a great way to mix , Hotel PROPERTIES ROOMS LOCATIONS COUNTRIES BRANDS PANDOX BUSINESS OPERATIONS REPORT 2011

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1 Pandox a great way to mix PANDOX BUSINESS OPERATIONS REPORT , Hotel PROPERTIES ROOMS LOCATIONS COUNTRIES BRANDS one of the leading hotel PROPERTy companies in europe

2 The Holiday Inn Brussels Airport was acquired in The hotel was totally refurbished in and is now one of the leading business hotels close to Brussels international airport. Pandox operates the hotel under a franchise agreement with the InterContinental Hotels Group. WE WE OWN

3 OWN 118 hotel properties and one congress and fair centre totalling 24,500 rooms, with operations in 10 countries and 58 strategic cities.

4 Hotel Berlin, Berlin was acquired in 2006 and has since been successfully repositioned towards the profitable meeting and events segment. The hotel is centrally located next to the tourist-popular Kurfürstendamm, and with 701 rooms is the third largest hotel in Berlin. OWN OWN OPERATIONS

5 OPERat Pandox own operations embrace 11 hotels operated on local strategies, and are located in Berlin, Brussels, Antwerp, Montreal, Helsinki and the Bahamas. Together they generate total revenues of SEK 1.3 billion.

6 scandic hilton hyatt radisson blu park inn intercontinental crown plaza holiday inn clarion hotel quality hotel comfort hotel elite hotels rica hotels WE first hotels best western ibis hotel omena hotels rantasipi

7 CO-OPE WE CO-OPERATE with 12 hotel chains under 20 different brand names. All are well-known, established and successful.

8 Pandox often acquires hotels that under-perform, which implies that the hotels need to be developed in order to reach full potential through, for example, repositioning and investments. WE WE DEVELOP

9 DEVEL Hyatt Montreal was acquired in 2008 and has since been successfully developed to one of the city s leading meeting and leisure hotels. With 605 rooms, it is one of Montreal s largest hotels. The location is strategic and central right in the centre of the entertainment and shopping district.

10 WE WE GENERATE GE The Hotel Brussels hotel property and operations was acquired in The hotel is currently undergoing comprehensive product development that is estimated to be completed in two years. The picture shows the magnificent view from the top floor of the hotel.

11 NERAT Pandox strategy and business model has generated an average annual return of approximately 19 percent since the Company was formed.

12 WELCOME TO PANDOX WORLD! first part To describe Pandox, we have assembled the Company s different parts in a visual hotel building where each floor represents a separate part of the Company s business chain. Welcome to Pandox World and an exciting tour through our hotel building. Let s start on the ground floor. SECOND PART CEO commentary, Workforce Pandox heart and mind, Hotel properties and summary list, Economic and financial information,

13 TOP Floor WE MANAGE 7046 We manage 7048 Board of Directors and auditors 7050 Senior executives 6th FLOOR WE GENERATE 6040 Growth and cash flow 6042 Pandox development 6044 market communication 6045 Social responsibility 5th FLOOR WE DEVELOP 5034 Investments 5036 The Shark Project 5038 Success Stories 4th FLOOR we CO-OPERATE 4030 Network and cooperation 4032 Pandox partners 3rd FLOOR OWN OPERATIONS 3024 Active ownwership 3026 Pandox Tool Box 3026 Environmental work 3028 hotel managers 2nd FLOOR BUSINESS MODEL 2020 Operational strategies 2021 main processes 2022 Types of lease 1st FLOOR WE OWN 1018 The portfolio 1019 geographical spread and breadth GROUND FLOOR 0012 Vision and business concept 0013 Pandox characteristics 0014 Strategy 0016 Value-growth chain

14 0012 // ground floor // Vision and business concept T ground Floor Who do we think WE ARE? The driving forces for Pandox successful and rapid development are to be found in the Company s specialist expertise, well-defined strategy, professional employees, and industrial owners. A special characteristic is the Pandox Spirit our corporate culture where nothing is impossible! Vision Pandox vision is to be one of the world s leading hotel property companies with regard to specialist expertise in both hotel and property operations, and active ownership. For the vision to become reality, the Company must retain its specialist expertise regarding the value-growth chain, and that the balance between international and national revenues, brand names and types of hotel be maintained. Another important aspect is to constantly develop the business model so as to adapt to each situation and choose the strategy that is best suited to local conditions. Business concept Pandox business concept based on expertise within hotel properties, hotel operations and business development is to actively own, develop and lease hotel properties. Overall goal Pandox overall goal, through specialist expertise within hotels, hotel properties and business development, is to achieve optimal yield and value-growth in the hotel property portfolio. Specific goals are set each year for the operating net, return on investment, value-growth objectives in the existing hotel property portfolio, and the equity/assets ratio. The goals are then broken down to each individual property and act as guidance during investment decisions.

15 1WELL-DEFINED AND FOCUSED STRATEGY Pandox has a well-defined strategy where country, city, hotel type, form of partnership and yield requirements have been consistently followed since the Company was formed. >> Further information about Pandox strategy is available on pages Pandox' characteristics // ground floor // 0013 ACTIVE OWNERS AND RAPID DECISIONS 4 Pandox shareholders and Board of Directors possess industrial expertise in the Company s three most important disciplines: hotel operations, hotel properties and business development. Their knowledge and experience create con fid ence, which enables us to take rapid decisions within, for example, different acquisition questions. This is a competitive advantage in a significantly slower world at large. Pandox shareholders and Board of Directors set distinct goals for operations, which provide excellent guidance for the Company. EXPERTISE AND NETWORK 2 International network enables access to unique expertise. 5 KNOWLEDGE AND BUSINESS INTELLIGENCe Pandox has a small management organisation. The model provides major One of Pandox most important cornerstones is to constantly develop its areas benefits with rapid decision-making paths, a high level of interactivity and of competence and expertise. The business model is based on considerable individual freedom. In order to be able to maintain momentum in all business processes, the organisation is supplemented by a employees to focus on development and the well-developed methodology that enables Pandox skilled national and international network. The model places demands on both creative process. visionary and operative leadership, as well as an ability to create forms of 3 6 collaboration with individuals with different backgrounds. STRUCTURED WAY OF WORKING CORPORATE CULTURE THE PANDOX SPIRIT Neat and orderly. Pandox has established an informal management style where a high Pandox operations are structured in five main pro - level of competence is combined with minimum bureaucracy and cesses that in a clear and simply way describe the Company s effective monitoring methods. Our keywords are inspiration, ongoing position. This in turn creates prerequisites for a simplicity, rapidity, expertise and prominent leadership. situation-adapted and commercially inspired way of working.

16 0014 // ground floor // Strategy T CONSISTENT 0 ENABLES STABILITY AND RISK-SPREADING ONE TYPE OF ASSET HOTEL PROPERTIES The Hotel, Brussels A hotel property has distinctive features and differs from other types of property, which demands specialist expertise in order to maintain active ownership. Pandox therefore invests only in one type of asset hotel properties. Business position: Pandox portfolio contains 118 hotel properties and one congress and fair centre. GEOGRAPHIC MARKET Geographical spread, proportion of hotel rooms Focusing on one type of asset requires a broad geographic market so as to create growth prerequisites and benefit from changes in the hotel economic cycle. Business position: Pandox has operations in ten countries, where Sweden is largest. Other major submarkets are Brussels, Copenhagen, Helsinki, Gothenburg and Montreal. Overall, Pandox is established in 58 locations that represent a mix of international and domestic demand. Sweden, 51% Finland, 13% Norway, 10% Belgium, 9% Other Europe, 7% Denmark, 5% Canada/Bahamas, 5% BUSINESS MODEL Lease structure rent revenues 2011 In order to maximise the value-growth of each hotel, Pandox has a flexible business model that enables a situation-adapted strategy based on the hotel s local prerequisites. Business position: The largest form of business model in the Pandox portfolio consists of leases, which represent 83 percent of revenues, while the Company s own-operated hotels and management agreements amount to 12 percent. Revenue-based leases with guarantee, 61% Revenue-based leases, 22% Own operation and management agreements, 12% Other, 5%

17 Strategy // ground floor // 0015 STRATEGY LOCATION AND SIZE Billingen, Skövde Large hotels with strong locations provide the best business prerequisites, while simultaneously reducing risks. Such hotels have higher liquidity and are easier to finance. Business position: All Pandox hotels have strong and natural locations with an average of 206 rooms, which is significantly higher than the average hotel in each respective market. TYPE OF HOTEL Bastionen, Oslo The hotels shall belong to the upper-medium and high-price segment. Business position: The portfolio contains a mix of upper-medium and high-priced hotels. The medium-priced hotels include many Scandic hotels, as well as the Hotel Berlin, Berlin. Examples of high-priced hotels include InterContinental Montreal and Hilton Stockholm Slussen. CHOICE OF BRAND NAMES AND PARTNERS Each hotel shall have the best possible brand name that strengthens the profile. This requires that Pandox maintains a broad network within national and international hotel companies. Business position: Pandox currently works together with 12 hotel chains under 20 well-known and established brand names, as well as a number of independent distribution channels thus providing a unique position and a broad network.

18 0016 // ground floor // Value growth chain T VALUE GROWTH The value-growth chain in a hotel property forms the basis for Pandox vision, strategy and choice of lease structure. Knowledge of the entire chain is a precondition for success. 10. Financing and taxes The choice of financing and legal structure represents a key issue that creates prerequisites for stable value growth. 9. Lease structure The hotel industry has many forms of lease that affect a hotel s profitability, financing and valuegrowth. In general, a lease shall contain mutual incentives so that the parties work in the same direction. 8. Asset management The hotel industry is capital-intensive and requires specialist expertise within both hotel operations and property so as to effectively manage and develop the hotel properties. 7. Investments To continuously develop a hotel is a necessity in order to maintain a strong market position. 1. Macro economy The activity level (global, regional or local) represents an important component for how demand develops in the hotel market. Macro also affects the economic course, which in turn can imply choosing different points in time to enter a specific market. 2. Hotel economic cycle The hotel economic cycle is part of the macro economy, and can be divided into five different phases: downturn, declining rate of downturn, levelling-out, growth, and peaking. Knowledge of the pattern of a hotel economic cycle can be utilised when investing in different geographic markets, and endeavouring to limit risk in markets that have poorer outlooks. 3. Location and size Two important factors are that hotels must have strong and natural locations, as well as the right size so as to obtain critical volume and thereby good preconditions for profitability. 4. Competition new capacity different market positions Each market is unique, and considerable knowledge of local conditions is required to create a product that provides sustainable profitability. 6. Operations and management Hotel operations are complicated and demand a high level of expertise, considerable presence and good leadership. A good local hotel team creates both satisfied customers and employees, as well as a high level of profitability. 5. Brand names A strong brand name strengthens the hotel s market position and competitiveness in the chosen product segment.

19 Hyatt Regency, Montreal Value growth chain // ground floor // 0017

20 T floor // we own // The portfolio we own PROBABLY the best mix! Pandox principal strategy is to own one type of asset hotel properties. The portfolio currently embraces 118 hotel properties and one congress and fair centre with 24,500 rooms where the majority belong to the profitable fullservice segment or stable medium-priced products. Operations are located in 10 countries and 58 locations. About 60 per cent of revenues come from international markets such as Brussels, London, Montreal, Stockholm, Gothenburg, Malmö, Copenhagen, Berlin, Helsinki and Oslo. The remaining 40 percent are characterised by domestic demand in regional towns and cities in Scandinavia and Germany. The mix of locations and brand names creates stable demand that gives a portfolio with good potential and limited risk. 118 Hotels >> 24,500 rooms >>

21 Geographical spread and breadth // we own // 1019 Hyatt Regency, Montreal GEOGRAPHICAL SPREAD AND BREADTH canada 2 hotels 1 city NORWAY 14 hotels 10 cities bahamas 1 hotel 1 city England 1 hotel 1 city FINLAND 14 hotels 1 congress and fair centre 8 cities BELGIUM 8 hotels 2 cities SWITZERLAND 1 hotel 1 city GERMANY 4 hotels 4 cities DENMARK 5 hotels 1 city SWEDEN 68 hotels 29 cities 58 LOCATIONS >> 10 COUNTRIES >>

22 T floor2 BUSINESS model 2020 // BUSINESS MODEL // Operational strategies Hyatt Regency, Montreal PANDOX BUSINESS MODEL Depending on local preconditions, Pandox can choose between four operational strategies: 1. Lease with a professional operator where Pandox remains strategic partner 2. Management agreement where another party manages daily operations on behalf of Pandox 3. Manage operations under a franchise agreement with a well-known brand name 4. retain own operations via independent distribution systems. The business model provides excellent potential to create a situation-adapted strategy asset by asset.

23 Main processes // BUSINESS MODEL // MARKET MAPPING Create knowledge of the market situation and change patterns. 4 ECONOMIC AND FINANCIAL REPORTING Operations are monitored through established goals, evaluations and appraisals. Pandox five main processes are used to describe the Company s business situation, understand external and internal driving forces, and how they interact. 2 THE PANDOX MODEL The Company s methodology increases cash flow and limits risk for each respective hotel. 3 Asset management Daily maintenance and major investments so as to increase the value of properties in the long-term. 5 MARKET COMMUNICATION Pandox regularly carries out market activities towards its target groups. THE PANDOX MODEL AND ITS FOUR PHASES Market analysis A market analysis is performed in order to assess a hotel s profitability potential and subsequent ability to pay the agreed rent. The local market is identified and analysed with regard to demand, competition and the current and future offer. Market strategy A strategic plan for each hotel property is established based on each respective hotel s specific prerequisites, the local market, and its position in the hotel economic cycle. The property s continued area of use is unconditionally evaluated during the preparation of the strategic plan. Profitability optimisation In view of that the value of a property is influenced by the profitability of the related hotel operations, the operator is Pandox most important partner. The hotel operator is constantly assessed in order to ensure positive developments of the hotel s operations and the value of the property. Lease optimisation The optimal cash flow of each respective hotel property is then divided among the operator, Pandox and other related parties. The lease is formulated in such a way that all parties involved are given an incentive to continuously improve the hotel property s overall profitability. Possibility to acquire the hotel property Action plan with concrete measures Evaluation of each respective hotel property and the portfolio Market analysis Market strategy Profitability optimisation Lease optimisation Sale in accordance with the strategy

24 2022 // BUSINESS MODEL // types of lease T InterContinental, Montreal The hotel industry has many forms of lease, which influence a hotel s profitability, financing and value growth. TYPES OF LEASE The value of a hotel property is determined to a considerable degree by how the underlying lease or agreement is formulated. Pandox endeavours to find agreements that create optimal preconditions for maximum development for both parties. Optimal lease framework Pandox flexible business model is reflected in the different types of lease. The design and formulation of leases and agreements are guided by factors such as anticipated market trends, local competition, planned investments, as well as choice of operator and distributor. A mixture of different types of lease/agreement provides Pandox with a structure that increases cash flow in good times and, with rental guarantees, protects against receding markets. Depending on local preconditions, Pandox is able to choose to mix several possible types of lease/agreement: 1. Rental agreements/leases Revenue-based hotel lease Revenue-based hotel leases are linked to the sales generated by the hotel business. This form of lease provides Pandox with a share of growth in both the market as a whole and in the market share. To limit the risk, these leases generally specify a minimum guaranteed rent. Result-based hotel lease A result-based lease implies that Pandox receives a share of the hotel operator s operating net. This type of lease requires that Pandox be informed of and have insight to the operating company s finances and accounts. This form of lease can also have a guaranteed rent.

25 types of lease // BUSINESS MODEL // 2023 Radisson Blu, Lillehammer Pandox leases are formulated so that all parties involved are encouraged to continuously improve each hotel property s overall profitability. Fixed-fee lease Fixed-fee hotel leases are used in mature markets and in well-established hotel products. A fixed-fee lease limits the risk but also the potential. 2. Management agreements A management agreement can be perceived as a sort of agent contract, where Pandox owns the hotel business. Through a management agreement, a hotel company is assigned to operate and manage the hotel on behalf of Pandox. This implies that Pandox owns the hotel operations as well as the hotel property. 3. Franchise agreements Franchise agreements can be entered into with a hotel company for Pandox own operations. Pandox thereby benefits from a large system that takes care of the hotel s overall marketing and sales. This implies that Pandox owns the hotel operations as well as the hotel property. Lease structure rental revenues 2011 Revenue-based leases with guarantee, 61% Revenue-based leases, 22% Own operation and management agreements, 12% Other, 5%

26 T own floor // own operations // Active ownership op KNOWLEDGE generates BUSINESS! A natural part of Pandox active ownership is to manage its own operations. Pandox operations currently embrace 11 hotels with close to 4,000 rooms and total sales of SEK 1.3 billion. The hotels are located in Berlin, Helsinki, Brussels, Antwerp, Montreal and the Bahamas. The philosophy behind Pandox operations is to build each hotel s strategy and competence locally. Pandox vision is to be one of the world s leading hotel property companies with regard to specialist competence in both hotel and property operations, as well as active ownership. To manage its own hotel operations is an important part of Pandox active ownership. Hotel BLOOM!, Bryssel

27 Active ownership // own operations // 3025 eration Hotels operated by Pandox CIty Hotel Brand name No. of rooms Situation Antwerp Crowne Plaza Antwerpen Crowne Plaza 262 City centre Berlin Hotel Berlin, Berlin Independent 701 City centre Brussels Crowne Plaza Brussels Le Palace Crowne Plaza 354 City centre Hotel BLOOM! Independent 305 City centre Hilton Brussels City Hilton 283 City centre The Hotel Brussels Independent 433 City centre Holiday Inn Brussels Airport Holiday Inn 310 Airport Montreal Hyatt Regency Hyatt Regency 605 City centre InterContinental Montreal InterContinental 357 City centre Helsinki, Espoo Korpilampi Independent 151 Ring road Bahamas Pelican Bay Independent 186 Central Total 3,947 The business cultures differ among Pandox various geographic areas. In the Nordic Region, leases dominate, while in North America management and franchise agreements are most common. Europe has a mix of both. It is therefore important to master different strategies in order to successfully work in an international hotel environment. To have one s own operational expertise also implies possessing specialist knowledge so as to be able to evaluate the operators with whom one has leases, and be able to complete acquisitions where both the property and operations are included. In view of that the sector-trend is for hotel companies to increasingly be management companies, it is also natural for Pandox to integrate vertically and to take over responsibility for operations. In view of that the sector-trend is for hotel companies to increasingly be management companies, it is also natural for Pandox to integrate vertically and to take over responsibility for operations. In recent years, five under-performing operations that were acquired and thereafter developed, have been rented with long leases to well-known operators thus creating prerequisites for new acquisitions. The philosophy behind Pandox operations is to establish each hotel s strategy and competence locally. This implies that most decision-making is delegated, and reporting is made to a board of directors with external members elected for their specialist knowledge. To be successful in these business processes requires the ability to attract the best management, and that these persons be given substantial influence over operations. Hotel Berlin, Berlin a real Berliner located centrally in the tourist-frequented district of Kurfürstendamm. The hotel is the city s third largest with 701 rooms and excellent meeting facilities.

28 3026 // own operations // pandox tool box/environmental work T pandox tool box Pandox is an active owner. Over the years, the Company has developed various specialist competences, of which a number have been assembled and structured into management tools as support for decisions taken in daily operations. We call this the Pandox Tool Box tools that are actively used for successful analysis, forecasts, cost-control and high productivity. PROFITABILITY OPTIMISATION Tool 1. Reservations status Information about the exact reservations status for each given time period and each segment enables detailed analyses and correct forecasts. Tool 2. Revenue management The consistent use of a Property Management Software system that includes information about late cancellations, early checkouts and check-ins and other guest information, creates preconditions for effective forecasts and right pricing. Tool 3. Implementation The implementation of the two first tools takes place in all parts of the hotel conferences, breakfast, restaurant, etc. Tool 4. High-quality forecast tools High-quality forecast tools that enable to provide accurate daily, weekly and monthly forecasts is a precondition for good planning both in the short and long-term. ENVIRONMENTAL WORK We strive to reduce our own and our operators environmental impact. The hotel industry has placed considerable focus for many years on environmental and sustainability procedures. Scandic, which was one of the pioneers, has purposefully endeavoured for a very long time to minimise their impact on the environment. We at Pandox perceive an active environment process not only as being quite natural, but also as a necessity where we shall do all we can to contribute to long-term sustainable development. This implies that Pandox endeavours to fulfil with a good margin the environmental demands of the countries where the Company has operations, that we monitor the energy and water consumption of all of our hotels, and that we primarily use suppliers, contractors and consultants that have an established environment policy. Development measures are often implemented in cooperation with the operators. For example, we have successfully endeavoured to actively and systematically reduce the CO 2 emissions and thereby reduce the environmental impact. Internally within Pandox, we weigh in the environmental aspects as systematically and structured as possible in our daily work, examples of which can be simple things such as minimising the use of paper and energy in our premises. We sort waste and recycle as much as possible. And of course, the coffee and fruit in our premises are ecological and KRAV-labelled.

29 pandox tool box/environmental work // own operations // 3027 COST CONTROL AND FLEXIBILITY Tool 5. Time reporting Detailed reporting of hours worked spread by day, week, month and department enable rationalisation measure and correct profit assessments. Tool 6. Work rotation / multi-tasking Cooperation among the hotel s departments increases efficiency, strengthens personnel development and reduces the number of recruitment processes. Tool 7. Organisation Personnel costs can be kept down, at the same time as obtaining a stable organisation, by allowing the hotel s fundamental organisation and number of permanent employees to be based on the year s weakest month of occupancy, and to adapt the remaining workforce to seasonal requirements. Tool 8. Conversion Flexible cost volumes enable adaptation when revenues fluctuate. strategic tools Tool 9. Business plan A tangible and well-embodied business plan with budget, forecasts and investments guides the organisation to the right priorities. Tool 11. Action plan and log Distinct and measurable activity goals with clear allocation of responsibility and timetable are necessary to maintain focus and to continuously monitor and improve operations. Tool 10. Early-warning system An early and clear warning system based on daily analyses of revenues and costs increases the possibility to take active measures and the right action at an early stage. in practice SUCCESSFUL ENVIRONMENT PROCEDURES AT THE CROWNE PLAZA BRUSSELS LE PALACE. The Crowne Plaza Brussels is one hotel where ronment procedures at the hotel. Most of the Pandox has successfully and systematically improvement measures were carried out in order to worked together with the hotel management to optimise operations, enhance controls and to find reduce total energy consumption and the negative alternative energy solutions. The investments have environmental impact. proven to be both effective and profitable. For the An energy analysis performed in 2008 marked full-year 2011, measurements show that the hotel s the beginning of intensive and comprehensive envi- energy consumption, compared with 2008, has ELectricity gas water -46% -15% -17% been reduced as follows: electricity 46 percent, gas 15 percent, and water 17 percent. The reduced consumption has led to 40 percent lower energy costs and 35 percent lower carbon dioxide footprint (to 1,300 kco2 per annum). The largest part of the energy savings comes from operational optimisation in the form of energysaving lighting systems, environment-economising shower taps, as well as the installation of an own district-heating plant driven with natural gas. The district-heating plant is very effective compared with other electricity-driven systems, which implies that the hotel receives financial compensation from the Belgian state in accordance with green certificate practice.

30 3028 // own operations // Hotel managers T montreal brussels Bernard Chênevert, hotel manager Employed since Bernard is a graduate of the Lausanne Hotel Management School and has more than 15 years experience of the hotel industry and the repositioning of hotels, including the prize-winning W in Montreal. In 2011, Bernard obtained the prestigious award of Hotel Manager of the Year within the whole of IHG America. Erik van Dalsum, hotel manager Employed since Erik is a graduate of the Lausanne Hotel Management School and has held several leading positions at large hotels across the world within Hilton, Shangri-La Hotels & Resorts, and Radisson SAS. Under Erik s management, the Crowne Plaza Brussels Le Palace received the distinction of Hotel of the Year IHG Hotels Group EMEA in energy& creativity professional leaders WITH SERVICE IN THEIR BLOOD brussels MONTREAL antwerp Christel Cabanier, hotel manager Employed since Christel has extensive and solid experience from several hotels in Antwerp. Her hotel career started as receptionist, and via a number of different positions Christel became at 25 years of age the youngest hotel manager in Belgium. Christel is also a well-known TV-profile in Belgium. Raymond Soumako, hotel manager Employed since Raymond is a graduate of Montreal University in industrial economy, and has more than 30 years experience of the hotel sector from both IHG and the Starwood Group, as well as previous hotel repositioning. Raymond is a member of the Hotel Association of Greater Montreal and is board member of IAHI. Hans Wils, hotel manager Employed since Hans has extensive experience of the hotel industry from Marriott, Golden Tulip, Accor and Sofitel, and worked most recently at the Lafayette Square in Washington DC, USA.

31 Hotel managers // own operations // 3029 bahamas berlin brussels airport Magnus Alnebäck, hotel manager Employed since Magnus is a graduate of SHM-Les Roches in Switzerland, and has previously worked for InterContinental, Cunard, Radisson/SAS and Forte Hotels in Switzerland and London. He was also hotel manager of Ladera Resort, St Lucia from 1996 to Cornelia Kausch, hotel manager Employed since Cornelia is a graduate of the Lausanne Hotel Management School and has many years international experience from leading positions at hotels in the upper segment. With strong visions and broad competence, Cornelia has successfully led the transformation of the hotel to one of Berlin s leading and most creative meeting places. Charles Boelen, hotel manager Employed since Charles came to IHG and the Crowne Plaza Brussels in 2001, after ten years within Hilton in Belgium, the Netherlands and France. Charles has been the driving force behind the successful refurbishment of the Holiday Inn Brussels Airport and introduced the FUN experience as a creative and appreciated feature of the new hotel. Pandox basic management philosophy is more about inspiration than control, and more about the individual than the system. It is the individual people at Pandox that make the Company so unique. The principal ingredients are experience, entrepreneurship, the will to constantly improve, to find new opportunities and to win as well as a good dose of responsibility and power of initiative. brussels Espoo brussels Jan Joris Kriele, hotel manager Employed since Jan Joris is a graduate of the Leeuwarden Hotel Management School, and has more than 10 years experience of the hotel industry including at Hilton hotels in Scotland, France and the Netherlands. Jan Joris most recent position was as Director of Business Development at the Pandox-owned Stockholm Hilton Slussen. Kari Hiltonen, hotel manager Employed since Kari has many years international experience from leading positions at hotels in the upper segment. Kari s most recent position was as GM of the Radisson Blu Hotel Latvija, and before that as Country Manager at Reval Hotels Latvia, and from 2004 to 2007 as CEO/GM of Sokos Hotel Viru Estonia. Aldert Schaaphok, Vice President Operations Employed within Pandox since Aldert is a member of Pandox management team and is responsible for the Company s own hotel operations. Aldert has also been acting hotel manager of The Hotel Brussels during the takeover phase. The recruitment of a new hotel manager is currently in progress.

32 T floor // we co-operate // network and cooperation 0 we co- PERATE Pandox currently works together with 12 hotel chains that via 20 wellknown brand names market the hotels. This way of working provides a unique position and a broad network, and thus an excellent platform to continuously develop our competence base. The hotels are situated in 10 countries and 58 locations. Pandox most comprehensive partner is Scandic, which operates 55 of the hotels and one congress and fair centre in the Pandox portfolio followed by Nordic Choice Hotels with 20 hotels. Other partners include Hilton, Hyatt, Radisson Blu, InterContinental, Holiday Inn, Park Inn by Radisson and Elite Hotels. 11 of the hotels are managed under independent flags, including Hotel BLOOM! and The Hotel in Brussels, Pelican Bay in the Bahamas, Mr Chip in Stockholm, and Korpilampi in Helsinki.

33 network and cooperation // we co-operate // 4031 IT S MORE to it than TALent! Hyatt Regency, Montreal Each hotel is handled and analysed based on its prerequisites and surroundings. The business model, partnership and lease are chosen adapted to each situation in order to create optimal preconditions for maximum development for both parties. >>

34 4032 // we co-operate // Pandox partners T Pandox Partners Well-known and established brand names Pandox has a unique network in the hotel market, and currently works together with several of the large hotel chains under 20 different well-known and established brands. This enables a strong position and a broad network, and thus an excellent platform to continuously develop our competence base.

35 Pandox partners // we co-operate // 4033 A PROUD PARADE Each market is unique, and thorough knowledge of local conditions is required to create a product that provides sustainable profitability. A strong brand strengthens the hotel s market position and competitiveness in the chosen product segment.

36 T floor // WE DEVELOP // Investments we de we see OPPORTUNITIES WHERE OTHERS SEE PROBLEMS Over the years, Pandox has successfully developed a large number of hotel properties and hotel operations. A further SEK 2 billion will be invested in the next three years for the upgrading of existing hotels, including the creation together with Scandic of the new generation of highway hotels one of the largest hotel ventures in the Nordic Region. SEK 2 BILLION >>

37 // WE DEVELOP // 5035 velop The Radisson Blu Hotel Malmö is one of southern Sweden s leading business hotels with an excellent location in central Malmö close to the business and shopping districts. The hotel has 229 rooms, 12 conference rooms, a relaxation centre, and restaurant. In 2011, the hotel was nominated best meeting hotel by the leading conference organiser, Congrex.

38 5036 // WE DEVELOP // the project shark T One of the Nordic Region s largest hotel investments ever seen! SEK 1.6 billion is being invested in the upgrading and development of 38 existing Scandic hotels. The investment is a joint venture between by Pandox and Scandic, and is one of the largest joint hotel ventures ever realised in the Nordic Region between a hotel operator and a property owner. The project, which has been named Shark, will be implemented over the next three years. The challenge is now in planning the numerous sub-projects covered by the overall investment. Pandox acquired Norgani for SEK 9.7 billion in the autumn of The hotel portfolio was composed of 73 hotels in Sweden, Norway, Denmark and Finland. In general, the hotels were in need of refurbishment and upgrading. A major contract was signed with Scandic in 2011, where the parties agree to invest SEK 1.6 billion in the development of 38 existing Scandic hotels, as well as a congress and exhibition centre. The Shark investment is one example of the ongoing restructuring and development of the Norgani portfolio. Since the acquisition of Norgani, four non-strategic hotels have been sold and new agreements with related investment programs have been entered into for 40 hotels. Scope of the project Scandic s origins are in the classic highway hotels that were created to offer the motorist overnight accommodation and facilities in the 1960s. The hotel segment with highway hotels is now established over the entire Nordic Region. The Shark investment includes the Moby sub-project with the vision of developing the new generation of highway hotels. Several of Scandic s highway hotels are covered by the Moby project, including well-known and popular highway hotels such as Kungens Kurva by the E4/E20 on Stockholm s southern approach, Backadal by the E6 on Gothenburg s western approach, Klarälven on Karlstad s E18 ring road, Scandic Upplands Väsby

39 the project shark // WE DEVELOP // 5037 The Moby project, with new concept for the new generation of highway hotels, is now part of the major Shark project. The first highway hotel to implement the new design concept is the Scandic Upplands Väsby. and Elmia in Jönköping. The first hotel to implement the new design concept will be the Scandic Upplands Väsby. The hotels in central city locations covered by the Shark investment include the Malmen in Stockholm, Continental and Hilton Strand in Helsinki, as well as the KNA hotel in Oslo. New Concept The new hotel concepts are characterised by flexibility and untraditional solutions, taking into consideration new family constellations, travel habits and trends. The whole way from the car park to the reception, lobby, conference facilities and restaurant to the hotel room and with complete focus on the guests needs and well-being. The concept also implies that the history of Scandic and each respective hotel be integrated into the design element and layout, that the informal home-feeling at the hotels be strengthened, that more social meeting places be created, and that the rooms obtain new and complete furnishings and design. Technology will also be upgraded throughout so that the hotels will be well-equipped to meet future needs and requirements in the best possible way. sek1.6 Shark is a joint investment program between Scandic and Pandox, and embraces a total of 26 hotels in Sweden, 10 hotels and one congress and fair centre in Finland, and 2 hotels in Norway. Most of the highway hotels covered by the project are located in Sweden. ApproxIMATEly Billion

40 5038 // WE DEVELOP // Success stories T success stories INVESTMENTS IN DEVELOPMENT AND REPOSITIONING Over the years, Pandox has purchased and sold 174 hotels. Many of them have undergone considerable investment development programs. Some of the successful repositioning projects of recent years as well as ongoing projects are presented below. Crowne Plaza Antwerp Total make-over in Antwerp The Crowne Plaza Antwerp was acquired in The hotel is operated under a franchise agreement with the InterContinental Hotels Group. A total upgrading and modernisation was completed in the autumn of 2011 covering the lobby, restaurant & bar, sky bar, conference facilities and rooms, as well as a completely new event spa and fitness centre with the capacity to hold various activities, seminars and parties. Further to the upgrading, the hotel is now one of the city s leading business and meeting hotels. Investment program: EUR 3.7 million Realised: Total upgrading with a new design concept called Welcome in t Stad. The concept uses the city s architecture and history as theme and inspiration. Different characteristic design elements from the city can be seen throughout the various parts of the hotel.

41 Success stories // WE DEVELOP // 5039 Hotel Berlin, Berlin start of the LAST PHASE IN BERLIN InterContinental Montreal center of attraction AND AWARD-WINNING! InterContinental Montreal was acquired by Pandox in 2007 as a traditional business and meeting hotel with international style. The product lacked a local profile and primarily competed through its location. This was the strategic starting point for a comprehensive investment and upgrading program. Through changes in layout, design, management and style, the hotel has created a new concept with a more boutique feeling. Since completing the investment in 2010, the hotel has strengthened its position and is now one of the city s leading hotels with regard to RevPAR development. During a large IHG conference held in Las Vegas in October, hotel manager Bernard Chênevert was designated Hotel Manager of the Year 2011 within InterContinental in America a very prestigious award. The InterContinental Montreal is the first Canadian hotel to receive this distinction. Hotel Berlin, Berlin was acquired in The hotel is the third largest in Berlin with 701 rooms. Since the acquisition, the hotel has been successfully repositioned towards the meeting and business segment through a comprehensive investment program of approximately EUR 7.5 million that has now been completed. Via active ownership, Pandox has also supported the local management for the implementation of effective and modern operations. The upgrading of 200 rooms in the hotel s old Classic Wing remains to be carried out in 2012 in order to create a uniform product standard. Investment program: EUR 5.5 million (total investment since acquisition: approximately EUR 13 million) Program for 2012: Refurbishment and development of 200 rooms including fittings, bathrooms, corridors, technology, etc. Investment program: CAD 13 million Realised: In , refurbishment and modernisation of all 357 hotel rooms, development of the restaurant and bar concept, as well as upgrading of the lobby and meeting facilities. Radisson Blu Basel COMPLETE UPGRADING IN Basel The Radisson Blu Basel was acquired in The hotel is centrally located close to the old town and shopping district, and contains 206 rooms, conference facilities, restaurant and large relaxation centre. Since the acquisition, the hotel has undergone a comprehensive investment program where all parts have been upgraded and modernised, including a total facelift of the fitness and spa centre. The Pool Inn Club, which was inaugurated in 2010, has an unparalleled indoor pool, large relaxation centre, sauna and a large complete and modern fitness centre. After total refurbishment, the hotel has continued to expand its market share and show stable and good profitability. Investment program: EUR 10 million Realised: In , total refurbishment including rooms, conference facilities, bar and relaxation centre.

42 T floor // WE GENERATE // Growth and cash flow we ge with a sense of humor &passion for BUSINESS Pandox' most important success factors are above all the thoroughly planned and consistent strategy, the flexible business model and the unique special expertise contained in the Company and its network. Enthusiastic and committed people with the courage to do the unexpected.

43 Growth and cash flow // WE GENERATE // * 831* nerate cash flow from 1995, SEK M *Refers to 100 percent of Norgani's and Pandox' ongoing cash flow for each respective full-year. +19% Pandox strategy and business model generates value. Pandox has generated an average annual return of 19 percent since the Company was formed in During the same period, the world has undergone three finance crisis. Key indicators Number of hotels* Number of hotel rooms 24,500 24,800 Property revenues, SEK M 1,782 1,730 Cash flow, SEK M * As well as one congress and fair centre.

44 6042 // WE GENERATE // Pandox' development T FROM FINANCE CRISIS TO SUCCESSFUL HOTEL PROPERTY COMPANY When Pandox started in 1995, the Company's operations were composed of 18 hotels with 3,000 rooms located in nine Swedish towns and cities. The business model was new and untried. The Company had weak profitability and limited capital. The road to success has been to acquire under-performing hotels that have been developed, and to increase the Company's cash flow and value which in turn has been used to further expand. All in all, transactions for more than SEK 20 billion have been completed. With a consistent strategy, Pandox has shown durable and profitable growth, along with a greater geographical spread. At the end of 2011, Pandox had 118 hotels and one congress and fair centre with a total of 24,500 rooms situated in 58 strategic locations in 10 different countries in the Nordic Region, northern Europe, and North America. Pandox is thereby one of the leading hotel property companies in the European market. Pandox' development from 1995 Number of hotels At the end of 2011, Pandox had a total of 118 hotel properties and one congress and fair centre. Four transactions were completed in 2011: The hotel property Park Inn by Radisson, Solna was acquired. The hotels Scandic Bromma, First Linköping and Scandic Luosto in northern Finland were sold.

45 Pandox' development // WE GENERATE // 6043 Acquisitions for more than SEK 20 billion Founded in Pandox has its origins in the finance and property crisis in the beginning of the 1990s. The Company was formed in 1995 by Securum and Skanska. The mission was to take over and restructure the hotel portfolio, and prepare it for sale. The original hotel property portfolio. In the beginning, Pandox consisted of 18 hotel properties and three small operating units. All of the hotels were in Sweden, and most of them were small with weak locations and in bad condition. Stock-exchange listing. Pandox was floated on the Stockholm Stock Exchange in 1997 with a new and untried business concept. The Company's portfolio was valued at SEK 1.3 billion and the market capitalisation at SEK 520 million. The listing gave 4,000 new shareholders. Further to the listing, Pandox expanded substantially with acquisitions of large hotels in strong locations, while its smaller hotels were sold. Internationalisation. In 2000, Pandox enlarged its geographical strategy to Northern Europe through the acquisition of Hotellus with 16 hotel properties. Privatised again in Pandox is bought out from the stock market in 2004, with new industrial owners through Eiendomsspar AS and Sundt AS. Stronger in Europe. The transaction tempo increased further to the privatisation and several large hotels were acquired in Berlin, Brussels, Basle, Copenhagen, Stockholm and Malmö thus strengthening Pandox as one of the leading hotel property players in Europe. Expansion to North America. In , Pandox continued its international expansion with two acquisitions in Montreal. Leading in Europe. In August 2010, Pandox announced the close to SEK 10 billion acquisition of Norgani Hotels with a portfolio of 73 hotels in Sweden, Finland, Norway and Denmark. Further to the acquisition, Pandox is one of Europe's leading pure hotel property companies with regard to geographic spread and number of hotels and brands. Since starting in 1995, Pandox has carried out acquisitions for a total of more than SEK 20 billion composed of 174 hotels at the end of The value of the Company's hotel property portfolio amounted to approximately SEK 24 billion at the end of 2011 which implies that the value has increased about 20 times since the Company was formed. This has been achieved through a good hotel market, active ownership, sound expertise and profitable acquisitions. TRANSACTIONS COVERING 174 HOTELS

46 P. P. P // WE GENERATE // Market MARKET COMMUNICATION communication T MARKET COMMUNICATION The concept of a hotel market day was introduced by Pandox in The principal reason was that the Company, and the hotel industry, needed to be presented to the capital market prior to being listed on the stock market, which took place the following year. From the start, the Hotel Market Day has been an annual recurring event and has been developed into a dynamic meeting place for the hotel industry. hotel market day The Hotel Market Day is held each year in the middle of November at the Pandox-owned Hilton Stockholm Slussen hotel. Recent years have seen a full house with more than 300 people taking part, with an increasingly larger proportion of international guests. During the day, the participants are offered interesting talks, an occasion to form networks and meet new contacts, as well as to obtain Pandox' hotel forecast for forthcoming years. The event is closed in the evening with a mingle and dinner in a pleasant and relaxed environment. In recent years, the theme for the day has included the effect of low-price airlines on the hotel industry, the significance of shopping tourism for a destination, as well as the signification of the term "brand profitability". The theme for 2010 was the economic situation and its consequences for the hotel industry, as well as social media and their effect on the sector. In 2011, the Hotel Market Day was about the contemporary subject of Corporate Social Responsibility (CSR). Today it is not a question of whether a company shall take social responsibility, but how it should do so. Companies are placed with new challenges and new areas to handle, and developments are being driven by increased globalisation. The Hotel Market Day in 2011 highlighted the question from the hotel industry's perspective. The list of speakers was as usual of top quality, with several speakers with considerable commitment to the subject and with long experience of international CSR work. The main speaker was Lars H. Thunell, previously CEO of SEB and now in a top international position within the World Bank Group as Executive Vice-President and CEO of the International Finance Corporation (IFC). Other speakers during the day included Bicky Chakraborty, owner and CEO of Elite Hotels of Sweden, and Lyndall De Marco, Managing Director of Only Sustainability. pandox upgrade REGULAR MARKET INFORMATION Our newsletter, Pandox Upgrade, contains information about market developments, hotel trends and transactions, as well as news from the Pandox sphere. When Pandox was formed in 1995, the publication of a newsletter was started in order to market the Company vis-à-vis the capital market prior to being listed on the stock exchange. The newsletter later went over to presenting public reports distributed by the Company. In spite of Pandox no longer being listed on the Stockholm Stock Exchange, we continue to maintain the flow of information to people interest in the hotel sector and the hotel property market, which is why Pandox Upgrade is still regularly issued with normally three issues per year. Subscribe now! Pandox Upgrade is free of charge and may be ordered from Pandox either by telephone at +46 (0) or by sending an to info@pandox.se >> Pandox Upgrade can also be downloaded in PDF format in Swedish and English at Up Grade MARKET INFORMATION FROM PANDOX ONE OF EUROPE S LEADING HOTEL PROPERTY COMPANIES Recovery on most markets 6 from Where are we heading? Report Hot.E! Autumn 8 projects Theme: Social 2011 S POTLIGHT 9 handball trends s OCIAL MedIA In C rea s I n G In IMPOrtA n C e A fantastic year for Swedish