcoming develop-
ment and refurbishment.
HILTON BRUSSELS CITY
The hotel property and operation were included in the acquisition of Hotellus International AB in
2000. A comprehensive investment program was completed in 2002 – and transformed the Hilton
Brussels City from a tourist hotel to an international hotel with high standard and good profi tability.
The hotel is located in central Brussels at Place Rogier and has 283 rooms, restaurant, bar, fi tness
centre and conference facilities. It is operated through a management agreement with Hilton.
HOLIDAY INN BRUSSELS AIRPORT
Pandox acquired the hotel property and operation in
the spring of 2007. Holiday Inn Brussels Airport is a
full-service hotel with 310 rooms. It has a strategic lo-
cation close to Brussels’ international airport in a busi-
ness area with high growth of new offi ce buildings.
The hotel is operated under a franchise agreement
with InterContinental Hotels Group. The product
needs to be upgraded and modernised. The new
management has produced a new strategic plan that
has been immediately implemented, and which is es-
timated to take two years to complete.
18 PANDOX 2007
MARKET OVERVIEW
2007 was a very strong year in the hotel industry.
Occupancy was stable at high levels and average
rates experienced excellent growth. The sector is
benefi ting from good global conditions, but is
simultaneously threatened by them. There is a risk
that anxiety surrounding mortgage loans in the
United States will slow down economic growth and
have subsequent effects in Europe. In general, eco-
nomic development is more diffi cult to appraise
than it has been for a long time.
In the United States, occupancy closed at 63 percent
which is in line with last year. Demand has increased
slightly, but because the number of available rooms
increased by the same amount, the change in occu-
pancy is minimal. The average rate closed at USD
104, representing a rise of 6 percent compared with
2006. With regard to price segments, the luxury and
medium price segments achieved the highest growth
during the year. The trend is the same in all seg-
ments, with occupancy in line with last year while
growth in prices drove RevPAR upwards. In New
York, occupancy increased slightly while prices in-
creased by a signifi cant 12 percent during the year.
Occupancy closed at 84 percent and the average
rate at USD 270.
After three consecutive years of growth, the Euro-
pean market continues to perform well with growth in
most of the region’s major cities. Good economic con-
ditions have led to greater demand from both the
leisure and business segments. In London, demand
has started to reach upper limits. Over a period of two
years, occupancy has been more than 80 percent
almost every month. It is a strong market with consid-
erable underlying demand. Occupancy closed at
83 percent for 2007, representing a slight increase of
almost 1 percent compared with last year. Average
rates rose strongly during the same period by about
10 percent. RevPAR closed at GBP 110, representing
a rise of more than 10 percent against 2006.
New York and London move in different directions
New York and London are two markets that usually
follow each other’s trends. However, we have re-
cently seen that the two markets are instead moving
in individual directions. In New York, the rate of
growth is still rising while growth is slowing in
London. London lost momentum after the terrorist
attacks in 2005. Right in the middle of a recovery pe-
riod where New York grew strongly, London suffered
a setback and has not been able to regain the lost
ground even if growth has been good. Compared
with previous top levels seen at the beginning of the
millennium, New York is close to 35 percent over
while London is about 16 percent over.
The Football World Cup in Germany in 2006
was mainly positive for the market also in 2007.
The German cities that hosted matches during the
World Cup had diffi culty maintaining prices in 2007,
although occupancy from increased business and
leisure travel in certain cities has been able to
balance the situation. Munich closed 2007 with an
occupancy of 73 percent, representing a rise of about
4 percent, and increased the average rate by more
than 3 percent. Berlin closed at 71 percent in occu-
pancy, and through the increase succeeded in bal-
ancing the fall in prices of about 2 percent. RevPAR
in Berlin closed at EUR 63 for the full-year 2007,
representing an improvement of 3 percent. Certain
cities, such as Dortmund for example, have however
been able to maintain the high levels.
The favourable economic climate has also bene-
fi ted France and Spain. Madrid and Barcelona were
the principal driving forces behind the growth in
Spain. In Madrid, growth is favoured by a new airport
and the city’s greater signifi cance as a conference
centre. In Barcelona, the rise in average rates was
stronger. In Paris, the 3 and 4-star hotels were mainly
behind the growth. Occupancy in Paris closed at 78
percent, representing an increase of close to 4 per-
cent against last year. Growth in prices saw the highest
rise with approximately 6 percent to EUR 216.
In Brussels and Antwerp, prices were behind
RevPAR in 2007. Occupancy in Brussels was in line
with last year while average rates rose by 9 percent.
In Antwerp, occupancy declined by almost 1 percent
while average rates increased by 15 percent.
RevPAR improved in Brussels by 11 percent and in
Antwerp by 14 percent.
Scandinavia at high levels
Copenhagen, like London, has experienced high
occupancy for a relatively long period of time and has
now reached the limit in demand – which reduces the
growth conditions for occupancy. International guest
nights seem to have stagnated and growth is now
Growth in prices beats occupancy
PANDOX 2007 19
Trends in the hotel market were strong in
2007. Occupancy was at historically high lev-
els in many markets. Prices continued to rise
from already high levels. At the same time,
interest rates have increased slightly in some
markets, and certain macro-economic indica-
tors point towards lower growth.
Activity within the transaction market contin-
ued to be high and in line with 2006. Despite
higher interest rates, good demand has created
competition, which in turn muffl ed the interest
effect. In the fi rst half-year 2007, the price per
room rose by about 2 percent to EUR 177,000.
Private equity sells
The new situation with higher interest rates
and low initial direct return has also affected
who invests in the market. The proportion of
transactions made by HNWI (High Net Worth
Individuals) was four times greater in 2007
than the previous year. This type of purchaser
has a long-term ownership perspective and
considerable interest in prestige hotels. On the
other hand, private equity companies signifi -
cantly reduced their acquisitions of hotel prop-
erties. These companies have instead sold
many hotel properties. Hotel companies were
also active on the sales side last year.
Greater transparency in several European
markets has led to more cross-border transac-
tions. Many investors from the United King-
dom are looking for acquisitions in continental
Europe. In the UK, interest rates are higher
and direct return lower – particularly in large
cities such as London. The potential for good
acquisitions has thereby decreased. Via a geo-
graphical diversifi cation, purchasers simulta-
neously see that risk-spreading and dynamics
have im proved. Because the markets are at
different stages of the economic cycle, the
geographic spread also dampens the volatility
in the port folio.
Germany, France and Italy have been inte-
resting markets in the last two years. In 2007,
these countries’ proportion of the total transac-
tion value increased by close to 20 percent.
Lease agreements still interesting
The proportion of lease agreements was as
high in 2007 as the previous year. The conti-
nued interest for lease agreements could be
explained by the growing proportion of institu-
tional investors. They stand for half of all trans-
actions that involve lease agreements.
Transactions with management agree-
ments have increased and are currently the
most common form of agreement. It is most
common in portfolio acquisitions.
Continued strong transaction market
dependent on domestic demand. The city has re-
cently gained a considerable amount of new capac-
ity, which also restrains occupancy growth. However,
the city has been strengthened by a rise in growth of
leisure travellers and an improved conference mar-
ket. Occupancy in 2007 was 71 percent in Copen-
hagen and the average rate was DKK 845, repre-
senting a decline of close to 4 percent and a rise of
8 percent respectively compared with last year.
In Sweden, the market is at historically high
le-vels both for prices and occupancy. Both para-
meters have a stable rate of growth where prices are
increasing by about 5 percent on an annual basis
and occupancy by around 1 percent.
In Stockholm, demand has started to fall back in
certain markets – particularly in the high price seg-
ment in the city centre. In conjunction with price
increase and re-segmenting where central hotels
choose more and more high paying guests instead of
volume-strong groups at a lower price, the low price
segments are being pushed out of the centre of
Stockholm. Four-star city hotels lost approximately
3 percent in occupancy in 2007 while prices rose by
a signifi cant 10 percent. Trends in both parameters
are moving in completely different directions. Prices
are seeing an increase in the rate of growth while
occupancy is declining. Occupancy closed at 77 per-
cent while the average rate was SEK 1,270 for 2007.
Hotels in northern Stockholm are showing similar
patterns but at lower levels. Occupancy was in line
with 2006 while prices were behind the increase in
RevPAR of close to 9 percent for the year.
Neighbouring markets such as Uppsala and
Arlanda achieved growth in both occupancy and
prices even if the rise in occupancy in Uppsala
was at a higher level. RevPAR for both locations
in creas ed respectively by 17 and 9 percent for the
year. Södertälje has also increased in both average
rate and occupancy, and RevPAR rose by close to
10 percent in 2007.
Gothenburg is also at historically high levels, and
occupancy closed at 71 percent for the city centre’s
four-star hotels – representing an increase of about
1 percent against last year. Growth in prices has
been slightly stronger and closed with a rise of 3
percent. Mölndal showed the same pattern during
the year, although it achieved higher price growth
than Gothenburg. RevPAR in Mölndal improved by
about 7 percent, compared with 4 percent in the
centre of Gothenburg.
Malmö has experienced very strong growth, due
primarily to increasing average rates. Despite histor-
ically high levels, occupancy also increased for the
full-year 2007 and closed at 68 percent. Malmö has
developed well as a city and region in recent years,
and this can be seen in the hotel market. The ave-
rage rate closed at SEK 831, compared with SEK
777 last year. RevPAR increased in the municipality
of Malmö by 12 percent. The high price segment in
the city centre showed the same pattern as the
municipality as a whole.
All market fi gures for Sweden are rolling 12-months, December
2006 to November 2007. Other countries and cities are for the
calendar year 2007.
Scandic Hallandia, Halmstad
20 PANDOX 2007
Strong positions in Brussels/Antwerp
Pandox acquired another two hotels in the Brussels/Antwerp area in 2007. Pandox thereby becomes one of
the largest players in this market with a total of seven hotels and 1,819 rooms. The portfolio contains four
hotels operated by the Company, two hotels with lease agreements, and one with a management agreement.
Brussels/Antwerp
CREATIVITY
20 PANDOX 2007
Five hotels in Brussels
Further to Pandox’ acquisition of Holiday Inn
Brussels Airport in the spring of 2007, the Company
now owns fi ve hotels in Brussels. Scandic Grand
Place is an effective medium class hotel with 100
rooms, located adjacent to the well-known Grand
Place in central Brussels. Both of Pandox’ business
hotels, Crowne Plaza Brussels City Centre and Hilton
Brussels City with 354 and 283 rooms respectively,
are located with direct access to Place Rogier –
which has been developed into a strong business
district. And the Company’s fi fth hotel in the area –
Hotel BLOOM! is just a few hundred metres away.
Hotel BLOOM! is owned and operated by Pan-
dox through independent distribution channels.
The strategy is to develop Brussels’ best lifestyle
hotel. Each room is hand-painted by students from
various art schools in Europe that are members of
ELIA (European League of Institutes of the Arts).
The inspiration for the wall paintings are the stu-
dents’ own interpretations of the word “Bloom”,
thus making all rooms individual and personal. The
hotel is unique and has received considerable
attention in the press, both locally and in trade mag-
azines such as Elle Déco and Sleeper.
International hub
Brussels has approximately one million inhabitants.
The city has both a strategic and central location in
Europe with the same distance to Paris, London and
Frankfurt. That Brussels is the seat of the European
Union has played an important role in the develop-
ment of the city and the whole of Belgium. Brussels
is well-known as a political and administrative cen-
tre, but also as a hub for international institutions
such as NATO and Benelux. An increasing number
of international companies and organisations are
also establishing their head offi ces in the city.
Brussels’ international signifi cance and strong
Crowne Plaza Brussels City Centre
PANDOX 2007 21
07
PANDOX 2007 21
infrastructure make it a sought-after meeting, con-
ference and congress location, which gives a large
number of guest nights to the hotels every year. The
city’s attractiveness is further strengthened via the
new meeting centre – Square Brussels – which will
open in September 2009.
Good infrastructure
Pandox owns Scandic Antwerp since 2000. Just
like the newly acquired Crowne Plaza Antwerp, it is
located by the ring-road that surrounds Antwerp.
The hotels have 204 and 262 rooms respectively.
Antwerp is Belgium’s second largest city with
half a million inhabitants. The city has good
infrastructure for both road and rail connections.
Amsterdam, Rotterdam and The Hague are within
two hours by car, and both Brussels and Paris can
be reached by high-speed trains. After Rotterdam,
Antwerp also has Europe’s second largest freight
port.
Since the 17th century, Antwerp has played an
important role in the diamond industry and is cur-
rently the world’s diamond trading centre. Antwerp
is also home to international companies such as
DAF Trucks, Procter & Gamble and Amoco.
New acquisitions in 2007: Holiday Inn Brussels Airport and Crowne Plaza Antwerp
Pandox completed another two major tran-
sactions in Belgium in 2007 and acquired
the hotel properties Holiday Inn Brussels
Airport and Crowne Plaza Antwerp, includ-
ing their respective operations. The acquisi-
tions amounted to the equivalent of half a
billion Swedish kronor and entered into
force at the end of June 2007.
Holiday Inn Brussels Airport is a full-service
hotel with 310 rooms at a strategic location
close to Brussels’ international airport and in a
business area with high growth of new offi ce
space. With 262 rooms and well-developed
conference activities, the Crowne Plaza
Antwerp has a good hotel location with direct
access to Antwerp’s ring-road and close to the
city’s historical centre.
Pandox’ principal strategy is to operate the
hotels under the current franchise agreement
with InterContinental Hotels Group. The hotels
need upgrading and modernising, and
Pandox will closely cooperate with the local
management teams to immediately prepare
strategic plans for the operations and com-
mence active measures. The development
programs are estimated to take two to three
years and imply investments equivalent to
approximately SEK 80 million.
Hotel BLOOM!
22 PANDOX 2007
1. Aldert Schaaphok, Director Operations, based in Belgium,
born in 1959. Aldert Schaaphok has considerable experi-
ence of operations and concept development, including as
manager of full-service hotels in the Netherlands, Belgium
and Germany. Before joining Pandox, he was Regional Di-
rector Operations and Vice President Operations for Dorint
Hotels & Resorts AG. Aldert has been consultant to Pandox
since January 2004, and is now responsible for the Compa-
ny’s operations in Belgium and Montreal. He is also board
member of Hotel Berlin, Berlin.
2. Anders Nissen, Chief Executive Offi cer, born in 1957.
Anders Nissen has a strong background from the hotel
industry and hotel property sector with more than 25 years’
experience. He started his career as hotel manager and then
held leading positions within the group management team of
the hotel operator Reso. In the beginning of 1993, Anders
became CEO of Securum Hotel & Turism AB, where he led
the process of structuring Securum’s hotel activities. Anders
Nissen was a key player behind the initiative to form Pandox,
and has been CEO since the Company was started in 1995.
3. Anette Österberg, Acquisition and Investment Analyst,
born in 1975. Anette Österberg is a graduate in business
administration 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 acquisi-
tions, market analysis, market communication and deci-
sion-making support for the business area managers.
4. 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 Riddarstaden AB,
Marco Polo and Fritidsresor. Ann-Sophie works within
Pandox’ fi nance and accounting department.
5. Erik Hvesser, born in 1969. Erik Hvesser is an econom-
ics graduate of the School of Economics & Business
Administration in Oslo. He came to Pandox in the autumn
of 2006 from the position as asset manager with Norgani
ASA. Erik has 15 years’ operating experience within the
hotel industry as hotel manager, business area manager,
business controller, as well as various senior positions
within Hilton/Scandic’s Swedish management team.
He is currently responsible for the major part of Pandox’
Swedish hotel property portfolio.
6. Folke Holmqvist, Property Manager Sweden, born in
1943. Folke Holmqvist is a construction engineer with 25
years’ experience of the building sector and fi ve 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 refurbishment programs, and as Property
Manager for the Swedish properties works closely with the
three business area managers.
7. Jill Jansson, Assistant to the CEO, born in 1952. Jill
Jansson joined Pandox in September 2005 as Assistant to
the CEO. Her position implies providing support to the
board of directors and management of the Company, as
well as internal and external communication including the
annual report. Jill comes most recently from Ventelo
Sverige AB, and has also worked within group functions at
Pharmacia.
8. Jonas Törner, Controller, born in 1971. Jonas Törner 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 Cor-
porate Finance at Deloitte & Touche and Nordea Securi-
ties, and most recently comes from the position as group
controller of the industrial company DeLaval. Jonas was
recruited by Pandox as Controller in the autumn of 2005.
During his time with Pandox, Jonas has built up operating
systems that have grown considerably in recent years,
thus enabling operations to be monitored in a simple and
analytical way.
HUMAN RESOURCES | KNOWLEDGE
44 hotels
+ 10,200 rooms
+ 655,000 m2
+ SEK 782.2 m Property revenues
+ SEK 655.9 m Operating net
+ SEK 230.0 m Profi t after tax
17 employees
2.
16.
5.
1.
4. 15.
PANDOX 2007 23
9. Josefi n Bergqvist, Acquisition and Investment Analyst,
born in 1974. Josefi n Bergqvist holds a master’s degree in
hotel management from Griffi th University in Australia as
well as a master’s degree in property fi nance from the
Royal Institute of Technology (KTH) in Stockholm. Josefi n
has previously worked for CBRE Hotels in London as ana-
lyst and operationally for Marriott International. She has
been with Pandox since August 2006 and is board mem-
ber of a number of the Company’s international operational
activities.
10. Josefi n Nilsson, Receptionist, born in 1983. Josefi n
Nilsson is responsible for daily offi ce procedures together
with the Assistant to the CEO. She has been with Pandox
since September 2006.
11. Lars Häggström, Vice-President Asset Management
and Business Area Manager, born in 1954. Lars Hägg ström
is a graduate engineer and has considerable experience
of the hotel sector, with an emphasis on property-related
issues. He was technical manager of Scandic Hotels from
1993 to 1998, and property manager of Hotellus Interna-
tional from 1998 to 2000 when Pandox acquired the com-
pany. Lars has recently been appointed VP of Pandox with
responsibility for all hotel properties and development proj-
ects, in addition to a number of the Company’s interna-
tional hotels.
12. Louise Ceder, Property Support, born in 1970. Louise
Ceder works with property support and during the last year
has produced a new website for reporting and follow up.
Louise reports to our business area managers and has
worked at Pandox since 2000.
13. Marie Sivertzen, Property Accountant, born in 1957.
Marie Sivertzen came to Pandox in October 2007 after hav-
ing most recently worked for Pfi zer AB via Manpower. She
has also worked for Investor AB for 15 years and Ponsus
Pharma AB. Marie now works within Pandox’ fi nance and
accounting department.
14. Mikael Planell, Business Area Manager, born in 1960.
Mikael Planell’s area of responsibility covers several of
Pandox’ large hotels, including the Hotel Berlin, Berlin. He
was behind the development of the Clarion Collection Hotel
Twentyseven, which is now leased to Choice Hotels. Mikael
has a solid background from the hotel industry with 20
years as hotel manager and area manager, including in
London and Stockholm. Before joining Pandox in 2005, he
was manager of operating and business development for
Accor Hotels’ Nordic operations.
15. Liia Nõu, Vice-President and CFO, born in 1965. Liia
Nõu joined Pandox in 2007 and is responsible for fi nance
and accounting within the Group. Her principal activities
are fi nancial control and reporting and the Group’s fi nanc-
ing of acquisitions. Liia holds a degree in economics and
business administration from the Stockholm School of Eco-
nomics and comes most recently from GE Money Bank AB
where she was Nordic CFO. She has also been CFO of
Song Networks, Tele2, Icon Medialab in addition to working
for Kuwait Petroleum and American Express.
16. Nils Lindberg, Senior Advisor, born in 1947. Nils Lind-
berg has a long career within Pandox and has previously
been responsible for accounting and fi nance issues. Since
last year, he has chosen himself to go over to an advisory ca-
pacity within the Group. Nils has previously been controller
and treasurer for Dow Chemical Nordic Region as well as
bank manager at Nordbanken. Nils joined Pandox in 1995.
17. Ulrika Norrbrink, Property Accountant, born in 1966.
Ulrika Norrbrink came to Pandox in March 2006 after hav-
ing worked previously for Power Hemelektronik AB, Proact
IT Sweden AB and Lars Gullstedts Fastigheter AB. Ulrika
currently works within Pandox’ fi nance and accounting de-
partment.
18. Enzo, Corporate dog.
Salme Olsson, Property Accountant, born in 1944. Salme
Olsson entered retirement during the year. We at Pandox
thank her for her excellent work and pleasant memories.
10.
7. 17.
8.
6. 13. 9.
3.11.
14. 12.
18.
24 PANDOX 2007
Business development Sweden
CREATIVITY
Hotel Scandic St Jörgen in Malmö has been
part of Pandox since the Company was
founded in 1995. The hotel has a strong loca-
tion next to one of Malmö’s most attractive
shopping streets, and with its 283 rooms it is
the city’s largest hotel.
The hotel was opened in 1967 and has since be-
come one of the city’s leading hotels. An investment
program of around SEK 60 million was completed in
2007, thus strengthening the hotel’s position in the
local market and where ineffective restaurant areas
have been converted to profi table shopping and
business activities. The development program also
included the creation of new conference facilities,
implying that the Scandic St Jörgen has now been
developed into one of Malmö’s leading meeting and
conference hotels. The lobby and public areas have
been modernised, and an offer of contemporary
food and drinks has been created. The Scandic St
Jörgen is today one of Malmö’s most attractive pro-
perties with a well-developed shopping, hotel and
meeting profi le.
New investment in Malmö
24 PANDOX 2007
PANDOX 2007 25
07
The Scandic Hallandia is located in Storgatan
in central Halmstad and now has 154 rooms
further to an extension program.
The hotel was fi rst built in the 19th century and has
been converted several times over the years. Pandox
acquired the hotel property in 1999, at the time with
130 rooms in need of development.
Halmstad is a relatively stable hotel market and
has over the past ten years had occupancy of around
50 percent. The Scandic Hallandia holds a strong
position and performs well over the market in both
price and occupancy.
Joint development
The strong underlying demand has led to the hotel
being fully occupied several days per year. Both the
property owner and tenant therefore saw potential in
increasing the number of rooms. When the lease was
renegotiated in 2005, the partners therefore agreed a
development program for the hotel.
The agreement included a major investment with
the creation of 24 new rooms. Logistics changes were
also made in the property in order to improve opera-
tional conditions for Scandic. By modifying the dispo-
sition of the areas, new rooms could be created
within the existing property. The kitchen, restaurant
and bar were moved while most of the meeting
capacity was concentrated to one location in the
building. The result is a hotel that can meet demand,
but also a more effective and operationally friendly
property.
Expansion in Halmstad
PANDOX 2007 25
26 PANDOX 2007
HOTEL PROPER
26 PANDOX 2007
PANDOX 2007 27
44 hotels with strategic locations in
Sweden, Denmark, Belgium, Germany,
Switzerland, the United Kingdom, the
Bahamas and Canada.
TIES
PANDOX 2007 27
28 PANDOX 2007
HOTEL PROPERTIES
Property Operator/Brand nameType of lease Location
Numberof rooms
Year of constr.extension
Total area (sqm)
Stockholm Radisson SAS Arlandia Hotel, Arlanda Rezidor/Radisson SAS Og International airport 335 1979/89 15,260
Hilton Stockholm Slussen Hilton O City centre 288 1989 18,416
Best Western Hotell Skogshöjd, Södertälje Pandox/Best Western Fr Södertälje/Central 225 1972/81/87 14,115
Scandic Järva Krog, Stockholm Scandic O Stockholm north 215 1971/97 11,300
Scandic Park, Stockholm Scandic O City centre 198 1969/88 12,290
Quality Hotel, Nacka Choice Hotels Scandinavia/Quality Og Sickla-Nacka 162 1986 10,830
Mr Chip Hotel, Kista Kista Hotell AB Og Stockholm north 150 1984 5,517
Quality Hotel Park, Södertälje Pandox/Choice Hotels Scandinavia Fr Södertälje/City centre 149 1890s/1984 10,292
Scandic Upplands Väsby Scandic O Stockholm north 150 1986 6,955
TOTAL STOCKHOLM 1,872 104,975
GothenburgScandic Crown, Gothenburg Scandic O City centre 338 1988 24,380
Elite Park Avenue Hotel, Gothenburg Elite Hotels Og City centre 291 1950/74/90 21,998
Scandic Mölndal, Gothenburg Scandic O City centre 208 2000 11,000
TOTAL GOTHENBURG 837 57,378
ÖresundScandic Copenhagen Scandic O City centre 484 1970/99 31,500
Scandic St Jörgen, Malmö Scandic Og City centre 283 1967/95 21,485
Radisson SAS Hotel, Malmö Rezidor/Radisson SAS Og City centre 229 1971/88 18,969
Clarion Collection Hotel Twentyseven Choice Hotels Scandinavia/Clarion Og City centre 200 1913/55/65 7,568
Scandic Star, Lund Scandic Og Central 196 1991 15,711
Clarion Hotel Grand, Helsingborg Choice Hotels Scandinavia Og City centre 164 1926/29/96 8,555
Scandic Kramer, Malmö Scandic O City centre 113 1875/1994 6,913
TOTAL ÖRESUND 1,669 110,701
Regional towns and other locationsScandic Grand, Örebro Scandic O City centre 219 1985 12,900
Scandic Winn, Karlstad Scandic Og City centre 199 1984/90 10,580
Scandic Swania, Trollhättan Scandic Og City centre 196 1918/83/89 10,399
Clarion Hotel Grand, Östersund Choice Hotels Scandinavia/Clarion Og City centre 176 1978 8,766
First Hotel Grand, Borås Västsvenska Hotellfastigheter AB/First Hotels Og City centre 158 1972/87/90/97 9,593
Scandic Plaza, Borås Scandic O City centre 135 1988 10,592
Elite Stora Hotellet, Jönköping Elite Hotels Og City centre 135 1860/1930/95 11,378
Clarion Hotel Plaza, Karlstad Plaza Hotell & Restaurang i Karlstad AB/Choice Og City centre 131 1929/91 5,907
Scandic Hallandia, Halmstad Scandic O City centre 154 1890s/1950/75/2007 7,617
Scandic Billingen, Skövde Scandic F City centre 106 1888/1939/65 7,743
TOTAL REGIONAL TOWNS AND OTHER LOCATIONS 1,609 95,475
International2)
Crowne Plaza Brussels City Centre Pandox/Crowne Plaza Fr City centre 354 1910 28,095
Holiday Inn Brussels Airport Pandox/InterContiental Fr Airport 310 1971 21,072
Hotel BLOOM!, Brussels Pandox Io City centre 306 1976 23,445
Hilton Brussels City Pandox/Hilton M City centre 283 1910/30 13,850
Scandic Grand Place, Brussels Scandic O City centre 100 1900/91 4,500
Crowne Plaza Antwerp Pandox/InterContinental Fr Central 262 1971 18,340
Scandic Antwerp Scandic O Ring road 204 1974 13,200
Hotel Berlin, Berlin Pandox Io City centre 701 1958/87/96 41,093
Hilton Bremen Hilton O City centre 235 1991 21,000
Hilton Dortmund Hilton O Exhibition centre 190 1990 12,500
Scandic Lübeck Scandic O Ring road 158 1991 9,700
Hilton London Docklands Hilton O Docklands 365 1991 22,800
InterContinental Montreal Pandox/InterContinental M Central 357 1991 31,091
Radisson SAS Hotel, Basel Rezidor/Radisson SAS Og Central 205 1957/63/72 17,800
Pelican Bay at Lucaya, Grand Bahama Island Sundt GB Management AM Resort 186 7,983
TOTAL INTERNATIONAL 4,216 286,469
TOTAL PANDOX 10,203 654,998
1) Includes hotel, restaurant and conference areas. 2) Excluding Copenhagen (included in Öresund).
O = Revenue-based, Og = Revenue-based with guaranteed rent, Or = Revenue and result-based, R = Result-based, F = Fixed, Io = Internal revenue-based, M = Management agreement, Fr = Franchise, AM = Asset management agreement.
Pandox’ hotel operations (hotels operated by Pandox)
PANDOX 2007 29
Of which hotel1) (sqm)
Offi ces(sqm)
Shops(sqm)
Other(sqm)
Right ofdisposal
Propertydesignation
Tax assessment value (SEK M)
15,260 – – – Land leasehold Benstocken 1:5 132.7
15,725 2,097 – 594 Land leasehold Överkikaren 31 365.9
14,115 – – – Yxan 8 46.2
11,300 – – – Land leasehold Tanken 2 77.6
10,290 – – 2,000 Lönnen 30 213.0
8,090 2,705 – 35 Sicklaön 363:2 84.8
5,517 Land leasehold Knarrarnäs 7 50.2
10,110 182 – – Herkules 13 35.6
6,955 – – – Vilunda 6:48 34.6
97,362 4,984 – 2,629 1,040.6
21,800 – 300 2,280 Stampen 5:5 170.0
21,998 – – – Lorensberg 28:4 208.0
11,000 – – – Laken 1 55.2
54,798 – 300 2,280 433.2
25,200 – – 6,300 99943-2 –
14,655 – 4,230 2,600 S:t Jörgen 11 222.0
18,969 Carolus 33 123.0
7,568 169 Vester Kvarter København –
15,711 – – – Porfyren 2 102.4
7,325 – 1,230 – Högvakten 8 59.4
6,373 – 540 – Gripen 1 73.8
95,801 – 6,000 8,900 580.6
10,900 – – 2,000 Land leasehold Mältaren 1 50.6
10,580 – – – Negern 2 49.0
10,399 – – – Svan 7 48.5
8,766 – – – Borgens 6 33.8
9,365 – – 228 Land leasehold Prometeus 3 31.9
7,961 2,631 Balder 6 62.8
9,379 – 899 1,100 Alhambra 1 60.6
5,907 – – – Höken 1 39.6
6,813 360 427 17 Erik Dahlberg 14 & 15 44.8
6,844 – – 899 Fjolner 7 27.6
86,914 2,991 1,326 4,244 449.2
28,095 – – – –
21,072
23,445
13,850 – – – Saint-Josseten-Noode (1div) 032 –
4,500 – – – –
16,780 1,560 Land leasehold
13,200 – – – 24th div, Borgerhout 1st div, Ar –
41,093
15,100 – – 5,900 Grundbuch Altstadt IV, Blatt 60 –
11,300 – – 1,200 Grundbuch Dortmund, Blatt 897 –
8,800 – – 900 Grundbuch Lübeck, Blatt 54545 –
21,500 – – 1,300 HM Land Registry: SGL465779 –
31,091
17,000 800
7,983
274,809 1,560 – 10,100 –
609,684 9,535 7,626 28,153 2,503.6
Proportion of total
number of rooms
18%
PANDOX’ MARKET SEGMENT
Stockholm
Number of hotels 9
Number of rooms 1,872
Property revenues, SEK M 177.1
Operating net, SEK M 136.1
Gothenburg
Number of hotels 3
Number of rooms 837
Property revenues, SEK M 79.2
Operating net, SEK M 72.0
Öresund
Number of hotels 7
Number of rooms 1,669
Property revenues, SEK M 160.5
Operating net, SEK M 131.2
Regional cities and other locations
Number of hotels 10
Number of rooms 1,609
Property revenues, SEK M 106.8
Operating net, SEK M 91.2
International
Number of hotels 15
Number of rooms 4,216
Management revenues, SEK M 258.6
Operating net, SEK M 225.4
Hotel operations
Number of hotels 10
Number of rooms 3,133
Operating revenues, SEK M 788.8
Operating profi t, SEK M 180.9
Proportion of total
number of rooms
31%
Proportion of total
number of rooms
16%
Proportion of total
number of rooms
8%
Proportion of total
number of rooms
42%
Proportion of total
number of rooms
16%
30 PANDOX 2007
Scandic Crown, Gothenburg Number of rooms: 338 Operator: Scandic
Scandic Upplands Väsby Number of rooms: 150 Operator: Scandic
Mr Chip Hotel, Kista Number of rooms: 150 Operator: Kista Hotell AB
Quality Hotel Nacka Number of rooms: 162 Operator: Choice Hotels Scandinavia/Quality
Radisson SAS Arlandia Hotel Number of rooms: 335 Operator: Rezidor/Radisson SAS
Scandic Järva Krog Number of rooms: 215 Operator: Scandic
Hilton Stockholm Slussen Number of rooms: 288 Operator: Hilton
Scandic Park, Stockholm Number of rooms: 198 Operator: Scandic
HOTEL PROPERTIES
Best Western Hotell Skogshöjd, Södertälje Number of rooms: 225 Operator: Pandox/Best Western
Quality Hotel Park, Södertälje Number of rooms: 149 Operator: Pandox/Choice Hotels Scandinavia
ST
OC
KH
OL
M
ST
OC
KH
OL
MG
OT
HE
NB
UR
G
PANDOX 2007 31
Elite Park Avenue Hotel, Gothenburg Number of rooms: 291 Operator: Elite Hotels
Clarion Collection Hotel Twentyseven Number of rooms: 200 Operator: Choice Hotels Scandinavia/Clarion Collection
Scandic Copenhagen Number of rooms: 484 Operator: Scandic
Scandic Mölndal Number of rooms: 208 Operator: Scandic
Scandic Kramer Number of rooms: 113 Operator: Scandic
Scandic St Jörgen Number of rooms: 283 Operator: Scandic
Radisson SAS Hotel Malmö Number of rooms: 229 Operator: Rezidor/Radisson SAS
Clarion Hotel Grand Helsingborg Number of rooms: 164 Operator: Choice Hotels Scandinavia
Scandic Grand Örebro Number of rooms: 219 Operator: Scandic
Scandic Star Lund Number of rooms: 196 Operator: Scandic
GO
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32 PANDOX 2007
Scandic Billingen, Skövde Number of rooms: 106 Operator: Scandic
Clarion Hotel Plaza Karlstad Number of rooms: 131 Operator: Plaza Hotell & Restaurang i Karlstad AB/Choice
Crowne Plaza Brussels City Centre Number of rooms: 354 Operator: Pandox/Crowne Plaza
First Hotel Grand Borås Number of rooms: 158 Operator: Västsvenska Hotellfastigheter AB/First Hotels
Scandic Plaza Borås Number of rooms: 135 Operator: Scandic
Elite Stora Hotellet Jönköping Number of rooms: 135 Operator: Elite Hotels
Scandic Hallandia Halmstad Number of rooms: 154 Operator: Scandic
Clarion Hotel Grand, Östersund Number of rooms: 176 Operator: Choice Hotels Scandinavia
HOTEL PROPERTIES
Scandic Winn Karlstad Number of rooms: 199 Operator: Scandic
Scandic Swania Trollhättan Number of rooms: 196 Operator: Scandic
RE
GIO
NA
L CIT
IES A
ND O
TH
ER L
OC
AT
ION
S
RE
GIO
NA
L CIT
IES A
ND O
TH
ER L
OC
AT
ION
SIN
TE
RN
AT
ION
AL
PANDOX 2007 33
Hilton Brussels City Number of rooms: 283 Operator: Pandox/Hilton
Hotel BLOOM!, Brussels Number of rooms: 306 Operator: Pandox
Hilton Dortmund Number of rooms: 190 Operator: Hilton
Scandic Grand Place Brussels Number of rooms: 100 Operator: Scandic
Scandic Antwerp Number of rooms: 204 Operator: Scandic
Hilton Bremen Number of rooms: 235 Operator: Hilton
Scandic Lübeck Number of rooms: 158 Operator: Scandic
Holiday Inn Brussels Airport Number of rooms: 310 Operator: Pandox/Holiday Inn
Crowne Plaza Antwerp Number of rooms: 262 Operator: Pandox/Crowne Plaza
Hotel Berlin, Berlin Number of rooms: 701 Operator: Pandox
INT
ER
NA
TIO
NA
L
INT
ER
NA
TIO
NA
L
34 PANDOX 2007
HOTEL PROPERTIESFINANCES
Hilton London Docklands Number of rooms: 365 Operator: Hilton
InterContinental Montreal Number of rooms: 357 Operator: Pandox/InterContinental Hotels
Radisson SAS Hotel Basle Number of rooms: 205 Operator: Rezidor/Radisson SAS
Pelican Bay at Lucaya, Grand Bahama Island Number of rooms: 186 Operator: Sundt GB Management
INT
ER
NA
TIO
NA
L
PANDOX 2007 35
Financial overview . . . . . . . . . . . . . . . . . . . 36
Sensitivity analysis . . . . . . . . . . . . . . . . . . 38
Evaluation and tax situation . . . . . . . . . . . . 40
Defi nitions . . . . . . . . . . . . . . . . . . . . . . . . 41
Ten-year overview . . . . . . . . . . . . . . . . . . . 42
Quarterly data 2006–2007. . . . . . . . . . . . . 44
Financial statements 2007. . . . . . . . . . . . . 45
Report of the Board of Directors. . . . . . . . . . 46
Income statement and comments . . . . . . . . 48
Balance sheet and comments . . . . . . . . . . . 50
Changes in equity . . . . . . . . . . . . . . . . . . . 52
Cash fl ow statement and comments . . . . . . . 53
Accounting principles . . . . . . . . . . . . . . . . 54
Notes to the Accounts . . . . . . . . . . . . . . . . 56
Proposed disposition of earnings . . . . . . . . . 62
Auditor’s report . . . . . . . . . . . . . . . . . . . . . 63
Scandic Hallandia, Halmstad
36 PANDOX 2007
Well-weighted risk profi le
Financial policy
The basic objective of Pandox’ fi nancial operations
is to achieve the lowest possible fi nancing costs
while simultaneously limiting the risks related to
interest rates, foreign currencies and borrowings.
The interest rate risk is the risk that changes in
interest rate levels which could negatively affect the
Group’s results. Currency risk is the risk that the
Group’s balance sheet and income statement
which could be negatively affected by changes in
the value of the Swedish krona. Finally, the borrow-
ing risk is the risk that external fi nancing may be-
come more diffi cult to fi nd.
Interest rate risk/interest rate strategy
Pandox’ basic objective is that interest rate expo-
sure 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 con-
tracting periods of varying lengths with the aim of
creating an optimal due date structure and fi xed
interest periods. The long term objective is that the
average fi xed interest period be matched with the
average point in time when rental revenues, based
on underlying leases, are estimated to be affected
by a change in interest rates.
Currency risk/currency risk strategy
Pandox is exposed to currency risks due to certain
of the Group’s assets being denominated in foreign
currencies. Pandox’ policy is to hedge the majority
part of its exposure by raising loans in the local
currency of each respective country and by hedg-
ing with appropriate currency hedging instruments.
Methodology and systems
Pandox has developed and implemented systems
and procedures to enable the continuous monito-
ring and reporting of interest rate risk trends.
Financing strategy
In order to gain fl exibility and administrative bene-
fi ts, 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 fi xed margins. Derivative instruments such as
swaps are preferably used for the extension of fi xed
interest rate periods.
Capital structure
The objective for the Group’s capital structure is
that the equity/asset ratio long term should meet in-
ternal and external fi nancial strength requirements
in order to enable continued expansion.
Financing
As of 31 December 2007, the Pandox Group’s inte-
rest bearing liabilities amounted to SEK 5,516.8 M
(4,398.5). The loan portfolio had an average fi xed
interest rate period of 1.8 years (2.9) and the aver-
age rate of interest on loans amounted to 4.9 per-
cent (4.3). The fi nancing of hotel properties is
raised in each respective local currency in accord-
ance with the fi nancial policy. At the same point in
FINANCIAL OVERVIEW
Pelican Bay at Lucaya, Grand Bahama Island
PANDOX 2007 37
INTEREST STRUCTURE1), SEK M
Year due SEK DKK EUR GBP CHF CAD Total Share, % Interest, %2)
2008 1,653.0 157.0 1,374.7 206.4 51.2 242.3 3,684.6 66.8 5.2
2009 125.0 – – – – – 125.0 2.3 4.6
2010 250.0 – – – – – 250.0 4.5 4.8
2011 125.0 – 30.1 – – – 155.1 2.8 5.1
2012 325.0 – – – 51.3 – 376.3 6.8 4.0
2013 and later 175.0 127.1 521.1 – 102.6 – 925.8 16.8 4.0
Total 2,653.0 284.1 1,925.9 206.4 205.1 242.3 5,516.8 100.0 4.9
Share, % 48 5 35 4 4 4 100
Average interest rate, % 4.9 3.8 4.9 7.4 2.9 5.4 4.9
Average interest rate period, years 1.7 3.7 1.8 0.2 4.5 0.1 1.8
1) Converted to SEK. 2) Average interest rate in percent.
time, the Pandox Group’s liquid funds amounted
to SEK 272.8 M (174.1). In addition, there was an
unutilised credit facility of SEK 400.5 M.
Equity capital
The Pandox Group’s equity capital as per the bal-
ance sheet at 31 December 2007 amounted to SEK
2,407.7 M of which SEK 1,260.3 M was restricted
equity and SEK 1,147.4 M unrestricted equity.
The Pandox Group’s cash fl ow before changes
in working capital, investments and non-recurring
revenue amounted in 2007 to SEK 389.0 M (317.6).
Working capital
Pandox receives rental revenue in advance and
pays most of its operating costs and interest ex-
pense in arrears while hotel operations normally
receive revenues in arrears. Altogether the Group
normally has a relatively small working capital to
fi nance.
38 PANDOX 2007
Clarion Hotel Grand Helsingborg
Factors that affect Pandox
Pandox’ operations and profi tability are affected
by a number of factors, of which the most impor-
tant are described below.
The hotel market
The 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 developments.
Business travel and conference activities nor-
mally increase during periods of high economic
activity, while there is a corresponding decrease
during periods of low economic activity. There is
thus a strong connection between economic trends
(GDP) and trends within the hotel market. Develop-
ments of GDP can be closely monitored, whereas
factors that infl uence local hotel markets are signif-
icantly more complex. The most important infl uen-
tial factors are local economic conditions, the pro-
portion of new hotel capacity in the market, how
well developed a market is concerning brand
names and segments, currency fl uctuations,
as well as extraordinary events.
New capacity
New 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 infl uence on occupancy rates and aver-
age prices. To deal with this risk, Pandox has devel-
oped an information system that continually moni-
tors planned new constructions within its market
areas, and thus enabling Pandox to be prepared
and proactive.
Agreement structure
Pandox has a large proportion of variable leases,
which represented 95 percent of total rental reve-
nue in 2007.
About 30 percent of variable leases contained a
guaranteed rent, meaning that only 65 percent 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 agreement is based on optimal
distribution of cash fl ow between Pandox and the
operator so that both parties are motivated to con-
tinuously increase the hotel property’s overall pro-
fi tability. Factors that may infl uence risks associ-
ated with variable leases are the hotel property’s
location, market segment and brand name/opera-
tor. Pandox’ strategy is to operate in a selected
market segment, which in combination with its
hotels market expertise and systems, limits
Pandox’ agreement risk.
Partners
Pandox’ agreement structure, with a large propor-
tion of variable leases, means that the Company is
more dependent on the individual tenant/opera-
tor’s business than other property companies. The
Company’s strategy to actively cooperate with the
market’s most competitive and powerful operators
with well established brand names, reduces both
the related operative and fi nancial risks. Pandox’
largest tenants in terms of revenue are Scandic,
Hilton, Radisson SAS, Elite Hotels, InterContinental
Hotels Group, Choice Hotels and First Hotels,
which together accounted for 89 percent of all
rental revenue in 2007.
Leasing level
The leasing level as of 31 December was 99.7 per-
cent. Vacant space amounting to 1,840 m2 con-
sisted entirely of store and offi ce 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 management.
SENSITIVITY ANALYSIS
PANDOX 2007 39
EARNINGS IMPACT 2007
SEK M
Change in rental revenue
Occupancy rate +5 percentage points +53.0
Occupancy rate –5 percentage points –52.4
Average room rate SEK +50 +39.8
Average room rate SEK –50 –39.4
Other commercial premises +/–5 %1) +/–1.4
Change in other variables
Interest expense during the year +/–1 percentage point +/–36.8
Average interest expense +/–1 percentage point1) +/–55.2
Exchange rate fl uctuation +/–5 % +/–5.8
Operating and maintenance costs +/–5 % +/–5.6
1) The fi gures 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.
With Pandox’ specialist expertise in the hotel sec-
tor, the risk of vacant hotel space is seen as being
extremely low.
For other commercial space, which represents
approximately 6.9 percent of total space in the
Company’s properties, Pandox is exposed to the
same fl uctuations in supply and demand for
premises experienced by other property owners.
Changed risk potential
Historically, the hotel industry and hotel property
sector have always been associated with high risk.
The market has however changed signifi cantly in
recent years. Owners have become more profes-
sional with restructured companies and focused
strategies, with a greater holistic view and special-
ised expertise. Reports from public companies have
substantially improved information about the trans-
parency of the market. The proportion of estab-
lished strong brand names with effi cient operations
has increased. For streamlined companies with
own expertise in hotel operations, hotel properties
and business development, and who are active
owners, the potential risk is considerably lower than
it has been in historic terms.
Decisions by public authorities
The hotel market can be affected by decisions
made by public authorities. Two examples of such
decisions are changes in taxation related to claims
for travel expenses or rules concerning value added
tax both in general and for the hotel and restaurant
industry in particular.
Property tax
Property tax on Pandox’ Swedish properties
amounts to 1.0 percent of the tax assessment
value. Changes in the tax rate or in the tax assess-
ment 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 outside Sweden is generally less
than one per cent of the book value. About 48 per-
cent of the property tax was debited to tenants in
2007, which means that the net effect on Pandox’
earnings amounted to SEK 26 M.
Site leasehold rents
As of 31 December 2007, Pandox held seven prop-
erties via site leasehold rights. Rents on these prop-
erties are currently calculated in such a manner
that a municipality that normally owns the land re-
ceives what is deemed to be a reasonable real rate
of interest on the estimated market value of the land
in question. Site leasehold rents generally run for
periods of 10 to 20 years.
Interest rates
Interest expense is Pandox’ largest single cost item.
Continuous fl uctuations in interest rates will there-
fore have an impact on Pandox’ earnings. In order
to limit its fi nancial risk, the Company’s average
fi xed interest period is 1.8 years. The full effect of a
change in interest rates is accordingly not felt by
Pandox for several years.
Currency risk
Pandox’ policy is to hedge the major part of its cur-
rency exposure, including shareholders’ equity, by
fi nancing properties in local currencies and by hed-
ging through means of appropriate currency
instruments. Transaction exposure is limited as
revenue and costs are usually in the same currency.
Sensitivity analysis
The table below illustrates how Pandox’ earnings
are affected by changes in certain key factors.
40 PANDOX 2007
VÄRDERING OCH SKATTER
Hotel property portfolio value
VALUATION AND TAX SITUATION
The valuation of hotel properties with their speci-
fi c characteristics demands extensive knowledge
and expertise of the hotel market and hotel
operations.
Cash fl ow valuation
Pandox continuously evaluates all of its hotel pro-
perties in accordance with a valuation model based
on the properties’ cash fl ow, and which is adapted
to the characteristics specifi c to the hotel industry.
The cash fl ow calculation is built up from under-
neath, with the property operator’s income state-
ment as the point of departure. This in turn is based
on assumptions as to how the underlying hotel mar-
ket will develop in terms of occupancy and average
rates, as well as how each specifi c operator’s
respec tive key ratios and fi gures develop in this
market. The operator company’s results and fore-
casts, together with the formulation of the agree-
ment, provide underlying data to estimate revenues,
which subsequently constitute the basis of the cash
fl ow calculation. The value calculated is the present
value of the next ten years’ cash fl ow, with a supple-
ment for the present value of the hotel properties’
residual value after ten years.
The valuation model is based on the following
assumptions:
• Changes in rental revenue during the calculation
period are based on the formulation of individual
agreements and on underlying factors.
• Infl ation is assumed to amount to an average of
2.0 percent annually during the calculation period.
• Operating costs are assumed to increase in line
with infl ation.
• 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’ 43 hotel properties
in accordance with this method resulted in a total
value as of December 2007 that substantially
exceeds the book value. In accordance with the
Swedish Financial Accounting Standards Council’s
recommendation No 17, each individual property’s
recovery value was reconciled 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 holdings are re-
ported for accounting purposes as fi xed assets.
The consolidated book value as of 31 Decem-
ber 2007 amounted to SEK 7,803.7 M exclud-
ing equipment, of which the consolidated sur-
plus values amounted to SEK 1,631.6 M.
Accounting of deferred tax
Pandox applies the Swedish Financial Account-
ing Standards Council’s recommendation (RR 9)
on income tax. In short, this recommendation
implies that both deferred tax liabilities and tax
claims are to be included in the fi nancial state-
ments and that any changes will affect the in-
come statement as deferred tax.
Pandox’ consolidated balance sheet as of 31
December 2007 includes a deferred tax liability
in the net amount of SEK 229.2 M corresponding
to the difference between a deferred tax liability
of SEK 352.5 M and a deferred tax claim of SEK
123.3 M. The deferred tax liability refers mainly
to the estimated deferred tax based on the diffe-
rence between the properties’ consolidated book
value and the fi scal residual value of each respec-
tive legal unit. The difference in value has arisen
as an effect of surplus value upon acquisitions of
property in companies, known as pure intrinsic
acquisitions, as well as fi scal depreciation that
exceeds book depreciation. Tax deduction for
annual depreciation of properties has normally
Crowne Plaza Brussels City Centre
PANDOX 2007 41
DEFINITIONER
Defi nitions of key data
Property related key fi gures
Direct yield 1
Adjusted 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 equip-
ment rental is included in the numerator.
Direct yield 2
Adjusted operating net including property related
administration as a percentage of the book value of
the properties.
Operating net
Hotel property revenue less operating and main-
tenance costs, property tax, ground rent and other
property costs.
Property related administration
The portion of total administration costs that is
directly related to the management and develop-
ment of a property. Other administration costs
include central administration and costs for main-
taining the Company’s market listing.
Adjusted operating net
Operating net adjusted for properties sold and
purchased during the year.
Total property revenue
The sum of rental revenue and other property
revenue.
Financial key fi gures
Return on equity
Profi t after net fi nancial items and paid tax as a
percentage of average equity.
Return on total assets
Profi t after net fi nancial items, plus fi nancial costs
as a percentage of average total assets.
Interest coverage ratio
Profi t after net fi nancial items, less one-off items,
plus interest costs as a percentage of interest costs.
Equity/asset ratio
Equity at the end of the year as a percentage of total
assets.
Hotel market related key fi gures
Occupied rooms
Number of sold room nights during a given period
of time – normally one year.
Available rooms
Available room capacity during a given period
of time – normally one year.
Occupancy rate
Number of occupied rooms as a percentage of
the number of available rooms.
Average room rate
Total 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 penetration
The performance of an individual hotel in relation to
the average of the market.
GOP (Gross Operating Profi t)
Net profi t in hotel operator companies before
depreciation, rent, net fi nancial items and taxes.
DEFINITIONS
been made at the rate of 3 to 5 percent of a prop-
erty’s acquisition cost. As a result, the amount of
fi scal depreciation exceeds that of book deprecia-
tion, and the difference between the book value
and the fi scal 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 ownership estimated for each
property, and corresponds to an average tax rate
of approximately 10 percent. This is based on the
Swedish Financial Accounting Standards Council’s
regulation for assessing deferred tax upon pure
intrinsic acquisitions, where the tax effect is taken
into consideration when calculating the acquisition
price. The deferred tax relating to the difference
between book depreciation and fi scal depreciation
is calculated based on the applicable tax rate.
The deferred tax claim pertains mainly to defi -
cit deductions and the fi scal surplus value regard-
ing limited partnerships. At the end of 2007, there
were remaining defi cit deductions totalling SEK
272 M in the Swedish companies. The valuation of
deferred tax claims is based on their potential utili-
sation against future taxable profi ts, and is calcu-
lated according to the applicable tax rate. Conse-
quently, no defi cit deductions in non-Swedish
companies were reported at the end of 2007.
42 PANDOX 2007
Condensed consolidated income statement
SEK M 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Property operations
Rental revenue 218.5 254.0 476.3 551.1 536.2 535.1 562.7 548.8 605.0 747.5
Other property revenue 16.1 18.0 21.4 24.0 26.0 26.5 30.2 25.2 29.9 34.7
Total property revenue4) 234.6 272.0 497.7 575.1 562.2 561.6 592.9 574.0 634.9 782.2
Operating and maintenance costs –47.8 –54.2 –88.9 –96.7 –93.2 –100.1 –118.7 –103.8 –111.5 –126.3
Operating net 186.8 217.8 408.8 478.4 469.0 461.5 474.2 470.2 523.4 655.9
Depreciation1), 2) –36.0 –40.3 –45.8 –56.2 –63.2 –64.3 –70.3 –78.2 –91.3 –129.3
Income from property operations 150.8 177.5 363.0 422.2 405.8 397.2 403.9 392.0 432.1 526.6
Hotel operations
Operating revenue 18.5 – 28.2 39.7 60.1 81.3 216.8 250.2 420.0 788.8
Operating costs1) –18.7 – –25.5 –39.3 –58.2 –75.7 –204.4 –239.4 –407.7 –768.2
Operating income hotel operations4) –0.2 – 2.7 0.4 1.9 5.6 12.4 10.8 12.3 20.6
Gross income 150.6 177.5 365.7 422.6 407.7 402.8 416.3 402.8 444.4 547.2
Administrative costs1) –19.2 –21.6 –31.8 –33.9 –34.5 –35.5 –39.3 –42.5 –51.9 –55.4
Non-recurring revenue/expense 1.4 5.3 1.9 8.6 28.8 7.4 – 444.4 39.9 3.4
Operating income 132.8 161.2 335.8 397.3 402.0 374.7 377.0 804.7 432.4 495.2
Non-recurring fi nancial charges – – – – – – –56.1 – – –
Net fi nancial items for current operations –71.3 –77.5 –150.7 –178.1 –171.0 –159.2 –148.4 –137.4 –166.4 –232.4
Income after fi nancial items 61.5 83.7 185.1 219.2 231.0 215.5 172.5 667.3 266.0 262.8
Deferred tax3) – – –27.0 –28.3 –44.2 –50.3 –47.6 36.8 –33.0 –23.5
Tax – –0.3 –1.4 –0.2 –0.1 11.4 –0.2 –15.8 –31.4 –9.3
Income/loss for the year 61.5 83.4 156.7 190.7 186.7 176.6 124.7 688.3 201.6 230.0
1) The depreciation rate on properties is 1.0 percent as of 2000 and amounted in 2007 to 129.3. Depreciation in administration and hotel operations amounted in 2007 to SEK 0.3 M respectively SEK
0.0 M (in 2006 to respectively SEK 0.2 M and SEK 0.0 M; in 2005 to SEK 0.3 M and SEK 0.0 M; in 2004 to SEK 0.3 M and 0.0 M; in 2003 to SEK 0.5 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 and in 1998 to SEK 0.5 M and SEK 0.2 M).2) A depreciation rate of 1.0 in 1999 would have amounted to SEK 29.4 M (in 1998 to SEK 26.5 M). 3) As of 2001, Pandox applies the Swedish Accounting Standards Council’s recommendation on income tax (RR:9). Comparative fi gures for 2000 have been restated to take this into account.4) The 2004 fi gure has been adjusted regarding rental revenue within hotel operations of SEK 3.7 M.
TEN-YEAR OVERVIEW
PANDOX 2007 43
Condensed consolidated balance sheet
SEK M, as of 31 December 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Assets
Properties including hotel equipment 2,085.2 2,393.7 4,784.5 5,036.8 4,961.4 5,276.7 5,262.8 5,477.5 6,907.5 8,223.8
Other fi xed assets 16.5 14.5 13.0 5.4 6.9 7.2 6.9 113.7 172.8 139.0
Current assets 14.6 17.9 61.9 37.1 29.5 34.6 58.6 201.7 174.4 223.1
Cash and bank 82.9 3.9 16.4 86.7 213.2 137.5 58.0 236.4 174.1 272.8
Total assets 2,199.2 2,430.0 4,875.8 5,166.0 5,211.0 5,456.0 5,386.3 6,029.3 7,428.8 8,858.7
Equity and liabilities
Shareholders’ equity 830.1 883.6 1,670.8 1,772.1 1,853.9 1,919.2 1,923.0 2,307.7 2,272.3 2,407.7
Deferred tax liability – – 8.8 37.0 83.5 135.9 184.3 208.5 279.7 352.5
Interest bearing liabilities 1,281.8 1,463.6 2,934.7 3,178.5 3,070.6 3,211.9 3,080.4 3,165.3 4,398.5 5,516.8
Non-interest bearing liabilities 87.3 82.8 261.5 178.4 203.0 189.0 198.5 347.8 478.3 581.7
Total equity and liabilities 2,199.2 2,430.0 4,875.8 5,166.0 5,211.0 5,456.0 5,386.3 6,029.3 7,428.8 8,858.7
Key data
Property related key data
Book value of properties including hotel equipment, SEK M 2,085.2 2,393.7 4,784.5 5,036.8 4,961.4 5,276.7 5,262.8 5,477.5 6,907.5 8,223.8
Total property revenue, SEK M 234.6 272.0 497.7 575.1 562.2 561.6 592.9 574.0 634.9 782.2
Operating net, SEK M 186.8 217.8 408.8 478.4 469.0 461.5 474.2 470.2 523.4 655.9
Adjusted operating net, SEK M 1) 194.6 229.2 459.4 484.3 472.7 464.1 474.2 433.3 561.0 706.4
Direct yield 1, % 2) 9.3 9.6 9.6 9.6 9.5 9.3 9.1 8.5 8.1 8.6
Direct yield 2, % 8.9 9.2 9.3 9.3 9.2 9.0 8.8 8.2 7.9 8.4
Financial key data
Interest coverage ratio, multiple 1.8 2.0 2.2 2.2 2.3 2.3 2.6 2.63) 2.4 2.1
Return on total assets, % 6.6 7.0 8.1 8.0 7.8 7.1 7.0 14.2 5.9 6.1
Return on equity, % 7.6 9.7 11.6 11.0 12.6 12.0 12.0 30.8 10.4 11.0
Equity/assets ratio, % 37.7 36.4 34.6 34.3 35.6 35.2 35.7 38.3 30.6 27.2
Cash fl ow from current operations, SEK M 96.8 119.1 228.2 267.2 265.8 272.4 298.9 301.4 317.6 389.0
Investments excluding acquisitions, SEK M 22.6 28.6 101.3 149.1 67.3 60.8 70.5 165.1 282.6 274.9
Property acquisitions, SEK M 260.0 331.0 2,340.3 141.9 – 370.7 – 661.3 1,327.8 1,063.4
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 acquired properties, which were not charged any internal rent in 2005.3) Excluding non-recurring income due to the sale of hotel properties.
44 PANDOX 2007
Quarterly data 2006–2007
CONDENSED INCOME STATEMENTS
2006 2007
SEK M Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Total property revenue 134.3 154.8 161.8 184.0 165.0 189.5 204.6 223.1
Operating net 110.3 129.3 134.0 149.7 135.5 160.7 174.2 185.5
Income from property operations 89.2 109.0 109.0 124.8 105.9 129.9 140.4 150.4
Income from hotel operations –4.1 7.9 4.9 3.6 –2.7 9.9 1.2 12.2
Operating income 83.5 114.2 120.6 114.0 91.0 125.3 127.5 151.4
Net fi nancial items –34.4 –37.2 –46.7 –48.1 –49.3 –52.5 –64.2 –66.4
Income after fi nancial items 49.1 77.0 73.9 65.9 41.7 72.8 63.3 85.0
Income after tax 38.5 64.7 56.4 42.0 32.6 56.8 50.0 90.6
CONDENSED CONSOLIDATED BALANCE SHEETS
2006 2007
SEK M 31 Mar 30 Jun 30 Sep 31 Dec 31 Mar 30 Jun 30 Sep 31 Dec
Assets
Properties including hotel equipment 5,499.5 6,438.7 6,924.2 6,907.5 7,260.0 7,793.7 8,141.0 8,223.8
Other fi xed assets 113.8 126.5 148.0 172.8 152.9 152.5 152.6 139.0
Current assets 190.5 162.6 175.0 174.4 161.9 213.7 221.4 223.1
Cash and bank 266.2 226.4 186.5 174.1 229.8 229.2 258.2 272.8
Total assets 6,070.0 6,954.2 7,433.7 7,428.8 7,804.6 8,389.1 8,773.2 8,858.7
Equity and liabilities
Shareholders’ equity 2,345.0 2,273.8 2,331.1 2,272.3 2,317.8 2,369.7 2,268.7 2,407.7
Deferred tax liability 218.9 235.0 263.3 279.7 315.6 367.3 369.7 352.5
Interest bearing liabilities 3,148.3 4,084.0 4,450.1 4,398.5 4,631.8 5,102.1 5,562.4 5,516.8
Non-interest bearing liabilities 357.8 361.4 389.2 478.3 539.4 550.0 572.3 581.7
Total equity and liabilities 6,070.0 6,954.2 7,433.7 7,428.8 7,804.6 8,389.1 8,773.2 8,858.7
PROPERTY RELATED KEY DATA
2006 2007
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Direct yield 1, % 8.0 8.1 7.9 8.1 7.7 8.7 8.7 9.1
FINANCIAL KEY DATA
2006 2007
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Interest coverage ratio, multiple 2.4 2.8 2.3 2.4 1.8 2.4 2.0 2.3
Return on total assets, % 5.5 6.1 5.5 5.9 4.9 6.4 5.9 6.9
Return on equity, % 6.6 10.1 12.0 10.4 7.2 12.3 11.0 13.4
Equity / assets ratio, % 38.6 32.7 31.4 30.6 29.7 28.2 25.9 27.2
Cash fl ow from current operations, SEK M 62.2 87.0 77.9 90.3 71.3 104.6 97.1 116.0
Investments excluding acquisitions, SEK M 63.0 65.6 85.4 68.6 79.7 73.2 93.4 28.6
Property acquisitions, SEK M – 916.4 411.4 – 210.7 332.3 520.4 –
QUARTERLY DATA
PANDOX 2007 45
Property revenues and total revenuesPandox’ property revenues for 2007 amounted to SEK 782.2 M
(634.9), which for comparable units represented an increase
of 10.2 percent against last year. The Group’s total revenue
amounted to SEK 1,410.7 M (967.5).
Acquisitions during the yearFive hotel properties were acquired during the year.
In March, the hotel properties and operations of Quality Hotel
Park and Best Western Hotell Skogshöjd in Södertälje with a total
of 374 rooms were acquired. In June, Crowne Plaza Antwerp
and Holiday Inn Brussels Airport with 262 and 310 rooms
respectively were acquired including the hotels’ operations.
In July, InterContinental Montreal with 357 rooms was acquired.
A management agreement was signed with Inter Continental
Hotels Group regarding the operation of the hotel. Total acquisi-
tion cost for the fi ve hotels amounted to SEK 1.0 billion.
Profi tsThe pre-tax profi t for 2007, excluding non-recurring items,
amounted to SEK 259.4 M (226.1). Profi t after tax, including
non-recurring items, amounted to SEK 230.0 M (201.6).
Cash fl owCash fl ow from ongoing operations, excluding non-recurring
items, amounted to SEK 389.0 M (317.6).
Financial statements 2007
46 PANDOX 2007
Report of the Board of Directors
The Board of Directors and Chief Executive
Offi cer of Pandox AB, Swedish corporate regis-
tration number 556030-7885, hereby submit
the annual report and con solidated accounts of
the Company for the fi nancial year 2007.
Operations and strategy
Pandox is one of Europe’s leading 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 devel-
oped strategic plans for each hotel, enables the
creation of good prerequisites for stable and im-
proved cash fl ows, and thereby growth in value
for the shareholders.
Pandox’ strategy is to own one type of pro-
perty – hotel properties. Its focus is strengthe-
ned by a prioritised market segment.
Pandox is to own large hotel properties in
Sweden, major locations in Europe, as well as
developing regions in Eastern Europe as well as
North America.
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 inde-
pendent distribution channels create strong
market positions and thereby stable revenues.
Revenues are created by fl exible agreements
related to the operator’s turnover and results or
through management agreements where Pan-
dox 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 fl ows and reducing risks.
At the end of the year, the Company’s portfo-
lio contained 44 hotel properties and ten hotel
operations of which one asset management
assignment. Pandox owns and develops assets
in Sweden, Denmark, Belgium, Germany,
Switzerland, the United Kingdom, Canada and
the Bahamas.
Accounting principles
Pandox does not apply IFRS. As an unlisted
company, Pandox is not subject to the IFRS
accounting requirements. Pandox applies the
stipulations of the Swedish Annual Accounts Act
and generally accepted accounting principles,
as well as the recommendations of the Swedish
Accounting Standards Board unless otherwise
stated.
Ownership situation
Pandox is since the beginning of 2004 owned by
the Norwegian companies Eiendomsspar AS
and Sundt AS through their wholly owned
Swedish company APES Holding AB.
USA
The American economy has slowed, and 2007
showed the lowest growth of GDP in fi ve years.
Anxiety in the fi nancial markets led to banks in-
troducing restrictions, which could risk deepe-
ning the slow-down. Continued reductions in
interest rates along with fi nancial support
packages are expected to help the economy.
Occupancy for 2007 was in line with last year
(63 percent) while average rates increased by
6 percent. In New York, prices rose by 12 per-
cent and occupancy was just over last year’s
levels.
Good growth in Europe
Europe experienced broad economic growth, al-
beit at a slowing pace. The hotel market in 2007
was primarily driven by rising average rates. Up
to the end of December, Europe had increased
by about 7 percent in RevPAR compared with
last year. In London, rising prices continued to
fuel growth and RevPAR had increased by about
10 percent by December compared with the
same period last year. Growth is however slowing
in London. The market in Brussels developed
considerably better than last year with a rise in
RevPAR of 9 percent. In Berlin, a certain recov-
ery could be seen from the increased supply that
characterised the market in recent years. Occu-
pancy increased by 5 percent while average
rates declined by 2 percent – due partly to an
adjustment from last year’s Football World Cup.
From a profi tability viewpoint, 2007 was an
historically strong year for the Swedish hotel
industry. Growth for the country as a whole was
8.9 percent, with the major cities showing the
best trends. Stockholm’s hotel market continued
at a high activity level with a rise in prices being
the primary growth engine. Occupancy has how-
ever started to decline, especially in the centre of
the city. Overall, RevPAR increased for Greater
Stockholm by an excellent 11 percent compared
with the same period last year.
The Gothenburg market grew by roughly
4 percent for the year, due principally to higher
average rates. In Malmö, the market continued
to show good demand and, like Gothenburg,
with growth primarily in prices. RevPAR
increased by more than 12 percent compared
with last year.
Pandox portfolio developed well
Pandox’ hotels in Stockholm experienced good
trends and performed in line with the market.
Scandic Upplands-Väsby and Scandic Järva
Krog were in line with market growth levels,
while Quality Hotel Nacka gained market shares
during the year.
Elite Park Avenue Hotel and Scandic Mölndal
in Gothenburg developed well in 2007, while
Scandic Crown had less capacity due to refur-
bishment work, thus leading to slower growth
compared with the market.
The strong trends of the Scandic St Jörgen in
Malmö held to the end of the year with above all
good rate developments and conference sales.
Scandic Copenhagen performed well in a
market with declining occupancy. The develop-
ment program, where the hotel has been given a
new and better conference product, has resulted
in a rise in revenues. The operation of Copenha-
gen Hotel 27 was transferred on 1 July to Choice,
who will operate the hotel under Clarion Collec-
tion Hotel Twentyseven. Revenues developed as
planned. Hilton Bremen performed well and
gained market shares. Scandic Lübeck strength-
ened its position and performed signifi cantly bet-
ter compared with last year. Hotel Berlin, Berlin
increased RevPAR by more than 10 percent
between the years, and gained market shares
despite the hotel undergoing refurbishment
work. Occupancy rose while average rates still
need to improve.
Hilton London Docklands performed well in
its geographic sub-market, which grew primarily
in price. New competition in the vicinity has put
pressure on RevPAR.
Pandox’ geographic sub-market in Brussels
(Place Rogier) increased by 9 percent during
the year. Crowne Plaza developed well and is
currently leader in RevPAR in the area. Hilton
Brussels City also experienced a strong 2007
FINANCIAL STATEMENTS
PANDOX 2007 47
with good effectiveness improvements. Pandox’
hotel in Antwerp and Scandic Grand Place
developed in line with the market, as did Radis-
son SAS Hotel in Basle which will start a major
refurbishment project in the beginning of 2008.
Revenues and operating net – property
operations
Property management revenues for the year
amounted to SEK 782.2 M (634.9). For compa-
rable units, the portfolio grew by +10.2 percent.
This increase is due to a good underlying hotel
economic climate in all of Pandox’ sub-markets,
new agreements with better conditions, and that
last year’s three major refurbishment projects
are now running with higher capacity. Property
costs excluding depreciation amounted to SEK
126.3 M (111.5). The increase is mainly due to
the addition of new acquisitions.
The operating net rose by SEK 132.5 M to
SEK 655.9 M (523.4), and for comparable units
the operating net improved by SEK 60.9 M.
Direct yield was 8.6 percent (8.1).
Revenues and income – hotel operations
Revenues from hotel operations come from
hotels managed directly by Pandox or via man-
agement agreements. There were eleven such
operations in 2007 (nine in the beginning of
2008) as well as one asset management assign-
ment. Total revenues from hotel operations
amounted to SEK 788.8 M (420.0) and the profi t
amounted to SEK 20.6 M (12.3). Pro forma reve-
nues on a full-year basis were approximately
SEK 950 M. Extensive refurbishment work has
been carried out at Hotel BLOOM! and Clarion
Collection Hotel Twentyseven during the year,
which reduced capacity in hotel operations.
Income
The Group’s profi t for 2007 before tax, excluding
non-recurring items, amounted to SEK 259.4 M
(226.1). For comparable units, the profi t in-
creased by about SEK 24 M. Profi t after tax, in-
cluding non-recurring items, amounted to SEK
230.0 M (201.6).
Financing and cash fl ow
Net fi nancial items relating to current operations
for the period January–December 2007
amounted to SEK –232.4 M (–166.4). The
Group’s interest-bearing liabilities amounted as
of 31 December 2007 to SEK 5,516.8 M
(4,398.5). The loan portfolio has a spread due-
date structure with an average fi xed-interest pe-
riod of 1.8 years. The average interest rate on
loans at 31 December was 4.9 percent. Financ-
ing of Swedish properties has been made in
Swedish kronor (SEK), while properties outside
Sweden have essentially been fi nanced in each
respective local currency. Available liquid funds,
including unutilised credit facilities totalling SEK
400.5 M, amounted to SEK 673.3 M (675.5).
Cash fl ow before changes in working capital and
investments, excluding non-recurring items and
tax, amounted to SEK 389.0 M (317.6).
Investments
The Pandox Group’s investments, excluding ac-
quisitions, amounted to SEK 274.9 M (282.6).
Major development programs during the year
were the completion of Clarion Collection Hotel
Twentyseven in Copenhagen, the refurbishment
of Hotel BLOOM! in Brussels, Hotel Berlin, Ber-
lin, as well as Scandic St Jörgen and Scandic
Hallandia located respectively in Malmö and
Halmstad.
The book value of hotel properties, including
furniture, fi xtures and equipment, amounted to
SEK 8,223.8 M (6,907.5). The market value of
the hotel properties signifi cantly exceeds their
book value.
The hotel properties Best Western Hotell
Skogshöjd and Quality Hotel Park in Södertälje,
with a total of 374 rooms, were acquired in
March. Crowne Plaza Antwerp with 262 rooms,
Holiday Inn Brussels Airport with 310 rooms,
and InterContinental Montreal with 357 rooms
were acquired during the summer at a total
acquisition cost of SEK 1,063 M.
Taxes
The Swedish Tax Agency has in a reassessment
notice dated October 2007, decided to increase
the assessed income of a number of Pandox’s
subsidiaries by in total SEK 430 M (correspond-
ing tax effect of SEK 120.4 M) as a consequence
of the sale of real estate through non-Swedish
subsidiaries carried out in 2005. The decision
has been appealed to the county administrative
court. The case has been put on hold awaiting
the Supreme Administrative Court’s judgement
in another (non-Pandox related) case. The Com-
pany is of the opinion that all transactions and
claims have been made in accordance with ap-
plicable laws.
Personnel
Central administration counted 16 employees as
at 31 December 2007. Figures concerning aver-
age number of employees, as well as salaries
and other remuneration are set out in Note 15.
The work of the Board of Directors
during 2007
The Board of Directors of Pandox has been com-
posed of six members since the Annual General
Meeting of Shareholders held in 2007. During
the year, the Board has held one statutory con-
stituent meeting and four ordinary meetings in
accordance with the established annual agenda.
The meetings have reviewed and discussed ex-
ternal and internal reporting of operating results
and the Company’s fi nancial position as well as
various business matters. Other important items
that are regularly studied and reviewed each
year are marketing, strategy, fi nance, and
budget issues.
Parent Company
Property activities in the Group’s property-
owning companies are administered by staff em-
ployed by the Parent Company, Pandox AB. The
cost of these services has been invoiced to the
Group’s subsidiaries. Invoicing in 2007 amounted
to SEK 46.6 M (38.2). The loss for the year
amounted to SEK –13.1 M (–8.3).
Outlook for 2008
The outlook for 2008 is more uncertain com-
pared with one year ago. Pandox’ principal sce-
nario is that the market makes a soft landing with
regard to demand with a continued good hotel
market in most of the areas where the Company
is committed. RevPAR trends will be driven by a
combination of volume and price, with greater
focus on maintaining occupancy comparable
with 2007. The proportion of transactions will fall
and the bid processes will change towards a
greater share of off-market deals. Yields are ex-
pected to increase as a result of more expensive
capital and greater insecurity. The latter could
benefi t Pandox, because the Company is able to
act from a more long-term perspective than cer-
tain fi nancial players. Overall, Pandox’ revenues
and profi ts for 2008 are expected to exceed last
year, due in part to the completion of several de-
velopment projects in the fi rst part of the year.
48 PANDOX 2007
Income statement
Group Parent Company
SEK M 2007 2006 2007 2006
Property operations
Rental revenue note 2, 3 747.5 605.0 – –
Other property revenue 34.7 29.9 – –
Total property revenue 782.2 634.9 – –
Property costs –126.3 –111.5 – –
Operating net 655.9 523.4 – –
Depreciation as per plan note 4 –129,3 –91.3 – –
Income from property operations 526.6 432.1 – –
Hotel operations
Operating revenue 788.8 420.0 – –
Operating costs –768,2 –407.7 – –
Operating income from hotel operations note 2, 15 20.6 12.3 – –
Gross income 547.2 444.4 – –
Administrative costs note 4, 14, 15 –55.4 –51.9 –50.1 –48.5
Other revenue – – 46.6 38.2
Operating income 491.8 392.5 –3.5 –10.3
Interest income note 6 10.0 4.2 174.3 116.0
Interest expense –236.3 –167.8 –182.3 –146.4
Dividend from shares in subsidiaries – – – 1.5
Other fi nancial income and costs –6.1 –2.8 –13.0 9.2
Extraordinary income note 5 3.4 39.9 – 18.5
Net fi nancial items –229.0 –126.5 –21.0 –1.2
Shareholders’ contribution – – 0.3 –
Income before tax 262.8 266.0 –24.2 –11.5
Tax note 7 –9.3 –31.4 11.1 3.2
Deferred tax note 7 –23.5 –33.0 – –
INCOME FOR THE YEAR 230.0 201.6 –13.1 –8.3
Specifi cation of external revenue
Revenue from property operations 782.2 634.9 – –
Of which internal rentals –160.3 –87.4 – –
Revenue from hotel operations 788.8 420.0 – –
Total external revenue 1,410.7 967.5 – –
FINANCIAL STATEMENTS
PANDOX 2007 49
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 2007
increased in relation to the previous year and
amounted to SEK 747.5 M (605.0).
Other property revenue
Other property revenue is primarily comprised
of costs debited for heat, electricity and property
tax.
BREAKDOWN OF OTHER PROPERTY REVENUE
SEK M 2007 2006
Payment for operating costs 10.6 9.9
Invoicing of property tax 24.1 20.0
Total 34.7 29.9
Property costs
Operating costs
Operating 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 costs
Maintenance 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 – are
responsible for the greater part of interior main-
tenance of the properties.
Ground rent
A total of seven properties owned by Pandox
are held under site leasehold rights. The condi-
tions and maturities in all cases are based on
prevailing market terms.
Property tax
Pandox’ 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 costs
These costs include costs of legal counsel on
leasing matters, insurance premiums, and
costs of leasing external premises.
BREAKDOWN OF PROPERTY COSTS
SEK M 2007 2006
Operating costs 20.6 20.7
Maintenance costs 39.4 35.7
Ground rents 9.7 6.3
Property tax 49.9 44.1
Other costs 6.7 4.7
Total 126.3 111.5
Operating net
The operating net for 2007 amounted to
SEK 655.9 M, representing an increase of
SEK 132.5 M. Adjusted direct yield, excluding
administrative costs, amounted to 8.6 percent
(8.1).
Hotel operations
For accounting purposes, the hotel operations
conducted by Pandox are charged with inter-
nal rent. The internal rent is linked to the oper-
ator’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 2007,
fi ve hotel properties including hotel operations
were acquired; Best Western Hotell Skogshöjd
and Quality Hotel Park in Södertälje, Crowne
Plaza Antwerp, Holiday Inn Brussels Airport
and InterContinental Montreal. In July an
agreement was made with Choice Hotels
Scandinavia regarding takeover of the hotel
operations in Copenhagen Hotel 27. With that,
ten hotel operations are included in Pandox
port folio at the end of 2007 of which eight were
directly operated by Pandox and two through
management agreements.
Administrative costs
Administrative costs relate to central adminis-
tration, as well as foreign hotel property ad-
ministration. All central administrative staff is
based at the Stockholm offi ce. The remunera-
tion of staff and auditors is set out in Notes 14
and 15.
50 PANDOX 2007
Balance sheet
Group Parent Company
SEK M 2007 2006 2007 2006
ASSETS
Fixed assets
Tangible fi xed assets
Properties note 8 7,803.8 6,631.8 – –
Equipment note 9 420.8 276.5 0.8 0.9
8,224.6 6,908.3 0.8 0.9
Financial fi xed assets
Shares and participations in subsidiaries note 10 – – 3,293.5 2,668.9
Amounts due by Group companies – – 2,915.4 2,566.0
Other long-term receivables 14.9 35.1 13.2 12.5
14.9 35.1 6,222.1 5,247.4
Deferred taxes recoverable 123.3 120.7 – –
Total fi xed assets 8,362.8 7,064.1 6,222.9 5,248.3
Current assets
Inventories 5.6 2.2 – –
Accounts receivables 73.3 62.9 – –
Tax receivables 0.2 4.2 – –
Other receivables 113.5 86.1 1.5 1.6
Prepaid costs and accrued revenue 30.5 19.1 3.3 2.8
Other shares and participations – 16.1 – –
Cash and bank 272.8 174.1 75.4 52.0
Total current assets 495.9 364.7 80.2 56.4
TOTAL ASSETS 8,858.7 7,428.8 6,303.1 5,304.7
Comments on the balance sheet
Properties and equipment
Five hotel properties were acquired in 2007.
Depreciation of properties amounted to SEK
89.0 M (62.7), and the year’s investments to
SEK 219.7 M (219.2). The book value of equip-
ment, including hotel furniture and fi xtures
amounted to SEK 420.8 M (276.5). Deprecia-
tion amounted to SEK 40.6 M (28.8) and in-
vestments to SEK 55.4 M (63.4).
The greater part of the book value of furni-
ture, fi xtures and equipment, representing SEK
420.8 M, pertains to that used by hotel opera-
tors. In certain cases, these items are included
as an unspecifi ed 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
properties, including hotel furniture, fi xtures
and equipment, amounted to SEK 8,223.8 M.
Other items consist of administration equip-
ment with a book value of SEK 0.8 M.
Other long-term receivables
Pertain to a long-term promissory note and to
a pledged deposit.
Inventories
Relate to stocks of consumables in the hotel
operations.
Trade accounts receivable
Pandox’ accounts receivable normally consists
of rental receivables and trade receivables in
hotel operations. Since rent is generally paid
quarterly and monthly in advance, amounts
outstanding at year-end mainly comprise ac-
crued revenue-based rents.
Other receivables
Short-term receivables such as those pertaining
to costs that are to be debited to external parties.
Prepaid costs and accrued revenue
This item is comprised mainly of prepaid costs
for the following year, such as insurance pre-
miums and rents.
FINANCIAL STATEMENTS
PANDOX 2007 51
Group Parent Company
SEK M 2007 2006 2007 2006
EQUITY AND LIABILITIES
Equity
Restricted equity
Share capital 373.5 373.5 373.5 373.5
Restricted reserves 886.8 840.3 830.0 830.0
1,260.3 1,213.8 1,203.5 1,203.5
Unrestricted equity
Unrestricted reserves 917.4 856.9 394.4 523.6
Profi t for the year 230.0 201.6 –13 .1 –8.3
1,147.4 1,058.5 381.3 515.3
Total shareholders’ equity 2,407.7 2,272.3 1,584.8 1,718.8
Untaxed reserves
Tax allocation reserve 2004 – – – 0.3
– – – 0.3
Liabilities
Liabilities to credit institutions note 11 5,516.8 4,398.5 3,894.3 2,963.3
Trade accounts payable 103.7 88.1 16.4 15.6
Liabilities to Group companies – – 767.8 578.8
Deferred tax liability note 7 352.5 279.7 – –
Tax liabilities 7.0 3.9 – –
Other liabilities 269.3 234.8 3.2 2.3
Accrued expenses and prepaid revenue note 12 201.7 151.5 36.6 25.6
Total liabilities 6,451.0 5,156.5 4,718.3 3,585.6
TOTAL EQUITY AND LIABILITIES 8,858.7 7,428.8 6,303.1 5,304.7
Pledged assets note 13 4,470.3 4,099.9 12.2 12.2
Contingent liabilities note 13 1.3 – 1,548.6 1,344.2
Cash and bank deposits
The 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 fi xed term bank deposit. In addi-
tion, Pandox has unutilised credit facilities for a
total of SEK 400.5 M.
Restricted reserves Parent Company
Opening balance adjusted for non exercised
options.
Liabilities to credit institutions
As at 31 December 2007, Pandox’ total interest-
bearing liabilities amounted to SEK 5,516.8 M,
spread over eight lenders and six currencies.
Because fi nancing is arranged mainly through
long-term credit agreements, the majority of
the debt is considered as long-term. As regards
fi xed interest rates, debt amounting to SEK
3,684.6 M carries a fi xed interest rate for a pe-
riod of less than one year. Further details are
set out in the Financial Overview section on
page 37.
Deferred tax liability
In 2007 the deferred tax items are accounted
for on a gross basis. Further details are set out
in the Pandox’ Tax Situation section on page 40.
Accrued expenses and prepaid income
The amount pertains essentially to accrued
interest expense and prepaid rent.
Pledged assets
This item refers mainly to property mortgages
pledged to credit institutions as collateral for
loans.
Contingent liabilities
The Parent Company’s contingent liabilities
refer mainly to guarantees to banks with regard
to subsidiaries’ debts.
52 PANDOX 2007
Changes in equity
SEK M Share capitalRestricted
reservesUnrestricted
reservesProfi t
for the year Total
Group 2006
Opening balance 373.5 848.5 397.4 688.3 2,307.7
Appropriation of profi ts – 0.7 687.6 –688.3 0.0
Dividend – – –137.0 – –137.0
Group contribution – – –82.8 – –82.8
Translation differences including tax effect – –8.9 –8.3 – –17.2
Profi t for the year – – – 201.6 201.6
373.5 840.3 856.9 201.6 2,272.3
SEK M Share capitalRestricted
reservesUnrestricted
reservesProfi t
for the year Total
Group 2007
Opening balance 373.5 840.3 856.9 201.6 2,272.3
Appropriation of profi ts – –0.2 201.8 –201.6 0.0
Dividend – – –149.4 – –149.4
Group contribution – – –2.9 – –2.9
Translation differences including tax effect – 46.7 11.0 – 57.7
Profi t for the year – – – 230.0 230.0
373.5 886.8 917.4 230.0 2,407.7
SEK M Share capitalRestricted
reservesUnrestricted
reservesProfi t
for the year Total
Parent Company 2006
Opening balance 373.5 830.0 64.6 609.6 1,877.7
Appropriation of profi ts – – 609.6 –609.6 0.0
Dividend – – –137.0 – –137.0
Group contribution – – –13.6 – –13.6
Profi t for the year – – – –8.3 –8.3
373.5 830.0 523.6 –8.3 1,718.8
SEK M Share capitalRestricted
reservesUnrestricted
reservesProfi t
for the year Total
Parent Company 2007
Opening balance 373.5 830.0 523.6 –8.3 1,718.8
Appropriation of profi ts – – –8.3 8.3 0.0
Dividend – – –149.4 – –149.4
Group contribution – – 28.5 – 28.5
Profi t for the year – – – –13.1 –13.1
373.5 830.0 394.4 –13.1 1,584.8
Translation differences include a tax effect of SEK 5.4 M (10.0) regarding currency hedging of non-Swedish operations. The number of shares as at 31 December 2007
amounted to 24,900,000 with one vote per share and a nominal value of SEK 15 per share.
FINANCIAL STATEMENTS
PANDOX 2007 53
Cash fl ow statement
Group Parent Company
SEK M 2007 2006 2007 2006
Current operations
Profi t/loss before fi nancial items 491.8 392.5 –3.5 –10.3
Depreciation 129.6 91.5 0.3 0.2
Extraordinary income 3.4 39.9 – 18.5
Interest income 10.0 4.2 174.3 116.0
Interest expense and other fi nancial costs –242.4 –148.1 –195.3 –137.2
Tax paid –5.0 0.8 0.0 0.0
Cash fl ow from current operations before change in working capital and investments 387.4 380.8 –24.2 –12.8
Change in working capital
Increase/decrease (±) in operating receivables 21.5 –58.0 –0.5 1.6
Increase/decrease (±) in operating liabilities 96.3 34.6 241.5 –386.9
Total change in working capital 117.8 –23.4 241.0 –385.3
Cash fl ow from current operations after change in working capital and investments 505.2 357.4 216.8 –398.1
Investment operations
Investment shares and participations – – –624.6 –186.3
Investments in properties and equipment –275.1 –282.5 –0.2 –0.6
Acquisition of properties and equipment –1,063.4 –1,327.7 – –
Sale of fi xed assets – 0.5 – 0.1
Total investments –1,338.5 –1,609.7 –624.8 –186.8
Cash fl ow after investments –833.3 –1,252.3 –408.0 –584.9
Financing operations
Change in fi nancial fi xed assets 16.1 31.6 –350.1 17.8
Change in interest-bearing loans 1,062.7 1,298.1 930.9 603.7
Dividend –149.4 –137.0 –149.4 –124.0
Cash fl ow from fi nancing operation 929.4 1,192.7 431.4 497.5
Change in liquid funds 96.1 –59.6 23.4 –87.4
Liquid funds at the beginning of the year 174.1 236.4 52.0 139.4
Exchange rate difference in liquid assets 2.6 –2.7 – –
Liquid funds at the end of the year 272.8 174.1 75.4 52.0
Change in liquid funds 96.1 –59.6 23.4 –87.4
Adjusted for extraordinary income of SEK 3.4 M the cash fl ow from current operations amounts to SEK 389.0 M (317,6).
Cash fl ow per share rose to SEK 15.62 (12.76).
Comments on the cash fl ow statement
54 PANDOX 2007
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 accounts
The consolidated accounts for the Group in-
clude all subsidiaries as at fi nancial year-end.
The Swedish Financial Accounting Stan-
dards Council’s recommendation RR 1:00 has
been applied in the preparation of the fi nancial
statements. The consolidated accounts have
been prepared in accordance with the pur-
chase method, whereby assets and liabilities
have been taken over at market value in accord-
ance with an acquisition analysis. The differ-
ence between acquisition value and acquired
shareholders’ equity has been added to land
and buildings as surplus value. Surplus value
is amortised in accordance with the same prin-
ciple used for properties. Estimated deferred
tax liability with respect to Group surplus
value and estimated deferred tax recoverable
are reported net as a deferred tax liability in
the balance sheet.
Tax
Pandox applies the Swedish Financial Ac-
counting Standards Council’s recommenda-
tion RR 9 regarding income tax. Briefl y, the
recommendation implies that both deferred
tax liabilities and tax recoverable shall be in-
cluded in the fi nancial statements, and that
any changes shall affect the income statement
as deferred tax. The deferred tax relating to
the difference in book depreciation and fi scal
depreciation shall be calculated using the
prevailing tax rate.
Acquisitions before 2004 are based on
the deferred tax liability relating to the asset
acquisition and shall however be based on the
acquisition price and be calculated from each
respective property’s shortest estimated period
of ownership, resulting in an average tax rate of
approximately 10 percent.
The deferred tax recoverable pertaining to
estimated tax recoverable related to defi cit
deductions in the Company are valued based
on the estimated potential utilisation against
future taxable profi ts, and are calculated based
on the prevailing tax rate.
Property operations
The Group’s properties are reported in the
balance sheet as fi xed assets in view of the
purpose of the holdings being the long-term
ownership, management and development of
the properties.
Hotel operations
The hotel operations conducted by Pandox are
charged with internal rent for accounting pur-
poses. The internal rent is linked to the operat-
ing companies’ revenue and based on what are
deemed to be market conditions. The internal
rent is expensed to hotel operations, and car-
ried as revenue in property operations.
Tangible fi xed assets
When new construction and additions are
carried out, all direct costs including project
costs are capitalised. In the case of refurbish-
ments, direct costs related to the improvement
of properties compared with their original con-
dition 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 estab-
lished at the time of an acquisition, and where
the acquisition price is adjusted accordingly.
FINANCIAL STATEMENTS
PANDOX 2007 55
Costs of tenant-related modifi cations that
imply that the rent may be increased are capi-
talised 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 fi xtures 4 – 6.7
Land improvements 3.5
Equipment 6.7–33
Pandox changed the depreciation rate for
buildings 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
SEK 0.
Write-down of fi xed assets
The Group’s properties are continuously valued
in accordance with an internal cash fl ow
model, which also fulfi ls the requirement to
calculate the utilisation value in accordance
with RR:17 whereby the recoverable value,
which is the greater of the net sales value and
the utilisation value, is compared with the
property’s book value in order to assess the
need for a possible write-down.
Leasing
Pandox reports all leasing contracts as opera-
tional. Leasing contracts entered into concern
private cars and offi ce machines. They are not
signifi cant in size and do not therefore infl u-
ence an assessment of the Group’s results and
fi nancial position.
Revenue
Management 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 re-
ported as prepaid rental revenue.
Shares and participations
Shares 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 instruments
Interest swaps are used to change underlying
fi nancial liabilities’ interest-due structure.
Revenue and costs related to interest swaps
are reported net as interest costs, and are
spread over the duration of each contract.
International subsidiaries
International subsidiaries are stated as per the
current rate method, which implies that the
income statement is restated at the average
exchange 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
directly 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 currencies
Receivables and liabilities expressed in foreign
currencies are restated at the rate of exchange
prevailing on balance sheet date. Any differ-
ences that may arise are either credited or
debited to income. When loans or forward con-
tracts are entered into to hedge investments in
international subsidiaries, any exchange rate
differences that may arise are offset in the
Group by an amount corresponding to the dif-
ferences arising from the recalculation of the
net assets of international subsidiaries.
Other receivables and liabilities
Receivables have been stated in the amounts
expected to be received. Other assets and lia-
bilities have been stated at nominal values.
56 PANDOX 2007
Notes to the accounts
NOTE 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 2007 Stockholm Gothenburg Öresund Rest of Sweden International Adjustment Total
Property revenue 177.1 79.2 160.5 106.8 258.6 –160.3 621.9
Property costs –41.0 –7.2 –29.3 –15.6 –33.2 –126.3
Operating net 136.1 72.0 131.2 91.2 225.4 –160.3 495.6
Book value of properties 1,328.5 755.6 1,491.4 825.2 3,823.1 8,223.8
Investments 9.2 10.0 85.2 48.1 122.4 274.9
Operating revenue – hotel operations 80.4 19.4 45.0 644.0 788.8
Operating costs – hotel operations –76.4 –25.7 –37.9 –628.2 160.3 –607.9
Operating profi t – hotel operations 4.0 –6.3 7.1 15.8 160.3 180.9
Year 2006 Stockholm Gothenburg Öresund Rest of Sweden International Adjustment Total
Property revenue 144.4 76.5 125.4 92.5 196.1 –87.4 547.5
Property costs –29.8 –8.9 –28.6 –15.7 –28.5 –111.5
Operating net 114.6 67.6 96.8 76.8 167.6 –87.4 436.0
Book value of properties 1,130.6 757.8 1,417.3 786.2 2,815.6 6,907.5
Investments 8.2 24.2 112.6 42.3 95.3 282.6
Operating revenue – hotel operations 17.8 42.2 360.0 420.0
Operating costs – hotel operations –23.0 –36.2 –348.5 87.4 –320.3
Operating profi t – hotel operations –5.2 6.0 11.5 87.4 99.7
1) Pertains to adjustment of internal rental.
NOTE 2 – RENTAL REVENUE
Revenues from hotel operations pertain to business, of which two are operated under management agreements with Hilton and InterContinental respectively, as well as the
eight hotels operated by Pandox. Rent and remuneration for other property costs which were paid by these hotel operator companies to the property company are reported
gross, i.e. they have not been eliminated in the income statement. This is done to provide a more accurate picture of the operating net generated by the property company
and the operating income of the hotel operating company. The elimination of these items would imply that the total management revenue and the operating company’s oper-
ating costs would be reduced by SEK 160.3 M for the year 2007 (87.4).
NOTE 3 – GEOGRAPHICAL DISTRIBUTION OF RENTAL REVENUE
% 2007 2006
Sweden 58 60
Denmark 8 8
United Kingdom 6 7
Germany 13 12
Belgium 12 10
Switzerland 2 3
Canada 1 3
Total 100 100
FINANCIAL STATEMENTS
PANDOX 2007 57
NOTE 4 – DEPRECIATION ACCORDING TO PLAN
Group Parent Company
SEK M 2007 2006 2007 2006
Buildings –87.5 –61.9 – –
Land improvements –1.5 –0.8 – –
Equipment –40.6 –28.8 –0.3 –0.2
Total depreciation –129.6 –91.5 –0.3 – 0.2
Depreciation amounts to a total of SEK 129.6 M of which SEK 129.3 M (91.3) refers to property operations and SEK 0.3 M (0.2) to administration.
NOTE 5 – NON-RECURRING REVENUE/COSTS
Non-recurring revenue of SEK 3.4 M in 2007 refers to compensation for transfer of a rental agreement to a new legal entity. Non-recurring revenue of SEK 39.9 M in 2006 of
which 28.9 refers to a capital gain generated by the sale of hotel properties and operations, SEK 10.3 M refers to a capital gain by the sale of shares and SEK 0.7 M refers to
other one-off items.
NOTE 6 – INTEREST REVENUE PARENT COMPANY
The interest revenue of the Parent Company is divided into SEK 171.3 M from Group companies and SEK 3.0 M from other companies.
NOTE 7 – DEFERRED TAX AND ACTUAL TAX
Group Parent Company
SEK M 2007 2006 2007 2006
Deferred tax expense for the year
Deferred tax expense relating to temporary differences –18.1 –43.0 – –
Deferred tax expense relating to other provisions –5.4 10.0 – –
Deferred tax reported in the income statement –23.5 –33.0 – –
Actual tax in the income statement –9.3 –31.4 11.1 3.2
Difference between reported tax and nominal tax rate of 28%
Reported profi t before tax 262.9 266.0 –24.2 –11.5
Tax as per applicable tax rate of 28% –73.6 –74.5 6.8 3.2
Tax effect due to nontaxable income 0.1 0.1 0.0 0.4
Tax effect of nondeductible costs and other tax adjustments 30.6 0.1 4.3 –0.4
Tax effect relating to foreign operations 10.1 9.9 – –
Reported tax expense –32.8 –64.4 11.1 3.2
Deferred tax recoverable
Defi cit deductions 76.3 76.3 – –
Other deferred tax recoverable 47.0 44.4 – –
Total deferred tax recoverable 123.3 120.7 – –
Deferred tax liabilities
Differences between book value and fi scal value of properties 352.5 279.7 – –
Total deferred tax liabilities 352.5 279.7 – –
Total deferred tax liabilities/recoverable net –229.2 –159.0 – –
58 PANDOX 2007
NOTE 8 – LAND AND BUILDINGS
Group
SEK M 2007 2006
Opening acquisition value 7,331.8 5,959.6
Reclassifi ed as equipment –90.7 –53.9
Acquisition of properties 1,035.0 1,298.9
Investments 219.7 219.2
Sales – –
Translation differences – balance sheet 105.7 –92.0
Closing accumulated acquisition value 8,601.5 7,331.8
Opening depreciation –700.0 –635.4
Acquired accumulated depreciation – –11.7
Sales – –
Depreciation for the year –89.0 –62.7
Translation differences – balance sheet –8.7 9.8
Closing accumulated depreciation –797.7 –700.0
Closing residual value 7,803.8 6,631.8
Tax assessment value of Swedish properties 2,470.4 2,073.5
Of which land 722.6 765.9
NOTE 9 – EQUIPMENT
Group Parent Company
SEK M 2007 2006 2007 2006
Opening acquisition value 412.7 262.2 3.2 2.6
Reclassifi ed from land and buildings 90.7 53.9 – –
Acquisition of equipment 28.4 44.8 – –
Investments 55.4 63.4 0.2 0.6
Sales/disposals – –1.4 – –
Translation differences – balance sheet 14.7 –10.2 – –
Closing accumulated acquisition value 601.9 412.7 3.4 3.2
Opening depreciation –136.2 –108.3 –2.3 –2.1
Sales/disposals – 0.9 – –
Acquired accumulated depreciation – –4.2 – –
Depreciation for the year –40.6 –28.8 –0.3 –0.2
Translation differences – balance sheet –4.3 4.2 – –
Closing accumulated depreciation –181.1 –136.2 –2.6 –2.3
Closing residual value 420.8 276.5 0.8 0.9
FINANCIAL STATEMENTS
PANDOX 2007 59
NOTE 10 – SHARES AND PARTICIPATIONS IN SUBSIDIARIES
Corp. Reg. No. Registered offi ceNumber
of shares Par value Percentowned Book 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
Fastighets AB Stora Hotellet i Jönköping 556469-4064 Stockholm 1,000 100 100 30.1
Pandox Belgien AB 556495-0078 Stockholm 1,000 100 100 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 0.1
Pandox Luxemburg AB 556515-9216 Stockholm 10,000 100 100 68.3
Fastighets AB Porpur 556349-8327 Stockholm 10,000 100 100 0.1
Pandox i Halmstad AB 556549-8978 Stockholm 1,000 100 100 8.7
Pandox i Borås AB 556528-0160 Stockholm 1,000 100 100 45.3
Grand i Borås Fastighets AB 556030-7083 Stockholm 6,506 100 100 10.0
Hotell Värmdövägen 84 AB 556286-4826 Stockholm 1,000 100 100 4.3
Hotellus International AB 556030-2506 Stockholm 7,480,000 100 100 970.2
KB Lorensberg 49:2 916833-3269 Gothenburg – – 100 0.0
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 SA 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 75.9
Hotel Bloom SA 0476.704.322 Brussels 68,808 – 100 65.9
Pandox Belgium SA 0890.427.732 Brussels 100,000 – 100 471.6
Pandox i Malmö AB 556704-3723 Stockholm 100,000 100 100 142.0
Ypsilon Hotell AB 556481-4134 Stockholm 100,000 100 100 46.3
Pandox i Ryssland AB 556706-8316 Stockholm 100,000 100 100 0.1
Total Pandox AB 3,293.5
Corp. Reg. No.
Registered offi ce
Group
Arlanda Flyghotell KB 916500-8021 Stockholm
Fastighetsbolaget Utkiken KB 916611-7755 Stockholm
Fastighets AB Hotell Kramer 556473-6402 Stockholm
Hotellus Östersund AB 556367-3697 Stockholm
Hotellus Nordic AB 556554-6594 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
Skogshöjd Handels & Fastighets AB 556066-0432 Stockholm
Hotell Skogshöjd AB 556065-6109 Södertälje
Park-Statt Hotell i Södertälje AB 556465-5529 Södertälje
KB Sjöstjärnan Fastighetsförvaltning 916850-4554 Gothenburg
Corp. Reg. No.
Registered offi ce
Hotellus Belgium NV – Belgium
Grand Hotel Brussels NV – Belgium
Town Hotel SA – Belgium
Holcro NV – Belgium
Hotellus Suomi OY – Finland
Hotellus Nord OY – Finland
Euro Lifi m BV – Netherlands
Hotellus Europe BV – Netherlands
Pandox Holland BV – Netherlands
Hotellus Luxemburg Sarl – Luxemburg
Hotellus Deutschland GmbH – Germany
Atlantis mbH – Germany
Pandox Berlin GmbH – Germany
Hotellus Canada Holdings Inc – Canada
60 PANDOX 2007
NOTE 11 – LIABILITIES TO CREDIT INSTITUTIONS
Group Parent Company
SEK M 2007 2006 2007 2006
Liabilities that fall due within one year following balance sheet date 338.2 308.5 335.0 204.1
Liabilities that fall due between one and four years following balance sheet date 1,271.5 844.5 993.0 576.2
Liabilities that fall due fi ve or more years following balance sheet date 3,907.1 3,245.5 2,566.3 2,183.0
Total 5,516.8 4,398.5 3,894.3 2,963.3
NOTE 12 – ACCRUED EXPENSES AND PREPAID REVENUE
Group Parent Company
SEK M 2007 2006 2007 2006
Prepaid rents 50.9 57.0 – –
Accrued interest expenses 30.0 19.0 18.2 15.6
Property tax 5.1 2.0 – –
Other 115.7 73.5 18.4 10.0
Total 201.7 151.5 36.6 25.6
NOTE 13 – PLEDGED ASSETS AND CONTINGENT LIABILITIES
Group Parent Company
SEK M 2007 2006 2007 2006
Pledged assets for loans from credit institutions
Property mortgages 4,433.0 4,051.3 – –
Pledged deposit 37.3 48.6 12.2 12.2
Contingent liabilities 1.3 – 1,548.6 1,344.2
NOTE 14 – AUDIT FEES AND REMUNERATION
Group Parent Company
SEK M 2007 2006 2007 2006
KPMG
Audit assignments 2.9 2.0 0.7 0.6
Other assignments 0.4 0.3 – –
SET Revisionsbyrå
Audit assignments 0.1 0.1 0.1 0.1
Other
Other assignments 0.2 0.1 – 0.1
Total 3.6 2.5 0.8 0.8
FINANCIAL STATEMENTS
PANDOX 2007 61
NOTE 15 – PERSONNEL
Group Parent Company
2007 2006 2007 2006
Average number of employees
Men 379 213 7 8
Women 392 226 9 6
Total 771 439 16 14
Of whom employed in Sweden 120 56 16 14
Of whom employed in Belgium 331 256 – –
Of whom employed in Germany 205 110 – –
Of whom employed in Denmark 14 17 – –
Of whom employed in Canada 101 – – –
Wages, salaries and other remuneration, SEK M
Board of Directors and CEO
Wages, salaries and other remuneration 5.6 5.2 5.6 5.2
Social security costs 1.3 1.9 1.3 1.9
Pension costs 0.8 0.8 0.8 0.8
Total 7.7 7.9 7.7 7.9
Other employees
Wages, salaries and other remuneration 217.1 126.5 15.4 13.0
Social security costs 53.1 25.5 3.4 2.8
Pension costs 6.5 4.5 2.0 2.4
Total 276.7 156.5 20.8 18.2
Wages, salaries and other remuneration per country, SEK M
Sweden
Board of Directors and CEO 7.7 7.9 7.7 7.9
Other employees 64.2 32.8 20.8 18.2
Belgium other employees 116.9 88.4 – –
Germany other employees 50.4 25.9 – –
Denmark other employees 9.6 9.4 – –
Canada other employees 35.6 – – –
Total 284.4 164.4 28.5 26.1
Personnel employed in Belgium relate to the operator activities of the Crowne Plaza Brussels City Centre, the Holiday Inn Brussels Airport (6 months), the Crowne Plaza
Antwerp (6 months), the Hilton Brussels City, and the Hotel BLOOM!. Personnel employed in Denmark refers to Clarion Collection Hotel Twentyseven (6 months), in
Germany to Hotel Berlin, Berlin and in Canada to InterContinental Montreal 6 months).
The remuneration of the Members of the Board is established by the Annual General Meeting of Shareholders. The remuneration of the Chief Executive Offi cer (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 identifi ed with one particular individual. The term “group” concerns both
gender and age categories.
62 PANDOX 2007
Proposed disposition of earnings
The following profi ts are at the disposition of the forthcoming Annual General Meeting of Shareholders:
Balance brought forward SEK 394,389,345
Profi t for the year SEK –13,084,414
SEK 381,304,931
The Board of Directors and Chief Executive Offi cer propose that the accumulated profi ts be appropriated as follows:
Dividend to the shareholders,
SEK 6.50 per share SEK 161,850,000
Amount to be carried forward SEK 219,454,931
SEK 381,304,931
The Board of Directors believes that the proposed dividend is justifi able 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 fi nancial position in general.
Stockholm, 11 February 2008
Christian Ringnes
Chairman
Leiv Askvig Olaf Gauslå
Bengt Kjell Björn-Åke Wilsenius Mats Wäppling
Anders Nissen
Chief Executive Offi cer
Our audit report pertaining to this annual report and consolidated
fi nancial statements was submitted on 12 February 2008.
Per Gustafsson Willard Möller
Authorised Public Accountant Authorised Public Accountant
FINANCIAL STATEMENTS
PANDOX 2007 63
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 offi cer of PANDOX AB for the year 2007. These accounts and the administra-
tion of the company are the responsibility of the board of directors and the chief executive offi cer. Our responsibility is
to express an opinion on the annual accounts, the consolidated accounts and the administration based on our audit.
We conducted our audit in accordance with generally accepted auditing standards in Sweden. Those standards
require that we plan and perform the audit to obtain reasonable assurance that the annual accounts and the consoli-
dated accounts are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the accounts. An audit also includes assessing the accounting principles used and their
application by the board of directors and the chief executive offi cer and signifi cant estimates made by the board of direc-
tors and the chief executive offi cer 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
concerning discharge from liability, we examined signifi cant 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 offi cer.
We also examined whether any board member or the chief executive offi cer 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
Accounts Act and thereby give a true and fair view of the company’s and the group’s fi nancial position and results of
operations 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 profi t 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 offi cer be discharged from
liability for the fi nancial year.
Stockholm, 12 February 2008
Per Gustafsson Willard Möller
Authorised Public Accountant Authorised Public Accountant
64 PANDOX 2007
Work of the Board of Directors
Expertise 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 compo-
sed of six members, has broad experience and
knowledge of these areas.
Work procedures
The Board of Directors has adopted work procedu-
res and directives for the Chief Executive Offi cer
and has provided management instructions on
reporting. Every year, Pandox’ Board of Directors
establishes and documents the objectives and stra-
tegy of the Company. The Board has also adopted a
fi nance policy, an approval policy and guidelines
for decision making, as well as a par ticular strategy
regarding acquisitions.
The Board of Directors of Pandox holds fi ve
ordinary meetings each year. In addition to the
ordinary meetings, the Board held two extraordi-
nary meetings during the year to discuss certain
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 fi nancial 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 approximately one
week in advance. The Company’s auditors attend
at least one meeting each year to present a report
of their audit and their review of the Company’s
internal control systems.
In addition to their ongoing audit, the
Company’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 inspected
during a three year period according to a rolling
timetable.
Crowne Plaza Brussels City Centre
PANDOX CORPORATE GOVERNANCE
PANDOX 2007 65
Board members
The Board of Directors of Pandox is composed and dimensioned so as to enable the establishment and implementation 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.
CHRISTIAN RINGNES, CHAIRMAN
b. 1954
CEO of Eiendomsspar AS.
Member of the Board of Pandox since 2004.
Chairman of NSV-Invest AS, Sundt AS and
Mini Bottle Gallery AS.
Board member of Schibsted ASA, Norsk Scania AS,
Thor Energy Corporation AS and Nationaltheatret.
LEIV ASKVIG
b. 1957
CEO of Sundt AS.
Member of the Board of Pandox since 2004.
Other appointments:
Chairman of Imarex NOS ASA and Fjellkraft AS.
OLAF GAUSLÅ
b. 1961
CFO of Eiendomsspar AS.
Member of the Board of Pandox since 2004.
BENGT KJELL
b. 1954
Executive Vice President, Head of Investments,
Industrivärden AB.
Member of the Board of Pandox since 1996.
Other appointments:
Chairman of Kungsleden AB and Indutrade AB.
Board member of Helsingborgs Dagblad AB,
Isaberg Rapid AB, Munters AB and Höganäs AB.
BJÖRN-ÅKE WILSENIUS
b. 1944
Member of the Board of Pandox since 2004.
Other appointments:
Chairman of BDB Bankernas Depå AB.
Board member of Bergen Energi AB and Finansiell
ID-teknik BID AB.
MATS WÄPPLING
b. 1956
CEO of SWECO AB.
Member of the Board of Pandox since 2003.
Other appointments:
Board member of SWECO AB and Castellum AB.
66 PANDOX 2007
Senior executives
The management team is responsible for the Company’s current operations and reports to the Board of Directors. Management
prepares and implements strategies and action plans, and ensures that set targets are met. Other important areas of responsibility
include overall planning, personnel development and an ongoing dialogue with the capital market.
Auditors
The task of the auditors is to examine the Company’s accounts, administration and fi nancial information. The audit results in an audit report
where the auditors give an opinion as to whether the annual accounts and fi nancial statements have been prepared in accordance with the
Swedish Annual Accounts Act and generally accepted accounting principles.
Per Gustafsson
b. 1959
Authorised Public Accountant
KPMG
Willard Möller
b. 1943
Authorised Public Accountant
SET Revisionsbyrå AB
ANDERS NISSEN
b. 1957
Chief Executive Offi cer
Employed since 1995
LIIA NÕU
b. 1965
Chief Financial Offi cer
Employed since 2007
PANDOX CORPORATE GOVERNANCE
A newsletter about the hotel industry
When Pandox was formed in 1995, the publi-
cation of a newsletter was started in order to
present the Company to the capital market
prior to being listed on the stock exchange.
The newsletter was later replaced by the pu-
blic reports. Despite Pandox no longer being
listed on the Stockholm Stock Exchange, the
Company continues to maintain the fl ow of
information to people interested in the hotel
sector and the hotel property market, which
is why Pandox Upgrade is regularly issued.
Three newsletters were published in 2007
with topics such as market trends and cur-
rent Swedish and international hotel market
questions.
You are most welcome to become a sub-
scriber. Pandox Upgrade is free of charge
and may be ordered from Pandox either by
telephone at +46 (0)8 506 205 50 or via
PA N D O X
Strong year for hotels, with double-digit growth
NO
. 1 •
20
07
Sustainability – a lasting trend Sustainability – a lasting trend
MARKET INFORMATION FROM PANDOX ONE OF THE LEADING HOTEL PROPERTY COMPANIES IN EUROPE
Upgrade_nr1_eng.indd 1 07-04-10 11.17.56
PA N D O X
MARKET INFORMATION FROM PANDOX ONE OF THE LEADING HOTEL PROPERTY COMPANIES IN EUROPE
Demographic changes challenge the industry
NO
. 2 •
20
07
London – highest occupancy in Europe
Upgrade_nr2_eng.indd 1 07-09-13 11.10.10
PA N D O X
MARKET INFORMATION FROM PANDOX ONE OF THE LEADING PURE HOTEL PROPERTY COMPANIES IN EUROPE
Feeling at home– Lifestyle hotels extend a welcome
London showing strong growth
No. 3
• 2
00
6
PA N D O X
Rate increases push up RevPAR
PA N D O X
MARKET INFORMATION FROM PANDOX ONE OF THE LEADING HOTEL PROPERTY COMPANIES IN EUROPE
Niche hotels a clear success
NO
. 3 •
20
07
Upgrade_nr3_eng.indd 1 07-11-14 11.41.54
PANDOX UPGRADE
PANDOX 2007 67
68 PANDOX 2007
Production: Pandox/n3prenör. Photo: Ulf Blomberg, Shutterstock. Printed by: Jernström Offset, Stockholm, Sweden 2008.
Crowne Plaza Brussels City Centre
PANDOX 2007 III
Pandox AB, P O 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