Pandox AB (publ) interim report January–September 2021

Pandox Q3 2021

Report

Wednesday, 27 October 2021

Pandox Q3 2021 Report	Wednesday 27 October 2021

Opening Presentation

Anders Berg

SVP Head of Communications and IR

Thank you very much. And I would like to welcome you all to this presentation of Pandox's third quarter 2021. I am here with Liia Nõu, our CEO and also acting CFO for the time being, at least. In line with our tradition through this pandemic, we also have an external guest. Robin Rossmann, Managing Director, International at STR and as you well know by now, Robin represents a leading independent research firm focussed on the hotel market, and he will share STR's view on this market. And please remember that the views expressed by STR are completely separate from Pandox and that we offer this presentation only as a service to Pandox's stakeholders. And also note that Robin's presentation will be held after we have completed the formal earnings presentation, including the Q&A.

So, we will start with Liia and myself presenting a business update with financial highlights for the third quarter, followed by Q&A. And then after that, Robin will do his external hotel market presentation. Next page, please. And I now hand over to Liia Nõu, CEO of Pandox.

Business Update

Liia Nõu

CEO, Pandox

Thank you, Anders. A lot has happened during this quarter. One thing is that I have been appointed the permanent CEO of Pandox. I am very honoured and pleased over the trust placed in me to lead this fantastic company, which I have been a part of for more than 14 years.

Pandox as an excellent modern company

Pandox has everything I admire in a modern company, having a clear and strong business idea. A competent, experienced and committed organisation and board, as well as a corporate culture which reflects the core values I cherish, being courage, integrity, competence, expertise, low sense of prestige, warmth and a bit of playfulness.

Anneli Lindblom to join as the new CFO

Also, we are very happy of the recent news that Anneli Lindblom will join as our new CFO. She has extensive experience from publicly listed companies, both in the roles of CFO and board member, and most importantly, she has strong personal qualities that will be very valuable to us. So, she will take on her new role on the 1st of December this year, so welcome Anneli to Paradox.

Well-diversified property portfolio

Pandox has a well, diversified hotel property portfolio. In total, we have 156 hotel properties with more than 35,000 rooms in 15 countries and 90 cities, with a property market value of more than 61 billion kroner.

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Pandox Q3 2021 Report	Wednesday 27 October 2021

Property management and operating activities

Pandox is divided into two business segments. Property management and operating activities. In property management, we lease hotels to strong and well-known operators under long revenue-based agreements. And this makes up for some 83% of our property market value.

In operating activities, we operate the hotel ourselves under different operating models and operating activities makes up for some 17% of our property market value.

Strong Pandox network

Pandox has one of the strongest networks of brands and partners in the hotel industry. As you can see in the picture, we work together with several well-known operators. For example, Scandic in the Nordics, we work with Jurys Inn in the UK and Leonardo Hotels in Germany. We also have long relationships with strong international brands such as Hilton, Holiday Inn and the Radisson Group. We also recently added Motel One to our network.

Operating activities

In the operating activities segment, we also have some independent brands created by Pandox. For example, Hotel Berlin Berlin, which is our largest hotel with over 700 rooms.

Hotel demand

Hotel demand increased in all markets in the third quarter, supported by strong domestic leisure travel and increased business travel. The underlying drivers of demand were higher economic activities, lifted government restrictions and increased vaccination rates. Our relationship with our banks are strong, and we have close to 4.2 billion in cash and unutilised credit facilities at the end of the quarter. At the same time, our loan to value is a strong 49.6%. The level of economic activity in Pandox market is high and household finances are strong.

Easing of restrictions

Vaccination rates are high and many restrictions that impact travel conferences and events have been eased considerably or lifted altogether in most countries. Companies have also started to return to the physical workplace, is laying the foundation for more conferences and increased domestic business travel alongside continued active domestic leisure travel. All in all, the hotel market is now on steadier ground. Pandox is in an attractive position, as around 80% of all rooms are in regional and domestic cities, and therefore we have a high exposure to domestic demand, which is the main driver of the hotel market recovery.

Numbers for the third quarter

And to sum up this slide, just a quick look at the numbers for the third quarter. Total net operating income increased by 70% like-for-like, property management increased in net operating income by 11%. Return on equity measured by annualised growth in EPRA NRV was approximately -2%.

In the third quarter, we saw clear improvements in demand and earnings in both business segments. Like-for-like, the total revenue increased by 25%, while net operating income increased by 24%. Only minor government support was recorded in the quarter. End of quarter accounts receivable relating to deferred rent and the temporary payment terms amounted to approximately 650 million, which is in line with the second quarter. And the

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Pandox Q3 2021 Report	Wednesday 27 October 2021

difference is basically only currency changes. Repayment of deferred rents is expected to begin in the fourth quarter of 2021.

A diversified revenue base

Pandox's revenue base is diversified with revenues from different operational models and agreement types. Currently, the minimum rent and fixed rent in property management is our main source of revenue. This amounts to more than 1.9 billion per year, or approximately 475 million per quarter. In the third quarter, we had the revenue-based rents of 147 million, mainly from leases without any minimum guaranteed rent and due to a structure of agreements, we only expect limited variable revenue in leases with minimum granted in 2021. Revenue from operating activities amounted to 287 million.

Comparison of the occupancy levels for the business segment property management

Here we have a comparison of the occupancy levels for our business segments, property management from 2019 until today. The numbers are based on 135 hotels in more than 80 destinations. As you can see, occupancy is currently somewhere between the strong 2019 and the weak 2020; for the month of September, being 55%.

A rapid increase in COVID infection rates in 2020

In Q4 2020, as you remember, Europe witnessed a rapid increase in COVID infection rates and tough restrictions, which led to very weak occupancy in the quarter of 2020. Currently, our prospects for the hotel markets are markedly stronger and occupancy in Q4 2021 will be higher than last year. All in all, the hotel market now rests on a much steadier ground.

Pandox's portfolio in property management

Here we have Pandox's portfolio in property management categorised based on type of location with occupancy index versus 2019. The locations being interstate, our classical roadside hotels, resorts like the hotels you have in Brighton, a Lillehammer, airport like Radisson Hollandia, T4 Heathrow, suburban, that is outside city centres like [inaudible] Italia. We have regional cities meaning Stockholm, Copenhagen, Manchester, Glasgow, Hamburg, et cetera. We have small cities, buildings, hotels like in cities like [inaudible] or Heidelberg. And finally, we have large cities, for example, Amsterdam, Brussels, Dublin, et cetera.

And as you can see, small cities and interstate are leading the recovery, which is explained by the higher degree of domestic demand. We can also say that large cities which are more dependent on international demand have had a slower development. However, large cities are likely to catch up as international travel becomes easier and the recovery continues.

Property management index categories

On this slide, we are divided the portfolio in property management into four different index categories. It showed that in the third quarter of this year, 2021, a fourth or 25% of the number of hotels in the portfolio had recovered up to at least 90% of the corresponding RevPAR level in Q3 2019. Another 26% were between 75% and 89% of the level of 2019 and another 26% between 50% and 75%. Lastly, 23% of the number hotels were below 50% of the Q3 2019 RevPAR level.

Important business events

Now, I would like to highlight some important business events in the third quarter. First how did nhow Brussels bloom, for which we recently completed a major renovation and upgrade.

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Pandox Q3 2021 Report	Wednesday 27 October 2021

The hotel has been rebranded to nhow, which is the lifestyle brand of NH Hotel Group. It has a distinct, eccentric design are really stands out in Brussels hotel market. The renovation covered all of the 305 rooms, the lobby and the public area, as well as expansion of fitness area, which we like.

Following an extensive renovation and change of brand, the DoubleTree by Hilton Brussels City has now opened its doors to the public. As you may know, the hotel is located in an eight storey art deco building, which is a landmark in Brussels. The hotel has a very strong location, just minutes away from Grand Place and all main attractions of the city. This fully renovated and refurbished hotel features 354 rooms and suites and extends extensive meeting and conference facilities. All in all, a very strong product.

31st of August, the lease agreement for the Maritime Hotel Mumbai expired and Pandox took over the operations. We also reclassified it to operating activities on the same date. We see great value potential in developing the hotel and we will invest approximately €20 million in a comprehensive renovation and repositioning of the hotel. And we expect this to be completed during the second half of 2022. The hotel will be closed during the renovation.

h27. Pandox took over the operations of h27 in central Copenhagen in April 2020, just when the pandemic started. We immediately started on a renovation and repositioning project, which has been completed in June 2021. 1st of September, we were happy to announce a new lease agreement with Motel One. The lease is revenue based with a minimum guarantee rent on attractive terms and a tenor of 20 years. We very much look forward to working together with the highly skilled team at Motel One and the Hotel property has been reclassified to property management, 1st of October 2021.

The 3rd quarter Pandox property portfolio

In the third quarter, pound of value, the property portfolio, according to same method and model we used on the IPO which we did in 2015. Value changes in the third quarter were modestly positive and yields largely unchanged due to the still inconclusive transaction evidence. Approximately 83% of the properties have now been externally valued during the past 12 months and on average, some five percentage points below Pandox's internal valuations. External valuations exhibit large dispersions both within and between markets, and the valuation differences are smaller in Nordics and larger outside the Nordics.

The 25 external evaluations we carried out in the third quarter were on average, some 3% above Pandox internal evaluations.

Total realised changes during the 3rd quarter

In the third quarter, total unrealised and realised changes in the value amounted to a positive 48 million of which are negative, 9 million for investment properties and a positive 57 million for operating properties. And as always, please note that according to IFRS our unrealised changes in value for operating properties are only reported for information purposes, but is included in the EPRA NRV. End of period, the average valuation yield for investment properties was 5.45% and for operating properties, it was 6.4%.

Value chain of the portfolio per quarter

On this slide, we can see the value change of our portfolio per quarter, as well as accumulate the value change from the start of the pandemic in the first quarter of 2020. For this total

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